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THE MAGAZINE FOR LEADERS IN AMERICAN ENERGYJanuary / February 2021OilmanMagazine.comUpstream A&D MarketJosh Robbins, Founder, BeachwoodOffshore Industry Executes Great Effort in Hurricane Preparedness p. 44Avoid Getting Blindsided by Safety Culture in your Next M&A p. 8Real-Time Completions Renement with Electromagnetics p. 38Interview: Ryan Lailey, CTO, WolfePak p. 22
508 West Vandament Avenue, Suite 304 l Yukon, OK l (405) 265-7050 l bchwdx.comBeachwood navigates teams to find deals that no one else can.
Oilman Magazine / January-February 2021 / OilmanMagazine.com1IN THIS ISSUEFeatureCover Story: Acquiring More than Assets: Sarah Skinner ...................................................................................................................24-26In Every Issue Letter from the Publisher ...................................................................................................................................................................................2OILMAN Contributors .....................................................................................................................................................................................2OILMAN Online // Retweets // Social Stream ...........................................................................................................................................3Downhole Data .................................................................................................................................................................................................. 3OILMAN ColumnsInterview: Ryan Lailey, CTO, WolfePak: Eric R. Eissler .............................................................................................................................22Interview: Chad Valentine, Partner, Assurance Services, Weaver Accounting: Eric R. Eissler ............................................................27Where Does the Industry Go After COVID-19? Eric R. Eissler .............................................................................................................34America’s Energy: 2021 and Beyond: Mark A. Stansberry .........................................................................................................................35A Look Inside 2021: Outlook and Predictions for the Oil and Gas Industry: Tonae’ Hamilton ........................................................36Oilman Cartoon: Steve Burnett ......................................................................................................................................................................46Living the Crude Life: Jason Spiess ................................................................................................................................................................ 53Guest ColumnsTax Considerations for Oil and Gas Partnerships Deliberating Bankruptcy and Debt Restructuring: Jon R. Roberts and Jon Pezzi ...............................................................................................................................................................................................................4The State of the Oil Industry 2020: An Updated Look at Things to Come: Henry Berry .................................................................... 6Avoid Getting Blindsided by Safety Culture in your Next M&A: Josh Williams and Eric Michrowski ................................................8Technologies to Detect and Mitigate Pipe Corrosion: Raul Palencia ....................................................................................................... 10How to Control Target Areas During Hydraulic Fracturing: Andres Ocando ....................................................................................... 13The Dangers of Unreliable Data: Pallav Sarma, Ph.D. ............................................................................................................................... 16COVID-19 Testing and Background Screening Are Now Essential for Safe Workplaces: Alla Schay ...............................................20Measuring Oil and Gas Volumes in Different Countries: The U.S. and Russian Cases: Eugene M. Khartukov and Alexander Novak...............................................................................................................................................................................................28Young Professionals in the Oil and Gas Industry: Interview with Ahmed Elgohary: Alan Alexeyev ................................................32Real-Time Completions Renement with Electromagnetics: Sam Young ...............................................................................................38Squeezing the (Remaining) Golden Geese: Renery Closures May Lead to Increased Tax Scrutiny on Operating Facilities: Jay Adams and Bill Backstrom ........................................................................................................................................................................ 41Offshore Industry Executes Great Effort in Hurricane Preparedness: Nick Vaccaro .......................................................................... 44The Drilling Conundrum – Efciency Versus Reliability: Shrikant Tiwari..............................................................................................47Oilmen’s Salaries Across the World: Eugene M. Khartukov ......................................................................................................................50The Economic Superorganism: Beyond the Competing Narratives on Energy, Growth and Policy: Carey W. King ......................54
Oilman Magazine / January-February 2021 / OilmanMagazine.com2Mark 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-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. Joshua RobbinsJosh Robbins is the Founder of Beachwood. 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.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, 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.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 upon retirement, nished 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. With a humorist for a father, he also learned that a dose of comedy makes everything better. The major inuences on his cartooning style were the Ace Reid Cowpokes cartoons, the Dirk West sports cartoons and V.T. Hamlin’s Alley Oop comic.JANUARY — FEBRUARY 2021PUBLISHER Emmanuel SullivanEDITOR-IN-CHIEF Rebecca PontonMANAGING EDITOR Sarah SkinnerASSISTANT EDITOR Eric R. EisslerASSOCIATE EDITOR Tonae’ HamiltonCOPY EDITOR Shannon WestCREATIVE DIRECTOR Kim FischerCONTRIBUTING EDITORS Steve Burnett Joshua Robbins Jason Spiess Mark StansberryADVERTISING SALES Eric Freer Diana GeorgeTo subscribe to Oilman Magazine, please visit our website, www.oilmanmagazine.com/subscribe. The contents of this publication are copyright 2021 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 reect 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 42511 Houston, TX 77242 (800) 562-2340 Cover photo courtesy of Josh Robbins, BeachwoodLETTER FROM THE PUBLISHERCONTRIBUTORS — BiographiesEmmanuel Sullivan, Publisher, OILMAN MagazineThis past year was challenging for many of us, having to deal with the disruptions from COVID-19 in virtually every aspect of our daily routines. In the oil and gas industry, companies struggled to survive, many were forced into bankruptcy and some closed for good. There were ma-jor mergers last year stemming from the nancial crunch companies faced as a result of the pandemic. Several of the mega-acquisitions are still being worked out, which may result in more layoffs. The energy industry is known for annual trade shows and, because of the pandemic, we were forced to change our networking pattern from in-person to virtual. With all that said, I’m optimistic about the oil and gas industry moving forward this year. Industry events and conferences are planned for the second half of this year and I’m sensing the enthusiasm to get out and network again. There is no doubt all of us had to pivot in some way to continue business as usual. At OILMAN we did as well. Not only did we adjust to survive, by focusing on our customers and core product, we launched a new magazine, OILWOMAN. Yes, indeed, a daunt-ing endeavor to pursue in a challenging business climate, but it was the right time and the feedback has been positive. It’s the optimistic spirit in our industry and as Americans that moves us forward. Please take time to read the feature article about Josh Robbins, founder of Beachwood, and one of our longest OILMAN contributors. He discusses the A&D market and how he started his business in Oklahoma. OILMAN has a slightly new look as we move into the new year. Sim-ilar to OILWOMAN, the cover page is now a portrait of the guest in the feature article. Hope that you enjoy this issue, happy new year, and all the best in 2021!
Oilman Magazine / January-February 2021 / OilmanMagazine.com3Week Ending December 30, 2020DIGITAL DOWNHOLE DATAGulf of Mexico: 17Last month: 13Last year: 23 New Mexico: 65Last month: 65Last year: 105 Texas: 161Last month: 159Last year: 404 Louisiana: 43Last month: 43Last year: 58 Oklahoma: 17Last month: 16Last year: 52 U.S. Total: 351Last month: 348Last year: 805OIL RIG COUNTS*Source: Baker HughesBrent Crude: $50.88Last month: $46.88Last year: $68.91 WTI: $47.50Last month: $45.58Last year: $61.76CRUDE OIL PRICES*Source: U.S. Energy Information Association (EIA)Per BarrelGulf of Mexico: 32,777,000Last month: 45,159,000Last year: 59,351,000New Mexico: 33,519,000Last month: 30,708,000Last year: 29,594,000 Texas: 143,640,000Last month: 138,933,000Last year: 163,072,000Louisiana: 2,446,000Last month: 2,528,000Last year: 3,883,000Oklahoma: 13,043,000Last month: 13,328,000Last year: 18,643,000 U.S. Total: 322,984,000Last month: 325,842,000Last year: 392,849,000CRUDE OIL PRODUCTION*Source: U.S. Energy Information Association (EIA) – October 2020 Barrels Per MonthGulf of Mexico: 36,765Last month: 47,495Last year: 86,698 New Mexico: 179,349Last month: 165,294Last year: 156,870 Texas: 763,147Last month: 750,679Last year: 823,698Louisiana: 259,460Last month: 251,833Last year: 279,489 Oklahoma: 219,782Last month: 223,193Last year: 278,887 U.S. Total: 2,996,276Last month: 2,917,020Last year: 3,119,983NATURAL GASMARKETED PRODUCTION*Source: U.S. Energy Information Association (EIA) – October 2020Million 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 / January-February 2021 / OilmanMagazine.com4OILMAN COLUMNMany oil and gas companies have sought debt reduction through bank-ruptcy protection or debt restructur-ing in response to nancial difculty brought on by the COVID-19 pandem-ic. When considering options to reduce debt, companies should understand the tax consequences that these actions can bring. This is particularly true for partnerships, which have special rules that affect certain allocations related to canceled or restructured debt. Tax Impacts of Debt DischargesDebt discharges can have signicant tax consequences that oil and gas partner-ships must assess when considering debt reduction options. When a debt is discharged, the difference between the outstanding debt and any amount paid as consideration for the debt is deemed cancellation of indebtedness income (CODI). While taxpayers are generally required to include CODI in their gross income, they can exclude it in certain circumstances, including bankruptcies and insolvency. Specically, IRC Section 108 allows taxpayers to exclude CODI from gross income in Title 11 cases, which include Chapter 7 liquidations, Chapter 11 reorganizations and Chapter 13 bankruptcies for individuals. Insol-vent taxpayers can also exclude CODI from gross income to the extent of their insolvency. A discharge of debt from a bankruptcy or a reduction of debt from debt re-structuring requires taxpayers to reduce their tax attributes by the amount of CODI excluded from gross income. Section 108(b) requires this reduction in the following order: net operating losses (NOLs), general business credits, mini-mum tax credits, capital loss carryovers, basis reduction, passive activity loss and credit carryovers and foreign tax credit carryovers. In an exception to the ordering rules, taxpayers can choose under Section 108(b)(5) to reduce basis in depreciable property rst.Partnership AllocationsIn determining whether to seek debt reduction, oil and gas partnerships must understand the treatment of CODI under the special partnership allocation rules. Under Section 108(d)(6), CODI is recognized at the partnership level with-out any exclusions from gross income, but it is allocated to the partners under the rules of IRC Section 702 and IRC Section 704. Under these rules, the exclusions of CODI from gross income for bank-ruptcy and insolvency are determined at the partner level. While the partner-ship may be insolvent, the individual partners may be solvent and required to recognize the CODI income as gross income. The process can also produce signicant differences between partners, as insolvent partners may exclude their share of CODI from gross income while solvent partners are taxed on their share. Failure to consider this can result in unanticipated tax liabilities for individual partners.Given these possible differences in the tax impact of debt reduction, how a partnership allocates CODI to its partners is a signicant issue in partner-ship bankruptcies and debt restructur-ings, as allocation can depend on how the CODI arose as well as on the terms of the partnership agreement. For example, Section 704 provides that the partnership agreement determines the allocation of tax items. However, if the partnership agreement does not ad-dress tax allocations or the agreement’s tax allocations do not have substantial economic effect, then the tax allocations are made in accordance with the part-ner’s interests in the partnership.Tax Considerations for Oil and Gas Partnerships Deliberating Bankruptcy and Debt Restructuring By Jon R. Roberts and Jon Pezzi Photo courtesy of Vitaliy Vodolazskyy – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com5OILMAN COLUMNDebt Restructuring OptionsUnder these partnership allocation rules, oil and gas partnerships must also take into account the tax consequences for in-dividual partners when considering debt restructuring options such as debt for equity exchanges, debt work-out plans, asset sales under Section 363 of the U.S. Bankruptcy Code and purchase-money debt reductions. • Debt-for-equity exchanges: Debt-for-equity exchanges can provide oil and gas partnerships debt relief in exchange for partnership capital or an interest in prots. In these transac-tions, a partnership transfers a capital or prots interest in the partnership to a creditor in satisfaction of its debt. The excess of the debt over the fair market value of the partnership capital or prot interest results in CODI. The regulations provide a safe harbor for partnerships under which the fair market value of the partnership inter-est is deemed equal to the liquidation value that the creditor would receive, allowing the debt-for-equity exchange to reduce or eliminate CODI. Section 108(e)(8) requires CODI that results from these transactions to be allocated to those partners that were partners immediately before the exchange, and the exclusion for bankruptcy or insol-vency is made at the individual partner level. • Debt work-out plans: A debt work-out plan or debt restructuring involves modications to the original debt instrument that produce debt relief. Typical restructuring includes changes in yield, timing of payments, obligor or security, or changes in the nature of the debt instrument. Under Treas. Reg. §1.1001-3, these types of “signicant modications” in the terms of the debt could result in CODI, as they are treated as an exchange of that debt instrument for a new debt instrument. • Section 363 sales: With private equity rms looking for investment opportu-nities, selling assets to settle outstand-ing debt could be an option. Section 363(b) of the U.S. Bankruptcy Code allows for court-approved sales of assets during bankruptcy that allow a debtor to have more control over the terms of the sale than they would oth-erwise have in a Chapter 7 liquidation. Section 363 sales, however, can have signicant tax consequences not only from CODI but also from possible state transfer taxes and taxes on any gain on the sale of the asset.• Purchase-money debt reduction: Solvent taxpayers not in bankruptcy could nd an exception to CODI if they negotiate a reduction of purchase-money debt from the seller. Section 108(e)(5) treats this type of reduction as a purchase price adjust-ment if the reduction would otherwise be treated as CODI. Given that the treatment of CODI is determined at the partner level, the IRS waived the bankruptcy and insolvency restrictions for partnerships. Under IRS guidance, the exclusions apply at the partner level, making the bankruptcy or insol-vency of the partnership irrelevant for the application of Section 108(e)(5). A bankrupt or insolvent partnership can treat a reduction of an indebted-ness as a purchase price adjustment if the transaction would qualify as a purchase price adjustment but for the bankruptcy or insolvency of the part-nership. This allowance does not apply if any partner adopts a federal income tax reporting position for the debt discharge that is inconsistent with that of the partnership.ConclusionWhen considering discharges of debt through bankruptcy, insolvency or debt restructuring, oil and gas partnerships must assess the tax impact of CODI allocations on individual partners. This assessment includes understanding how the partnership agreement will affect CODI allocations and how this will impact the nancial position of each partner. Partnerships that do not fully understand the tax implications of bank-ruptcies and debt restructurings could cause individual partners to incur an unexpected tax liability.Jon R. Roberts, CPA, Partner, Tax Service, has more than a decade of public accounting experience, with a focus on serving oil and gas exploration, production and service companies. He has extensive experience in federal and state taxation of partnerships, corporations, S corporations and limited liability companies, as well as serving their individual owners. Roberts is also experienced in tax planning for business and individual clients and providing tax services for closely held family groups. A certied public accountant, he is a member of the Texas Society of Certied Public Accountants (TSCPA), American Institute of Certied Public Accountants (AICPA) and the Wednesday Tax Forum. Roberts earned a Bachelor of Business Administration in accounting from Abilene Christian University.Jon Pezzi, CPA, Partner, Tax Service, has more than 13 years of public accounting experience which includes federal and state taxation of partnerships, corporations, S corporations and limited liability companies. His focus is on providing tax consulting for mergers and acquisitions, including tax structuring and tax due diligence. Pezzi also has experience handling multi-state taxation issues and public company taxation issues, including ASC 740 issues. He is a certied public accountant in Texas and Virginia. Pezzi earned a Master of Science in accounting with a concentration in tax consulting from the University of Virginia, as well as a Bachelor of Science in accounting from Ohio State University.
Oilman Magazine / January-February 2021 / OilmanMagazine.com6OILMAN COLUMNEach year, an array of industry analysts makes its predictions on the specic directions the oil and gas industry could be heading in the coming months. However, it’s fair to say that a detrimental global pandemic was not factored into any of those calculations. We know that oil is the lifeblood of industrialized nations, but COVID-19 has forced even this thriving industry to reevaluate and reset.Henry Berry, director of the U.K. oil company, Tristone Holdings, believes that an investigation of the oil industry as it stands now – rather than where it may have been six months ago – is paramount. With business continuing to change rapidly, there certainly will be developments to come, but Berry has identied distinct areas in which solid trends seem to be manifesting.Agile PracticeThe pandemic has thrown the oil busi-ness into a new era, one in which agility has proven a mandatory trait for any company that wants to grow and suc-ceed in the undetermined times ahead. Oil companies will need to consider a substantial level of agility and exibility within the industry as crucial for the foreseeable future.It’s no surprise that in such an uncer-tain climate only the ttest and most competent businesses will survive. Even prior to COVID-19, a few suc-cessful companies identied the need for exibility and started to lay the necessary foundations for increasingly agile practices. Oil giant, bp, for ex-ample, announced last year that it had been able to cut its logistical costs in Azerbaijan by a considerable $60 mil-lion. The “scrum” technique was the main catalyst in this business develop-ment plan. Essentially, this technique is all about teamwork, bringing the right conglomeration of professionals together and allowing them to develop and implement the ideal solution to a problem. The benet of putting this type of agile practice in motion within a company is its incredible simplicity. Each utilized member would be an expert in their eld, enabling a quick and efcient way of problem solving. The need for this shift has signicantly accelerated. While these practices may have enabled certain companies to get ahead of the game a few months ago, they are now considered essential for industry survival. Sustainability Across all industries, oil companies included, there is a large focus and ef-fort on contributing to environmental care by cleaning up essential processes. It goes without saying that in an indus-try revolving around a particular fossil fuel, an effort to use more sustainable practices can only go so far. There is, however, a lot that can be implemented in order to make the oil industry, as a whole, much cleaner.It’s important to evaluate strategies and make sure that even the smallest inef-ciencies are running as smoothly as possible. There is a signicant amount that can help make processes more sustainable, from recycling and reduc-ing freshwater wastage to mitigating methane leakages. Tristone Holdings has identied that utilizing technology is a contributing factor in making this endeavor more successful. As a range of companies have discovered, using drones can effectively detect ozone-destroying leakages of methane, one of the most harmful greenhouse gases. Making The State of the Oil Industry 2020: An Updated Look atThings to Come By Henry Berry Photo courtesy of wrightstudio – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com7OILMAN COLUMNsmall changes like this can help oil com-panies cut costs and adapt for success in the future.Diversifying Interests Expansion into the natural gas market, for any oil operator that has the means to do so, is highly recommended. Natu-ral gas is the fastest growing fossil fuel, according to the 2019 edition of bp’s Energy Outlook. With an estimated annual growth of 1.7 percent between 2017 and 2040, its volumes are set to continue their increase. Likewise, liqueed natural gas (LNG) is also predicted to grow steadily. In the uncertain period we’re all experiencing, the prospect of investing our interests safely with a more diverse asset portfo-lio seems a sagacious move. While natu-ral gas, like crude oil, has taken a hit as a result of the pandemic, it’s also likely to return to form in the coming year.An Example from Tristone HoldingsTristone Holdings’ primary vision is to pursue high-value crude oil assets located in the Cherokee Valley in the United States. It’s fair to say, however, that diversication is most denitely an option. The area we focus on not only features existing wells, but also a very well-established natural gas pipeline net-work, too. Pursuing such a prospect can allow us to secure an asset, which is not only high value, but extremely versatile, as well. It’s important to note that no mat-ter how well prepared your company may be, this year has emphasized the signicance of being able to evaluate and adapt your approach. You can be acutely organized and still fall victim to an unforeseen event – like a global pandemic – that has the capability to disrupt even the most thoroughly pre-pared of businesses. Consequently, agility and exibility are fundamental strategies for companies looking to succeed in the industry in this unprecedented time. Be smart and vigilant in the way you have your business structured. That allowance for diversication will place you in a substantially better position to deal with any new challenges that arise. Henry Berry is a director at Tristone Holdings, an energy company based in the U.K. with a primary focus in the U.S. It nds, develops and produces essential sources of energy and its portfolio includes high-quality conventional oil and natural gas assets in the top U.S. onshore plays. Currently, it is raising capital to acquire and expand its energy base, specically in the oil and gas sector. For more information visit tristoneholdings.com. 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 / January-February 2021 / OilmanMagazine.com8OILMAN COLUMNWhile the pace of oil and gas mergers and acquisitions (M&A) deal-making declined throughout 2020 in both value and number of deals,1 experts are highlighting the potential growth in cross-border M&A, as well as increas-ing trends toward “responsible invest-ments” with a greater focus on environ-mental, social and governance (ESG) screening as part of due diligence.2This intensies the importance of not being “blindsided” by safety culture in your next M&A. In two recent con-versations with senior executives that had experienced fatalities in their newly acquired companies, they reinforced the importance of conducting a deeper due diligence process prior to acquiring a new company and in accelerating the pace of safety culture integration.Aligning safety culture effectively on the front end will help avoid a myriad of challenges on the back end. It will also help prevent serious injuries and fatali-ties (SIFs) down the road. Although it’s not necessary to merge with a company that has the same safety culture, it IS critical to manage the cultural differ-ences well and identify them early.Step 1: Assess Safety Culture in M&A Target CompaniesAs part of the due diligence process, leaders should perform a robust, independent and thorough safety culture analysis to diagnose differences and similarities. When this cannot be completed as part of the due diligence process, it should be completed as soon as possible prior to integration. This is increasingly more critical when dealing with cross-border transactions and to meet more stringent ESG requirements. Potential approaches include:• Interviews with managers and em-ployees to provide insight into how workers of each organization view the prioritization of safety and leader-ship commitment to safety culture.• Employee surveys should be em-ployed to assess attitudes, behaviors and intentions when it comes to safety ownership, accountability and performance. • Learning culture should be assessed to determine if organizational lead-ers treat close calls and incidents as opportunities to learn or occasions to punish. • Safety risk analyses should be con-ducted with safety metrics, systems, policies and procedures. Step 2: Rapidly Establish a Safety Culture Integration PlanOnce M&As are complete, leaders need a game plan to rapidly integrate safety cultures. While safety culture is a component of the overall integra-tion, it needs dened expertise, focus and urgency to drive forward. In our experience, speed is of high importance to mitigate risk. The integration plan should explore the following questions:• Where are current goals and vision already aligned?• What aspects of both the target and parent company’s safety culture need to change and which should stay the same? • What differences between the two safety cultures present challenges? • What differences could be compli-mentary? • What can be learned from the target company that needs to be integrated into the larger organization?• What should the culture look like moving forward?When differences exist, proper planning and management of the integration process can alleviate negative ramica-tions and prevent culture clash. It is important to establish a documented process for working through differences between the two safety cultures prior to the integration.3 Charting a clear path removes ambiguity during the transition period and aligns leaders on a common goal moving forward.Step 3: Safety Culture IntegrationLeaders must be proactive in driving safety transformation initiatives dur-ing company integration. These efforts include communicating expectations, establishing trust, encouraging em-ployee participation, providing adequate resources, and holding the organization accountable for performance dur-ing and after the change management process. The following are 10 “musts” Avoid Getting Blindsided by Safety Culture in your Next M&A By Josh Williams and Eric Michrowski Photo courtesy of Propulo Consulting
Oilman Magazine / January-February 2021 / OilmanMagazine.com9OILMAN COLUMNto accelerate the pace of safety culture integration:1. Paint a picture of desired organizational values and culture. 2. Set clear expectations around safety and safety culture.3. Boost trust throughout the organization. 4. Promote participation. 5. Provide mentoring, coaching, training and guidance to ease the transition. 6. Drive out fear. 7. Demonstrate you care.8. Show people the ropes.9. Check to see how people are doing.10. Learn from new employees.Step 4: SustainmentSafety champions should be identied to ensure integration efforts are sus-tained. Explore themes such as safety metrics, leading indicators, training, processes and systems to ensure new employees are effectively aligned with the values and goals of the organiza-tion. This includes coaching and men-toring employees as they adapt to their new environment. Pre and post-pulse assessments are also used to measure M&A success, and to strategically and behaviorally address remaining gaps. Also, “safety” is a unifying force to get people on the same page so that every-one goes home safely to their families. Improving and aligning safety culture before, during and after the M&A process builds on successes already attained. It also helps prevent serious injuries and fatalities in the future. The Bottom LineLike in the movie, The Blind Side, introducing someone new may have surprising effects that benet everyone. The upheaval that is sometimes created with M&As provides a rich environment for larger organizational improvement. This is especially true with safety culture. Bringing in a new partner triggers a focus on how things are currently being done. Holding up a mirror and honestly assessing strengths and weaknesses is an important rst step to improvement. Also, new partner organizations may have creative ideas and best practices to further strengthen the organization. M&As, while challenging, offer an outstanding opportunity for leaders to improve safety culture throughout the organization and prevent SIFs. Don’t let the opportunity escape you!References:1. S&P Global Market Intelligence. Oil, gas deal tracker: COVID-19 fallout stied Q3’20 M&A. October 14, 2020.2. Intralinks. What Will Oil & Gas M&A Dealmaking Look Like in 2021? November 5, 2020.3. Schweiger, D. M., & Lippert, R. L. (2005). Integration: The critical link in M&A value creation. In G. K. Stahl & M. E. Mendenhall (Eds.), Mergers and Acquisitions: Managing Culture and Human Resources (pp. 17–45). Stanford, CA: Stanford University Press.Eric A. Michrowski is president and CEO of Propulo Consult-ing, a global manage-ment consulting rm delivering signicant and sustainable improvements in organizational performance. He is a globally rec-ognized thought leader and guru in safety and operational performance, and a highly sought-after executive speaker, who is recognized for his in-novative evidence-based approaches to safety and operations. He has been featured on TV, in articles and on podcasts, and his upcoming book will be published by ForbesBooks this year. Contact: eric.michrowski@propulo.com.Dr. Josh Williams is a partner with Propulo Consulting. For over 20 years, Williams has partnered with clients around the world to drive increased discretionary effort and improved strategic execution. He is the author of Keeping People Safe: The Human Dynamics of Injury Prevention and received the Cambridge Center Na-tional First Prize for his research on behavioral safety feedback. Contact: josh.williams@propulo.com. ADVERTISE 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! We have a creative team that can design your ad! Call us (800) 562-2340 Ex. 1 OilmanMagazine.com/advertise Advertising@OilmanMagazine.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com10OILMAN COLUMNCorrosion can be dened as the dete-rioration that a metal suffers from being under exposure to electrochemical mol-ecules that are in its environment, creat-ing permanent damage to the surface and, in many cases, even worse.In the article, “Corrosion – The Lon-gest War” published by Schlumberger, it mentions that in 2015 the annual cost of the effects of corrosion was $500,000 in the United States alone. This budget was six times bigger than the one for natural disasters. Corrosion is one of the most frequently recurring problems the oil industry faces today, just as it has in the past. The ar-ticle written by Kermany in 1995 for the Society of Petroleum Engineers (SPE) mentions that out of the failures that occur in the operations of the gas and oil industry, the most important is cor-rosion, which was involved in 33 per-cent of the cases at that time.This number has dropped over time due to the use of new alloys, but challenges related to reservoirs with more contami-nating uids also increased, as did both hydraulic and matrix stimulations. All these factors cause metals to come into contact with uids for which they are not normally prepared, accelerating the corrosion process and, in some cases, even creating corrosion immediately, compromising the structures and lives of the wells over time. In view of the different problems, there are different tools and technologies that are designed to detect corrosion early on and others designed to mitigate such processes. Technologies to Detect CorrosionCorrosion not only affects the opera-tional sector of the oil and gas industry, it also affects the tasks performed in a rening complex. This is why Impe-rial College London-Permanense developed the use of Radio Fre-quency Identication (RDIF) sensors upon request from bp, to be installed in its 11 reneries worldwide. RDIFs are sensors widely used for dif-ferent activities. For corrosion detec-tion in pipes, they focus on the use of radio waves that travel the metal surface where multiple emitters are distributed throughout the pipe.The emitting sensors are also informa-tion receivers and together they are able to provide an overall picture of the pipe’s integrity. Using sounds, they go off when corrosion occurs, which can be noticed at different levels, thus facili-tating early detection and being able to choose which type of repair methodol-ogy to use. In 2017, the company Draper took no-tice that in the U.S. alone, gas and oil pipelines travel over 2.5 million miles of mountains, forests and urban wetlands, whose characteristics create the per-fect conditions for corrosion to occur. Overhead pipelines were not prepared and losses related to pipe problems and repairs increased. For this reason, Draper decided to focus its efforts on creating an economical and reliable technology to detect cor-rosion in pipes around the country. Draper’s team of engineers developed WiSense, an identication network, which centers on the detection of the pipe’s magnetism, corrosion being one of the erce enemies of this character-istic in metals. WiSense is placed directly on the pipe, emitting a conductive signal on the metal and, when it detects a drop in its magnetism, it emits a signal to the checkpoint, thus detecting the growth of corrosive agents immediately. Draper is dedicated to the transportation of hydrocarbon, knowing that in order for this technology to succeed both low costs and minimal human operation are needed. They used the Internet of Technologies to Detect and Mitigate Pipe Corrosion By Raul PalenciaPipe corrosion. Source: PV Productions - www.freepik.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com11OILMAN COLUMNThings (IoT) to create a conductive loop, where each of the responses from the magnetic sensors located throughout the pipe is monitored by its hydrocarbon distribution system, making it a single data network where, in addition to being able to read the pressure, temperature and volume values of the uids, workers can also check the integrity of the metal equipment. The lifespan of Draper’s patented sensors is 10 to 20 years, during which time no battery change or human interference is required to ensure their operation.The inclusion of ber optics is in the race to nd out which is the best corrosion detector in pipes. The article, “External and Internal Corrosion Detection Sensors for Oil and Gas Pipelines Using Fiber Optics,” written by Dr. Nader Vahdati and company in 2018, presents a detailed study on the technology provided by Fiber Bragg Grating, which is based on the use of a permanent magnet.Following the same line as Draper, FBG’s engineers designed a prototype in which they took advantage of how economic ber optics are to use them as a data bus, and use the FBG sensor as a detector, based on the reading of inter-nal pipe material loss normally caused by corrosion. In this rst prototype, the FBG sensor is capable of issuing an alert when the pipe drops below a 3mm thickness.A small sensor placed on a thin metal sheet that is then bolted to the pipe works as a thickness reader. By early 2021, FBG hopes to patent this innova-tive tool, as well as its big brother, which is capable of working with greater thick-nesses. Techniques and Technologies to Avoid CorrosionIt is better to have an ounce of prevention to a pound of cure. In his article, “Use of Polyurethane Coating to Prevent Corrosion in Oil and Gas Pipelines Transfer,” written for the University of Mahshahr, Iran, in 2012, engineer Amir Samimi proposes a plan to use a triple layer of coating to improve the external corrosion resistance in the pipe over time.With the use of a rst layer of poly-olen, this material acts as insulation against the oxidizing ions in the metal by limiting movement and its spread. As an intermediate layer, copolymer is used, which is responsible for improving the adhesion of the polyolen and further restricts the occurrence of electrolysis; nally, it is covered with an epoxy coat-ing, which acts as a sealant agent which provides greater resistance to shock and high temperatures to which the pipe is exposed. The disadvantage to this type of method is how difcult it is to install in old, settled and working pipes, and in turn it represents added costs for new installations.There is a great battle in the develop-ment of corrosion inhibitors. One of the competitors is Baker Hughes with its CRONOX ™ corrosion control solutions. This element can be used in drilling or production areas as well as in transport and rening areas. It has a great duality thanks to its HP/HT char-acteristics. It is also able to resist attacks of oxidizing agents such as CO2 and oxygen. CRONOX was tested by Dr. Mihalea Alexandra, which she writes about in her article, “Corrosion Inhibition Pro-cess of Carbon Steel in Hydrochloric Acid by CRONOX,” written for Po-litehnica Timişoara University in 2017. In this study, she tested CRONOX in two cases: weight loss and linear polarization by the Tafel polarization method. In the experiment, a cylindrical disc cut from a carbon sample was used; hydrogen chloride or hydrochloric acid or in its hydrated form (HCI), which is a highly corrosive agent and is present in most oxidation processes to which pipes Draper WiSense. Source: Draper.comFBG Sensor. Source: Research Gate Continued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com12Figure 2: Tafel with CRONOX. Source: Research Gateare exposed in the oil and gas elds, was used as an oxidizing agent. Subsequently, for the gathering of results, she used electrochemical studies to detect corrosion. For the Tafel polarization method, the disc was exposed to temperatures of 298°k to 338°k, with a concentration of one M CHI and 0.1 percent of CRO-NOX for 240 hours, and another experi-ment was conducted without CRONOX during the same time. The application of CRONOX yielded positive results in im-proving the resistance to oxidation. The results are shown in Figure 1 & 2.In Figure 1 you will notice how the oxi-dation accompanies the piece through-out the whole process, corrosion being the lines that are in the lower plane. In Figure 2 you can see how CRONOX inhibits the corrosion process by stop-ping its occurrence during the experi-ment.Subsequently, a study was carried out on the tested plates based on the mass loss they experienced when CRONOX was and was not present in the process. The results gave a green light to the use of this compound as an inhibitor. The best way to work with corrosion is to avoid any existence of it. Also, it is known that some structures are already very long-lived and were not properly prepared before this derivation. How-ever, there will always be detection meth-ods to address the problem in time. Raul Palencia is an engi-neer and researcher with more than 10 years of experience as a geolo-gist. He graduated from the prestigious University of Andes (ULA), later he received a master’s degree in reservoir engineering at the Venezuela Hydrocarbons University. During his career development, he worked for oil companies in posi-tions such as: eld geologist, reservoir engineer and reservoir simulation. He has worked in Argentina, Ecuador, Mexico and Venezuela. He currently resides in Texas. OILMAN COLUMN Figure 1: Tafel without CRONOX. Source: Research GateCRONOX mass loss. Source: Research Gate
Oilman Magazine / January-February 2021 / OilmanMagazine.com13OILMAN COLUMNWeight of Hydraulic Fracturing in the IndustryHydraulic stimulations in the oil and gas industry are positioned as one of the rst three solutions to elds where the pressure has declined or in elds where the permeability is very low, either because of special conditions or because the reservoir is unconven-tional. In either case, it is an important monetary investment, in which nor-mally more than one service company is involved with the operation in search of the best results for an adequate and effective extraction of hydrocarbons.We try to alter the skin factor the for-mation has with respect to the well in order to make the passage of uid from one place to another easier and turn it into produced barrels. One of the most important factors during the fracking process is to be able to attack the target area correctly. The target area is chosen in multidisciplinary meetings outside of the well, which in-clude petrophysicists, geologists, reser-voir engineers and all relevant, related disciplines. Importance of the Selection of the Area The selection of the target zone is the rst step to the success or failure of the fracturing, according to the article, “Criteria for Selecting a Candidate Well for Hydraulic Fracturing,” written by F. Roshanai and J. Moghadasi. Impor-tant factors when selecting a well are detailed and the area or sand of the well that is to be fractured is discussed in-depth. One of the requirements that is taken into account is the permeability of the area, noting that reservoirs that are from 0.5 to 5 md are more favorable for fracturing; on the other hand, the content of this reservoir is detailed in the following table:Typical values of some parameters for candidate well selection in hydraulic fracturing. Source: OnePetroIn hindsight, the most inuential data in the selection of a candidate reser-voir to be fractured are the amount of hydrocarbons contained in the sand, along with the low permeability vari-able, and a minimum sand size of 10 meters (32.80 feet) in thickness. Analyzing the variables of low perme-ability and sand thickness, we note that:• Low permeability is synonymous with hard sands, with high Young and Poisson cohesion values, as they are resistant to separating their grains and, at the same time, they’re resistant to loads and have elastic-ity around the direction of applied force received. • On the other hand, these types of sands to be fractured tend to be low in thickness. Fractures are made in multiple stages either because the reservoir is a lenticular reservoir, or we simply want to fracture different reservoirs at the same time. Therefore, taking into account that the optimal selection of the area to be fractured is what will decide the valid-ity of the fracture, this task is divided into two halves. One is on the surface when a multidisciplinary team takes the knowledge about the area as a tool, and subsequently decides on the basis of geological and reservoir data to choose the area of interest. The second one is when the fracturing starts.Common Problems Associated with the Selection of the Area to be FracturedWhen facing an area of high mechani-cal strength values, and minimum sand thicknesses, multiple risks are taken when practicing the fracturing. These types of conditions are normal in shale How to Control Target Areas During Hydraulic Fracturing By Andres Ocando Photo courtesy STI GroupContinued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com14OILMAN COLUMNgas, but are also common in convention-al reservoirs, since seismic movements can divide a reservoir into several, be-coming known as a lenticular reservoir. A catastrophic error is the deviation of the fracture uid to less-resistant areas. This type of problem goes along with poor synchronization of the sand. If one takes into account the thickness of 32.8 feet, and that the wire-line opera-tions have a margin of error of 10-15 feet, the margin of error is approxi-mately 32 percent, which is normally de-creased with the use of technology and expertise of the engineers in charge. Another common error is to hit the cas-ing area, an error caused by erroneous calculations on the elongation that the wire will have at the time of starting the fracturing. Errors of this type not only compromise the hydraulic fracturing, but also cause substantial damage to the casing, making it necessary to use a sidetrack to continue working the area, in most cases. On the other hand, accidents occur when the acid used for shale gas sands seeps into areas of ecological interest, compromising the life of environments and organic beings, causing much more than monetary losses. In some cases, in conventional reservoirs, there is the possibility of opening communications with aquifers, affecting the production with high volumes of water. In any of the cases mentioned, the bad reputa-tion of hydraulic fracturing is further entrenched. During the planning of the fracturing there is another term that can further increase the difculty of the work: frac-turing in multiple stages. This type of fracturing is based on selecting differ-ent areas to fracture along the wellbore; these areas can sometimes be the same hydrocarbon divided into several reser-voirs. This modality can slightly com-promise the success of the fracturing.Tools That Can Mitigate Operational Errors for Correct Selection of the AreaThe ACUMEN article, “Hydraulic Fracturing Market Size Hit U.S. $83 Bil-lion by 2026,” explains that hydraulic fracturing practices are in position to grow more than 10 percent, from 2019 to 2026, increasing their market value to more than $80 billion by 2026. This means that the use of fracking will con-tinue to increase; therefore, the technol-ogy industry looks for ways to mitigate the operational problems that can com-promise the operation.In trying to give an answer to the op-timal selection of the area, there are several tools in the race to solve this challenge.One of them is The Tryton Multi-Stage Frac System (MSFS). A tool designed to operate in multi-stage fracturing, its functioning is based on the use of me-chanical balls technology, in which the tool is lowered between the pipes, and placed in the areas to be fractured.After the system is pressurized and the rst pressure area is pumped, this area increases the pressure of the pipe and the annulus causing the plugs of the tool to open, isolating the areas. Finally, the second area is pumped with the frac-turing uid at the same time, the sleeves open and the reservoir is fractured. This type of tool works from bottom to top, allowing optimum isolation of the areas, and, as it is placed in between the pipes, the margin of error in the area at the time of the fracture decreases. On the other hand, thanks to Weather-ford, there is technology in which the tool has two parts: the TRUFRAC® COMPOSITE PLUGS. Like in the previous case, the plugs work with a mechanical sphere mechanism to increase its internal pressure and release the plug.Along the operation there are the opening sleeves: the SIN-GLESHOT SLEEVE and the MULTI-ARRAY SLEEVE. The main difference between them is the MULTI-ARRAY SLEEVE can be installed in a series of ve, and, in the case of the SINGLESHOT, there is one for each tube. It has a sphere opera-tion and fractures can only be performed from bottom to top. As in the Tryton Multi-Stage, the geo-location of the sleeves goes hand-in-hand with the position of the pipes. In this way, the po-sition of the pipe in the bottom is correlated with the point where the sleeve was placed. Finally, there is the LIMIT-LESS™ Fracturing System. This technology separates itself from the normal manual process and features automated technology, with the use of the Limitless More than 200,000 wells had been fractured in the U.S. by 2017. Source: FracTracker Tryton Multi-Stage Frac System. Source: Tryton Tool Services
Oilman Magazine / January-February 2021 / OilmanMagazine.com15OILMAN COLUMNSleeves that are smaller than the ones mentioned above and have a coupling in both directions to avoid errors. These sleeves feature a hardened interior that prevents erosion, and can be closed after being open, providing exibility throughout the entire operation. The process of fracturing with this tool does not require intervention with wire or exible pipe as with the others men-tioned, but the way to open the sleeves is completely different as it has an auto-mated mechanism with sensors.The master secret of this tool lies in the Limitless Dart, which replaces the me-chanical spheres to automate the system entirely, leaving the sphericity behind. It is a completely soluble dart to avoid any plugging in the future. When this is dissolved, it leaves an important mark in the production, making its disappear-ance visible.In turn, it works as a geo-locator, be-cause outside of the well the position the dart occupies in the subsoil is known at all times, emitting a different signal each time it crosses a sleeve. In this way, the drilling maps can be correlated with the desired depth of the reservoir and the position of the sleeve, thus decreas-ing the margin of error in the selection of the optimal fracking area. The dart is programmed to be located in the desired sleeve and gives the signal to open. It is not necessary to apply pres-sure for its opening, so the execution times decrease. It also has the ability to open more than one sleeve with its pas-sage and follow its path, or to only open one at a time, turning the fracture into one of multiple stages at the same time or multiple selected stages. These tools are designed to mitigate the errors that can be caused by wireline operations, and, in turn, decrease the time and make the work during the fracturing easier, raising the economic feasibility of the activity because they achieve a signicant decrease in the preexisting margins of error.Andres Ocando is a 30-year old petroleum engineer, who has been working for PDVSA for ve years, facing posi-tions such as reservoir engineer and geomechanical engineer. He currently works as a project analysis engineer. There, he has optimized the data col-lection process for the development of geomechanical models. Ocando has ex-perience in copywriting and is currently a technical writer on topics related to the oil and technology industries. He collaborates for important technical publications such as OILMAN Maga-zine and SPE. Quality and responsibil-ity are two words that describe him perfectly. Ocando is currently pursuing higher studies at the University of Zulia to obtain his master’s degree in petroleum engineering. Advertise 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!We have a creative team that can design your ad! OilmanMagazine.com/advertise • Advertising@OilmanMagazine.com • (800) 562-2340 Ex. 1 LIMITLESS™ Fracturing System. Source: Advanced Upstream
Oilman Magazine / January-February 2021 / OilmanMagazine.com16OILMAN COLUMNThe beginnings of the digital transfor-mation effort of the oil and gas indus-try can be traced back at least a decade when many of the oil majors started their initial efforts on smart elds. Dif-ferent oil majors had various names for this concept – Shell called it Smart Fields, Chevron named it Intelligent Oil Fields, bp referred to it as Field of the Future – but the basic premise was the same: data combined with software and technology would enable autonomous, continuous optimization of oil elds. The underlying technology enabling smart elds is known as closed-loop reservoir management, and is described in Figure 1 below.The Real Reservoir box represents the real oil eld over which one or more objectives needs to be optimized. In a typical application, it might be net present value or cumulative oil pro-duced. The optimization is carried out by nding the optimal values of a set of control parameters including, for example, well rates for injection opti-mization and well locations for inll drilling optimization. The Models box represents approximate models that are mathematical representations of the real reservoir. These could be complex simulation models, analytical models or machine learning models that relate the control variables to the objective functions. Since our knowledge of the reservoir is generally uncertain and data is noisy, the models and their output are also uncertain. The closed-loop process starts with an optimization performed over the current models to maximize or minimize the objectives.The optimization provides optimal settings of the controls for the next control step. These controls are then applied to the real reservoir over the control step, which impacts the outputs from the reservoir (such as water cuts, BHPs, etc.) which are measured. These measurements provide new informa-tion about the reservoir, and therefore enable the models to be updated (and model uncertainty to be reduced). The optimization can then be performed again on the updated model over the next control step, and the process re-peated over the life of the eld.We have come a long way since the beginnings of the smart eld and digital transformation revolution, and COVID-19 has further accelerated the adoption of digital transformation. However, with data being the backbone of such a transformation, one of the key impediments to this digital trans-formation process has been the lack of standardized, high quality, easily acces-sible data in a timely manner, making it difcult to realize the full potential of digital transformation. Particularly with respect to closed loop optimiza-tion, high quality and timely data is critical to ensure that the models are The Dangers of Unreliable Data By Pallav Sarma, Ph.D.Figure 1Photo courtesy of JT Jeeraphun/Adobe Stock
Oilman Magazine / January-February 2021 / OilmanMagazine.com17OILMAN COLUMNalways “green” and reliable, and there-fore the optimizations based on them are reliable; otherwise, implementation of these “optimal” decisions would be disastrous.Among the many kinds of data being measured in oil elds, production data are probably one of the most impor-tant types, particularly because the eco-nomic viability of an oil eld depends directly on production. Additionally, well and layer level production data are required for most engineering work-ows and even for regulatory purposes like reserves reporting. Well level pro-duction is typically measured via well tests; however, such well tests are gen-erally quite infrequent due to the cost, production disruption and manpower needed to conduct them. Further, layer level measurements are even more dif-cult and rare, as they require running very expensive production logging tools (PLTs) that completely disrupt produc-tion and often are even not possible due to wellhead jewelry. As such, there is a need to allocate production to the wellhead and layers on a daily basis that is consistent with total production mea-sured at the sales or distribution points.Current approaches to surface alloca-tion balance uid input and output over the surface network so that inputs, outputs and inventory changes in the network are in balance for the selected quantity measure (volume, mass, en-ergy). Proportional allocation is the most common method used to allocate production, where the well tests are normalized to the sales and distribution point data. This proportional approach is very simplistic and has a few key limi-tations:• Inability of current methods to ac-count for the physics of uid ow in the surface network from the well-head to the delivery point can lead to inaccurate allocations.• Current approaches mainly use well test data to calculate allocations, which are then applied over periods of time, until the next well test is available. They don’t use all avail-able data, such as pressure and tem-peratures over the surface network, which are usually more frequently available than well test data.• Current approaches assume that al-location factors remain constant over periods of time when in reality sever-al factors, like wellhead pressure and injection-producer interaction, gener-ate signicant changes, making the allocation a dynamic process which needs to be continuously calculated.Using state-of-the-art machine learning and data assimilation approaches with well-known physical models and cor-relations, it is possible to signicantly improve over the current approaches to continuously calculate daily oil, wa-ter and gas rates at every wellhead and other network nodes that match all measured historical well tests, pressure and temperature data. Furthermore, such approaches can be operational-ized using the power of cloud and edge computing. Figure 2 shows a surface network with Continued on next page...Figure 2Figure 3
Oilman Magazine / January-February 2021 / OilmanMagazine.com18OILMAN COLUMN21 wells and one gathering station. This network is simulated with a full physics-based network simulator to create a test data set to compare the different ap-proaches to allocation.Figure 3 shows how employing such a comprehensive approach can lead to better allocation. Red is the “true” data created with the simulator and is hid-den from the proposed approach, black is the well tests, blue is the allocation based on current approach, and the green ensemble is the result of applying an ensemble estimator to a physics-based network model to perform the allocation. It is clear that such an ap-proach leads to much better allocations over a traditional allocation.Similar to the surface allocation prob-lem, the current approaches to layer level allocation are also usually quite simplistic and have many issues. • The most common approach is static KH (permeability*thickness) based allocation, which can again lead to erroneous results.• Since injection rates, production rates and connectivity are dynami-cally changing, there is a need to do layer level allocation on a continuous basis, which is impractical with cur-rent approaches.• Current approaches are determinis-tic in nature and do not account for uncertainty, which is necessary for reliable results.• This process can be very time con-suming and inaccurate if done manu-ally, which is currently the norm in the industry.Again, combining state-of-the-art ma-chine learning and data assimilation approaches with well-known physical models, layer level allocation can be improved signicantly, to provide fully automated, unbiased, layer level pro-duction and injection rates on a daily basis. Such an approach was tested us-ing a data set from a real eld. The eld has 98 active producers and 42 injectors with a total of 83 reservoirs. The op-erator measures well level production using well tests and layer level injection using injection surveys. The objective is to calculate layer level production using all available data.In order to solve this problem, a con-nection network for each layer was built using the operator’s understanding of the eld. Figure 4 shows such a net-Figure 4Figure 5
Oilman Magazine / January-February 2021 / OilmanMagazine.com19OILMAN COLUMNwork for a particular reservoir.A simple two-phase, physics-based uid ow model is then solved over these networks and combined with an en-semble estimator to t the models to all available historical well level prediction and layer level injection data. The end result is then oil and water production rates estimated at each reservoir layer. Figure 5 shows the quality of the t to the well level historical rates.The oil rate for one of the wells is on the left and the water rate is on the right. The red curves are the measured rates, the black curve is from a tradi-tional manual approach, the light blue curves are the ensemble estimate from the above approach, and the dark blue curve is the mean of the ensemble. It is clear that the proposed approach provides a much better match to the observed data, and even more so for water rates compared to the traditional approach. This is because the tradition-al manual approach is quite complex, so the engineers usually focus on match-ing oil only. Additionally, the traditional approach requires over three months to do a full allocation compared to less than an hour with the proposed auto-mated approach! Figure 6 shows the layer level alloca-tions for one of the layers of the well obtained using the approach above. Such allocations can now be used for many engineering workows like layer level reserves estimation.One of the fundamental drivers of digital transformation is good quality, reliable and timely production data. By integrating different data sources with physics, machine learning and data as-similation approaches, combined with cloud and edge computing, we can lead to a step change in the quality and reli-ability of such critical data.Dr. Pallav Sarma is chief scientist of Tachyus responsible for developing the funda-mental modeling and optimization technologies underlying the Tachyus platform. He is a world-renowned expert in reservoir man-agement, with multiple patents and numerous papers on the subject.Sarma has over 12 years of expe-rience working for Chevron and Schlumberger. As a staff research scientist for Chevron, he was re-sponsible for its key simulation and optimization technologies. He has received many awards including the Dantzig Dissertation Award from INFORMS and Chevron’s Excellence in Reservoir Management Award.Sarma holds a Ph.D. in petroleum engineering and a Ph.D. minor in operations research from Stanford University. Figure 6ADVERTISE 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! We have a creative team that can design your ad! Call us (800) 562-2340 Ex. 1 OilmanMagazine.com/advertise Advertising@OilmanMagazine.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com20The COVID-19 pandemic has dra-matically changed our entire lives, from work to education, recreation and more. What started out as a business continuity challenge – ensuring an orga-nization can continue to operate safely, often requiring considerable changes to operations to either stay open or re-open – has evolved. For jobs that require on-site attendance, temporary accommodations are beginning to look like more permanent solutions. It seems like some changes may last even after a vaccine is widely available. The safety and well-being of employ-ees and the community are the driving forces. Ultimately, a key focus for com-panies remains how they hire people who meet the standards they set and maintain safe environments, wherever those may be.Testing Helps Keep Your Workplace Open and SafeOrganizations are doing everything they can to protect their employees, custom-ers and communities from the spread of the virus. In addition, companies seek to avoid a COVID-19 incident that may cause a shutdown, which can be devas-tating. The stakes are particularly high in environments where social distancing and other precautions are either chal-lenging or almost impossible.By now, we are all accustomed to high-level screenings that occur in a range of settings, where foreheads are scanned for temperature and some basic ques-tions about symptoms and potential exposure are asked. Some companies have made considerable investments in training or hiring staff and purchasing equipment.It is possible, or even likely, to have the virus and display no signicant symp-toms. A more sophisticated, science-based approach is testing individ-uals for the active virus, leveraging polymerase chain reaction (PCR), to identify presence of COVID-19 at that specic time. This can provide a meaningful restoration of control, giving companies necessary informa-tion to manage and reduce the risk of outbreak. With recent advancements in non-invasive saliva-based testing, highly reliable test results can be achieved quickly to identify potential risk. Establishing a Population “Bubble”There have been some highly publi-cized instances where a large group of individuals, such as professional sports leagues, has undergone COVID-19 test-ing, with a negative test result required for entry into a contained environ-ment. We’ve seen this as one method to attempt to keep the virus out of the population, while continuing to test so any positive cases can be quickly iso-lated to reduce threat to the rest of the group. A clearly dened and controlled bubble requires all who enter to test negative, with consistent negative tests over time to remain inside.Certain jurisdictions have established strict testing and other requirements for entry as the only way to avoid a lengthy and potentially unrealistic quarantine period, creating their own protected environments. This can be most ef-fective where there are limited points of entry, as has been seen in Alaska, Hawaii and other select states. These types of locations provide a realistic way to enforce testing and quarantine stan-dards. Other places have enacted similar requirements, but those with more varied and open access (often through a vast network of well-traveled roads and highways) can yield lower compliance. In these cases, abiding by regulations is largely left to the individual traveler. As was done for professional sports, some companies have established their own bubbles, either to help abide by local regulations or to establish a higher stan-dard in and around their own jobsites.A Case Study in Creating a BubbleProduction and exploration within oil and gas tends to be in remote locations that feature strictly controlled access points. An effective way to keep CO-VID-19 and its devastating effects out is through proactively testing all who will be accessing the controlled environment COVID-19 Testing and Background Screening Are Now Essential for Safe Workplaces By Alla Schay Photo courtesy of Narongrit Sritana – www.123RF.com OILMAN COLUMN
Oilman Magazine / January-February 2021 / OilmanMagazine.com21shortly before entry. Sterling has worked with one of the largest privately-owned oil and natural gas producers in the U.S., featuring employees and contractors ro-tating in and out of the North Slope of Alaska every two weeks. State mandate requires all who enter to show proof of a qualifying negative COVID-19 test.Working with this client, Sterling estab-lished a process where test kits are de-livered to employees’ homes four days prior to scheduled travel to Alaska. This allowed sufcient time to collect the sa-liva sample, return it to the lab, have the sample analyzed, and to report results to both the individual and company – all before stepping into an airport for the journey to the worksite. In this case, testing has become one more routine item for the pre-trip checklist. Follow-ing a cycle away from Alaska, employees follow the same process in advance of their next work shift. To decrease the likelihood of contracting the virus while outside the bubble and to more eas-ily enable re-entry, individuals practice strict social distancing, masking and commonly used hygiene procedures.The Enhanced Role of Identity Verication and Background ScreeningAs you bring new workers onboard, you are adding to your company culture and introducing new people to your existing employee base, and potentially to that of your customers, partners and your community as well. In short, new team members can impact the people around you and your brand and reputation. A consistent, high-quality background check remains a critical step in creating a safe, secure workplace that includes only those individuals who meet the standards you set. An effective background screening program begins with identity verica-tion from the rst interaction with a candidate for a job. Government issued identication is scanned and validated for authenticity. Using a smart phone, a match can be established between the candidate and the information pre-sented.From there, criminal records can be checked, employment and education can be veried, and drug tests can be administered, among other items. In consultation with Sterling, clients can select pre-dened background screening packages designed for specic types of jobs, unique screening solutions for spe-cic needs or some combination. This is a best practice for all employees, with particular value for remote locations or instances where extended time periods are involved. Investing in consistent, high-quality background checks every 12 to 24 months can provide critical information about your workforce to help reduce risk. Methods for providing a safe working environment will continue to change over time. Managing through uncer-tainty and staying one step ahead of any threats is key. An end-to-end CO-VID-19 testing plan, which helps reduce risks associated with an outbreak, com-bined with an identity verication and background screening program, helps protect people and make the tangible statement that safety is a top priority and critical part of company culture. The information contained herein is for informational purposes only. Sterling is not a law rm, and none of the information contained in this notice is intended as legal advice. Clients are encouraged to consult with their legal counsel about the impacts of any requirements. This, and other important information can be found on the Sterling website at sterlingcheck.com.Alla Schay is the general manager of the Industrials, Government and Education group of Sterling, a leading provider of background and identity services. She previously served as Sterling’s Client Services and Account Management leader, Chief Operating Ofcer, and Chief Human Resources Ofcer. Schay is an operations management professional with experience in business process transformation, Six Sigma analysis, and software and CRM implementation. OILMAN COLUMNSUBSCRIBE 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 Questions? Call or email anytime.Editor@OilmanMagazine.com • (800) 562-2340 Ex. 5
Oilman Magazine / January-February 2021 / OilmanMagazine.com22OILMAN COLUMNEric Eissler: My grandfather used to tell me that there is nothing more constant in life than change. He is right and, for many, change is a hard thing to deal with. With all the auto-mation going on, how are you helping companies adapt to change?Ryan Lailey: At WolfePak, we speak daily with independent oil and gas companies about digital transformation and automation. Discussions may include how to get started with an electronic process, what should be taken into account when digitizing workows, and ways to ensure frictionless data transfer and integration with operations. WolfePak conducted a survey in April to learn about what challenges our customers were facing with practically an overnight transition to remote work. Their biggest hurdle was working with paper-based processes. Many organiza-tions are looking for ways to manage their operations, customers, employees and partners while working from home. Couple these challenges with the market volatility, and you have companies that need to automate functions to do more with less, lower general and administra-tive costs, and reduce their reliance on paper-based processes.The oil and gas industry is primed for this innovation and the events of 2020 gave the transition a “jump-start,” if you will. In an industry where even the small-est and least signicant transactions may require complex interactions with own-ers, stakeholders, oileld teams and more, along with the need to make smarter and faster decisions, now is the time for companies to automate. To survive market conditions and our industry’s evolution, we must adopt new practices and excel in a modern work-place. Independent companies can gain several benets by leveraging new auto-mation technologies. It lets them become more agile and gain a competitive edge – all securely and cost-effectively. EE: Automation usually spells layoffs for many. Have you been seeing lay-offs or are employees being re-trained to do other, more technical jobs?RL: Cost-cutting initiatives are just not enough. Automation eliminates manual tasks, enabling teams to do more with less, and focus on higher priority work. When implementing a digital transforma-tion strategy, you not only need to deploy new technologies, your team needs to learn new skills and expertise. That makes re-skilling and training the cur-rent workforce all the more critical. To complete a successful digital transforma-tion, companies must embrace the right technologies and invest in personnel to learn modern approaches.A recent report by Ernst & Young showed that nearly 60 percent of today’s oil and gas workforce needs re-skilling for their companies to remain competi-tive. Still, only 43 percent of them will receive the training they need, which averages about ten months to complete. Re-skilling employees can be challenging, but it’s not impossible. Companies are augmenting the skills gaps by leverag-ing automation technology, with more than 51 percent of respondents already in implementation mode and another 40 percent planning to do so.It’s not just individual companies that need to change. Our industry’s reliance on paper-based processes for the back-ofce is well past their expiration date. The most signicant opportunity for the industry is to collaborate and digitize the entire ecosystem.EE: What are the most essential con-cepts for management and operations teams to learn and promote while undergoing these changes?RL: Transformation denitely must start at the top. Leadership sets the vision. Communication is key. Start by giving employees an overview of how the digi-tized company will run and how it will affect success. Assure them that it will make everyone’s job more manageable and show them how. If they can replace rummaging through a le cabinet look-ing for one piece of paper with a simple Google-like search for the same docu-ment, they will appreciate that. Employ-ees will feel encouraged to rally around this effort to make the organization more efcient by saving time, resources and money. This makes the learning curve worth it. Depending upon their size, companies may house tens or hundreds of thou-sands of documents with complex workows. They will get overwhelmed if they try to digitize everything at once. We recommend a “point forward” process, meaning the company sets a date to go digital and stop the inux of paper as it moves its procedures online. Then companies can determine what the next priority is and continue their journey from there. Additionally, companies need to evaluate how their current software infrastruc-tures are best supporting them. It’s not enough to just cut costs. Companies have to change how they operate in order to thrive today. Ensuring that all of your company’s software meets your best-t requirements is tantamount to success. We advise companies not to fall into the “sunk cost” fallacy and continue to invest in systems that aren’t agile enough to maneuver in today’s climate.EE: What kind of automation are you seeing the most in your experience? RL: The current pandemic has shed a harsh light on the old-fashioned nancial processes hindering oil and gas opera-tors and production. The production side has always been quick to implement the latest technologies. Still, investments for Interview: Ryan Lailey, CTO, WolfePak By Eric R. Eissler
Oilman Magazine / January-February 2021 / OilmanMagazine.com23OILMAN COLUMNthe back ofce have not kept pace, so ac-counting teams, among others, have had to rely primarily on paper-based systems and spreadsheets. Huge le rooms of documents and paper-based information are quickly becoming a thing of the past with more and more people having to work from home. WolfePak’s Document Manage-ment solution helps our customers with digital transformation by automating workows to the back ofce. Since people aren’t going into the ofce to pull a le or approve an invoice, digitiz-ing documents is crucial for maintaining business continuity. With WolfePak’s document management, employees working remotely can log in from any computer with an Internet connection and gain instant access to the information they need to do their jobs. For accounting pros, if you haven’t made your workows electronic, something as simple as asking many people to sign off or approve invoices is difcult and inef-cient. With the integration of DocVue into WolfePak, customers can automate this entire process.When they do return to the ofce, [employees] will be more efcient in this environment, reducing their reliance on huge le rooms of documents and paper-based information. It’s a win-win situation. EE: Why WolfePak? What sets you apart from the competition? RL: WolfePak’s customers are active in our strategic roadmap planning and are the lifeblood of our organization. Every company is unique, and it is our entire team’s mission to collaborate with them to learn how best to provide support today and in the future.WolfePak Software has been providing software for independent oil and gas companies for the past 30 years. Our mission is to put technology, once re-served for the biggest oil and gas compa-nies, into the hands of independents to enable automation. Automation will be the key to optimizing costs and getting the visibility companies need to make better decisions. Our goal is to automate as much of the work as possible, providing solutions for oil and gas accounting, oileld data collection, document management and inter-company business transactions. Our customers trust us because we provide information that helps them make better business decisions to deal with today’s volatile market conditions. Today, virtually any company can auto-mate its operations. Doing it correctly re-quires forethought and planning. It’s not just about data collection and transfer. It’s about data insights and letting the data tell you what to do next. In short, the only way that companies can survive in what is now a depressed market is to automate and streamline everything they can. EE: While we have seen ups and downs in the past, it appears the COVID-19 pandemic will have lasting effects on how we live our lives and do business. Some of these effects, such as working from home, will have major impacts on cities and transportation. Given that transporta-tion demand will shrink, and electric vehicles are on the rise, which market do you see oil and gas consumption shifting to? RL: COVID-19 has indeed changed the way we live and work, perhaps forever. What happens next is still up for debate. But it doesn’t mean the end of the ofce as we know it. Don’t forget that essential workers, of which there are so many within oil and gas, never left the ofce. That said, companies need to do every-thing they can to make data access, trans-fer and integration as easy as possible to manage for their teams, whether they are remote or not. Many work processes will never come back. No one wants to push paper or drive to the ofce to get a le when they can access it online from wherever they are. But not all manual work disappears; the approach just changes. And while the electric movement is excit-ing, it doesn’t signal the end of oil and gas as an industry. We forget that there are so many other things that rely on oil and gas to run – trucks, boats, barges, even irrigation systems on farms.EE: Under the Biden administration, how do you see oil and gas faring? Do you believe there will be a lot more regulations set forth?RL: We work in a highly regulated industry already. Our job at WolfePak is to help our customers maneuver through any market or political climate with ease. Oil prices going negative is something no one thought would ever be possible. This year is a perfect example of our indus-try’s resiliency and adaptability – we’ll get through this together.Our primary focus is on taking care of our customers. We’re doing everything we can to help them adjust to the “new normal” of business, whether that’s get-ting online remotely, implementing new cloud and mobile technologies, or creat-ing new business rules in our software to account for so many of this year’s industry rsts. We work with our clients to navigate their specic market requirements, understand what insights they can glean, and what new reporting needs they may have. And we aim to provide our cus-tomers with access to the right informa-tion when they need it, in as few steps as possible. EE: Technology and the oil and gas industry have come a long way. What are your predictions for the next step in this relationship?RL: Technology is an enabler to a more protable path. As I mentioned before, we will continue to work with our cus-tomers and partners to ensure we deliver solutions that efciently help them reach their business goals. Cloud adoption has rapidly increased in the wake of COVID-19. Customers un-derstand the benets of cloud economics and want the ability to scale as needed. In addition to more cloud and mobile deployments with the back ofce, we’ll see more data analytics and business intelligence (BI). Companies are sitting on mountains of data, but need help in gaining actionable insights from the information.
Oilman Magazine / January-February 2021 / OilmanMagazine.com24Whether it makes the front-page news with names you know or it’s happen-ing behind the scenes, oil and gas assets are always being bought and sold. The reasons vary. The oil industry is volatile and always has been. Every year compa-nies will examine many factors and try to make predictions on what the future of the market will be for the upcoming year. I’m not sure anyone was able to accu-rately predict or prepare themselves for the roller coaster the last year brought. According to Deloitte’s article from October 2020, “The Future of Work in Oil, Gas and Chemicals – Opportunity in the Time of Change,” the oil indus-try is in a “great compression.” This is where companies’ room to maneuver is restricted by multidecade-long low prices, unforeseen demand destruction, and changes in end-use consumption due to mass telecommuting, mounting debt loads, and a renewed focus on health from COVID-19. This downturn is truly like no other…and a big opportunity for repositioning.Josh Robbins, Founder of Beachwood, has been a reoccurring contributor to OILMAN Magazine in the past concern-ing acquisition and divestitures. Rob-bins started Beachwood over ve years ago as a contract business development service that uncovers oil and gas deals by outright calling oil and gas operators. They make phone calls to potential sell-ers, who then provide their off-market deal specics to the Beachwood team. Phone conferences are set up for both buyers and sellers to talk to one another, removing all the back and forth that happens when there is a middleman. As an exclusive buyer in a specic area, the client will get to see everything: deals, information about marketed deals and useful data from the eld.Companies and employees are fearful right now. Given how the previous year has transpired, some would consider this a scary industry to be in. To truly decipher the impact that 2020 had on an industry in which many people are des-FEATUREAcquiring More than Assets By Sarah SkinnerPhotos courtesy of Beachwood
Oilman Magazine / January-February 2021 / OilmanMagazine.com25perate to keep their livelihoods, Robbins’ business seems like the perfect resource to obtain information on what kind of wreckage we’re looking at post-2020.Sarah Skinner: The pandemic has impacted every industry and oil and gas are denitely no exception. I can imagine the seller’s market has grown exponentially during this time. What effect has the pandemic had on your business and what changes and trends are you seeing now that weren’t happening a year or two ago? Josh Robbins: I think it is a fair assess-ment to say that the pandemic affected every business, regardless of industry (unless you were in the business of mak-ing face masks). At Beachwood, we were no different. First, I had to gure out what, exactly, was an essential worker? We all work to pay for the essentials, so I think the rst three months of the pandemic put everyone at home. I am on the road for forty-plus weeks a year, and when the pandemic hit, everything came to a screeching halt. I started driving to my ofce to work because getting anything done while at home is so difcult. I realized that I was driving 35 minutes one-way, so I could sit in an ofce built in 1972. I looked at the headlines and commercial real estate was collapsing. Renters were disappearing, so many landlords started offering discounted rates for their ofce space. I realized I could save a signicant amount of money, as well as a signicant amount of time, by moving closer to home. So, we packed everything up and moved ofces.In the meantime, I had picked up some excellent clients. People that understood that when everyone is going one way, you go the other. We were able to close six deals during the pandemic. Some companies didn’t have six operated deals to list in 2020.Everyone thought that properties were going to be sold at a discount in 2015. Everyone in the industry said that the properties should be sold at a discount. They said it all the way [through] 2015 and into 2016. Then, in 2017, when people could have sold at a high point in the market, they decided to wait it out. After the price drop in 2018, the talks started up again – things are about to sell at a discount! But nothing sold, and people kept talking about how there should be deals on the market, and they kept talking about it through all of 2018, all of 2019 and into the rst two months of 2020. Then COVID-19 hit and was the single most destructive factor that the entire industry has ever seen.The trends are a direct reection of that destruction. Future oil and gas compa-nies have to run extremely thin but, to everyone’s surprise, you can run thinner companies when everyone works from home. The industry had immediate buy-in from every large and mid-size com-pany because they knew they had to do something to survive. “Work from home” became its own ac-ronym (WFH), and it became completely acceptable, literally overnight, to have kids running through your conference calls. Again, serious adjustment time.Through that time period, the industry lost a ton of talent. Wave after wave of emails outlining the layoffs continued to hit the LinkedIn pages. So, when we see trends, they will be from companies and people who have made it through the pandemic. Those people are going to be cautious, the rigs they put in the ground (if they put rigs in the ground) will be checked (and quadruple checked) [to ensure] that the well will make money in this environment.You won’t see any large land grabs or huge lease amounts. You will see disci-plined teams working on common sense deals that will increase the amount of production they have for the least out-of-pocket cost. I think you will start to see a sell off of assets that can bring in cash and remove liability. SK: Is this a lucrative business to be in at this time or is it the opposite?JR: I honestly believe that the oil and gas business is the best and most lucra-tive business that exists. A close second would be space exploration. Oil and gas are the cornerstone of our world. Plastic and fuel are in every corner of the world. FEATUREContinued on next page...Buying oil wells. Josh Robbins with Jennifer Robbins, co-owner, Beachwood
Oilman Magazine / January-February 2021 / OilmanMagazine.com26FEATUREEveryone will need oil and gas for the rest of eternity. If that isn’t a winning in-vestment strategy, I don’t know what is.SK: What changes has Beachwood had to implement during this time and how have you adapted?JR: We have moved ofces [and] re-placed travel with phone conferences. I celebrate every time I can actually meet someone for coffee. We have to change and adapt in order to survive. Things are different now, and people will want to hold onto their old ways as hard as they can. But, in a post-COVID world, most people won’t have a choice; they will have to change and adapt. We have worked with sellers more close-ly. Everyone is looking for help during this time, [whether it’s] with understand-ing the market, the future of the asset [or] the employee head count. I built this company to help oil and gas companies. I don’t care about the dollar amount or the size of the tank battery; I care about the people that are trying to build companies. I care about building local businesses and transforming com-munities. Oil and gas are always rst on the list of donors or where people go to try to get donations. And we always help. But we are always the rst industry people slan-der. We help our hometowns, our small towns and our community downtowns. All of those communities need our help even more, and I want to help build the companies that will be that lifeline.SK: What do you think the future looks like for acquisition and di-vestiture (A&D) and where, in your opinion, is the oil and gas market headed?JR: People will start selling. For one reason or another, the more calls we make, the more people are willing to part with assets that no longer t into their company. The life of a well will be redened and companies will target straight line decline over years instead of what they have been looking for, which was immediate pay-out, and a complete disregard for how to produce the well in the later years of its life.I think gas assets are the rst step in that asset buying phase. People want low decline and stable pricing, and natural gas provides that. I think if the LNG market moves away from the Henry Hub, we could be looking at another boom, but that is nowhere close to the current environment we are in. For now, people will concentrate buying efforts on natural gas in oil-friendly states. I think the investment world will stay out of Colorado until sureties can be given from the state that oil and gas are, in fact, essential to their economy.Oil assets are going to be tough to move. People are going to expect top-tier pricing, but with so many other people looking to sell, the market will be lled with sub-par oil assets that need new homes. Unless the sellers are willing to take a real look at the current market, there will be disappointment after 40 of-fers are made and none are even close to what they perceive the value to be. With that being said, COVID-19 made “buy-ing local” a term that is being picked back up in the oileld. It makes so much sense to sell an asset to an operator that works in the same area you do. We man-age to connect people every day, and sometimes the companies know each other. They drink coffee at the same breakfast place. But they never reach out about buying a well or selling a well that no longer makes sense for them to own.This business is fascinating. Every single day I do something new. I meet new people, interesting and intelligent people. I help companies grow. I help them sell for whatever reason they want to. Building Beachwood was the best way to get involved with every company in the industry and help them out. On our website, that is a key quote: “Our success is driven by the client.” When companies are building, growing and making sound decisions, we have a healthy industry. Here’s to a healthy industry for the rest of the 2020s!Everything Robbins says about the industry is not only insightful, but hope-ful. He is not sugar-coating the situation. He made clear that, “COVID-19 was the single most destructive factor that the entire industry has ever seen.” However, it’s not all doom and gloom. Assets are coming and going, but we’re gaining more than assets, we’re gaining knowl-edge – the ultimate source of power. What we’re losing and whether we’re really losing anything here is a matter of perspective. There has been, and there will continue to be, adaptability among companies and employees. Day by day, we’re all learning how to familiarize ourselves with this now, not so strange, environment. This industry is resilient. Buying and selling will occur as needs change, but one thing remains constant. Oil and gas aren’t going anywhere. We, as an indus-try, will nd a way to grow from this. It’s one heck of a learning curve and prob-ably the biggest transition we’ll make in our lifetime, but we will come out of it better than before. With some of the most intelligent individuals and the most advanced technology across the globe, condence is high and we have nowhere to go but up.
Oilman Magazine / January-February 2021 / OilmanMagazine.com27OILMAN COLUMNEric Eissler: What accounting and nancial reporting methods can oil and gas companies apply to help manage future business decisions?Chad Valentine: Adopting the PCC GAAP alternative for goodwill can alleviate pressures related to goodwill impairment and simplify business combi-nation accounting as consolidations of companies continue to increase in the industry. While no one is recommend-ing early adoption of ASC 842 - Leas-es, the new pronouncement is coming soon. Companies should prepare by making schedules of all identied leases and begin to comb through repetitive monthly expenses to see if leases exist under the new guidance.EE: How should oil and gas com-panies monitor and maximize lease royalties?CV: Companies should ensure that they have good title on all leases and do thorough due diligence for titles on purchases to ensure they get their money’s worth. Additionally, compa-nies should monitor lease lives and drilling requirements to ensure they don’t lose leases unnecessarily. Lastly, companies should monitor costs by their operators to make sure they are in line with estimates and that they do not indicate overspending or improper well management. In certain cases, a JIB audit may be the proper step to xing or identifying any issues.EE: What are some key tax con-siderations energy companies can apply to reduce liabilities?CV: There are three common areas we help our clients with each year to help them save on taxes. Sales tax charged incorrectly by vendors to operators is one of the most common savings opportunities, and companies can look back multiple years for additional savings. Property tax renditions should be monitored each year as volatile oil and gas prices can change a property’s worth and there are chances to save money in situations where the state assessed a value too high. Lastly, there are other state and local tax issues, as well as federal tax savings, that can be had in certain situations that are avail-able to operators. These include fran-chise taxes, manufacturer’s credits, and research and development credits, just to name a few. Taxes will always exist, which means there is probably a way for companies to reduce their burden if the right experts are involved.EE: How should oil and gas com-panies structure a buy/sell agree-ment?CV: Companies on the buy or sell side should consider having due diligence experts conduct buy/sell side due dili-gence to ensure you are getting what you pay for. Protecting your invest-ment dollars doesn’t begin with the purchase, it begins with the budgeting phase, which should include some form of research and analysis of what the company intends to buy or sell. Furthermore, due diligence reports can help a seller move assets quicker as they show potential buyers a level of condence and organization that other companies may not have. Additionally, a buyer can express its interest and seriousness through buy side due dili-gence, which could give a company the edge in a bidding war. Due diligence should always be considered in a buy/sell transaction by management teams to show investors you are keeping their dollars safe and sound. Interview: Chad Valentine, Partner, Assurance Services, Weaver Accounting By Eric R. Eissler 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 Questions? Call or email anytime.Editor@OilmanMagazine.com • (800) 562-2340 Ex. 5
Oilman Magazine / January-February 2021 / OilmanMagazine.com28OILMAN COLUMNIt is well known that, if all things being equal (or in Latin ceteris pari-bus or caeteris paribus), the volume is directly proportional to temperature and inversely proportional to pres-sure, which are applied to it. In other words, under constant temperature and pressure, the relationship between the volume of gas and the number of moles is direct. This law is known as Avogadro’s Principle or Avogadro’s hypothesis and was rst published by Amedeo Carlo Avogadro (1776–1856), an Italian scientist, in the year 1811.For those who prefer a mathematical language, we refer to Avogadro’s origi-nal and simple modied equations:V ÷ n = k, which means that the vol-ume amount fraction will always be the same value, if the pressure and tem-perature remain constant.Let V1 and n1 be a volume amount pair of data at the commencement of our research. If the amount is transformed to a different value called n2, then the volume will be altered to V2.As we are aware that V1 ÷ n1 = k and we are acquainted with V2 ÷ n2 = k.Meanwhile, as k = k, we can determine that V1 ÷ n1 = V2 ÷ n2.This equation of V1 ÷ n1 = V2 ÷ n2 will be very useful in cracking Avogadro’s Law problems. Here is the Law articu-lated in fractional form:And, if we emphasize that the tem-perature should be presented in kelvins (and Celsius degrees), and the pressure in Pascals (which is how all the units are accepted in modern chemistry and physics, as well as in the SI, where 0 K = -273.15°C and 1 Pa = 1 Newton/m2 = 0.00014503773 Psi), then the needed equation is as follows:Vx = Vo × (273.15 + Tn) ¸ Po x Pn, whereVx – a new, sought-for volumeVo – an original volume in the same unitsTn – a new temperature in Celsius degreesPo – an original pressurePn – a new pressure in the same unitsAlthough the Avogadro’s Law relates to an ideal gas (an abstract, theoreti-cal gas composed of many randomly moving point particles whose only in-teractions are perfectly elastic collision), the above equation is actually good (universal) for any gaseous or liquid hy-drocarbons.There are no such problems with weight measurements but, when it comes to volumes, it is very important to bear in mind that, in the U.S., the oil/gas and energy business (and, im-portantly, the API, DoE, PRMS and USGS) now use the following set of volume measurements, known as U.S. standard temperature and pressure (STP): 60°F (288.706 K, 15.556°C) and 14.696 psia (one atm, 1.01325 bar), also known as “one standard atmosphere.” Using these standards, the volume of one mole of a gas equals 23.6442 liters; however, one cubic foot of a gas does not equal 28.3168 liters (under any sim-ilar measurements), but 28.8719 liters (in line with the denition of the STP, used by the International Gas Union (IGU) (15°C and 760 mmHg).These U.S. measurements are the most Measuring Oil and Gas Volumes in Different Countries: The U.S. and Russian Cases By Eugene M. Khartukov and Alexander Novak
Oilman Magazine / January-February 2021 / OilmanMagazine.com29OILMAN COLUMNcommonly used, if not specied or if unknown, worldwide to dene the volume of what is termed “Sm3” (Stan-dard cubic meter). [FYI: The earlier International Union of Pure and Ap-plied Chemistry (IUPAC) denition of the STP (273.15 K and 101.325105 kPa), “is now discontinued worldwide,” as if it was ever used in the States or elsewhere.]It is noteworthy that the aforemen-tioned “standard” and “normal” indi-cate that these units are not strict vol-umes of gas that are owing but quan-tities of gas. An SCF corresponds to one cubic foot of gas at 60°F (15.6°C) and 14.73 psia, while a Nm3 corre-sponds to one cubic meter of gas at 15°C and at 101.325 kPa or 760 mil-limeters in a mercurial barometer (760 mmHg). This is about 29.9 inches of mercury and represents approximately 14.7 pounds per square inch (psi).Sometimes, other sets of volume-measurement units are utilized. In particular, Normal Temperature and Pressure (NTP) are commonly used as a standard condition for testing and documentation of air compressors, blowers and fans capacities: They are dened as 20°C (293.15 K, 68°F) and one atm (101.325 kN/m2or kPa, 14.7 psia, 29.92 in Hg, 407 in H2O, 760 torr). A fan that produces a static pres-sure of 3 in H2O (a good average value) will increase the absolute air pressure by 3 (in H2O).Currently, the IUPAC denes the NTP as 273.15 K (0°C) of temperature and 100,000 Pa of pressure, while the Na-tional Institute for Standards and Tech-nology (NIST) denes it as 293.15 K (20°C) and 101,325 Pa (760 mmHg).Worldwide industrial applications have the so-called Standard Ambient Tem-perature and Pressure (SATP), which are also used in chemistry as a reference with a temperature of 25°C (298.15 K) and pressure of 101.325 kPa and may be called “normal conditions.” Under these conditions, the volume of one mole of a gas is 24.4651 liters.The Montreal-based UN International Civil Aviation Organization (ICAO) invented “the international standard atmosphere at sea level” (101325 Pa or 760 mmHg with a zero absolute and relative humidity), which is often called “normal pressure” and uses the follow-ing measurement conditions: 288.15 K or 15°C and 101,325 Pa or 760 mmHg.In Europe, Australia and Latin Amer-ica, for example, the STP conditions used by the International Organiza-tion for Standardization (ISO) (that are 15°C and 101.325 kPa) have been adopted, as a rule, and are used as the base values for dening the standard cubic meter.In Russia 20°C and 760 mmHg, cor-responding, in particular, to the U.S. NIST’s NTP and EPA’s STP, are of-cially used for volume measurements. This is almost the biggest difference in temperatures used at present in the oil and gas industry worldwide (20°C and 60°F).1 By Russian measurements, Figure 1: Oil and gas volumes under the U.S. and Russian Current STP, in %. Sources: Calculated and drawn by the author.Table 1: Production of HCs in Russia and effects of different oil & gas measurements Sources: Compiled and calculated by the author based on https://minenergo.gov.ru/ activity statistic, http://www.cdu.ru/catalog/statistic and http://of-si.ru/rosstat-ocialnyj-sajt.Continued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com30one U.S. cubic foot of a gas does not equal 28.3168 liters, but nearly 28.7527 liters, or contains almost 1.54 percent more gas, while a U.S. 42-gallon barrel of oil is not equal to 158.987295 liters but accommodates over 161.4345 liters (again by nearly 1.54 percent more) (Figure 1).If taken in absolute physical terms, with gas production in Russia now standing at some 730 bcm a year and that of crude oil and mixed/leased condensate at over 560 mta, this is more than what was actually pro-duced last year in Vietnam (9.6 bcma or 0.93 bcfd) or Peru (6.4 mta or 154 kb/d) or Russia (Table 1).For its energy measurements, Russia (like the IEA and the PRC) ofcially uses an energy unit of tonne of oil equivalent (toe), which net caloric value (NCV) is dened, by conven-tion, as follows:• 1 toe = 11.63 megawatt-hours (MWh)• 1 toe = 41.868 gigajoules (GJ)• 1 toe = 10 gigacalories (Gcal) – us-ing the international steam table calorie (calIT) and not the thermo-chemical calorie (calth)• 1 toe = 39,683,207.2 British ther-mal units (BTU)• 1 toe = 1.42857143 tonnes of coal equivalent (tce)A similar energy unit – barrel of oil equivalent (boe) – is often used in the U.S. for energy comparisons and combinations. This is a unit of energy based on the approximate energy released by burning one bar-rel (42 U.S. gallons or 158.9873 litres) of crude oil. The BOE is used by oil and gas companies in their nancial statements as a way of combin-ing oil and natural gas reserves and production into a single measure, although this energy equivalence does not take into account the lower nancial value of energy in the form of gas.The U.S. Internal Revenue Ser-vice (IRS) denes higher heating value (HHV) of the boe as equal to 5.8 mi llion BTU (5.8×106 BTU59°F equals 6.1178632×109 J, about 6.1 GJ or about 1.7 MWh.) The value is necessarily approximate as various grades of oil and gas have slightly different heating values. If one con-siders the lower heating value instead of the higher heating value, the value for one boe would be approximately 5.4 GJ (see toe above). Typically, 5,800 cubic feet of natural gas or 58 CCF (100 cubic feet) are equiva-lent to one boe. The USGS gives a gure of 6,000 cubic feet (170 cubic meters) of typical natural gas.Over the northern border, in Canada, the toe is used by the country’s min-istry of energy – the National Energy Board (NEB) – and leading Canadian energy companies. NCV of this en-ergy unit is dened as 41.868 giga-joules (GJ) or 10 gigacalories (Gcal) (see above). For natural gas and NGLs, cubic metres (m3) are used and measured at 15°C and 101.325 kPa (760 mmHg), which means that Canadian STP fully corresponds to those used in the EU (see above).In Russia and the other former Soviet countries, the tce (see above) is widely used for energy comparisons. This energy unit is usually called tonne of standard reference fuel (trf), net caloric value of which is dened as 29.3 GJ or 7,000 kcal. In this case, it equals 0.7 toe and refers to energy contents of various fuels in (Table 2).1 To be exact, an even larger differ-ence should be attributed to volumes (of natural gas) exported by Russia to the EU (almost 1.74%).Eugene Khartukov is a Professor at Mos-cow State Univer-sity 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.Alexander Novak is Minister of Energy of the Russian Fed-eration, Chairman of the Board of Direc-tors of Transneft, a member of the Board of Directors of Rosneft, Gazprom and of the Supervisory Board of Rosatom. In 1993, he graduated from Norilsk Industrial Institute as a specialist on Economy and Management in Met-allurgy. In 2009, he graduated from the economic faculty of the Mos-cow State Lomonosov University (evening education) as a specialist on management. On May 21, 2012, appointed Minister of Energy by Presidential Executive Order. OILMAN COLUMNTable 2: Average energy contents of various Russian fuels. (incl. in relation to the reference fuel). Source: Adapted from and calculated by the author based on https://studles.net/preview/5707551/ page: 6. (1) For dm3
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 / January-February 2021 / OilmanMagazine.com32OILMAN COLUMNYoung Professionals in the Oil and Gas Industry: Interview with Ahmed Elgohary By Alan Alexeyev Alan Alexeyev: Tell us a little bit about your current (or latest) posi-tion and what you do, as well as how you found a job.Ahmed Elgohary: I currently work as a QHSE engineer. I started out as a rig hand then I became an operations engineer with a drill-ing contractor. When the slow down happened, I was transferred to QHSE where they felt there was a need for an engineering team to revamp the organi-zation’s safety system.AA: What inspired you to start a career in the oil and gas industry? How did you decide to become a petroleum engineer?AE: I grew up in the Middle East where politics is part of everyone’s life. The oil eld is afliated with politics, which is what inspired me to become part of the game. I did not really know much about the content studies in petroleum engi-neering; however, I was one of the top students in high school in Egypt, which made me eligible to enroll in petroleum engineering faculty in Suez Canal, as it is very selective since they only accept a handful of students from the entire country.AA: You often meet workers in industry who do not have a formal college degree but, in your case, how valuable was it to get the university experience? AE: The way I see it, and excuse my expression, having a university degree (preferably engineering) and going to work in the industry is like going to war while having a more advanced weapon to ght with. You are still going to ght, and you might actually not win the ght, but it gives you some leverage of winning the ght. In other words, it is a good idea to have a petroleum engi-neering degree, but it is not a guarantee you’ll make it to the top. As we all know, most organizations care about hiring someone who can have a positive con-tribution to their business. This is when soft skills and oil eld experience come into play, and these are not acquired through college.AA: How did you nd yourself transitioning from an academic envi-ronment to the industry/corporate? What would you tell people who are about to make such a transition?AE: It was a very tough transition going from a petroleum engineering gradu-ate working as a rig hand. You have to turn on survival mode if you’re put in such a situation; otherwise, you won’t make it. The situation is different from person-to-person, but my advice is to try to make connections with industry personnel and get industry internships while in college as this would increase your chances of landing a nice job after graduation and, believe me, this is [far] more important than your GPA. The industry/corporate environment is a totally different game that relies heavily on being a people person and maintain-ing good relationships and, above all, being a leader.AA: Has the industry taken initia-tives to help smooth the transition for young professionals into the oil sector? What, if anything, could be done better?AE: Unfortunately, in my opinion, no. And it’s not in the large corporations’ favor to do so. If you look at the big corporations’ attrition prole, you’ll notice they have relatively high attri-tion. The reason is because joining a big corporation is like going to the military. In an organization, some will survive; some won’t, and they will quit. The nice part here for the organization is that the ones who survive are the good soldiers and they’re now in the system and part of a long-term process to become future leaders. This brings us to one of the main aspects of a leader which is to be adaptable (in industry terms, to be moldable). Now, if this transition was so smooth, everyone would make it, including individuals who are not willing to do what it takes (and in the eyes of an organization, they’re not leaders).AA: The oil and gas industry has tons of conferences and events. Have you attended any of them? If so, how useful do you nd them and what’s your takeaway?AE: Yes, I used to attend a lot of them, with the mentality of trying to get a job, and this was the issue. If I go back in time, I would change my mentality from trying to land a job to trying to make good friends, and I mean it; you’re really trying to make a friend, like you would in college. You meet someone that you feel you have a lot in common with – maybe at the conference or the hotel or the bars afterwards – and you make friends with them and stay in touch with them. Through pure friendship, this person may be the reason you were able to nd a job after graduation. If not, you still have a good friend and a good connection.AA: If you communicate with students on a regular basis, do you think there’s an increased or decreased interest among young [people] to have a career in the oil and gas industry, in comparison to the past?AE: I would say, in general, there’s de-creased interest; however, unfortunately a very slight decrease, since most of the students are not really in tune with the
Oilman Magazine / January-February 2021 / OilmanMagazine.com33OILMAN COLUMNindustry or trying to predict if it [will survive] or not. Picking a major nowa-days is like picking a watermelon – you never know what’s inside it until you open it. My advice to young [people] is do in-depth research before joining a major and, above all, taking advice from people who have been in this specic industry for years. Also, follow your passion.AA: What advice do you give to students who have an interest in the oil and gas industry? Should they pursue the career during these constant downturns?AE: I would love to tell them, yes, go for it if it’s your passion, but my opin-ion has changed recently. I literally just convinced one of my best friends, who was enrolled in petroleum engineer-ing, to switch their major because of the many downturns and the feeling of instability. The only reason I would tell someone to continue pursuing their oil and gas career, if they still have not nished college, is if they really know someone or have a strong connection with oil and gas industry higher ups. It’s the ugly truth. It is all about who you know not what you know, fellas!AA: What main technical skills do you think will be needed for the industry in the near term based on your experience so far?AE: As I mentioned earlier, soft skills and eld/industry experience are more important. When it comes to technical skills, however, I advise taking technical courses or participating in organizations to improve your leadership or manage-ment skills. You could even enroll in a minor in college that would improve these skills. Depending on your inter-ests, seek international technical certi-ed courses related to what you’re trying to do after graduation, which is some-thing you MUST decide during college. You can’t just say, for example, “I want to become a petroleum engineer,” as this is so broad. You have to be specic and work toward your focused goal. For instance, you’re very interested in the drilling side, so you take well con-trol, and stuck pipe prevention courses through the IADC, or maybe look for a drilling simulator course/internship, preferably outside of college.AA: What would you like to learn in the near future from experienced people who are in their mid-to-late careers?AE: I am an observer, so I like to make conclusions myself instead of asking leaders how they made it this far. There is a reason why an organization decided to put someone in a higher up position, like a vice president, for example. If you ask them about their advice, they’ll give you a general answer like, develop your skills and increase your exposure with different departments/segments within the company, or maybe even sign up for global assignments, or take the company’s offered training courses and so on. Ask yourself, “Didn’t everyone else around do the same thing?” so why specically did this person become the leader? You have to make the conclu-sion yourself and you have to be a very observant person. When you reach this high a position within an organization, the very small details matter, like your body language, how you look, how you talk – everything matters – and if you want to be this person in the future, you have to start learning the little details/secrets they did not tell you about when you asked their advice. ADVERTISE 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! We have a creative team that can design your ad! Call us (800) 562-2340 Ex. 1 OilmanMagazine.com/advertise Advertising@OilmanMagazine.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com34OILMAN COLUMNCOVID-19 has been a global disaster, the likes of which haven’t been seen since World War II in terms of disrup-tion, and a lot of the old ways of oper-ating are not going to return. Jobs Reduction A recent analysis reveals 107,000 lost oil and gas jobs won’t be recouped. What will streamlined companies look like in the future? Kirk Edwards, president of Latigo Petroleum, says, “Companies will be using and investing in more and more technology, as it becomes available, especially when it comes to translating production in the eld to digital formats.” Many companies are already taking on new software platforms to help them work from home, manage assets, documents, revenue, HR, taxes, operations and a slew of other functions that make the oil and gas industry tick. There is still room in the ofce for many workers who are in the eld, but more frequently we are seeing automa-tion free these workers to do other things. While that has had a positive impact on the level of productivity, it is not, however, an easy task to retrain workers and teach them new skills (something that usually takes 10 to 12 months). Retraining and retaining loyal workers, rather than laying them off, is better for general morale, the company and, most importantly, the economy. Diversication An extreme period of reduced demand for oil and oil-based products has led to a slump in oil prices which has oil companies asking themselves, “Where do we go from here?” Compounding the future slump in prices, the utilization of electric cars becoming more com-monplace will also cause many in the oil industry to pause and consider the new reality that will dawn in the near term. While many companies are taking a look at diversifying into various energy options, some other companies that have natural gas assets are dou-bling down on consumption over the long term. Edwards goes on to explain, “Many companies took the path to di-versify last year and have pivoted away from basins that are notoriously bad for marketing, especially on the natural gas side. These companies that maintain steady, low-decline natural gas assets should be well positioned for 2021 and beyond.”Consolidation With bankruptcies running rampant, companies with stronger nancial posi-tions will take advantage of the situa-tion and acquire the smaller struggling companies in order to expand their presence, footprint and own operations. Edwards adds, “The Big Four compa-nies will use this period in our industry to consolidate the larger, yet weaker, independents in critical strategic areas they are now calling ‘core.’ The 2,900 in-dependent producers will still continue the tradition of operating in a low-cost environment and hopefully see a reward when prices turn higher ahead . . . which they always do!”This year there have already been nu-merous consolidations across the indus-try, with large companies getting larger or diversifying into other verticals of the industry by acquiring downstream operations or mid-stream transportation solutions. There are abundant opportu-nities in the current market. Environmentalism With extra time, many companies are working hard to clean up the environ-ment from decades of pollution. Many are looking at ways to mitigate their contributions to the carbon footprint of the industry. Edwards mentions, “Except for the operators in the Perm-ian Basin that continue to are large amounts of natural gas, operators have, Where Does the Industry Go After COVID-19? By Eric R. EisslerIllustration courtesy of Kristijan Aranjos – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com35OILMAN COLUMNand always will be, strong in stewarding their operations for a clean environ-ment. The truth is this: everyone wants a clean environment. For anyone to preach differently is just wrong when it comes to the modern oil and gas indus-try practices of today.”The industry is making wise use of its time to diversify, reduce, consolidate and clean up the environment. While there are going to be a lot of permanent changes that occur or remain after the pandemic ends, the industry is doing its best to shore up against a lot of the negative changes, by taking action now. This month, we are completing a full year of the pandemic. With vaccines soon to be released, we are going to turn the corner. Taking off on a new and better trajectory, 2021 should be a year of recovery. The year 2020 was truly a time of uncertainty and challenges, to say the least. The future of regulations, executive orders, tax issues, scal and monetary policies, international trade issues, COVID-19 vaccination outcomes, supply and demand of energy, and private/public education challenges are some of the numerous issues before us. Energy education is needed more than ever. Nothing moves without energy. We need to work together to provide energy efciency and environmental preservation. The oil and gas industry is strongly needed for necessary energy usage and petrochemical products.As I state in my book, America Needs America’s Energy: Creating Together the People’s Energy Plan, “Future generations are depending on us to keep the American dream alive. For too long we in America have been wasting time blaming the energy industry or the government for failure to adopt a national energy strategy, when we should be responsible for creating the plan. As consumers of energy, we must drive the process, evaluating how we can best leverage our natural resources here at home to ensure long-term energy independence and security. American citizens must take individual responsibility for the state of this great nation, striving to protect the land we call home.”The 24th Annual/Anniversary of IEPC (Energy Policy Conference) – Roundtable/Summit was held August 11, 2016, at the Renaissance Hotel in Tulsa, Oklahoma. The roundtable was hosted by IEPC, the Energy Advocates and the Master of Energy Program, University of Tulsa.Roundtable participants included representatives of state and federal government, chambers of commerce, public relations rms, concerned citizens, various areas of the energy sector, professors, think-tanks, energy management students from across the U.S. and the media.Several issues were discussed regard-ing energy issues and views. Since that time, we have seen continued dialogue regarding the ever-changing landscape of energy and other economic areas of interest. The energy sector will need to form alliances with other economic sectors in 2021 and beyond. For example, one company, Ingenu-itE, is looking at ways to assist energy companies and businesses entering and maintaining digital transformation. It is able to provide consulting to energy companies and businesses. Former U.S. President Eisenhower founded People to People International (PTPI) in 1956. His great grandson, Merrill Eisenhower Atwater, is the cur-rent CEO of PTPI. At an event at the University of Central Oklahoma, he stated, “We can all make a difference and together work toward solutions.” Energy is the future of America, and America Needs America’s Energy.U.S. energy security is vital. It is impor-tant that we develop and maintain the proper infrastructure. There are many countries and regions of the world that have been added to our watchlist for 2021, including the Philippines, Armenia, Azerbaijan, Syria and Iran. Of course, China, Russia, India and OPEC continue to be on the watchlist. America needs America’s energy now, more than ever! Join our effort by visiting Facebook: National Energy Talk. America’s Energy: 2021 and Beyond By Mark A. StansberryMark A. Stansberry
Oilman Magazine / January-February 2021 / OilmanMagazine.com36OILMAN COLUMNThe oil and gas industry experienced signicant changes throughout 2020, from digital transformation to cloud migration. The industry has also seen an increase in safety and training tech-nologies and, in relation to the current pandemic, a higher demand for person-al protective equipment (PPE). With 2020 coming to a close, many busi-nesses are left anticipating and gearing up for what 2021 has in store.While many companies are either wondering what the future holds or looking for information, mobile eld operations management and software solutions company, LiquidFrameworks, has already developed its expectations for 2021. CEO Travis Parigi shares his predictions on 2021, what trends will likely occur in the industry, and how the oil and gas industry can respond to these changes.Like the rest of the world, the oil and gas industry has experienced a major shift in business operations due to COVID-19. As a result, companies will need to continue adjusting and revamp-ing their practices in 2021 to accommo-date the new reality. “Businesses have had to take operations online practically overnight. We will start to see compa-nies embrace digital processes more in the upcoming year as a long-term operational adjustment rather than a short-term solution. In doing so, these companies will start to be more nimble, agile and responsive with the tools they are using and how they are conducting operations,” says Parigi. He also highlights how paper processes once dominated operations in the oil and gas industry but, due to the current shift to digital processes, companies have begun pushing their workforce to use mobile capabilities such as phones or tablets for communication and pro-cess handling.“In doing so, businesses are nding their processes accelerating more ef-ciently and effectively as digital commu-nication is more productive for work-ers,” Parigi notes. With the continuous implementation of digital solutions, he predicts that we will see a stronger push for mobile tools and digital solutions across companies as a whole. “The companies that can successfully imple-ment and execute this shift can and will be the ones who can use digital trans-formation as a competitive advantage in garnering business.”With the signicant drop in oil prices in the past, the industry has seen various companies undergo consolidation in the industry. With lower oil prices reoc-curring in 2020, Parigi predicts that we will see “many companies throughout the world consolidating into big-ger, broader reach companies to take advantage of the scaling opportunities across the globe. The businesses that used their digital transformation as an advantage with customers will coincide with the ones that are able to success-fully consolidate the market and will provide a seamless transition into one large organization.” Of all the predictions made for next year, Parigi believes the most critical trend will be digital transformation. “Adopting a full-edged and continu-ous digital transformation will be crucial for the success of companies in the oil and gas industry now and in the fu-ture. Many companies will enable some change, such as requiring workers to use new tools like tablets in the eld or software to keep track of invoices.” He notes that without proper training, implementation or full-edged invest-ment in employees using new means of operation, companies may likely revert to old habits, which could lead to nega-tive consequences. “Companies that invest in digital transformation for the long term, even when the industry expe-riences difcult times, are the ones who will go on to be leaders.”Parigi’s company, LiquidFrameworks, is at the forefront of these trends and is focused on implementing a successful digital transformation leading into 2021. “Remote and socially distant work is no longer a simple solution, but now a A Look Inside 2021: Outlook and Predictions for the Oil and Gas Industry By Tonae’ Hamilton Photo courtesy of Dilok Klaisataporn – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com37OILMAN COLUMNlong-term practice,” Parigi says. “Com-panies are going to need to implement the proper tools and work processes to effectively carry out their daily opera-tions while maintaining protocols. Our FieldFX technology is built to meet the needs of companies from streamlining communications to automating process-es. We have many tools built into our platform that help to make this process as smooth as possible.”During these unprecedented times, Parigi notes how the industry can utilize this time to review its overall processes, both digital and manual. “In doing so, [operators] can take advantage of new tools, processes and other means of op-eration that will best benet their busi-ness. Oil and gas service companies, in general, have traditionally been slow to adopt new technologies and tools into their businesses. However, taking the time now to make necessary changes, such as implementing new technologies and workow processes for the work-force, will ultimately pay off in the long run as operations resume to full force and the energy market recovers in the coming quarters.”In response to industry changes due to COVID-19, LiquidFrameworks has focused on simplifying training and onboarding processes and developing more efcient education tools for oil and gas companies. “There is a pressure to quickly hire and train new employ-ees, including but not limited to how to use equipment as well as what the workow process looks like. This can ultimately lead to challenges when it comes to ramping up users and admin-istrators using systems like FieldFX. At LiquidFrameworks, we are reducing the amount of work [businesses] need to do to get their people up to speed on the entire process, as well as providing the ability to scale and effectively respond to growth in the market. This includes delivering new educational tools that help our customers ramp up new em-ployees from eld to back ofce quickly and efciently,” Parigi shares.The biggest trend to watch for in the industry will be digital transformation. Along with a push for digital, there has been a steady integration of technology in the industry and, as Parigi mentions, we likely will see more technology implemented in 2021. He describes how the implementation of technology will cover “everything from mobile eld operation software to data asset man-agement and more. As technology is implemented into everyday operations, we will see more and more data being collected for companies to use. The good news is that systems are also get-ting smarter at analyzing and using data. As this information is compiled, we will see technology take advantage of the data and simplify it for end-users so that businesses can further adapt their processes and become more efcient, productive and reach their goals.”Due to current events and society con-stantly evolving, the oil and gas industry, like many industries, will experience major shifts and, as Parigi predicts, will see a digital transformation in the com-ing year. He emphasizes how the move to modern technology is increasingly important for the industry, especially as it moves away from the traditional paper processes and face-to-face interactions.“As companies have gone through a digital shift in 2020 to keep operations alive, this has created a jump start for organizations to adopt a true digital transformation for the long run. In 2021, we will see a more visible digital transformation take place where compa-nies are investing in smart infrastructure that can sustain their operations now and into the future.”
Oilman Magazine / January-February 2021 / OilmanMagazine.com38OILMAN COLUMNA Troubled YearTo date, 2020 was one of the most challenging years for a majority of businesses, and the oileld industry was no exception. Since the beginning of last year, over 15 companies have been bought or merged, while over 30 companies have led for Chapter 11 bankruptcy. However, many companies have taken steps to remain competitive and operational. Benjamin Franklin famously said, “But in this world nothing can be said to be certain, except death and taxes.” If you have been in the industry for any signicant amount of time, you may argue that market volatility in the oileld is certain. Operators overextend their assets based on models’ predic-tions that continue to fail the bottom line with underperformance. This is often paired with increased costs on in-novative completions design programs that, aside from production changes, lack true validation. During downturns, outdated upper management slashes innovation budgets while technology improvements remain stagnant and con-tribute little true value. This is another Groundhog’s Day the industry cannot afford. Thousands of unemployed oileld workers are left thinking, “What if we did things differently?” Times are changing and so should the way we operate as an industry. To stay competi-tive, energy companies must continue to employ innovative technology.A New TechnologyDeep Imaging, a controlled-source electromagnetics company based in Tomball, Texas, has homed in on an innovative technology, which allows operators to make game-changing decisions during their fracking opera-tions through using real-time frac uid imaging. This is done through an array of highly sensitive nano-voltmeter receivers and a grounded dipole system laid directly over the wellbore trajectory completely off the pad. On the surface, a direct measurement of frac slurry magnitude and direction is measured then displayed as polygons taking shape over the stimulated rock area. The result is a 2D image shown in a map view. A transmitter capable of inject-ing 200 kilowatts of power into the Real-Time Completions Refinement with Electromagnetics By Sam Young Photo courtesy of Deep ImagingFigure 1: Schematic of Deep Imaging operations
Oilman Magazine / January-February 2021 / OilmanMagazine.com39OILMAN COLUMNground is utilized to transmit a signal via a grounded dipole. The receivers on the surface are laid out with cables connecting two rods in the ground that measure electric potential. A swath of receivers is turned on over the stage be-ing fracked and records a baseline mea-surement before fracking commences. Voltage changes are measured at 50,000 samples per second during the frac, then signals are processed for data quality. Following processing, the baseline signal is subtracted from the recorded signal giving the nal image result.The schematic in Figure 1 explains how this deployment is congured. The yel-low cylinders represent the transmitter wire grounding points, and the yellow boxes represent the deployed receiv-ers. The blue dotted lines represent the interaction between two electromagnetic elds – one from the transmitter that the horizontal wellbore casing responds to, which is perturbed by the second one caused by the frac. This amplies the frac response and is recorded by receivers. The baseline signal recorded is the response of the well’s casing alone, which through subtraction, allows for isolation of the frac response.What does this all translate to? What kind of data does this technology pro-vide? First and foremost, a map view of the data produced is shown in Figure 2. This map view can help companies mitigate or prevent frac hits. In Fig-ure 2, the polygons in the viridis color palette ranging from blue (weak signal) to yellow (strong signal) show the signal migrating west to a parent well (P1). These images allow for a signicant depth of analysis to gather trends and predictions for future completion stag-es, including frac azimuth and extent, as well as correlations of uid response with corresponding completions data. Additionally, the data can be analyzed in complement with microseismic for more extensive insights.Successful Real-Time ImplementationOriginally, Deep Imaging’s technol-ogy was developed with retrospective imaging. Stages were delivered to the operator a month after data acquisition. However, Deep Imaging had a success-ful trial in September 2020 where imag-ing was delivered within three hours of each stage’s end. On the nal stage, the team generated images 20 minutes after the stage had started. This means if the operator saw any signs of plug failures, extreme overlap into previously fracked stages or runaway propagation toward a parent well, they could alter the impact of that stage while it was being pumped. Figure 2: Map - view image of resultsFigure 3: Map - view of the survey areaContinued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com40OILMAN COLUMNNo more waste. No more frac hits.The primary goal of this assessment was to gain an understanding of stage to stage interactions. The scope of the operation is in Figure 3.In the map view above, the red line represents the transmitter and the horizontal yellow lines represent the full sensor dipole or receiver array. There were parent wells to the west and depletion effects were expected. However, using this technology, Deep Imaging determined that the stages were biased more toward the east than toward depletion zones. This was possibly due to a stress-conduit effect, where previous nearby stages from the opposing well created a path of least resistance for stages to propagate toward. In addition, frac azimuth and extent were observed, where azimuth corresponded with client model predictions as well as microseismic readings taken in the area. Stage over-laps and the percentage between the actual stimulated area versus what was expected were assessed for wasted time and materials. For detailed analysis, refer to Figure 4.Figure 4 illustrates the informational changes using this technology over time. In real-time, Deep Imaging provides calculated frac length and azimuth. This is seen in the table in the upper right corner of the image. It includes corresponding measurements on the frac polygon and rose diagram in the lower right corner. The outlines of previous stages, the calculation of the total area covered by the frac stage, and frac skewness are also automati-cally provided.Building Symbiotic PartnershipsDeep Imaging is converting its tra-ditional practices into an updated, real-time system to service larger scale zipper frac operations. The company partners its technology services with companies who want to revamp their completions design strategy and ac-tively respond to undesired frac events, resulting in true, real-time cost sav-ings. This is especially needed during economically challenging times. The industry needs symbiotic partnerships with technology service companies to make it through this downturn. Work-ing together, the oileld will weather the storm and emerge stronger than ever.Sam Young is a completions engineer at Deep Imaging. He helps Deep Imaging’s partner operators address and solve problems they are facing with their completion development strategy. With a wide range of industry experience in horizontal completions, operations and reservoir engineering, Young excels in unconventional design optimization, data analytics and enhancing well performance. He holds a BS degree in petroleum engineering with a minor in mechanical engineering from Texas Tech University. Contact: samyoung@deepimaging.com. Figure 4: Overall view of nal imageSUBSCRIBE 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 Questions? Call or email anytime.Editor@OilmanMagazine.com • (800) 562-2340 Ex. 5
Oilman Magazine / January-February 2021 / OilmanMagazine.com41OILMAN COLUMNOn November 4, 2020, Shell Oil Company announced the closure of its renery in Convent, Louisiana, a situation that is far from isolated. As reported in the Wall Street Journal ar-ticle, “Pandemic Pushes Fuel Makers in Richer Countries to the Brink,” 11 reneries from the U.S. to Japan have announced intentions to close. Sev-eral years of sinking oil prices, price disputes, and overproduction among OPEC+ nations, the move toward renewable energy sources, and the economic downturn associated with the COVID-19 pandemic are causing nearly unprecedented, simultaneous strains on the entire oil and gas indus-try. According to the research rm IHS Markit, and reported in the Houston Chronicle, more than three million bar-rels per day of rening capacity will be shut down as a result of the pandemic alone. A rationalization of production that was expected to be spread across the next decade has now occurred in the space of less than a year.The closure of a major industrial facil-ity, which is often one of the largest employers and taxpayers in a local ju-risdiction, has far-reaching impacts on the owner of the closed facility, owners of surviving businesses, individuals in the local community, and state and lo-cal governmental authorities. A closure of this type will result in the loss of millions of dollars in tax revenues and present signicant challenges to local tax recipient bodies. And for continu-ing industrial facilities and other busi-nesses in the jurisdiction, the closure of a major industrial facility could mean increased scrutiny by local tax authorities as they attempt to make up for the nancial shortfall.The apparent opposing positions of local tax recipient bodies (maintain or increase tax revenues) and local oper-ating businesses (preserve cash ow) present unique challenges and oppor-tunities. Among other challenges, own-ers of operating businesses must be aware of efforts by local governmental authorities to recoup potential revenue losses from facility closures and should develop proactive strategies to balance their business needs with the nancial needs of the communities in which they operate.This article focuses on strategies busi-nesses should implement to effectively manage their local property tax re-sponsibilities and opportunities. While beyond the scope of this article, similar efforts should be implemented with re-spect to other state and local taxes, e.g., income, franchise, sales/use.As Industrial Facilities are Lost, Focus Turns to Remaining Industrial Facilities and Other BusinessesFor decades, several states, including the authors’ home state of Louisiana, have viewed reneries and other large industrial facilities as proverbial golden geese. In return for certain economic development incentives, such facilities provided well-paying jobs to hundreds of thousands of individuals. These individuals in turn spent their hard-earned wages in the local community. In addition, local property and sales taxes paid by owners of such facilities went directly to local communities, as well as a portion of state-level taxes allocated to local governments by the legislature. Through economic ups and downs, this arrangement more or less worked – until now.Today, the oil and gas industry is con-solidating and, in some cases, simply closing down. Some closures are not temporary. Many are permanent, in part because consolidated or relocated operations are likely to be more ef-cient for the long term, but also because it may be technically very dif-cult to initiate a restart of an industrial facility. In some instances, a shuttled facility may never restart. More likely, the owner may sell the facility to a buyer that may dismantle and sell the “scrap” from the facility. In a best-case Photo courtesy of Milos-Muller/iStockContinued on next page...Squeezing the (Remaining) Golden Geese: Refinery Closures May Lead to Increased Tax Scrutiny on Operating Facilities By Jay Adams and Bill Backstrom
Oilman Magazine / January-February 2021 / OilmanMagazine.com42OILMAN COLUMNscenario, a new owner could repurpose the facility for a different type of manu-facturing.The fair market value of a shuttled facil-ity will be signicantly lower than the fair market value of an operating facility. As part of its closing strategy, the owner should take proactive steps to work with the local property tax assessor to make the necessary adjustments to the fair market value of the property remain-ing at the shuttled facility to reect the obvious obsolescence. The owner also should be prepared to retain valuation consultants to support requested valua-tion adjustments, as well as take steps to review its books and remove property that is no longer in existence or located at the shuttled facility.While valuation negotiations with an as-sessor may not be comfortable, they are a necessary part of a company’s facility-closing strategy. The goal is to reach an agreement as to the fair market value of the closed facility. These efforts, if properly executed, will result in a much-needed reduction of the property taxes ultimately due by the owner.At the same time, when a large industrial facility closes and proper adjustments are made to the value of the closed facility, the local tax recipient bodies – schools, law enforcement, public health, cultural and other services and infrastructure au-thorities – will see their funding sources diminished, sometimes signicantly. In addition, as the local workforce dwindles, the money spent by the local workers also will diminish.The local tax recipient bodies will have little or no choice but to seek replace-ment funding sources. There are several ways for local tax recipient bodies to fund their operations, but the proverbial “low hanging fruit” is increased tax col-lections. For local property taxes, the most likely ways to increase property tax collections are to raise the local property tax millage rates, increase the assessed values of operational properties while holding existing local millage rates steady or both. All local authorities have an in-terest in protecting their revenue streams, but it all starts with the local assessor.This leads us to the most important take-away in this article. In local jurisdictions where a large industrial facility closes, the owners of continuing businesses must implement proactive, strategic plans to work with local governmental leadership to protect the company’s interests, while taking into account the revenue needs of local tax recipient bodies. This begins with communications with the local as-sessor to resist any unwarranted increases in the fair market values of the opera-tional properties to increase resulting tax revenues, which would be borne by the continuing businesses.The effort cannot stop with the local as-sessor. Owners of operational industrial facilities also must meet with other key local leadership to discuss ways to keep local property tax millage rates at ap-propriate levels. Businesses and govern-mental leaders should work together to address the seemingly competing inter-ests of operating businesses and local tax recipient bodies.Against efforts by local ofcials to offset potential revenue losses, owners of con-tinuing businesses must develop effec-tive strategies that fairly reduce their tax burdens without threatening the mutually benecial relationship with the commu-nities in which they operate.Looking Ahead: Strategies for Tax FairnessA facility owner’s response to this rapidly changing environment must have both short-term and long-term components. Before the ink is dry on checks for pay-ment of 2020 property taxes, owners should implement a property tax “health check” for 2021 and beyond. The pro-cess starts with preparing and ling the 2021 property tax rendition form. Shortly thereafter, negotiations with local property tax assessors will begin.Continuing businesses must make extra efforts to assert and defend taxpayer-initiated valuation adjustments to take into account obsolescence factors. These businesses also must defend against unwarranted and unfair increases in the assessed values of operating properties. This process will continue beyond 2021 until the U.S. and global economies stabi-lize. These efforts, if properly prepared and pursued, will reap benets of lower local property taxes and improved cash ow.Among other steps, owners should: • Proactively manage relationships with local tax assessors and collectors, lo-cal tax recipient bodies and other key governmental leaders. This requires a government relations “health check.” Companies should take proactive steps to develop and maintain positive interactions with local governmental ofcials that underscore their commit-ments to nding mutually benecial solutions to the challenges that lie ahead. Businesses also should take ex-traordinary efforts to fully understand the budgets and budgetary processes for all local tax recipient bodies.• Manage books and inventories closely. More than ever, owners of large in-dustrial facilities must become more aware of their assets, expenditures and property valuations. Books and records should be scrubbed of any assets that are no longer at the facility. Businesses also must develop a clear plan to identify and properly value remaining assets. This component of the plan should include resources for outside valuation and legal profession-als. With clear, mutually understood data, businesses can present their cases for valuation adjustments to reect the current economic environment clearly and persuasively to local governmental leaders.• Seek experienced valuation consultants and tax counsel. Property tax issues, including procedural issues, gener-ally are complex, and they stand to become even more complicated as governments at every level take action in response to the economic down-turn. Property tax procedures in many jurisdictions often present the prover-bial “traps for the unwary.” Knowl-edgeable guidance will be critical to creating and executing an effective tax
Oilman Magazine / January-February 2021 / OilmanMagazine.com43OILMAN COLUMNstrategy in the months and years ahead.• Constantly evaluate short-term and long-term implications of state and local business and tax credits and incentives. In many jurisdictions, large industrial facili-ties benet from state and local tax credits and incentives. Now is the time for a credits and incen-tives “health check.” Businesses need to review current credit and incentive arrangements to deter-mine if all terms and conditions and reporting requirements are up-to-date and achievable. If not, businesses need to work with state and local economic development leadership as early as possible to address any potential claw backs or reductions of existing credits and incentives. It may be neces-sary for continuing, but strug-gling, businesses to renegotiate the terms of existing arrangements. Continuing businesses also should take proactive approaches to de-termine if their current credits and incentives packages can be revised or extended and if new credits and incentives are available. Also, long before existing credits and incentives expire, businesses should work with local govern-mental leadership to address the impact the expiration will have on both the business and the local tax recipient bodies.To revise our avian analogy from golden geese to canaries in coal mines, what is happening today in the oil and gas industry is simply a precursor of broader challenges to come for local, regional and national economies. The world is changing – sometimes by design and sometimes apparently randomly – but the busi-nesses that succeed will be those that take action in the face of rising chal-lenges. Now more than ever, stra-tegic, effective tax planning is a key tool in this effort. To do nothing, or very little, simply is not an option.Jay Adams is a partner in the Tax Practice Group and leader of the state and local tax team. Through partnering with his clients, Adams has developed a broad knowledge of the energy, manufacturing, healthcare, transportation and retail industries that allows him to provide comprehensive and cost-effective advice in those areas.Bill Backstrom is a partner and leader of Jones Walker’s Tax Practice Group. For more than 35 years, he has focused on state and local tax matters in Louisiana and on a multistate basis. Back-strom provides comprehensive, practical and solution-focused tax guidance to a broad range of business enterprises. Known for the quality of his counsel, his commitment to client service, and his ability to explain so-phisticated issues in clear terms – particularly with respect to Louisiana’s highly complex state and local tax system – Backstrom is recognized as a go-to tax attorney for clients with interests and operations across the region and nationally.
Oilman Magazine / January-February 2021 / OilmanMagazine.com44OILMAN COLUMNFor those who reside along the Gulf Coast of the United States, hurricane preparedness is a term that yields anxi-ety and reluctance. It is, however, a nec-essary evil mandated simply by proxim-ity to the tropical battlegrounds of the Gulf of Mexico (GOM). Sharing the stress of hurricane season, offshore oil and gas companies who populate the Gulf with assets must be keenly aware of the tropical weather season and be decisive in planning and evacuating structures when necessary.Regulated by the Bureau of Safety and Environmental Enforcement (BSEE), companies who perform operations within the offshore industry must meet Safety and Environmental Management Systems (SEMS) requirements. Of the various provisions required, any com-pany performing offshore work must be equipped with emergency response and control procedures. Guidelines for addressing hurricane threats are rooted in emergency response plans.With assets stationed in the GOM, hur-ricane planning and preparedness are a major role and concern of bp Interim Manager of Crisis and Continuity Man-agement, Carlton Landry. Each asset has its own specic Emergency Action Plan, or EAP. bp possesses specic proce-dures that have been developed through meticulous planning for addressing ap-proaching tropical weather.Many news reports depict Gulf Coast residents initiating their evacuation strat-egies when a hurricane or other tropical weather is as close as 24 hours from making landfall. bp, however, engages its plans far sooner than that. Hurri-canes and tropical activity are monitored by the bp Crisis and Continuity Manage-ment Team. Additionally, they consult with meteorology professionals to determine potential path and impact.“A storm doesn’t have to have entered the Gulf before we take action,” says Landry. “Safety is our absolute highest priority. Shutdown time is what is considered. We make sure we have enough time to shut down the facility and safely evacuate personnel.”When the decision is made to evacuate personnel, both air and vessel modes are utilized. According to Landry, trans-portation modes are highly dependent upon weather activity at the time of evacuation.Besides offshore asset owners, con-tractors of the industry must follow SEMS requirements as well and develop emergency response plans. Collabora-tion is essential because contractors typically have their own safety programs and policies for working offshore. The question, therefore, may arise of which EAP to follow.“All personnel are to follow the facility EAP,” says Landry. “These require-ments are made known to individuals through a facility orientation.”According to Landry, while drilling and intervention vessels can move safely out of tropical activity’s path, stationary production facilities present a differ-ent challenge. bp’s production facilities may call for the evacuation of over 750 individuals. Transporting person-nel off those facilities and returning them safely shoreside is an efcient and well-organized process. The Person on Board (POB) Coordinator initiates a pre-planned process when evacuation Offshore Industry Executes Great Effort in Hurricane Preparedness By Nick Vaccarobp Atlantis production platform. Photos courtesy of bp.bp Mad Dog 2 production platform with transportation vessel at is base.
Oilman Magazine / January-February 2021 / OilmanMagazine.com45OILMAN COLUMNorders are given. A main factor applied to the process is to max out all evacua-tion craft.“Third-party or contract personnel are evacuated rst from bp assets with facility leadership being the last to go,” Landry explains. “We have access to three Sikorsky S-92 (18-passenger) heli-copters and have always had enough to meet our needs.”Beyond the priority of personnel safety, bp must also take care to maintain operational integrity, not for nancial factors, but instead for environmental concerns and preservation. Constructed to withstand hurricane force winds, damage from storms is typically minimal. Although this is a positive factor, Landry says that production is still shut-in when tropical force conditions present themselves.Although bp’s team has developed a carefully designed plan of preparedness and action, support entities are avail-able should their presence be needed. Landry states that once bp has initiated its evacuation process, the team im-mediately noties BSEE and the Coast Guard in order to provide and maintain clear communications throughout the endeavor.According to Captain Matthew Denning of the U.S. Coast Guard Eight District, evacuation plans must be approved. Any signicant changes made afterwards must also be met with approval. In 2014, a “report by exemption” change was implemented and carried through the 2020 hurricane season. The U.S. Coast Guard Eight District Gulf of Mexico Outer Continental Shelf Marine Safety Information Bulletin (MSIB) 20-04 requests that all manned offshore facilities and Mobile Offshore Drilling Units (MODUs) relay when any personnel who were intended to be included in evacuation measures are stranded on board. It also requests notication of any MODU that is unable to relocate to avoid approaching storms. Captain Denning states that oil and gas companies are required to alert BSEE when evacuation plans are enacted and that MSIB 20-04 was specically designed to reduce duplication of reporting requirements in accordance with 30 CFR 250.192.“We want to hear if evacuation plans are unable to be carried out,” says Captain Denning. “We want to offer our immediate assistance and help them in any way possible.”When the hurricane or tropical system threat has dissipated, companies such as bp activate their return-to-work plans. Landry states that an initial yover is conducted when it is deemed safe to do so. This allows for a damage assessment to be determined.“Thirty-six individuals land on the asset to restore its capability and check for damage,” Landry explains. “Their main goal is to establish habitability prior to allowing non-essential personnel onboard.”bp’s team has developed a course of action for re-manning offshore assets post tropical threat. Order designation is determined by contractor need with those performing the most critical work returning sooner than others. SIMOPS is a well-known term used regularly in the offshore vocabulary. Simultaneous operations (SIMOPS) are simply dened as two operations that occur at the same time and within the same location. Industry standards specify good communication between the parties conducting the work. True to form, evacuation procedures within the GOM can be an effort of simultaneous operations. Landry says that although each offshore asset owner has its own EAP, discussions take place to compare notes.Hurricane and tropical threat evacua-tions require great thought and are a major responsibility to the personnel tasked with enacting the measures. Ex-ecuting plans and carrying them out can be stressful; remaining calm and deliber-ate is key.“Making decisions 100 hours out based on storm predictability is probably the greatest challenge of the evacuation process itself,” says Landry.According to Landry, each hurricane season offers lessons that can be used for improvement. His team reviews bp’s seasonal activity at the end of every year to identify success factors and deter-mine if changes are necessary.“No storm is treated differently,” says Landry.BSEE’s November 4, 2020, Hurricane Zeta Final Report indicated that 23 production platforms had been evacu-ated. This accounts for 3.58 percent of the 643 manned platforms occupying the Gulf of Mexico. These measures resulted in 48,092 BOPD (barrels of oil per day) shut-in. Additionally, 89.28 MMCFD (million standard cubic feet per day) of gas was also shut-in. These statistics depict an image of the Gulf ’s large size and its contribution to oil and gas production.The BSSE report also states, “From op-erator reports, BSEE estimates that 2.6 percent of the current oil production in the Gulf of Mexico has been shut-in. BSEE estimates that approximately 3.29 percent of the natural gas produc-tion in the Gulf of Mexico has been shut-in. The production percentages are Continued on next page...bp Mad Dog production platform with helicopter transport craft making landing.
Oilman Magazine / January-February 2021 / OilmanMagazine.com46Oilman Cartoon By Steve Burnettcalculated using information submitted by offshore operators in daily re-ports. Shut-in production information included in these reports is based on the amount of oil and gas the opera-tor expected to produce that day. The shut-in production gures therefore are estimates, which BSEE compares to historical production reports to ensure the estimates follow a logical pattern.”Captain Denning applauded the end of the 2020 hurricane season and states that a successful outcome is due to a collaborative effort between the oil and gas companies, BSEE and the Coast Guard.“We never received any reports that evacuation measures could not be met,” says Captain Denning.Reecting on his past experiences with hurricane preparedness, Landry believes Hurricane Laura of 2020 will stand out. The enormous wind eld of the storm and its continually changing track presented a great challenge for him and his team.“This year’s hurricane season was un-precedented when you consider all of the circumstances,” says Landry. “The season was record-based with the num-ber of named storms we experienced. On top of that, add the COVID-19 prevention measures before anyone can even go out to the asset. It made for great challenges this year, but this is what we train for and we couldn’t be prouder of our team’s dedication and resilience.”Nick Vaccaro is a freelance writer and photographer. In addition to providing technical writing services, he is an HSE consultant in the oil and gas industry with eight years of experience. Vaccaro also contributes to SHALE Oil and Gas Business Magazine, Louisiana Sportsman Magazine, and follows and photographs American Kennel Club eld and herding trials. He has a BA in photojournalism from Loyola University and resides in the New Orleans area. Vaccaro can be reached at 985-966-0957 or navaccaro@outlook.com. OILMAN COLUMN
Oilman Magazine / January-February 2021 / OilmanMagazine.com47OILMAN COLUMNIt is a well-known fact that drilling oil and gas wells is fraught with risks. Several disastrous accidents have taken place in the industry and caused grave harm economically and environmen-tally. They have even resulted in the tragic loss of human life. A blowout is one such event, which can take place in a well during drilling or even in the post-drilling phase. The event initiates with a simple hydrostatic imbalance or failure of barriers in a well. Hydro-static head of fluid in a well is the first line of defense. As long as the hydro-static pressure in the wellbore is higher than the formation pressure, the well is under control. If this control is lost, the formation uid could start enter-ing in the well, which is termed as a “kick” (Figure 1).1 There are several situations that can cause loss of primary control of the well. Rig crews are trained to avoid these conditions through mandatory refresher courses and regular drills on the rig site. If all those safety mea-sures are circumvented and primary control is lost, the secondary control is exercised through blowout preven-tion equipment (BOPE) by shutting in the well on the surface. (Figure 2)2 shows an example of BOPE stack ar-rangement, which varies depending on well equipment. All companies have standard practices, equipment testing requirement and training programs to ensure that a kick is detected and controlled in its earliest stage to avoid a blowout. This is the top priority and companies exercise all their efforts in this direction. In spite of these efforts, disasters like blowouts are common in the industry. Most post-mortems of incidents reveal that there were signs well in advance and the incident could have been averted through timely ac-tion and intervention. Companies have a well-developed system of cap-turing lessons learned but, many times, investigations reveal the reasons as overlooked initial indications and not following basic practices.There are other drilling troubles like sticking pipe, loss of circulation, downhole equipment rupture or fail-ure, hole collapse, underground blow-outs, etc. All these may not cause loss of human life, but they do cost com-panies dearly in the form of damaged equipment or equipment lost in the hole, loss of time to recover and loss of production. Once a downhole trou-ble starts, the recovery time and cost can be signicant. By some estimates, it can easily range from 20 percent to 27 percent of the drilling budget (Fig-ure 3).3 There are several underlying factors which cause these events. Most of the causes and remedies are very well known in the industry. All compa-nies equip drilling rigs with necessary equipment and personnel with re-quired training to be able to detect and avoid these situations. Drill teams exer-cise all their efforts to avoid downhole problems but, in spite of these efforts, downhole troubles occur frequently, adversely affecting protability of the companies. Safety needs to be balanced with the desire for companies to achieve high drilling efciency. It’s even more rel-evant in low oil price and low prot market environments. Increasing the rate of penetration (ROP) helps drill-ing a well to planned target depth faster, thus reducing overall well cost. ROP depends on several factors like energy input to the drill bit, vibrations in drill string, mud system, drill bit type and formation type, just to name a few. All of these factors are critically evaluated while planning a well based on information from offset wells, well objectives, geological information and many more critical aspects. Well progress is closely monitored dur-ing drilling and operating parameters are continually adjusted to optimize ROP. Meticulous planning, along with Photo courtesy of Song Qiuju – www.123RF.com Continued on next page...The Drilling Conundrum – Efficiency Versus Reliability By Shrikant Tiwari
Oilman Magazine / January-February 2021 / OilmanMagazine.com48OILMAN COLUMNa knowledgeable and trained engineer-ing workforce and experienced crew on the rig are required to achieve the best results. All these are important links in a chain of optimized process and need to be executed well for continued success. However, as it is said, the chain is only as strong as its weakest link. A weak link in this chain not only jeopardizes the optimized process but can create condi-tions which can lead to major downhole trouble, nullifying any potential gains of improved ROP.There are two schools of thoughts in the industry. One propagates maximiz-ing ROP, which is an obvious advantage to the company in reducing cost and improving protability. If a drill bit, drill string and mud system are appro-priately selected and designed based on all factors, ROP is adversely impacted primarily due to improper energy input, loss of energy in the string vibrations or hydraulic dysfunction. The concept of founder point and mechanical specic energy (MSE) has been well researched and successfully used by many drilling teams (Figure 4).4 Another school of thought emphasizes risk management. Aggressive operating practices to drill or trip fast have the po-tential to increase exposure to risks and can lead to cutting accumulation, surge, swab, string stuck ups and wellbore instability to name a few. If the well encounters these troubles, ROP gain is a moot point and, in fact, could lead to disasters with huge impact to a com-pany’s reputation and, in some cases, even its nancial feasibility. Therefore, it’s better to go slowly and avoid any downhole troubles.It is a given fact that you need to know your limits through good engineering, planning and control measures, so that steps taken for increasing ROP do not adversely impact the well conditions and do not pose any unnecessary risk. Maxi-mizing drilling efciency without the visibility of increasing risk is like speed-ing on an icy highway. Most disasters are found to be avoidable in hindsight, which clearly points toward a huge technological gap in the industry to be able to detect the troubles in time and take appropriate action to avoid them. Individual skills and intervention time-frame are of immense importance to catch and mitigate disasters. Companies spend enormous amounts of money on training and developing engineer-ing resources to be able to drill a well in a safe manner. However, every plan, every control process and every key individual involved in the process has to be 100 percent right all of the time, which is a lot to ask. The process still relies on individual skills to catch early indications, interpret them correctly, and advise appropriate measures to the operations team in a timely manner, in order to avert a disaster. Heavy reliance on individual skills is frightening. This is the concern that makes most opera-tions teams default to a safe approach and avoid going for fast paced drilling, which could reduce reaction time and land the well in trouble.In this day and age of digital real time data and articial intelligence, leaving it to a select few to make right decisions every single time on multi-million dol-lars wells is irrational. Real-time data transmission software is commonly used by companies, but most of them only relay the data in real time and still rely on individual skills to accurately interpret it and take timely action. It is equally surprising that regulatory agen-cies and underwriters have not made it mandatory for companies to deploy risk mitigating software to minimize if not eliminate the risk to these expensive op-erations. The solution lies in a software with Watch, Warn and Advise (WWA) capability that detects preliminary indi-cators of a developing risk, warns the user on-site and ashes recommenda-tions based on a tried and tested knowl-edge base, while also using articial in-telligence (AI) to continually enrich the recommendations based on well type, eld, offset well experience, etc. The drilling conundrum of choosing between drilling efciency and drilling Figure 1: Hydrostatic Balance in a well1Figure 2: A typical stack arrangement of Blow Out Prevention Equipment2
Oilman Magazine / January-February 2021 / OilmanMagazine.com49safety can be addressed by develop-ing and deploying predictive and advisory software and deploying it on-site. Real time operation centers are great, but the need is to have WWA set up on-site for quick detection of developing risk and recommendations for corrective steps to avoid downhole troubles right at ground zero. Drilling efciency and reliability are not mutu-ally exclusive but are complementary. The conundrum and different schools of thoughts in the industry are due to lack of foolproof and dependable sys-tems, which can generate condence in the drilling teams that risks can be identied and mitigated in time even while aggressively pushing for perfor-mance. A simple analogy is trafc regulations. Highways have higher speed limits due to multi-lane, unidirectional trafc. A warning ashes on highways to alert drivers to reduce speed if icy or foggy conditions develop. Residential streets have lower speed limits because there are stop signs, trafc lights, pedestrians crossing, school and playground areas, which require a higher level of alert-ness. Reduced speed provides more re-action time to avoid accidents. A simi-lar guiding tool is needed in the drilling industry. There is absolutely no harm in pushing for efciency as long as well conditions permit. This proposed tool, WWA software, will Watch closely for conditions developing in the well while drilling, Warn of upcoming risks and Advise appropriate actions in time.References:1. Admin. (2017, August 29). Bottom Hole Pressure Concept, from https://www.drilling-course.com/2017/08/bottom-hole-pressure-concept.html2. D. (2012, June 26). BOP Stack Organization and BOP Stack Arrangement, from http://www.drillingformulas.com/bop-stack-organi-zation-and-bop-stack-arrangement/3. Dodson, J. K. (jan. 1, 2004). Gulf of Mexico ‘trouble time’ creates major drilling expenses. Offshore.4. Krall, M., & Dupriest, F. (2006, January 1). New drilling process increases rate of pen-etration, footage per day. Retrieved December 07, 2020, from https://www.offshore-mag.com/business-briefs/equipment-engineer-ing/article/16754615/new-drilling-process-increases-rate-of-penetration-footage-per-dayShrikant Tiwari is an engineering profes-sional and innovator who has worked in the upstream oil and gas industry for over 33 years. Tiwari has worked internationally in several en-gineering leadership positions with multi-national and national oil and gas companies. Figure 3: Trouble time types and a typical distribution3 Figure 4: Founder Point Concept for Improving ROP4OILMAN COLUMN
Oilman Magazine / January-February 2021 / OilmanMagazine.com50OILMAN COLUMNThe job of an oilman is generally quite difcult and is associated with working in harsh environments for long periods of time away from one’s home and family. Unsurprisingly, average salaries for this job are comparatively high. However, it varies considerably accord-ing to specialization, experience and location (country and region). Thus, a petroleum engineer in Russia with up to two years working experience on average typically earns a minimal salary of 59,700 RUB per month or 612,000 RUB (slightly more than US$9,855) per year1 while a petroleum engineer in south Australia with more than ve years of experience typically earned $189,737 per year in 2018-2020.2 In the U.S., according to Simply Hired, a recruitment advertising network based in Sunnyvale, California, the salary of an average oilman (all job positions, ranging from a superintendent to a maintenance person) in 2019 was $6,330 a month (or $75,963 for the year), with the top 10 percent earning nearly $151,100 for the last year.1 As per Payscale, a Seattle, Washington, compensation software and data company, in 2020 a petroleum engineer in Texas earned $13,695 per month on average, which totals $164,340 per year (compared to an average annual salary nationwide for a U.S. employee of nearly $60,300). Second in rank was Colorado, which paid slightly less than Texas, at $13,042 a month for a petroleum-related job, which totals $156,500 per year2 (Figure 1).The Texas pay was not the highest in the world for a petroleum engineer (companies in Australia pay even more – on the average gross salary of US$ 142,721 per year), but it is still far more than in Nigeria, which paid its petro-leum engineers an average annual sal-ary of NGN 4,000,000 (approximately $11,110). In comparison, petroleum engineers in Saudi Arabia were paid an average of “only” SAR 237,206, which is equal to $63,250 per year.2As for oilmen in Russia – one of the world’s leading oil producers and a country that is in dire straits – a Rus-sian citizen, on average, now earns less than a petroleum worker in the small country of African Equatorial Guinea. Russian petroleum drilling engineers earn on average only 464,386 ₽ (RUB) (less than $6,630) per year (or a bit more than $550 a month).6 Unfortunately, this is a huge salary in Russia now! I have Oilmen’s Salaries Across the World By Eugene M. KhartukovPhoto courtesy of CareerStint.comFigure 1: Highest average gross salaries of petroleum engineers in the U.S. in mid-2020 Source: Petroleum Ninja3
Oilman Magazine / January-February 2021 / OilmanMagazine.com51OILMAN COLUMNto confess (at the risk of being disre-spected by better-off readers) that my own monthly salary as a professor at the most prestigious educational entity in the former Soviet Union (FSU) does not exceed, even with all the bonuses and premiums, $1,600 – really fantastic by current Russian standards!At any rate, according to the Society of Petroleum Engineers (SPE), average oil salaries in mid-2020 in the U.S. were the highest, while those in northern and central Asian countries were the lowest across the world (here we are not talking about Russia, where oil salaries are not even assessed by SPE) (Figure 2). The highest salary in North America’s petroleum industry is typically paid to a project manager. According to the London-based international OilPrice online services, in 2018, a project manager with at least six years of experience in the oil and gas industry on average earned $157,795 annually9 The 10 Highest Paying Jobs in Oil and Gas https://www.baystreet.ca/commodities/3555 (Figure 3).Still, according to the ofcial Bureau of Labor Statistics (BLS) data, average pay for oil and gas jobs in the U.S. in 2019 was far from the highest. Some medical professionals typically were paid more – $156,780 on average for petroleum en-gineers as compared, for instance, with $261,730 for anesthesiologists (physi-cians who administer anesthetics and analgesics for pain management prior to, during or after surgery), $213,270 for family and general practice physicians, and $178,260 a year for dentists.11It is widely assumed that the hard work in oil and gas is mainly for men – in 2018 the share of women worldwide was eight percent and even in the most high-tech petrochemical industry it is only nine percent.9The situation with salaries looks sub-stantially different when we bear in mind the taxation and cost of living in different countries (Table 2). This is highly relevant as up to half the pay is subject to personal income taxes, in some countries, and a considerable Figure 2: Average annual oil salaries in selected countries and regions in mid-2020. Source: SPE7Continued on next page...Figure 3: Top paying jobs in the hydrocarbon industry of North America in 2018 (according to Airswift and Energy Jobline). Source: Oilprice.com10
Oilman Magazine / January-February 2021 / OilmanMagazine.com52OILMAN COLUMNportion of the remaining salary will be spent to make ends meet.However, the situation changes only slightly even after undertaking those adjustments. The highest pay for a pe-troleum engineer remains in the U.S. and Australia while India and Nigeria “enjoy” the lowest salary rates.No doubt, the COVID-19 pandemic has greatly inuenced the oil and gas in-dustry, with some 107,000 jobs vanish-ing from the U.S. oil, gas and chemicals industry between March and August 2020. According to the London-based Deloitte international audit consultancy, about 70 percent of the jobs lost in 2020 may not come back by the end of 2021.14References:1. Petroleum Engineer Average Salary in Russia 2020 http://www.salaryexplorer.com/salary-survey.php2. Petroleum Engineer Salaries in Australia https://au.indeed.com/salaries/petroleum-engineer-Salaries3. Oilman Salaries https://www.simplyhired.com/salaries-k-oil-man-jobs.html4. Petroleum Engineering Salaries Worldwide https://interestingengineering.com/petroleum-engineering-salaries-worldwide 5. Learn How to Become an Oil Baron https://petroleum.ninja/petroleum-engineer-salary6. Oil and Gas Drilling Engineer Salary https://www.salaryexpert.com/salary/job/oil-and-gas-drilling-engineer/russian-federation7. Petroleum Industry Salaries Begin to Rise After Downturn https://pubs.spe.org/en/jpt/jpt-article-detail 8. Petroleum Engineer Salary https://www.salary-expert.com/salary/job/petroleum-engineer 9. The 10 Highest Paying Jobs in Oil and Gas https://www.baystreet.ca/commodities/3555 10. The 10 Highest Paying Jobs in Oil and Gas https://oilprice.com/Energy/Energy-General11. 25 Highest Paid Occupations in the U.S. for 2019 https://www.investopedia.com/personal-nance/top-highest-paying-jobs12. List of Countries by Personal Income Tax Rate https://tradingeconomics.com/country-list/personal-income-tax-rate13. Cost of Living Index by Country 2020 Mid-Year https://www.numbeo.com/cost-of-living/rankings_by_country.jsp 14. The Future of Work in Oil, Gas and Chemicals https://www2.deloitte.com/us/en/insights/industry/oil-and-gas/future-of-work-oil-and-gas-chemicals.html Table 1: Comparative 2020 average annual salaries (net of bonuses) of petroleum engineers in selected countries. Source: Based mainly on SalaryExpert.com8Table 2: Nominal and adjusted average annual salaries of petroleum engineer in selected countries. Source: Compiled and calculated by the author from: Interesting Engineering,4 Petroleum Ninja,5 Trading Economics12 and Numbeo13Eugene M. Khartukov is a professor at the Moscow State Institute/University for International Relations, (MGIMO), head of the Moscow-based Center for Petroleum Business Studies (CPBS) and of the World Energy Analyses and Forecasting Group (GAPMER), and vice president (for Eurasia) of the Geneva-based Petro-Logistics S.A. He is the author and co-author of over 360 scientic publications and speaker at more than 170 international oil, gas, energy or economic fora. Email: khartukov@gmail.com.
Oilman Magazine / January-February 2021 / OilmanMagazine.com53The Crude Life engages with industry experts and energy enthusiasts every day with interviews, radio programs, social media posts, print features, video content and podcasts. These conversations range from CEOs to truck drivers to authors to engineers to cafe owners. Just like our diverse experts and interviews, the conversations have depth and worldly experience. Here are some quotes from people Liv-ing the Crude Life. “When I rst got involved, we were still talking about units, like 160 acres, which meant one well pad for every 160 acres and then you’d round a lot of those out from that, and then it went to 640. Then it went to 1,280. I don’t know where it is now in terms of acreage. I mean, when you go 3.8 miles out, it’s an immense amount of acreage and what that means is you know you’re recovering the economic value under an ever-growing piece of land with an ever smaller footprint proportionally.” Tom Shepstone, president, NaturalGasNow“Last week sometime, there was a Citibank analyst who essentially came out and predicted that they foresee a Bitcoin price in the next year or two of $321,000 per Bitcoin from $20,000. Yes, it sounds ridiculous, doesn’t it, but the interesting thing about the way Bitcoin works is that it is a con-trolled distribution of the Bitcoin or of the production of Bitcoin. So, there will only ever be 21 million Bitcoin ever made. Right now, in circulation there’s approximately 18 million so that means that there will only ever be three million Bitcoin minted here in the next 100 years. That’s why opera-tors are now looking very closely at converting their ared gas into Bitcoins.”Tom Masiero, founding partner, Great American Mining Co. “We’ve really kicked off what we call the Digital NOW platform. Mainly focused at this point on e-commerce that is allowing our customers to place their orders online and be able to do research. And in some cases, through our new platform that we just released, customers are being able to design packages completely on their own. Whereas in the past, with the historical way that business has been done, you might be sitting down shoulder to shoulder with one of our personnel going over those BOMs and determining what needs to be there.”Josiah Black, Distribution NOW“The United States has the ability to provide France with access to the cleanest and most efcient source of natural gas in the world. Importing more U.S. LNG strengthens the U.S.-France trade relationship and provides France with signicant environmental and geopolitical benets. If France’s true objective is to lower carbon emissions from energy imports while ensuring access to a reliable and secure energy source, then the choice is clear: U.S. LNG provides the country the best option compared to its alternatives.”U.S. Senator Kevin Cramer“We’re outside of New Orleans on an intercoastal canal, so where we’re located is, I guess you can call the calmer waters, but that intercoastal canal reaches Texas, all the way to Ala-bama. So there’s some lochs in between, but Lake Charles is basically almost to Port Author, the next closest bigger city at Beaumont. So that’s on the other side but they had a lot of construction going on over there. We’re sticking here and trying to service folks here with their barges…”John Vindas, Bayou Energy and Repair Services“I had heard gures as high as $500,000 in savings per well by using the sand mined here in west Texas versus bringing sand in from somewhere else.”Danny Skiff, Specialized Desanders USA“I’m all about efciency and I think that as far as the industry goes, that’s where we always are moving. We’re trying to get more efcient, get our wells drilled cheaper, get our wells frac[ked] cheaper, use less water than we have to, but get it, use as much as we need. So, there’s this ne line and that’s— the oil and gas business constantly pushes those limits.”Brandon Davis, CEO, Swan EnergyLiving the Crude Life By Jason SpiessBitcoin Mining ContainerU.S. Senator Kevin Cramer (left), U.S. Secretary of Energy Dan Brouillette (middle left), U.S. Senator John Hoeven (middle right) and North Dakota Governor Doug Burgum (right)Currently Swan Energy has operations in Oregon, Oklahoma and Texas, and assets in Oregon, Oklahoma, Texas and Colorado.OILMAN COLUMNContinued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com54OILMAN COLUMN“Some of the largest oil and gas companies know that renewable energy is the future of the industry. Baker Hughes alone rewrote [its] mission statement way back in early 2000 to reect this. Then we have companies, such as Occidental Petroleum and bp, who are making very aggressive statements towards their plans at achieving very low to zero emissions to counteract the attacks seen on the industry thus far. The International Energy Agency projects that renewable energy gen-eration will more than quadruple by 2040 and, given the history of its projects, that’s probably a very conservative estimate. Companies aren’t able to ght these macro trends, but they can adapt their businesses to stay exceptionally relevant. This ultimately means some major oil com-panies are slowly going to become renewable energy companies. With all this being said, it is still very crucial to let our industry be heard and educate all others outside of it. We all want to be more environmental-ly conscious; this takes time and a team effort from all. We must stand up for our industry going into 2021.”Bailey Midkiff, W.I.C.The Crude Life Podcast can be heard Monday through Friday with a Week in Review news program aired on the weekend. For more info, visit www.thecrudelife.com.Jason Spiess is a multi-industry, multi-award-winning journalist, entrepre-neur and content strategist. He has over 30 years of media experience in broadcasting, journalism, report-ing, producing and principal ownership in media companies. Spiess has also worked as a guest cor-respondent for a number of local and global news organizations from 660 KEYZ-AM Williston to CNBC to the BBC World. He is a full-time father, cancer survivor, environmentalist, author and graduate of North Dakota State University. To understand and perhaps guide the purpose of our economy, econo-mists and scientists think about future energy-economic options by mix-ing laws and theory (scientic, legal, socio-political and economic) with data by inserting them into a computa-tional oven of some sort that spits out results for interpretation. Depending upon the knowledge and worldview of the critic interpreting the results, as well as the quality of input ingredients, the results are described anywhere from an elegant soufé to a half-baked pile of soggy dough.If the taste and shape of our energy and economic dessert does not meet our expectations, then how do we know whether or not the ingredients were combined incorrectly, the oven is broken, the recipe is poorly designed or we just simply can’t get what we want? If we determine we can’t get the result we want, and if we just change the inputs and assumptions to get our desired result, will anyone notice? After all, “it’s complicated,” right?At some point in the process of mix-ing and baking the ingredients that will rise into our future, we go from historical energy and economic data to energy and economic narratives. Somewhere between physical laws and data lies the theoretical economic oven, or “black box,” that uses a mathematical equation or computa-tional algorithm to convert inputs to outputs, data to information. We use these black boxes, or models, to help us peer into the future, to learn and project what enables future prosperity or poverty, to better understand how different the world might be if pow-ered by fossil [fuels] versus renewable energy. Sometimes people don’t even use a black box, but only the intuition they believe they have within their gray matter, or brain. Sometimes a reason-able argument is made, sometimes not. For better or for worse, people with gray matter design our computational models and black boxes. These people, all of us, are affected by our cultures, our languages, our environments and our narratives. For more information visit www.careyking.com. The Economic Superorganism: Beyond the Competing Narratives on Energy, Growth and Policy By Carey W. King
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