Featuring Keynote:

September 2324, 2014

Gregory Walz

Norris Conference Centers-CityCentre | Houston, Texas

Senior Drilling Engineering Advisor

Anadarko Petroleum Corporation

Best Practices and Technology

Solutions in HPHT Drilling & Completions
September 24, 2014 Agenda
REGISTRATION

Come to HPHT for the Latest Information on:

Opening Remarks: John Royall, President and CEO, Gulf Publishing Company
Keynote Address
COFFEE BREAK: Sponsored by Weatherford Drilling Services
TRACK 1: EXPLORATION & DRILLING
Session 6: Drilling Technology

Technical Program Sponsor:

Addressing cementing challenges in Ultra HP/HT wells

& Gas
Vidit Mohan
enda
Influence of accelerators on the setting time and
14MPDAg
EC-Drill
a new
technology for floating drilling rigs
20
strength development of calcium aluminate and
23,
John H. Cohen, TechnologyNManager, Enhanced Drilling ny calcium
aluminophosphate cements Kyriacos
RATIO
Compa
REGIST

ing

Gulf Publish

Agapiou, Halliburton
s
development
ation
psi subsea Corpor
John
um LUNCH
for 20,000
Remarks:
solutions r, Anadarko Petrole
Opening
industr y
Services
Session
ering Adviso
8: LWD & MWD
Developing Engine
Session 9: Testing
Address:
erford Drilling
S
Keynote
Senior Drilling
by Weath
red temperature
COMPLETION
y Walz,
2: in
Downhole: Sponso
MWD high
electronics
used
the
Gregor
TRACK
E BREAK
of Thailand Chris Hartley, Weatherford
Corrosion
nections/
resistance and mechanical properties of
COFFEGulf
rs/Con
NG
140 ksi min and 160 ksi min alloy 945X for HPHT
n 2: Tubula
Operational
Technology
N & DRILLI challenges; drilling HP HT Sessio
HD GulfSealing
of Mexico
design Mannan, Special Metals
RATIOwells
applications
Alejandro Montiel, Pemex and Carlos Padilla,
1: EXPLO
ch to seal Sarwan
plc.
approa
TRACK
fic
Corporation
Holdings
Schlumberger Mexico
A scienti
e, Plexus
1: Fluids
Metal sealingation Craig Hendri
tions
Session Sensitive process viscosity measurement
e applicafluid induced stress
Completion
and qualificat extremely in offshor
corrosion cracking in
high pressure for downhole
applications technologies
super 13Cr-110 tubing from HPHT well Wang Peng,
Group
seal
drilling fluid
Corentin Thierry,
Technetics CTG & Tubular
ApplicationsMetal
Specialist,
Sofraser
Young,
polymer-based Fluids
compounds Strings Research Center, CNPC Tubular
Jacob
erformance Newpark Drilling
connectionmance
Goods Research Institute
well
high-p
g,
HPHT:
Dearin
HPHT steam t, High Perfor
Harry
r
system
COFFEE BREAK
tic polyme
Larry Vincen logy
Techno
ized synthe
and
Tubular
of special differential sticking
risks
tion
g

e
applica
l reducin
to mitigat
transmission
Session 10: Reliability
materia
Successful
And Service
Life
red wells
pressure
of tubular
HPHT wells
in high pressuminimizing pore
Evaluation well integrity for Corporation
s
by
Reliability-based
ms
design
HPHT
assessment
ing
USA
for
tubular
Hughe
at
connection
sealability
y
rec
in
HPHT Well Applications
proble
enhanc
Jadav, Baker
Jueren
Xie,rheolog
Cole, Vallou
C-FER Technologies
e mud
Inc.
Zakaria
Prakash
Stuart
to optimiz
aterials
work Ahmed
Application
finite(SSE)
element analysis to fatigue life and fracture mechanics in HPHT. Sam
ering
Using nanomhout experimental Engineof
Lee, FMC Technologies
and
wells throug of Sciences
ent
(AUC)
LUNCH
4: Equipm
in Cairo
Noah, School
Session
Use a
University
CLOSING REMARKS
flexibility?
American
re design Technology
: HPHT wellbo ure Global
ent
Case History able! Envent
3: Equipm
Session
of
Solid Expand
generation and
: A new
try
res for
the lithium
, EM teleme P
teral wellbo
minus
s for M/LWD elli, FastCA
of multila
More power
the use
Halliburton
power system Ricardo Signor
ole
plating
Durst,
downh
Contem
Doug
monitoring
tertiary
and
production
the lower
re to offset
Corporation
er pressu
development PHT
ent
SYSTEMS
t seawat
design,
Equipm
for Ultra-H
l ambien
safety valve
ater HPHT
erations
Hughes
Use of externa re in deepw
Subsurface testing consid
logies
pressu
son, Baker
internal
FMC Techno
qualification Grant Thomp
South
,
Williams,
in Mexico
ent design
Michael
applications
rature wells
tion equipm n of Kinley caliper
high tempe
and comple
entatio
Drilling
Schlumberger
Drilling
and implem
Buitrago,
in
Oscar
development Group
operators
e risk for , Aggreko
timer, Expro
ns mitigat
Dickert
power solutioments David
Scalable
environ
E BREAK
drilling
COFFE
HPHT
tions
5: Regula
Session
es
Saga continu
tions: The
ion: Regula
Panel Discuss
KS
G REMAR
um
CLOSIN
ko Petrole
by Anadar
Sponsored
Reception:
Opening

International HPHT operations from South America, Asia and more

Regulatory changes on operations and policies
Effective solutions and best practices
Technological advancements and improvements
Lower Tertiary Gulf of Mexico
Networking opportunities with HPHT technology experts and fellow peers

Opening Reception Sponsor:

TRACK 2: COMPLETIONS
Session 7: Cementing

Drilling system design for 20,000 psi reservoirs

Anthony Spinler, GE Oil

September

nt
Royall, Preside

and CEO,

Register Now
and View the Agenda:
HPHTConference.com

Coffee Break Sponsor:

> Join World Oil on LinkedIn

> Register Now!

AUGUST
AUGU
AU
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GU
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2014
0 4 / DE
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DEFI
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NORTH AMERICAN

OUTLOOK
U.S.
U
.S. aactivity
ctivity fflourishes
lourishes ddespite
e s pi t e
rrising
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osts, regulatory
regulatory interference
interference
OIL COUNTRY TUBULAR GOODS
New
N
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xpandable hanger
hanger and
and packer
packker liner
linner enables
enablees
drilling
drilling ooff ffirst
irst ddeepwater
eepwater well
well in
in the
the Red
Red Sea
Se a

SHALETECH: EAGLE FORD

Deals
D
eals abound,
abound, as
as production
production
in
in tthe
he pplay
lay aapproaches
pproaches 1 MMboed
MMboed

UNCONVENTIONAL RESOURCES
AAutomated
utomated M
MPD
PD iinn SSAGD
A GD w
well
ell ssuccessfully
uccessfully
navigates
navigates nnarrow-pressure
arrow-pressure window
window

Demanding Drilling Environments?

Offshore or onshore, Grant Prideco consistently
delivers premium drill pipe specically designed for
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TurboTorque Connections
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uLtimate Connections
Designed for shale play drilling challenges
and ultra-ERD applications
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Purpose-Built Landing Strings

Adaptable to differing rig situations
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CONTENTS
AUGUST 2014 / VOL. 235 NO. 8

35

SPECIAL FOCUS:

OIL COUNTRY
TUBULAR GOODS
35

Expandable liner hanger and

packer exceed expectations for
first deepwater well in Red Sea
O. Adewuya / S. Tiwari
A. O. Abdelwahed / M. Solano

NORTH AMERICAN
DRILLING UPDATE
53

REGIONAL REPORT:
WEST AFRICA
78

High-alloy austenitic stainless

steels prove worth in sour
gas fields
K. Soerowidjojo

43

53

L. White / A. Waterman

85

Energy, security and

understanding the human
terrain of West Africa
M. Keating

SHALETECH: EAGLE FORD/

PEARSALL
88

Prosperity in the U.S.

market continues
K. Abraham / R. Curran
M. Nogarin

Identification of potential
pre-salt basins and improved
deepwater technologies leads
to targeted licensing rounds

Deals abound, as production

in play approaches 1 MMbpd

78

COLUMNS
7

Lets give em what they want

15

Technology fuels BHPs

Eagle Ford improvements

17

65

Automated MPD in SAGD

well successfully navigates
narrow-pressure window

Defining the E in exploration

Drilling advances

21

Whats new in production

BLM told to step it up

Onshore Africa: Hope,
investment in short supply

23

25

V. Boucher / N. Osayande
E. Mammadov / S. Sephton

SAND CONTROL
71

Innovative sand failure analysis

and prediction modeling
restore lost production in
North Sea field
L. De Groot / H. Graven
G. Suez / S. K. Subbiah

ABOUT THE COVER

Helmerich & Payne FlexRig 462 drills an
Eagle Ford shale well for Carrizo Oil & Gas
during early December 2013, alongside state
highway 72 in McMullen County, Texas, south/
southwest of San Antonio. Notice the warning
sign to personnel entering the wellsite. Photo
by Kurt Abraham, Executive Editor.

N. Ritchie / H. McIntosh

Oil and gas in the capitals

Capital markets balance
in Latin America

27

Executive viewpoint
Travails and triumphs
of a frontier explorer

29

Pipelay technology, vessels

set North Sea pipe-in-pipe
installation record

Offshore in depth
BOEMs rational decision to open
Atlantic OCS to exploration

DEEPWATER/SUBSEA
109

Whats new in exploration

19

J. Redden

UNCONVENTIONAL RESOURCES

Energy issues
Public awareness not
what it could be

J. Redden

103

First oil

Innovative thinkers
Freedom to rock:
dGB Earth Sciences

130

The last barrel

Tracking the enemy from within

NEWS AND RESOURCES

DEEPWATER REGULATORY
COMPLIANCE

World of oil and gas

31

Industry at a glance

117

Role of class in deepwater

regulatory compliance evolves
with industry needs

123

People in the industry

B. Montaruli / L. Feijo

124

Companies in the news

125

New products and services

126

Marketplace /
Advertising sales offices

GAS PROCESSING SUPPLEMENT

127

Advertisers index

GP1 Technology and Business

Information for the Global Gas
Processing Industry

128

Meetings and events

World Oil/AUGUST 20143

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Mailing Address: PO Box 2608

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PUBLISHERRon Higgins
EDITORIAL
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ChairmanDr. William J. Pike, Managing Consultant and Contractor to the

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4AUGUST 2014/WorldOil.com

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FIRST OIL
PRAMOD KULKARNI, EDITOR

Lets give em what they want

This editorial is about how personal experiences can influence thinking
about public policies that involve the oil
and gas industry.
My daughter has married into a family
in Massachusetts that loves outdoor activities. In mid-July, my wife and I had the opportunity to visit the familys camp at a
lake in Maine. Each camp consists of a lake
house, an assortment of small watercraft
(powerboat, kayak and/or canoe), and
a float that serves as a platform for swimming. At this particular lake in Maine, there
are a hundred or more such camps along
the waters edge. Each summer, the lake is
a venue for a variety of outdoor activities.
The ownership of a camp is transferred
from one generation to the next. Many of
todays camp owners are fourth- or fifthgeneration residents.
To most of us in the oil and gas states,
a drilling rig, or a line of pumpjacks across
the horizon, are picturesque sights. But, to
the people in Maine or other such pristine
settings, oil and gas activity can be seen as
a threat to their dream of passing on the
natures bounty to the next generations.
I think the oil and gas industry should be
cognizant of such motivations and make
Idyllic summer lake camp in Maine: venue
for a rethink on public policy about oil and
gas production.

every effort to blend into the local environment and minimize visual, chemical and
noise pollution as much as possible.
Stay off the front pages. The Santa
Barbara beach spill (1969), Piper Alpha explosion (1988), Exxon Valdez leak (1989),
Deepwater Horizon blowout (2010), and
recent oil train derailments, have made
front page news, and scarred the oil and gas
industrys image. Of course, oil and gas activity is inherently dangerous. We should,
however, do all that is humanly possible to
prevent catastrophic incidents.
Reduce pollution. The industry
should continually invest in technology
to install leak-proof valves and reduce fugitive emissions. Fracing risks should be
minimized through frac-water recycling
and responsible water management. Traffic through urban areas should be minimized. Noise reduction, through quieter
compressors and engines, should be a
high priority. We should continually improve pad usage and multilateral drilling,
to reduce the number of wells needed to
drain a particular formation.
Oil-and-gas-to-wire technology. Energy transportation by electricity is perhaps the most efficient and convenient.
Electrical vehicles are also becoming increasingly viable as a mode of transportation. We should develop small-scale power
plants, nearer to oil and gas fields and gathering facilities, that can convert the fossil
fuels to electricity and transfer the energy
to the grid as soon as possible.
Wheres the money? Im sure youre
already thinking about how we can pay for
such utopian solutions. The oil and gas
industry has long considered delivering
cheap and plentiful energy as its mission statement. Plentiful is appropriate,
but cheap may no longer be compatible
with the demands for greater attention
to health, safety and the environment.
We would have to pass on the additional
costs to the consumers. After all, havent
people come to terms with paying more
for globally responsible products (think
Starbucks) and organic produce?

IN THIS ISSUE

35

High-alloy austenitic stainless steels prove their

worth. Corrosion is a major issue for oil

country tubular goods. Our OCTG issue
focus section includes an article on a new
tubing product from Sandvik that exhibits
extremely high corrosion resistance, particularly in production environments with
the presence of H2S. A Sandvik author
describes laboratory and autoclave tests
under simulated deep, sour wells.

53

North American drilling

update. While oil and gas

prices have come off their recent highs,

the fundamentals remain in place for
another strong year for drilling in North
America. As of Aug. 1, the U.S. rig count
was 1,889, which was 107 rigs more than
the same week last year. Even the Canadian rig count is 51 rigs higher at 392. In
our 88th annual, U.S. mid-year update, Executive Editor Kurt Abraham provides an
analysis of well data from the state agencies and state-by-state drilling activity in
the various oil and gas plays.

88

ShaleTech report: Eagle

Ford. Contributing Editor

Jim Redden reports that new players are

shelling out top dollar to gain a share of
what are among the highest recovery
rates in the unconventional sector, and a
play with plenty of room to grow. In addition to the Eagle Ford activity report,
World Oil is presenting a profile on one
of the leading companies in the Eagle
Ford: BHP Billiton. An interview with Rod
Skaufel, BHP Asset President U.S. Shale,
reveals how technology is fueling BHPs
Eagle Ford improvements, such as diagnostic studies to select the optimum
number of stages and stage lengths.
Skaufel was the keynote speaker at the
World Oil Shale Breakfast Series on Aug.
12 in San Antonio.

World Oil/AUGUST 20147

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WORLD OF OIL AND GAS

MELANIE CRUTHIRDS, NEWS EDITOR

EXPLORATION ////////////////////////////////////////////////////////////////////////////
Gazprom Neft starts drilling
at Arctic eld
Gazpromneft-Sakhalin, a subsidiary of Gazprom
Neft, has started drilling a new exploration well
in Dolginskoye field, on the continental shelf in
the Pechora Sea. The work is being carried out
during the ice-free months of 2014, and will involve
drilling a single well to a depth of 3,500 m and
conducting a full range of geological investigations.
Gazprom Neft has worked previously in the area
at Prirazlomnoye field. Based on initial studies,
the company said that a further program will be
drawn up to explore the field and to prepare for
exploratory drilling during the ice-free seasons in
following years. Drilling and well testing will be
carried out in 2014 by the GSP Saturn jackup, which
arrived on site in mid-June and is installed directly
on the seabed. Photo courtesy of Gazprom Neft.

CNPC nds oil, gas shows

in disputed South China
Sea waters

Egdon Resources commences

drilling Wressle-1 conventional
exploration well

China National Petroleum Corporation (CNPC)

reported that, on July 15, it completed drilling
and exploration operations at the Zhongjiannan
Project, finding both oil and gas shows. The
company is now planning a comprehensive
assessment of the areas hydrocarbon horizons,
based on geological and analytical data collected previously. Further work is subject to the
aforementioned comprehensive assessment.
In 2013, CNPC conducted a well site survey
at the location, after identifying exploration
targets and well locations. On May 2, CNPC
started drilling two exploratory wells at the
Zhongjiannan Project, and finished drilling the
first of these wells on May 27, and the second
on July 16. The operation is undertaken by
the HYSY-981 drilling platform, run by China
Oilfield Services Limited.

Egdon Resources has begun drilling the Wressle-1 conventional oil exploration well in Lincolnshire License PEDL180,
to the east of Scunthorpe. Wressle-1 spudded on July 19,
and drilling is expected to take approximately 38 days. The
planned well will be drilled as a deviated well to a TD of
about 2,300 m. It will intersect a number of prospective
Upper Carboniferous sandstone reservoirs near the crest
of the Wressle structure. The Wressle Prospect is defined
by proprietary 3D seismic data, which were acquired by
Egdon in February 2012. The prospect is on trend with
Crosby Warren oil field and the Broughton-B1 oil discovery,
both to the immediate northwest, and the Brigg-1 oil
discovery, to the immediate southeast. The gross mean,
prospective oil resources at Wressle are estimated to be
2.1 MMbbl. The partners in PEDL180 and Wressle-1 include
Egdon Resources U.K. Limited (operator, 25%), Celtique
Energie Petroleum Limited (33.33%), Europa Oil & Gas
Limited (33.34%) and Union Jack Oil Plc (8.33%).

Petrobras begins
extended well
testing at Iara

On June 21, Petrobras began an

extended well test (EWT) in the
evaluation area known as Iara,
on Block BM-S-11, roughly 300
km offshore at a water depth
of approximately 2,200 m. The
EWT is part of the Discovery
Evaluation Program, approved by
Brazils regulatory agency, ANP.
The test is being conducted on
well 3-BRSA-1132-RJS (RJS-706),
in the western section of the
Iara Evaluation Plan, using FPSO
Dynamic Producer. The wells
initial production of 29,000 bopd
is similar to the output of wells
that are producing for commercial purposes in the Santos basin
pre-salt area. The Evaluation Plan
will expire at the end of 2014,
at which time the consortium
must submit a declaration of
commerciality to ANP. Petrobras
operates the consortium (65%),
in partnership with BG E&P
Brasil Ltda (25%) and Petrogal
Brasil S.A (10%). Photo courtesy
of Petroserv.

GOVERNMENT/REGULATORY //////////////////////////////////////////////////////////////
API releases new standard for subsea
capping stacks

UK opens bidding for latest

shale gas exploration round

API has published new guidelines for the design, manufacture and use of subsea capping
stacks. APIs Recommended Practice for Subsea Capping Stacks, known as RP 17W, applies to
the installation of new subsea capping stacks, and can serve as a guide to improving existing
equipment. It can aid during the design and manufacturing process, and in developing instructions for preservation, transportation, maintenance, testing and operations. The document
also provides guidelines for the deployment, well shut-in and recovery of a subsea capping
stack. RP 17W is an industry response to the post-Macondo joint industry task force (JITF)
recommendations to enhance subsea well control and containment. This JITF, and others,
focused on offshore equipment, operating practices and spill response.

On the heels of a June report announcing untapped

resource estimates for Scotlands Midland shale
basinhome to a potential 30 Tcf of gas and 6 Bbbl
of oilthe UK has opened its next bidding round
for onshore exploration licenses. The Department
of Energy and Climate Change (DECC) will oversee
the round, which is highlighting shale gas as a
cheaper, cleaner fuel source, with Business and
Energy Minister Matthew Hancock publishing the
most recent details. The licenses offered will give
operators the right to begin drilling, but do not
represent an absolute agreement to drill, said DECC.
Once a license is granted, further drilling applications will require planning permission, as well as
environment permits and sign-offs from health and
safety officials. There also will be additional planning
guidance, and environmental assessments, for
exploration that could occur near areas of outstanding natural beauty, UNESCO World Heritage sites,
national parks and the Broads.

Croatia opens public tender for onshore exploration

Croatian Economy Minister Ivan Vrdoljak has opened a public tender for exploration and
exploitation of onshore hydrocarbons. This offering is the first in a series of tenders for
a total of six blocks, ranging from 2,100 to 2,600 km2, in the areas near the Drava River,
Eastern Slavonia and Save. This round of concessions will close on Feb. 18, 2015, with contracts expected to be signed for any awarded concessions by the end of June 2015. Croatia
recently introduced new petroleum legislation and production-sharing contract terms, in an
effort to draw investment into the countrys oil and gas industry. With no new investments
between 2007 and 2013, Croatian oil and gas production fell 30%.

World Oil/AUGUST 20149

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WORLD OF OIL AND GAS

MELANIE CRUTHIRDS, NEWS EDITOR

Saturn

3D RADIAL PROBE

DISCOVERIES //////////////////////////////////////////////

Woodside reported that its

Toro-1 exploration well, in
permit WA-430-P, has intersected
approximately 150 m of gross
gas (65 m, net gas) pay within
the Mungaroo Formation target,
offshore Western Australia. The
well reached a TD of 3,724 m.
Following drilling, wireline logging
was conducted and confirmed
the presence of a gas column. The
well was planned for P&A. Toro is
in Western Australias Exmouth
sub-basin, and is near Woodsides
existing Ragnar-1A discovery.
Woodside operates the license.

Shell strikes third discovery at

Norphlet play in deepwater Gulf
Shell has hit its third major
Norphlet discovery in the
Rydberg exploration well.
The well is 75 mi offshore,
in Mississippi Canyon Block
525, in 7,479 ft of water.
It was drilled to a TD of
26,371 ft and encountered
more than 400 ft of net
oil pay. Shell is completing
full evaluation of the well
results, but expects the
resource base to be approximately 100 MMboe. Together
with the Appomattox and Vicksburg discoveries, the total
potential of the Norphlet discoveries is now over 700
MMboe. This is the first discovery for the partnership of Shell
(operator, 57.2%), Ecopetrol America Inc. (28.5%) and Nexen
(14.3%). Photo courtesy of Noble Corporation.

GeoPark nds new oil

eld in Chile

Repsol hits oil off Trinidad

and Tobago

GeoPark Limited has discovered a new

Chilean oil field with its Primavera Sur 1
well, on the newly acquired Campanario
Block in Tierra del Fuego. GeoPark
(50%) operates the Campanario Block, in
partnership with ENAP. GeoPark drilled and
completed Primavera Sur 1 to a TD of 8,025
ft. A test conducted in the Tobifera formation, at approximately 7,750 ft, resulted in a
production rate of approximately 215 gross
bpd of 39.9API oil. The operator said that
further production testing will be required
to determine stabilized flowrates.

Repsol has struck an oil discovery in Teak field in the

TSP Block, east of the island of Trinidad. The TB14
discovery has upgraded the northern portion of the
Teak B field that was not known previously, with the
newly discovered area estimated to contain over 40
MMbbl of oil-in-place. Repsol (70%) operates the
field, partnered by co-venturers Petrotrin (15%) and
The National Gas Company of Trinidad and Tobago
(15%). Repsol said that it is carrying out a drilling
campaign to add new resources and production to
the TSP Block. TB14, which has produced 1,200 bopd
in testing, is in addition to Junes start-up of the TB13
well, which added 1,384 bopd to the fields output.

BUSINESS /////////////////////////////////////////////////
Acquisition creates top Bakken/Three Forks producer
Whiting Petroleum Corporation and Kodiak Oil & Gas Corp. have announced a definitive agreement, by which Whiting will acquire Kodiak in a $6 billion transaction. The transaction will create
the largest producer in the Bakken/Three Forks area, with more than 107,000 boed of production
in first-quarter 2014, 855,000 combined net acres, and an inventory of 3,460 net future drilling
locations. The combined entity is expected to have an initial enterprise value of $17.8 billion, total
2014 production of 152,000 boed, and proved reserves of 606 MMboe (80% oil).

Devon sells non-core U.S. assets for $2.3 billion

Devon Energy said it has entered into a definitive agreement to sell all of its non-core U.S. oil
and gas properties to LINN Energy for $2.3 billion, or approximately $1.8 billion after taxes. The
agreement covers Devons remaining assets targeted for divestiture, and includes properties in
the Rockies, onshore Gulf Coast, and Mid-Continent regions of the U.S. With this sale, Devon completes its previously announced portfolio transformation, said President and CEO John Richels. In
keeping with this transformation, the company made an accretive Eagle Ford entry earlier this
year and created EnLink Midstream, in addition to selling off other non-core properties.

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Woodside reports
gas nd offshore
Western Australia

Sampling with 3D radial

probe recovers fluids
from tight dolomite.
Switching from an extralarge-diameter
conventional sampling probe to the
Saturn 3D radial probe, an operator in the
Middle East acquired fluids from a lowpermeability dolomite at 6.5 the flow rate
and 1/3 of the drawdown to confirm mobile
oil where openhole logs were inconclusive.

SPE to make URTeC sole focus for unconventionals

The Society of Petroleum Engineers (SPE), partnering with the American Association of Petroleum
Geologists (AAPG) and the Society of Exploration Geophysicists (SEG) to stage the Unconventional
Resources Technology Conference (URTeC), said it plans to focus its regional U.S. unconventional oil
and gas efforts on this one event. The group said this move presents the opportunity to consolidate
existing conferences, following industry feedback that URTeCs multidisciplinary approach is
favored. SPE said it will discontinue its Unconventional Resources Conference - USA, URTeC will be
held Aug. 2527 at the Colorado Convention Center in Denver, Colo.

Read the case study at

slb.com/saturn

World Oil/AUGUST 201411

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WORLD OF OIL AND GAS

MELANIE CRUTHIRDS, NEWS EDITOR

PRODUCTION //////////////////////////////////////////////
First oil begins at Dua project offshore Vietnam
Santos reported that oil production has commenced at the
Dua subsea project, offshore Vietnam. Sanctioned in August
2012, Dua is a three-well tieback to the existing Chim Sao
facilities in Block 12W, in the Nam Con Son basin. Gross
production from the Dua wells is estimated to average 8,000
bopd for the first 12 months of production. Sufficient oil and
gas handling capacity is available on the FPSO at Chim Sao,
to accommodate both Chim So and Dua at full production. Santos has a 31.875% interest in the Dua project, with
partners Premier Oil (operator) and PetroVietnam holding
the remainder. Photo courtesy of Santos Limited.

CNOOC commences initial

production at offshore gas eld
Primeline Energy Holdings Inc. announced that trial output
of gas from the LS36-1 field has now begun. Thanks to the
completion of the last section of the gas sales pipeline, and
connection to the provincial gas grid, LS36-1s development
was completed on July 1. Since then, CNOOC Limited, as
operator, and the downstream buyer, Zhejiang Provincial
Gas Development Co., have conducted joint commissioning
of the upstream and downstream facilities, with trial gas
production from LS36-1 beginning on July 16.

Ruspetro successfully tests rst

horizontal well
Ruspetro announced that a successful 10-day flowtest was
carried out on the companys first multi-stage, fractured
horizontal well (No. 214), in its Pottymsko-Inginsky license
area in Siberia. After initial clean-up, the well produced at an
average 1,350 bopd over the test period, with a water cut of
approximately 50%. The well is connected to the companys
production infrastructure, and has been contributing materially to sales volumes since early-July 2014.

EIA data reveal

sources of surge
in Permian output
The Permian basin in Texas and
New Mexico is the nations most
prolific crude oil producing area,
according to the U.S. Energy
Information Administrations Today
in Energy. Six formations within the
basin have provided the bulk of
the Permians 60% increase in oil
output since 2007. Crude oil production in the basin has increased
from a low point of 850,000 bpd
in 2007, to 1.35 MMbpd in 2013.
The region has exceeded output
from the federal offshore Gulf
of Mexico since March 2013. The
recent increase in Permian production is largely concentrated in six
low-permeability formations
Spraberry, Wolfcamp, Bone Spring,
Glorieta, Yeso and Delaware.

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ACQUISITIONS /////////////////////////////////////////////
Statoil divests
equity in Angolan
Blocks 38, 39
Statoil said it is divesting its 10%
equity in Blocks 38 and 39 of the
Kwanza basin, offshore Angola,
to Ecopetrol. In Block 39, the
10% divestment is accomplished
through two separate, but
simultaneous, transactions. Statoil
acquired 7.5% from Total under
one agreement. Statoil then
divested 10% in Block 39 through
a separate agreement, reducing its
net equity 2.5%. On April 3, Statoil
had announced the acquisitions
by WRG Angola Block 38 Limited
and WRG Angola Block 39 Limited
(both 50/50 JVs owned by White
Rose Energy Ventures and Genel
Energy Plc) of 15% interests
in Block 39 (from Statoil) and
Block 38 (from China Sonangol
International Holdings). Statoil is
also a partner in Blocks 22, 25 and
40 of the Kwanza basin.

Tethys increases interest in

license onshore Lithuania
Tethys Oil AB has increased an indirect interest in the
Rietavas license, onshore Lithuania, from 14% to 30%, as
JV partner Chevron has elected to leave the license. The
work program, focused on evaluating the license area for
conventional and unconventional hydrocarbon potential, will
continue as planned, and will not be affected by Chevrons
exit, said Tethys. After adjustments among the shareholders,
Tethys interest in the Raiseiniai license onshore Lithuania has
increased from 26% to 30%.

Inpex buys additional interest in

deepwater Gulf project
Inpex reported that its subsidiary, Teikoku Oil (North
America) Co., has acquired an additional participating
interest in the Lucius project, in the deepwater U.S. Gulf of
Mexico. Following this acquisition and the interim redetermination of equity ownership by the project partners, Inpexs
participating interest in the project stands at 7.75309%. The
companys increased participating interest follows Apaches
May 2014 decision to sell all of its participating interest in the
project, amounting to 11.669%, to Freeport-McMoRan Oil &
Gas. The Lucius project includes portions of Keathley Canyon
Blocks 874, 875, 918 and 919.

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World Oil/AUGUST 201413

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ENERGY ISSUES
DR. WILLIAM J. PIKE, EDITORIAL ADVISORY BOARD CHAIRMAN

Public awareness not what it could be

A couple of weeks ago, I gave another
of my periodic lectures at the local science museum. The lectures cover energy
industry-related topics and, occasionally,
tangential topics, such as plate tectonics
and earthquakes (no, I did not attribute
the majority of earthquake activity to
fracturing). I have no way of judging how
good the lectures are, but the topics generate a fair bit of commentary and questions. Its this interaction that leads me to
believe that, although we have been trying a lot harder lately, our story is still not
understood, much less believed.
The latest lecture dealt with the water
intensity of the various energy options.
Biofuels, for example, are water-intensive
to the extreme, using, by some estimates,
between 1,000 and 5,000 liters of water
to produce a liter of biofuel. Nuclear energy comes in second, mainly through
water usage to cool reactors. Oil and gas
are somewhat benign when it comes to
water intensitycompared to biofuels
and nuclear energybut water, be it
produced water or frac water, is still a big
issue. Explaining the options to handle
produced and frac flowback water (and
frac water sourcing) to a group of intelligent, but highly skeptical and generally
misinformed individuals is akin to explaining nuclear physics to a 14-year-old.
While the ability to comprehend is there,
the interest in understanding is not.
At these presentations, questions and
comments run the gamut. Below are fairly literal exchanges from recent lectures.
Q. Why dont the oil and gas companies clean up all the water they produce, so we can use it (it would solve
the pending water crisis, driven by
population expansion)?
A. They clean up what they can reasonably process, especially for frac
flowback water re-use. However, the
cost per barrel is much too high, and
the volumes are much too large, to
clean every gallon when compared to
the subsurface disposal option.

Q. Okay, but I still think they should

clean it up for us to use.

it could explode, too. Thats what

happened in Minnesota.

A. There are other problems associated with that idea. For instance, failure
to replace reservoir fluids on a major
scale would most likely lead to severe
subsidence, often in populated areas.

Response: There are two issues

herefracturing fluid toxicity and
the chance that gas might appear
in drinking water. As already mentioned, toxicity is not really an issue.
On the other hand, explosions due to
gas entrained in drinking water have
occurred. However, no instances can
be definitely proven to have occurred,
due to oil and gas wells leaking into
sources of drinking water. Rather, gas
in potable water is likely from shallow
gas-bearing formations untapped by
the oil and gas industry.

Q. Okay, but, still, like why dont they

clean all that water up?
A. Because, it was never part of the
water supply in the first place.
Comment: Yeah, but they could
clean it upright?
Response: Yes they could. In fact
they plan to. Its part of the scheme
to explore for oil and gas on Jupiter.
They will ship the extra clean water
there to use for pending human development of the planet.
Comment: Really? Thats cool.
Then there is the frac water conversation. This is almost guaranteed to occur.
Comment: I think its terrible what
fracing does!
Response: Really, what does it do?
Comment: Yeah, well, ituhyou
know, its like poison and can get in
drinking water and kill you, like it did to
those people in Michigan or somewhere.
Response: What makes you think
that fracturing is poisonous?
Comment: Well, it has toxic stuff in
it, and it can explode, too.
Response: Frac fluid does have chemicals in it, some of which you use in
your kitchen. Others are mildly toxic,
if you were to consume very large
amounts by drinking gallons and gallons of frac fluid. You dont drink frac
fluid do you?
Comment: HuhI mean, no, I dont
drink fracturing fluid, but, like, thats
what I mean. That fracturing fluid
could get in your drinking water. And,

Comment: Right. So water explodes

where there are oil and gas wells. I
knew it!!!
And, my favorite comment, received
as a nasty shot, as I entered the room to
give my lecture a few years ago in Seattle:
Comment: I hate the oil and gas industry. I hope that the price of oil doubles and then doubles again, so that the
price will skyrocket, and no one will
ever buy gasoline again, and the oil and
gas companies will disappear!!
Response: Thats an interesting concept. Of course, you realize that a
four-fold price increase in the most
commonly used fuel and chemical
feedstock would force other prices,
including those for almost all goods
and services, through the roof, which,
in turn, would bankrupt the national
and global economies, and lead to total worldwide chaos.
Comment: Oh. I hadnt thought of
that.
And, so it goes with our attempts to
educate the public. We will get thereit
will just take a while.

PIKE.WILLIAM@ATT.NET / Bill Pike has 47 years experience

in the upstream oil and gas industry, and serves as Chairman of the
World Oil Editorial Advisory Board.
World Oil/AUGUST 201415

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WHATS NEW IN EXPLORATION

WILLIAM (BILL) HEAD, CONTRIBUTING EDITOR

Defining the E in exploration

Before we can discuss exploration technology, we should agree on just what exploration means. Numbers on how much
is being spent on exploration typically are
reported as being from E&P activity.
Such expenditures are over-statements of
actual E dollars. Money spent on development (P) is quite real. Management at
that point knows they own something of
value and are spending investment dollars
to determine the extent of that value. Any
E going on at that point will be in New
Ventures or the Land Department, to see if
any more of those opportunities still exist and are available.
Exploration, according to me and most
of the crew who have participated in E
activity, is the effort to find hydrocarbons
in places previously thought to have a low
probability for occurrence and accumulation of hydrocarbons. Therefore, exploration areas, prior to a discovery, are usually
low-priority in the annual budgetary process of most majors, and large independents, i.e., when compared to field development and executive bonuses. Yes, I said
that. Bonuses are based on shareholder
return, and most execs rarely believe they
will be rewarded for chasing high risk.
Whats new? Large companies again
find themselves in the difficult position
of having to replace reserves, just to break
even (B.E.) with shareholder value. The
B.E. value is based on booked reserves
multiplied by the price of equivalent barrels of oil, minus total expenses. Reserves
are depleted by the natural course of events
of being an oil company in the supply business. In the last few years, several operators
have individually spent over $30 billion,
each, on E&P projects. Real exploration is
probably no more than 20% of that number. Reported elsewhere, overall E results
have been disappointing. Evidently, the
disappointment is occurring somewhere
outside of North Dakota.
Normal exploration success traditionally was somewhere around 10% of wells
ending up commercial. In the last 20 years,
technology has pushed that to about 20%.

Add in, that exploration today includes

what used to be called exploitation of a
known discovery, and we are up to about
40% commerciality per E well.
Some majors experience lower discovery rates than others. However, the days of
buying reserves in the ground for $5/bbl
on Wall Street are gone. So are Gulf Oil,
Superior Oil and Getty. Never heard of
them? You have heard of Chevron, which
used to be Chevron-Texaco, which used to
be Chevron and Texaco?
Do not be surprised that some megaoils are looking to acquire oily assets again.
There is only so much land that can be
leased. Until new land opens up, such as
the Arctic and major portions of the Eastern
Seaboard, the U.S. will have to wait. Africa
and South America continue to be promising. We all agree that we should stay away
from Eastern Europe and Iraq right now.
Tech news. A complimentary strategy
to buying oil is to invest in more technology, or at least apply more technology
when exploring. Spending, say, $4 million
to image a deepwater well with 3C VSP is
a bargain, compared to the $150 million
spent to drill the well in the first place. A
VSP image could control where the next
well should be placed. Amazingly, management, engineering and geoscientists all
agree that more information is better than
less. Not spending effectively on exploration technology is about the same as not
changing the oil in your car.
Everyone knows that 3D seismic is
the best way to acquire a comprehensive
subsurface image. We also know it is not
perfect. While marine seismic has greatly
improved, current legal restraints have become an economic barrier.
Professional litigants using the Marine Mammal Protection Act of 1972 (16
U.S.C. 1361 et seq.), as amended in 2007,
went to the courts, claiming that the U.S.
Department of the Interior was not properly protecting marine mammals from possible adverse effects resulting from oil field,
air-bubble [air gun] seismic activity. Ordinary marine seismic acquisition activity is

now categorized as harassment. The act

is enforced in U.S. waters by the U.S. Fish
and Wildlife Service and/or the Secretary
of Commerce (National Marine Fisheries
Service). Permits are required at a cost.
Restrictions often state hours of operation
and proximity to mammals. Scout boats
are a common prevention practice. Almost
all marine seismic surveys use air gun [collapsing air bubble] sources.
Good 3D seismic images can significantly reduce oil productions footprint
on the seafloor, subsequent environmental impact, and potential safety risks. Current U.S. governmental restrictions reduce marine seismic productivity times,
increase costs and often cause blind spots
in subsurface data coverage. Such blind
spots can eliminate the ability to adequately evaluate a reservoir or prospect.
Drilling within a blind spot and its aperture can also be very dangerous.
Seismic operators acknowledge the
public-legal interest and are seeking acceptable alternatives for seismic sources. I see
technology alternatives developing along
two lines. One, create mammal detection
capability superior to current methods,
which are binoculars on the fantail in daylight (seriously) and WWII sonar. Sercel
recently announced that they are adding
mammal detectors to the front of their
acoustic streamers. I suspect that after collecting a few years worth of calibration
data, this approach will lessen down time.
Second, we should invent alternate seismic energy sources, hopefully less impactful than air guns. The second approach is
more conventional and has been underway
for over 40 years. An industry JIP, Texas
A&M and RPSEA, will test a couple of
those alternative energy vibrators over the
next year.

BHEAD@RPSEA.ORG / William (Bill) Head is a project manager

for RPSEAs Ultra-Deepwater program. As a senior technologist,
he has worked over 38 years in U.S. and international exploration,
exploitation and production. Mr. Head has been instrumental to
several new international ventures, coordinating local and global
operations, and has managed one of the industrys largest
computer facilities.
World Oil/AUGUST 201417

DRILLING ADVANCES
JIM REDDEN, CONTRIBUTING EDITOR

BLM told to step it up

You may have paid handsomely to acquire the drilling rights to a highly prospective lease on federally controlled onshore
acreage, but dont plan on trucking in a rig
anytime soon. After you sign on the dotted
line, securing a permit to actually drill the
prospect is by far a more wearisome proposition than handing over a check.
It seems that the U.S. Bureau of Land
Management (BLM), which approves Applications for Permits to Drill (APD) on
federal and Indian-controlled lands, is sitting on a backlog of 3,500 unprocessed permit applications, largely because of agency
inefficiencies that are dragging out approvals, which average well over seven months.
That caustic assessment comes not from
disgruntled industry folks, but rather from
the watchdog of BLMs own parent, the
U.S. Department of the Interior (DOI).
In a June 26 memo to BLM directors
and the Bureau of Indian Affairs, DOI
Deputy Inspector General Mary Kendall
said the average lag time of 228 days to
get a drilling permit approved is untenable
and threatens the average $3 billion/yr in
federal royalty payments. Specifically, the
federal government and Indian mineral
owners risk losing royalties from delayed
oil and gas production. Industry officials
informed us that delays cause some wells
not to be drilled, resulting in additional lost
production and royalties, Kendall wrote.
By contrast, the DOI deputy inspector
general pointed out, most state regulators
approve permits to drill in 80 days or less.
She said the BLM does approve 99% of applications received, but only 6% are given
the go-ahead within 30 days of their receipt.
Although oil and gas operators share
responsibility for this situation, inefficiencies in the U.S. Department of the
Interiors review process impede productivity, she wrote in the 32-page report
that spelled out six recommendations
that could help speed up the process.
Long review times create uncertainties
in the APD process for both industry and
BLM. This adversely affects developing
the nations domestic energy resources.

Much of the blame for APD processing delays, Kendall said, can be traced to
DOI, which, until recently, has not placed
a high priority on improving the process.
The hold-ups began raising serious red
flags with the acceleration in applications
to drill on federal lands in, and around, the
Bakken shale. To date, DOI says that more
than 3,000 wells/yr are being drilled on
federal properties, primarily in Wyoming,
New Mexico, Utah and North Dakota.
The BLM shot back that its budget and
workforce are insufficient and do not reflect its stature as the nations largest land
management agency. Rather than calling
for an across-the-board staffing increase,
Kendalls recommendations focus entirely
on personnel management issues, including the appointment of project managers
for every field office to oversee the APD
process, develop and enforce performance
timelines for application processing, and
implement performance measures.
High-tech assistance. The DOI
deputy inspector general said operators
bear some of the blame by often failing
to provide all the complete and necessary
information required to grant a permit. A
considerable chunk of the data required,
and the item that occupies most of the processing time, she said, involves the surface
review that must comply with the National
Environmental Policy Act. The surface
review takes in myriad scientific analyses,
such as hydrology, archeology, biology, and
wildlife, including an assessment of threatened and endangered species.
If the public and privately-funded Environmentally Friendly Drilling (EFD)
program has its way, before the end of
2015, operators will have at their disposal
a high-tech analytical tool that will provide
all the fully vetted data required for a complete drilling permit application. Currently
under development, the GIS-driven Land
Use Site Selection Information Tool (LUSSIT) comprises a standardized analytical
methodology that addresses the environmental issues of well placement, which its
sponsors hope will expedite permitting.

The nine-year-old EFD, which is administered through the Houston Advanced Research Center (HARC) of The
Woodlands, Texas, under the direction of
Richard Haut, Ph.D., works with industry, academic, governmental and environmental representatives to conduct, what
it describes, as unbiased research into
potentially viable technologies that address air, water and land issues. HARC is
the brainchild of the late George Mitchell,
who is widely celebrated as the father of
hydraulic fracing.
The surface components of a federal
APD are at the heart of the LUSSIT tool
that EFD is developing in collaboration
with the University of Arkansas and Latitude Geographics. If all goes well, the complex analytical tool will be ready for field
trial deployment by November 2015.
The LUSSIT, according to EFD principals, is being developed to provide producers and regulators, alike, with a flexible and practical analytical tool to help in
placing wells, so they will deliver minimal
environmental impact. The tool, which
combines data, data models and advanced
workflows, would be used in conjunction
with specially engineered software.
Computer speak aside, the idea behind
the proposed LUSSIT is to provide operators access to the best practices employed
in a given area to minimize environmental
impact and, hopefully, present to federal
regulators a complete APD, which would
expedite the approval process.
This will help operators identify where
they should set their pads and build their
roads and infrastructure, to avoid environmentally sensitive areas. It also captures
best managed practices from 20-plus projects and brings a decision matrix into the
process to help operators make better decisions, says Tom Williams, EFD senior
advisor, along with Texas A&M Professor
Dave Burnett.

JIMREDDEN@SBCGLOBAL.NET / Jim Redden, a Houston-based

consultant and a journalism graduate of Marshall University, has
more than 38 years of experience as a writer, editor and corporate
communicator, primarily on the upstream oil and gas industry.
World Oil/AUGUST 201419

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WHATS NEW IN PRODUCTION

HENRY TERRELL, CONTRIBUTING EDITOR

Onshore Africa: Hope,

investment in short supply
The reasons for declines in the oil and
gas industry in Africa are not a mystery.
Investments required to sustain production levels and add reserves have not been
forthcoming, even in countries with relative economic and political stability. The
bright spots lie to the west, offshore and
in deep water (and the subject for another
column). But onshore, an enormous effort
will be required just to staunch the bleeding, in every sense.
Libyas troubles are well-documented.
The country holds the continents largest
proven reserves of crude oil, and the fourth
largest natural gas reserves, and has been a
very important source of light, sweet crude
to the European markets. The civil war in
2011 and subsequent removal of its petro-dictator sent oil production into nearcomplete collapse. With the advent of an
unsteady peace, production did slowly recover, so that by 2012, output reached an
average 1.391.45 MMbopd, still a ghost of
its former glory. Political/labor-related disruptions in 2013 kicked the chair out from
under the tepid recovery, as rebel protestors shut down oil fields and closed ports.
Last year showed signs of improvement. A deal with the rebels allowed ports
to reopen. In mid-July of this year, Libyas
oil minister told Reuters that the nations
output had risen to 588,000 bopd, as the
giant El Sharara oil field began a return to
production. Foreign investors are still waiting on the sidelines, which is usually the
case with such a tenuous peace.
Nigeria is Africas largest economy,
with a GDP in 2013 of 80.2 trillion Nigerian naira, or about $500 billion U.S. When
it was announced last spring, this figure
moved Nigeria ahead of South Africa for
the first time, and suggested a truly stunning growth rate of 89% year over year.
However, there is a certain artificiality to
the news, because the new GDP is the result of rebasing, which is an overhaul of
the way GDP is calculated. This sort of
reassessment is done by most countries
every few years to reflect basic changes
in the economy. However, Nigeria did its

last rebasing in 1990, when sectors such

as electronics, banking, e-commerce, and
even the countrys rapidly growing Nollywood film industry, were virtually nonexistent. While most economists agree
that the change better reflects the reality
of modern Nigeria, few Nigerians are impressed. The wealth is taking a long time to
reach down to the average citizen.
As a local farmer told the Al-Jazeera network, I dont feel it in my pocket Those
controlling the economy, those with government contracts, get all the money.
While Nigerias overall economy has
been growing, the petroleum sector has
not been leading the way, though it is still
a very large contributor. Along with the
other three top producers in Africa (Algeria, Angola and Libya), Nigeria experienced a decline in production, beginning
in second-half 2013. Nigerias average daily
crude output fell 24,000 bopd from 2013
to first-quarter 2014.
Speaking at the Nigeria Oil and Gas
conference and exhibition last March,
Shell Upstream International V.P. Markus
Droll said that decline rates in Nigerian
crude oil production run as high as 15%
20%. Droll told attendees that reversing
the decline rates requires more funds
than are currently available, and that the
high-cost operational environment in Nigeria further worsened the situation. The
Nigerian National Petroleum Corporation
has blamed funding shortfalls on the high
costs of oil and gas projects that were put
together by the IOCs.
Algeria, Africas second largest producer of oil and gas has seen petroleum output
fall in the past few years, due to waning
interest from production partners and foreign investors. According to reports, disappointing project results and unfavorable
project terms have been discouraging to
foreign companies, along with alleged corruption at Sonatrach, the countrys national oil company (NOC). Allegations were
made that Italian company Eni paid $256
million in bribes and kickbacks through its
Algerian subsidiary, Saipem, to help win

oil contracts. The Minister of Energy and

Mines was fired, and Sonatrachs managing
director went to jail.
This scandal was followed by the armed
terrorist attack in 2013 on a remote BPStatoil gas facility, which resulted in 37
deaths and caused international firms to
reevaluate their presence in Algeria.
Algerian production averaged 1.15
MMbopd in November of last year, a 15%
decline from the 20052010 average. The
nations gas production has also fallen
steadily since 2005 to 2.9 Tcf in 2011. This
situation has left the countrys reserves
mostly level for the last decade, with exports to Europe continuing to decline. Despite an effort in Western Europe to diversify its natural gas sources (i.e., away from
Russia), the regions slow recovery from
economic woes has kept a lid on demand.
Unfortunately, Algerias largest natural gas
customers, Italy and Spain, have been the
slowest to bounce back.
In a major effort to reverse a five-year
decline in oil and gas production, Algeria
announced an initiative to invest about
$100 billion in the countrys energy industry between now and 2020. The plan
is intended to increase exploration and
boost proven reserves, with an emphasis
on the countrys large shale deposits in the
middle-Cretaceous Benue Trough region.
The loss of interest on the part of foreign partners, and resulting fall in production levels, is a particular problem in
Algeria, because of the countrys heavy dependence on oil and gas for 97% of its export revenues, and a sizeable chunk of the
governments annual budget. According to
sources, plans call for $42 billion for the
development of fields over the next four
years, starting just ahead of the countrys
planned bidding round for 31 fields this
coming September. For the first time, this
round will include blocks with unconventional resources, and will include tax incentives for foreign companies interested in investing in shale development.

HENRY.TERRELL@GULFPUB.COM
World Oil/AUGUST 201421

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OFFSHORE IN DEPTH
RON BITTO, CONTRIBUTING EDITOR

BOEMs rational decision to open

Atlantic OCS to exploration
On July 18, the U.S. Bureau of Ocean
Energy Management (BOEM) announced that it had approved opening
of the southern and mid-Atlantic Outer
Continental Shelf (OCS) planning areas
for geologic and geophysical exploration,
including waters from Cape Canaveral to
Delaware Bay. Permits have already been
issued to nine geophysical survey companies that could conduct multi-client surveys as early as 2015. Exploratory drilling
could begin by 2018, with earliest production in 2026.
For many in the oil and gas industry, the
governments decision to open these waters
for G&G exploration was decades overdue. But one could argue that the process
worked the way it is supposed to in protecting the public interest. BOEM made
the decision after lengthy deliberation and
public comment on the draft environmental impact statement, which reviewed possible impacts on marine mammals, commercial fisheries, sea turtles, seabed corals,
and coastal communities.
Coverage of BOEMs decision in the
popular media sounded the alarm, giving seismic air guns the sinister name of
sonic cannons. The Associated Press
wrote that the sonic cannons emit sound
waves many times louder than a jet engine
reverberating through the deep every 10
sec. for weeks at a time. Coastal communities, dependent on tourism and fishing,
are concerned about eventual drilling and
fear another Deepwater Horizon accident.
Environmentalists were outraged that
the Obama administration would authorize the use of a technology that could
potentially injure 138,000 sea creatures.
(BOEM estimated marine casualties by
calculating the largest possible affected
number of marine mammals, fish and turtles, but also stated that the actual number
would probably be much lower.)
To mitigate the impact on marine life,
BOEM calls for survey exclusion zones
that would be in force during months
when whales migrate and sea turtles nest.
BOEM also called for protocols that re-

quire marine mammal observers on board

seismic vessels and mandate interruption
of seismic survey activity, if whales or dolphins are sighted nearby. Passive acoustic
monitoring technology will be required
to control operating frequencies, and seismic activity would be ramped up slowly to
enable unobserved animals to move away
from the sound produced by the air guns.
The industry already follows these operational protocols.
The BOEM restrictions are not sufficient for the most vocal environmentalists, who believe that any new fossil fuel
development should be stopped, not only
to save the whales, but also to combat
global warming.
The energy industrys argument in
favor of opening the Atlantic to oil and
gas exploration cites the commendable
record of minimal environmental impact,
while conducting seismic surveys in offshore basins around the world and large
potential economic benefits.
The API and NOIA sponsored a study,
prepared by Quest Offshore and released
in December 2013, which projected significant economic benefits of developing
oil and gas in all three planning areas off
the East Coast, including $195 billion in
investment and the creation of 280,000
jobs by 2035.
These economic projections optimistically assume that exploration efforts will
find commercial quantities of petroleum;
that regular lease sales will take place;
and that development will not face future
regulatory roadblocks. In the Quest forecast, drilling would commence in 2019
with a projected 69 development projects
achieving combined production of 1.34
MMboe/year in 2035.
In addition to job creation and a $23.5
billion/year contribution to the U.S.
economy, federal and state governments
would generate a cumulative total of $51
billion in revenues through 2035, according to the API-NOIA sponsored study.
Of course, it remains to be seen
whether commercial quantities of hy-

drocarbons are present off the Atlantic

coast. In the 1970s and 1980s, 2D seismic surveys covered much of the area
just opened. Based on these surveys and
a 2011 review by BOEM, the amount of
technically recoverable reserves was estimated at 3.3 Bbbl of oil and 31.3 Tcf of
natural gas. Modern seismic techniques
might find additional potential reserves,
but the new data are needed to confirm
this assumption. A total of 51 exploratory wells were drilled off the East Coast
through 1984, mainly in shallow water in
the North Atlantic planning area, without making a commercial discovery.
Like the controversies over hydraulic
fracturing and the Keystone XL pipeline,
oil exploration off the East Coast evokes a
strong not in my backyard reaction. Environmentalists use scare tactics to overstate the impacts and tie them to the ultimate fate of our planet. At the same time,
industry advocates tend to minimize the
negative impact of oil and gas development and exaggerate its economic benefit. Industrial activities do impact the environment. These impacts can be limited
by technology, responsible practices, and
regulation, but they are part of the price
we pay to live a modern lifestyle that depends on energy consumption.
In the final analysis, public policy for
energy development requires compromise. While we need to protect the environment and address global warming,
our industry is playing an important role
in providing the energy that powers civilization. Officials from both parties recognize the need to develop all forms of
energy while respecting the environment.
Opening these waters to exploration is a
reasonable step, taken after considering
all aspects of the issue. This action shows
that even a Democratic administration
can make a rational decision related to
energy exploration and production.

RON.BITTO@GMAIL.COM / Ron Bitto has more than 30 years of

experience as a technology marketer and writer in the upstream oil
and gas industry.
World Oil/AUGUST 201423

OIL AND GAS IN THE CAPITALS

MAURO NOGARIN, CONTRIBUTING EDITOR, LATIN AMERICA

Capital markets balance in Latin America

According to a June report by Barclays,
Latin American E&P spending is projected to rise 5% in 2014, down from Decembers expectation of a 13% increase. However, this low growth in regional spending
is transitory, and many continue to view
the region as an important driver.
PDVSA is driving the pullback in
spending. Barclays expects the Venezuelan NOC to increase spending $1
billion in 2014 (to $11 billion), down
from a $5-billion increase previously announced. Brazils Petrobras is increasing its CAPEX capture rate, which could
bode well for spending moving forward.
And Mexicos Pemex, discussed in more
detail in the North American drilling update, is in the early stages of a substantial
capital investment ramp, in an effort to
prove and develop vast unconventional
resources, including deep water and shale,
as well as investment in enhanced recovery projects. According to Barclays, Pemex is expected to increase spending 6%
in 2014 to $23.4 billion, tempered from
prior expectations of a 14% boost.
Venezuela. Despite the lack of political

stability during the last few months, Venezuela continues to be a good destination
for investors. PDVSA recently reported,
in its financial statements, that it made a
profit of $15.835 billion last year, despite
the average crude oil price level dropping
to $99.49/bbl from the $103.42/bbl average in 2012. Total sales for the company
increased 5.3 %, to $134.316 billion.
Among the new investments, the
moves made by Repsol and Eniwhich
will finance production from a gas field in
Venezuela at a cost of $1 billionin the
creation of a JV company stand out. This
JV will exploit an enormous gas field off
the Venezuelan coast. PDVSA will hold a
controlling interest of 60%, and Eni and
Repsol will each have a 20% share. The
project will produce 150 MMcfgd at its
maximum output level.
Last May, PDVSA signed an agreement with Halliburton, Schlumberger

and Weatherford for a line of credit worth

$2 billion, to expand production to 4
MMbopd in 2014. PDVSA also signed
a $420-million financial agreement with
Perenco for a JV company, which will expand production from Lake Maracaibo
and Faja de Orinoco to 25,000 bopd from
5,000 bopd. The agreement also includes
the drilling of 27 new wells in Ambrosio
field, again located in Lake Maracaibo.
Since last year, financial agreements
have been signed for more than $10.3 billion to form JV companies with foreign
oil companies, such as CNPC, Chevron,
Rosneft and Repsol. These deals should
increase production.
Argentina. Despite postponing con-

struction of the $910-million GNEA gas

pipeline project for several years, Argentinas Ministry of Industry has budgeted
$37 billion, between now and the end
of 2017, for investment in the hydrocarbon industry. This capital investment
consists of $28 billion for E&P and $9
billion for refining capacity. These investments may be compromised, if negotiations fail with the holdouts, which
are key investors for the development of
the Vaca Muerta mega field.
Repsols exit from the investment
package, and its replacement by investment funds will alleviate, in the near term,
the shortfall for 2014. This may become
a good letter of recommendation when it
comes time to look for further financing.
The inability to reach an agreement
with Repsol damaged the possibility of
securing investment partners in Europe,
which would be necessary to generate
contributions from investors in Asia
and the Middle East. To date, YPF has
been able to secure investors in the U.S.,
including such firms as Chevron (shale
oil) and Dow (shale gas), and probably
Eni or Statoil, as well as closing a deal by
the end of this year with Petronas for the
development of Vaca Muerta. Even without the purchase of Apaches assets in
Argentina, YPFs investment during the

third quarter was $1.2 billion, with a net

income of $350 million.
Colombia. The JV between Chevron
and Ecopetrol will invest $249 million
to optimize production of Ballenas,
Chuchupa and Riohacha gas fields in La
Guajira, which will increase Colombias
output by 50 MMcf. In April, the Colombian oil company launched a $2-billion,
30-year bond offering in the international capital markets. This bond offering
doubles Ecopetrols debt requirement,
which is regulated by the state at around
$1 billion.
Even though the development side of
the oil industry is the main destination for
foreign investment in the country, interest
in exploration is still strong, although industry experts worry about sustainability
over the medium and long term, considering the circumstances that exist for the
upstream hydrocarbon market. Currently,
a perception of increased difficulty in the
execution of operations can be observed.
Brazil. Petrobras will invest $102 billion

through 2018 to exploit ultra-deep oil

wells. Despite the fact that Petrobras is
highly indebtedtaking into account the
difference between the price it sells fuels
for in the domestic Brazilian market and
the current international price of oilthe
company in mid-March offered for an
$8.5-billion sale of 3-, 6-, 10- and 30-year
bonds. This was the second bond sale for
the Brazilian company in 2014, after raising $5.271 billion in January.
The decision, at the end of March, by
Standard and Poors to downgrade the
credit rating of Brazils state debt from
BBB to BBB- will, probably, affect
the companys debt in the short term,
but it could also force the government in
Brasilia to increase the sale price of fuels.
The downgrading of Brazils credit rating
will probably reduce access to new capital for Petrobras.

M.NOGARIN@MEDIASUR.NET
World Oil/AUGUST 201425

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EXECUTIVE VIEWPOINT
FIONA MACAULAY, CHIEF OPERATING OFFICER,
ROCKHOPPER EXPLORATION PLC

Travails and triumphs

of a frontier explorer
I have been fortunate in my career, to
have been posted to some of the worlds
most exciting frontier locations in the oil
industrys ongoing search for new resources. My postings have ranged from the UK
North Sea to northern Russia, and from
Vietnam and Trinidad to, most recently,
the hunt for oil offshore the Falkland Islands in the South Atlantic.
I have worked both on- and offshore,
and been lucky enough to be part of several
world-class organizations with a genuine
talent for finding oil. This has given me a
hard-won perspective on the search for hydrocarbons, and on what it actually takes
to open up a frontier area, especially as the
industry looks to stretch its technological
capability and management of political and
geological risk beyond the now-largely-exhausted easy stuff.
Naturally, when considering the hunt
for new oil and gas, many people see the industrys challenges as being focused principally on geologys roulette wheelare the
rocks right? Do they conform to what your
early technical work tells you, when you
actually drill? Have you missed the oils
earlier migration? And, even if it is there, is
it recoverable in sufficient quantities to enable economic production?
These inherent risks play on the minds
of explorers, as they deploy precious capital
in increasingly expensive and technically
difficult drilling environments. All of these
questions are highly relevant, and never
more so than when wildcatting in underexplored regions, such as the Falklands,
where my company, Rockhopper, undertook a high-profile campaign in 2010.
But, my experience over 28 years in
the industry is that the challenges companies face at the frontier are often rooted
in what is not there, as opposed to what
might be: infrastructure, easy financing,
proximate markets, an existing skilled
workforce, a sustainable fiscal regime, a
stable political environment and local
stakeholder support.
When Rockhoppers founders, Sam
Moody and Richard Visick, recognized the

opportunity to revisit acreage last drilled

in the late 1990s, but abandoned due to
the (ultimately very brief) era of $10/bbl
oil, their focus was on the rocks. The previously drilled wells had suggested that
there was, indeed, a working hydrocarbon
system in the North Falkland basin, but
the perceived economic incoherence of
exploiting reserves in a location with such
a low oil price environment had led to the
departure of big game hunters, such as
Shell, and Amerada Hess, departing after a
single phase of drilling. Times change, and
the current period of historically high oil
prices has underpinned interest in frontier
areas, in a way that would not have been
possible 15 years ago.
Often, smaller players in the E&P sector act as the pioneers, opening up new
territories while the majors stand back,
waiting for evidence of material hydrocarbons before diving into new provinces. In
this way, companies, such as Cairn in India,
Rockhopper in the Falklands, and Tullow
in Ghana/Uganda, open up new exploration territories by taking the risks that larger companies do not initially see as likely to
reap material-enough dividends.
The focus and detailed preparation
required in frontier areas, as well as longterm relationship-building with key local
stakeholders, suits the approach utilized by
independent E&P firms, where each assets
potential is hugely material to the business
and does not get lost in a global portfolio.
The ability to move quickly to address
challenges, often unforeseen, as they arise
in territories where there may be no history
of oil exploration and limited, if any, infrastructure, is essential.
As we drilled our exploration program
in 20102011, we saw great success, with
eight out of 10 wells encountering significant hydrocarbons. We were very fortunate
to have that almost mythic occurrencea
commercial discovery with our first operated well drilled, with 100% equity in the
license. The period of the build-up to the
operation was one of intense external interest, given how high-profile the campaign

was expected to be, following the continuing dispute between the UK and Argentina
over the Falklands.
The rigs progress was followed closely
as it made its way down to the South Atlantic, and each well (Rockhoppers Sea Lion
prospect was the second to be drilled in the
program) was covered in detail by the UK
media. Not only did the company have to
navigate the geological challenge, it also
had to do so with great scrutiny from both
the media and the market. This was only
exacerbated by the failure of the first well:
Desire Petroleums Liz prospect.
Planning was key to exploring in such
a distant location from traditional oil
hubs, such as Aberdeen, Stavangerand
slightly nearerHouston. Preparatory
work ensured that the port at Stanley
was appropriately equipped, so that everything we needed was on the islands;
there would be limits to this approach,
though, such as the need to send oil samples back to the UK for detailed technical analysis. But, we managed the supply
chain well and the program, in duration
and scope, was highly ambitious for a
company of our size, went smoothly, delivering exceptional results.
Premier Oil farmed-into the field in
2012, a transaction that saw Rockhopper
ensure financing through the development phase, ahead of first oil in 2019, in
exchange for selling a 60% stake in Sea
Lion. With pre-FEED work progressing,
and a TLP selected as the preferred development scenario, Rockhopper looks
toward next years further exploration
of the North Falkland basin with much
excitement. We seek to grow the regions
reserves base further, and really establish
the Falklands as the industrys newest
oil province.

Fiona Macaulay is COO at Falkland Islands-focused oil and

gas explorer Rockhopper Exploration Plc. Following roles at major
international oil companies, including Mobil, Amerada Hess and BG,
she joined Rockhopper in 2010, where working as G&G Manager, she
planned and executed the exploration and appraisal program for Sea
Lion field; and its satellites offshore the Falkland Islands, with in-place
resources of more than 1.3 Bbbl.
World Oil/AUGUST 201427

Help yourself to
better returns.

As the leader in innovative sand control technology, maximizing sand-free production is our
business. It always has been. We thoroughly understand your reservoir and design solutions to
address the unique challenges of each well.
No other company has more experience or a larger portfolio of innovative technologies to help
you overcome sanding problems.
Dont let prots slip through your ngers. Call us or visit BakerHughes.com/SandControlLeader
and improve recovery factors on your next well.
+1 713-268-6218 or +44 2070 483646
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INNOVATIVE THINKERS
MELANIE CRUTHIRDS, NEWS EDITOR

Freedom
to rock
 

dGB Earth
Sciences
Surely, not every intrepid entrepreneur
sets out to build an empire on the idea
that, at the end of the day, the fruits of his
or her labor will be given away for free.
But, that no-upfront-cost business model,
which the company refers to as freemium, has taken dGB Earth Sciences from
a two-man outfit, to a company with a
global footprint over the last two decades.
Getting its start in 1995, dGB has
since made a place for itself as a seismic
interpretation solution provider for the
oil and gas industry; its signature product offering is an open-source platform
called OpendTectpronounced open
detectwhich can be downloaded, at
no cost, online. The company is the brainchild of founders Paul de Groot and Bert
Bril, and takes its distinctive lowercase
name styling from the combination of the
two mens surnames.
OpendTect, and dGBs other software
products and packages enable users to
leverage technology to get a better understanding of the oil field, to better understand what to do in the oil field. Since
September 2009, more than 140,000 copies of OpendTect have been downloaded,
and one of the keys to unlocking the full
dGBs OpendTect software has 3,000
academic licenses being used at more than
340 universities around the world.

potential of these interpretation capabilities, and dGBs financial success, boils

down to one thing: plug-ins.
With the free product alone, the company says that the majority of users can
carry out highly sophisticated interpretation. But, the plug-ins, which are offered
through yearly or monthly licenses, can
provide an added layer of interpretation
and understanding for more specific applications. One of dGBs most popular
plug-ins is called HorizonCube, which
increases the number of mapped horizons
through semi-automated techniques. In
short, it helps maximize the potential of
high-resolution seismic data, so that, when
it comes time for a user to move forward in
an operation, they can do so with greater
confidence in their interpretations. The
company said it expects to release the latest version of OpendTect with significant
advances to HorizonCube in October.
But, it is not simply the fact that
OpendTect and its various plug-ins exist
that is solely important. Rather, as dGB
CEO Kristofer Tingdahl, PhD, sees it, it is
the potential within the softwares readily
accessible, open-source code, combined
with user ingenuity, which presents real
opportunity. A core element of dGBs operating model is the partnerships that it
forms and maintains with both software
companies and operators. In fact, Hori-

zonCube was influenced by one such

partnership, a Sequence Stratigraphic Interpretation System (SSIS) consortium,
which involved sponsorship from Saudi
Aramco, Statoil, OMV, MOL and RocOil.
And, it would not necessarily have to
be through a direct partnership with dGB
from which such innovations would result. Tingdahl said the idea that there is
an element for the common good is ingrained into the company, following with
its decision to offer its core product for
free, instead reaping profits from licensing plug-ins, and providing maintenance,
support and consulting, among other
things. He said he is driven by an overarching desire to see science grow and
good technology grow.
In an effort to improve on its own design, the company recently announced
that it would be working with an Austrian
research institute and an Austrian E&P to
extend both the capabilities and utilization of OpendTect. Users already have
the ability, to take the source code, and
make improvements and extensions of
their own. Both of these paths, whether
through dGB or not, serve the companys
founding idealism, to stimulate research,
and shorten the gap between academic research and operational deployment.

MELANIE.CRUTHIRDS@WORLDOIL.COM
World Oil/AUGUST 201429

INDUSTRY AT A GLANCE
HENRY.TERRELL@GULFPUB.COM

After oil prices lurched as high as $115/bbl for Brent crude

in response to a military offensive by Islamist insurgents in Iraq,
fears that they would gain control of the southern oil fields subsided, and prices slid accordingly. The lower Iraqi crude output
was mitigated by gains in other OPEC countries, while nonOPEC production remained steady. In the U.S., oil production
continued to gain ground, with North Dakotas estimated output exceeding 1 MMbopd for the first time. Natural gas prices
on the Henry Hub exchange have now gone down to about
$3.90/MMBtu, with production rising slightly to 73.5 Bcfd. The
U.S. rotary rig count jumped to 1,876 by the end of July.

U.S. OIL PRODUCTION1

JUN
20142
30
548
22
602
192
7
22
131
7
1,329
23
69
90
11
330
1,007
22
348
3,197
114
13
192
29
8,335
7,787

STATE
Alabama
Alaska
Arkansas
California
Colorado
Florida
Illinois
Kansas
Kentucky
Louisiana4
Michigan
Mississippi
Montana
Nebraska
New Mexico
North Dakota
Ohio
Oklahoma
Texas4
Utah
West Virginia
Wyoming
Others5
TOTAL U.S.
LOWER 48
1
3
5

Thousand barrels per day

JUN
20133
28
486
18
588
161
6
25
127
7
1,060
21
66
80
8
264
821
13
321
2,790
92
11
181
29
7,203
6,717

% DIFF.
7.1
12.8
22.2
2.4
19.3
16.7
12.0
3.1
0.0
25.4
9.5
4.5
12.5
37.5
25.0
22.7
69.2
8.4
14.6
23.9
18.2
6.1
0.0
15.7
15.9

MAY
20142
30
556
21
609
191
7
22
131
7
1,341
23
69
85
10
325
997
22
348
3,189
114
12
193
29
8,331
7,775

2 Preliminary estimate, API and World Oil.

Includes lease condensate.
DOEs revision, as of 10 months from current issue date, adjusted. 4 Includes federal OCS production.
Includes Arizona, Indiana, Missouri, Nevada, New York, Pennsylvania, South Dakota, Tennessee and Virginia.

U.S. GAS PRICES ($/MCF) & PRODUCTION (BCFD)

$7

80
70
60
50
40
30
20
10
0

$6
$5
$4

WORLD OIL & NGL PRODUCTION

Million barrels per day

JUN
2014

MAY
2014

AVG. 2013

AVG. 2012

OPECCRUDE OIL
Saudi Arabia
Iran
Iraq
United Arab Emirates
Kuwait
Neutral Zone
Qatar
Angola
Nigeria
Libya
Algeria
Ecuador
Venezuela
NGLs & condensate1
TOTAL OPEC

9.52
2.85
3.17
2.72
2.52
0.52
0.70
1.68
1.96
0.24
1.12
0.56
2.48
6.38
36.41

9.45
2.80
3.42
2.75
2.52
0.52
0.70
1.62
1.90
0.22
1.12
0.56
2.50
6.38
36.45

9.40
2.68
3.08
2.76
2.55
0.52
0.73
1.72
1.95
0.90
1.15
0.52
2.50
6.30
36.76

9.51
3.00
2.95
2.65
2.46
0.54
0.74
1.78
2.10
1.39
1.17
0.50
2.50
6.28
37.58

OECD2
U.S.
Mexico
Canada
United Kingdom
Norway
Europe-others
Australia
Pacific-others
TOTAL OECD

11.41
2.80
4.11
0.77
1.71
0.54
0.45
0.08
21.87

11.53
2.85
3.98
0.95
1.67
0.58
0.44
0.08
22.08

10.31
2.89
4.00
0.89
1.84
0.59
0.40
0.07
21.00

9.17
2.92
3.75
0.94
1.91
0.60
0.48
0.08
19.87

NONOECD
Russia
FSU-others
China
Malaysia
India
Indonesia
Asia-others
Europe
Brazil
Argentina
Colombia
Latin America-others
Oman
Syria
Yemen
Egypt
Gabon
Africa/Middle East-others
TOTAL NONOECD
PROCESSING GAINS3
TOTAL SUPPLY

10.93
2.92
4.20
0.66
0.86
0.80
0.93
0.14
2.27
0.61
1.00
0.41
0.95
0.02
0.16
0.70
0.24
1.68
29.75
2.19
90.23

10.92
2.91
4.22
0.64
0.86
0.93
1.08
0.14
2.28
0.62
0.95
0.42
0.94
0.02
0.12
0.70
0.24
1.67
29.68
2.19
90.40

10.88
3.00
4.18
0.64
0.88
0.95
1.11
0.14
2.12
0.63
1.01
0.42
0.95
0.06
0.15
0.73
0.24
1.59
29.68
2.18
89.62

10.73
2.93
4.17
0.67
0.91
0.89
1.17
0.14
2.16
0.66
0.95
0.41
0.93
0.17
0.18
0.72
0.25
1.48
29.52
2.14
89.11

Source: International Energy Agency

Note: Totals and subtotals may not add, due to rounding.
1 Includes condensates reported by OPEC countries, oil from non-conventional sources, e.g. Venezuelan Orimulsion
(but not Orinoco extra-heavy oil) and non-oil inputs to Saudi Arabian MTBE.
2 Comprises crude oil, condensates, NGLs and oil from non-conventional sources.
3 Net of volumetric gains and losses in refining (excludes net gain/loss in China and non-OECD Europe) and marine
transportation losses.

$3
Monthly price (Henry Hub)
12-month price avg.
Production

$2
$1
$0

J J A S O N D J F M A M J J A S O N D J F M A M J
2012
2013
2014

Production equals U.S. marketed production, wet gas. Source: EIA.

SELECTED WORLD OIL PRICES ($/BBL)

U.S. ONSHORE WELL COUNT

Basin

Q3 2014

Q4 2014

+/

Year ago

Ardmore Woodford

36

31

47

11

Arkoma Woodford

32

24

12

20

Barnett

261

327

57

403

142

Cana Woodford

65

94

23

74

287

267

13

268

19

1,186

1,110

1,089

97

DJNiobrara
Eagle Ford

+/

135

Fayetteville

147

127

18

194

47

120

Granite Wash

164

132

31

150

14

Haynesville

105

97

98

105

Marcellus

576

524

78

576

Mississippian

90
75
60
45

W. Texas Inter.
Brent Blend
Dubai Fateh
Source: DOE

J J A S O N D J F M A M J J A S O N D J F M A M J
2012
2013
2014

Permian
Utica

386

386

378

2,670

2,374

265

2,260

410

95

102

11

118

23

677

707

693

16

Others

2,707

2,550

85

2,651

56

TOTALS

9,394

8,853

428

9,011

383

Williston

Source: Baker Hughes

World Oil/AUGUST 201431

INDUSTRY AT A GLANCE
HENRY.TERRELL@GULFPUB.COM

INTERNATIONAL ROTARY RIG COUNT

REGION & COUNTRY
CANADA
EUROPE
Germany
Italy
Netherlands
Norway
Poland
Romania
Turkey
United Kingdom
Others
MIDDLE EAST*
Abu Dhabi
Egypt
Iraq
Kuwait
Oman
Pakistan
Saudi Arabia
Syria
Others
AFRICA*
Algeria
Angola
Kenya
Libya
Nigeria
Others
LATIN AMERICA
Argentina
Brazil
Colombia
Ecuador
Mexico
Venezuela
Others
ASIA-PACIFIC
Australia
China, offshore
India
Indonesia
Malaysia
New Zealand
Thailand
Vietnam
Others
TOTAL

JUN 2014
Land
Offshore
238
2
99
49
3
1
3
1
5
6
0
16
5
0
13
1
41
1
1
12
28
11
374
51
24
9
45
10
96
0
35
0
59
0
22
0
81
23
0
0
12
9
87
36
42
0
1
13
11
1
10
1
5
4
18
17
328
70
107
0
16
27
43
0
22
0
53
35
66
5
21
3
136
115
14
10
0
29
91
34
18
10
1
6
2
3
2
14
0
6
8
3
1,184
332

Monthly average

MAY 2014
Land
Offshore
160
2
97
56
2
1
4
1
4
6
3
18
3
0
12
1
41
1
1
19
27
9
367
39
21
9
45
11
94
0
34
0
59
0
20
0
82
19
0
0
12
0
100
40
47
0
1
16
12
1
11
1
9
3
20
19
333
71
105
0
21
26
38
0
26
1
49
36
72
3
22
5
130
112
11
9
0
28
90
38
17
11
1
3
2
2
0
14
0
6
9
1
1,223
323

Source: Baker Hughes

Note: Totals may not add, due to rounding.

JUN 2013
Land Offshore
182
1
87
51
5
0
4
1
4
5
0
19
5
0
8
0
32
0
0
18
29
8
346
43
19
7
52
11
89
0
34
0
48
1
24
0
64
18
0
0
16
6
93
40
48
0
0
13
5
0
14
1
10
10
16
16
339
95
81
0
17
44
45
0
26
2
59
40
81
6
30
3
142
108
11
8
0
20
84
35
27
9
0
11
5
1
5
16
0
3
10
5
1,094
329

*No data available for Iran and Sudan/South Sudan.

INTERNATIONAL OFFSHORE RIGS*

U.S. GULF OF MEXICO
JUN 2014 JUN 2013
Total rigs in fleet
Marketed Supply
Marketed Contracted
Rig utilization, %

113
87
79
90.8

Source: IHS Petrodata Weekly Rig Count.

NORTHWEST EUROPE
JUN 2014 JUN 2013

108
80
76
95.0

94
93
92
98.9

88
87
87
100.0

WORLDWIDE
JUN 2014 JUN 2013
849
795
735
92.5

806
743
703
94.6

*Rigs are no longer broken out into mobile and platform categories.

WORKOVER RIG COUNT

REGION
Texas Gulf Coast
ArkLaTex
Eastern U.S.
South Louisiana
Mid-Continent
West Texas / Permian
Rocky Mountains
West Coast / Alaska
TOTAL U.S.
CANADA

JUN
2014
208
142
83
16
220
708
338
311
2,026
488

MAY
2014
210
140
82
17
224
695
342
318
2,028
485

Source: Cameron

32AUGUST 2014/WorldOil.com

APR
2014
214
142
80
16
221
718
341
308
2,040
480

JUN
2013
206
133
88
22
212
697
357
334
2,049
506

% chng
mo. ago
1.0
1.4
1.2
5.9
1.8
1.9
1.2
2.2
0.1
0.6

% chng
yr. ago
1.0
6.8
5.7
27.3
3.8
1.6
5.3
6.9
1.1
3.6

Note: Totals may not add, due to rounding.

INTERNATIONAL ROTARY
DRILLING RIGS
2,000
1,900
1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,100 J J A S O N D J F M A A M J J A S O N D J F M A M J
2012
2013
2014

U.S. ROTARY
DRILLING RIGS
2,000
1,900

1,800

1,700 O N D J F M A M J J A S O N D J F M A M J J
2012
2013
2014

Source: Baker Hughes

U.S. ROTARY RIG COUNT

Monthly average

JUN
2014
7
7
0
0
10
9
1
11
48
47
1
67
2
32
3
109
27
16
15
51
0
12
7
2
1
89
0
170
40
202
58
0
0
891
3
0
118
90
57
34
10
33
14
103
321
38
15
57
27
25
50
3
58
1,861

JUL
2013
7
6
0
0
8
7
2
14
41
40
1
68
1
28
0
103
23
20
13
47
0
12
10
2
3
80
0
174
34
173
53
1
0
841
8
2
143
82
48
34
13
27
14
79
271
34
20
68
32
26
52
9
58
1,766

% DIFF.
JUL 13
JUL 14
14.3
0.0

12.5
14.3
0.0
21.4
7.3
10.0
100.0
1.5
100.0
7.1

7.8
17.4
10.0
15.4
10.6

25.0
30.0
50.0
66.7
15.0

0.6
26.5
17.3
3.8
100.0

6.1
75.0
100.0
15.4
4.9
25.0
5.9
46.2
18.5
0.0
30.4
18.5
26.5
25.0
14.7
15.6
3.8
0.0
44.4
1.7
6.2

STATE & AREA

ALABAMA-TOTAL
Land
Inland water
Offshore
ALASKA-TOTAL
Land
Offshore
ARKANSAS
CALIFORNIA-TOTAL
Land
Offshore
COLORADO
FLORIDA
KANSAS
KENTUCKY
LOUISIANA-TOTAL
North Land
South Inl. water
South Land
Offshore
MICHIGAN
MISSISSIPPI
MONTANA
NEBRASKA
NEVADA
NEW MEXICO
NEW YORK
NORTH DAKOTA
OHIO
OKLAHOMA
PENNSYLVANIA
SOUTH DAKOTA
TENNESSEE
TEXAS-TOTAL
Offshore
Inland water
District 1
District 2
District 3
District 4
District 5
District 6
District 7B
District 7C
District 8
District 8A
District 9
District 10
UTAH
W. VIRGINIA
WYOMING
OTHERS
U.S. OFFSHORE TOTAL
U.S. GRAND TOTAL

JUL*
2014
6
6
0
0
9
8
1
11
44
44
0
69
2
30
3
111
27
18
15
52
0
15
7
1
1
92
0
175
43
203
55
0
0
892
2
0
121
86
60
32
7
32
14
103
321
43
15
58
27
27
52
5
57
1,876

*Partial months data

Source: Baker Hughes

Note: State monthly averages may not add up to U.S. total, due to rounding.

SPECIAL FOCUS: OIL COUNTRY TUBULAR GOODS

High-alloy austenitic stainless steels

prove worth in sour gas elds

Rising oil prices and market growth are

enabling energy companies to extract oil and
gas from ever-deeper waters. However, the
harsher conditions encountered are causing
expensive failures in standard stainless steels,
creating a need for superior materials that aid
more productive, cost-efficient processes.

qualification tests are increasingly vital to ensure that a selected

material will perform, as expected, during operations.
Similarly, it is imperative to be fully aware of the complete mix
of corrosive elements, which are present in the operating environment. The selection of materials for operations in highly sour
environments is based on guidelines from NACE MR 0175/ISO
15156:2003, paragraph 7.
PARTIAL PRESSURES AND CORROSIVITY

KUKUH SOEROWIDJOJO IR., Sandvik South East Asia

Standard stainless steels used in hydrocarbon production
offer a number of advantagessuch as corrosion resistance,
economy and safetycompared to traditional low-alloyed materials. Nevertheless, these standard grades are proving insufficient in deeper, more hostile environments that contain corrosive elements, such as carbon dioxide (CO2), hydrogen sulfide
(H2S) and chlorides.
These challenges are placing ever-greater importance on the
selection of materials that can enable and sustain high levels of
productivity, while, simultaneously, minimizing the risk of leaks
and failures in the production tubing. Further investigations and
Harsh downhole conditions are driving the need for superior
materials.

To better understand material selection, it is necessary to examine the parameters that determine the risk of corrosion in oil
and gas wells. Corrosivity in wet sour wells is increased by the
presence of chlorides in water solutions, CO2 and H2S. An environment is considered sweet, as long as no H2S is present. However, CO2, alone, can cause high corrosion rates on carbon steel,
and does so by acidifying the solution, a process that is further
accelerated if chlorides are present.
Alternatively, an environment is defined as sour when the
partial pressure of H2S is above 0.05 psi. This increased total
pressure has only an indirect effect on corrosivity by increasing partial pressures of H2S and CO2 (PH2S and PCO2), which,
in turn, determine the amount of H2S and CO2 that will be
dissolved in the water phase. Meanwhile, the partial pressure
of CO2 influences corrosion only indirectly through its influence on pH.
Put simply, higher partial pressures substantially increase the
corrosion rate on carbon steels, due to the flow velocity and the
World Oil/AUGUST 201435

OIL COUNTRY TUBULAR GOODS

HIGH-ALLOYED MATERIALS

It is generally accepted that cold worked high-alloyed materials are best-suited for use in the types of severe environments
encountered in deepwater oil and gas wells. These materials can,
in theory, enable engineers to explore and extract hydrocarbons
more economically. Their mechanical properties are designed to
bear all the stresses that occur during operations, and produce a
high-tensile material with strong resistance to corrosion phenomena, such as SSC and stress corrosion cracking (SCC).
However, these materials have been shown to exhibit service
limitations in corrosive environmentsespecially in HPHT
fields, where there is a high presence of chlorides in formation
water. H2S and CO2 gases are prevalent in these wet conditions
and high temperatures, and expose high-alloyed components to
the risk of both SCC and SSC. To address these performance
limitations, end-users should perform a test to ensure that the selected material is suitable for application in their field.

Fig. 1. An example of failure at inappropriate application;

microstructure examination under 500X magnication.

HYDROGEN EMBRITTLEMENT

Research into the use of standard alloy steels in sour environments has found that the failure of componentsi.e. the fracturing of a production tubular caused by a corrosion attackcan be
attributed to inappropriate use in the field. These inappropriate
uses were exacerbated by a highly corrosive aggregation of hydrochlorides, H2S and H2O.
An example of component failure is illustrated in Fig. 1, which
shows an examination of material Duplex 2205 with a 125-ksi
minimum yield strength, an outside diameter (OD) of 88.90
mm x 6.45-mm wall thickness (w.t.) and a coupling size of 98.50
mm OD x 12.18-mm w.t. Further investigation revealed that the
component had suffered due to embrittlement, which was caused
by hydrogen introduced by H2S. This phenomenonhydrogen
embrittlementcommonly causes various metals, particularly
high-strength steels, to become brittle and fractured, due to hydrogen exposure at low temperatures (194F).

Fig. 2. A comparison of several commonly used materials

resistance to SCC.

Temperature, F

570

DUPLEX STEELS

390

210

32
0.0001

Sandvik SAF 2205

Sandvik SAF 2707 HD
Sanicro 28
Sandvik SAF 2304
Sandvik SAF 2507
AISA 304 and 316
0.001

0.1
Chloride ion concentration, %

10

partial pressure of CO2, which makes the water phase more acidic
and also forms an iron-sulfide scale.
Instead, the major issue with stainless steels is the risk of localized corrosion, especially with regard to sulfide stress cracking
(SSC), which causes failures in standard alloy stainless steels. Because of this, the partial pressure of CO2 and flow velocity can be
excluded as factors that determine the risk of corrosion in oil and
gas wells. The remaining four corrosion risk parameters are the
pH and chloride contents of the water phase, the partial pressure
of H2S and the temperature.
36AUGUST 2014/WorldOil.com

Engineers at Sandvik Materials Technology have identified

several desirable chemical characteristics in a replacement grade
for standard stainless steels: specifically nickel (Ni), chromium
(Cr) and molybdenum (Mo). The engineers also concluded that
stainless steels with greater resistance to low temperatures should
be used as the main selection of materials.
Sandviks findings are reflected in its duplex material production and development. Since the 1970s and 1980s, the company
has produced duplex stainless steels, which offer combined corrosion resistance and high mechanical properties that are superior to standard high-alloyed grades. These duplex grades also
make it possible to replace carbon steels with stainless steels,
without an extensive redesign. The products include Sandvik
SAF 2205, Sandvik SAF 2304, Sandvik SAF 2507 and Sandvik
SAF 3207 HD (UNS S33207), and the earlier grade Sandvik
3RE60 (UNS 31500).
A crucial advantage of the materials is their complete resistance to corrosion in wells rich in CO2, with a high amount of
chlorides in the water phase. There is still no general corrosion,
if H2S is present. Of these grades, it is necessary to identify the
grade with the least risk of localized corrosion, especially with regards to SSC. Figure 2 illustrates a comparison of these materials
resistance to SCC, alongside standard AISI 304 and 316 grades.

OIL COUNTRY TUBULAR GOODS

While the diagram and grading of materials is based on environments where oxygen is presentand can therefore differ from oil
wells which, typically, contain no oxygenthe findings indicate
that Sanicro 28 outperformed the duplex stainless steels.
Sanicro 28 (UNS N08028) is a high-alloy, austenitic stainless
steel designed for service in highly aggressive, corrosive environments. The material has good resistance to seawater and marine
environments, combined with excellent resistance to H2S.
Although the grade was initially designed for sulphuric acid
and phosphoric acid productionin either pipes or heat exchangerssubsequent developments have made it extremely
useful in both upstream and downstream applications. The grade
is especially useful for downhole production tubing, for which it
is supplied in cold worked condition to achieve high strength.
The chemical composition of Sanicro 28 (Table 1) has characteristics that are favorable in replacement grades for downhole tubulars in sour gas wells, containing 30.3-34 w.t.% Ni, 27% Cr and
3.5% Mo. Combined, these elements imbue the material with a
pitting resistance equivalent (PRE) minimum value of 38. PRE is a
measurement of the corrosion resistance of stainless steel containing chrome, molybdenum, tungsten and nitrogen. It can be calculated as follows: PRE= %Cr + 3.3%Mo + 16%N (% by weight).
For duplex stainless steels, the pitting corrosion resistance is proportional to the PRE number of an alloy, and, generally speaking,
a higher PRE value indicates steel that is more corrosion-resistant.
The nominal Ni content in Sanicro 28 is significantly higher
than standard alloy stainless steels 304L/316L grade. The element acts as an important austenitic stabilizer, encouraging resistance to SCC, and improves the materials mechanical properties
and fabricability. In practical terms, combined high-alloying Ni
and Cr elements imbue Sanicro 28 with considerably better resistance to sodium hydroxide than standard stainless steels of
AISI 304 and AISI 316 types.
Table 1. Sanicro 28 chemical composition (nominal values).
C
max.
0.020

Si
max.
0.6

Mn
max.
2.0

P
max.
0.025

Cr

Ni

Mo

Cu

0.015

27

31

3.5

1.0

Table 2. Taken from NACE MR0175-ISO 15156-3 table A.14.

Material
type

Coldworked
alloys of
types 4c,
4d and 4e

Temperature,
F max.

450

Partial
pressure,
H2S, PH2S
psi max.
30

425

100

400

150

350

200

270

See
"Remarks"
column

38AUGUST 2014/WorldOil.com

Chloride
pH
conc.,
mg/l,
max.
See "Remarks" See
column
"Remarks"
column
See "Remarks" See
column
"Remarks"
column
See "Remarks" See
column
"Remarks"
column
See "Remarks" See
column
"Remarks"
column
See "Remarks" See
column
"Remarks"
column

LABORATORY TEST

ISO 7539 test procedures qualify a component whenever the

aggressiveness of the downhole environment gets close to the service boundary of the material. This is normal practice, to verify
whether a material is suitable to serve in given well conditions.
According to NACE MR0175-ISO 15156-3 guidelines, Sanicro
28, in solution-annealed and cold worked condition, is categorized in the solid solution, nickel-based alloy group, 4c.
This category is reserved for any material that is recommended
for use in downhole equipment and, as detailed in Table 2, pertains to the grades reaction to the four main corrosion risks in oil
and gas wells: pH and chloride content of the water phase, the partial pressure of H2S and the temperature.
The materials categorization at type 4c is confirmed in data
from performance tests conducted under laboratory conditions.
As shown in Fig. 3, the material, in cold-worked condition,
demonstrated excellent resistance to SCC/SSC attacks in H2S
environments. In Fig. 3, any condition below the line is a nocorrosion attack region; this also represents a safe region considering that the materials CO2 partial pressure (594.65 psi) is much
lower than the test pressure, and chloride content (75,000 ppm)
is also lower than the test condition (90,000 ppm). The testing
time was 500 hr. From the findings illustrated in this figure, it can
be concluded that Sanicro 28 is sufficient for deep, sour wells.
AUTOCLAVE TEST

In addition to the laboratory test, qualities of Sanicro 28 were

further assessed with SSC tests in simulated aggressive environments over a 720-hr period, in accordance with ISO 7539-1
and ISO 7539-4.
In preparation for the H2S autoclave test, the first stage of the
assessment simulated the low oxygen levels of deep, sour wells
sometimes as low as 58 ppbwhich are shown to significantly
increase the corrosion rate of standard steels. Two sub-sized specimens, in solution-annealed and cold worked condition, were
stressed to the desired test stress and placed in 250 ml of deaerated test solution. They were then further deaerated with oxygenfree nitrogen for 2 hr and pressure tested to
870 psi with nitrogen gas.
To better simulate high-pressure conditions, the tests were performed in autoSulfurRemarks
resistant?
claves. This was achieved using Cortest
Inc. l autoclaves and calibrated proof
No
Any
rings, performed at a stress level of 90% of
Any
combination
the actual 0.2% proof stress of the material
combination
of chloride
of
chloride
at test temperature, to equal a stress level of
No
concentration
concentraand
in situ pH
712.8 N/mm2.
tion and in
occurring
The next stage of the assessment foin situ pH
No
production
occurring in
cused
on high-temperature and further
environment
a production
isenvironment
acceptable
corrosion tests. Nitrogen gas was vented,
No
is acceptable
and the solution saturated with H2S gas at
100200 ml per min. for 2 hr, at room temperature and at 55 psi pressure. Finally, the
Yes
Any
combination
specimens were heated to 302F 37.4F,
of H2S,
and any excess pressure was bled from
chloride
concentration
the autoclave, resulting in a pressure of
and in situ pH
783 psi. The autoclave was monitored for
in a production
environment
temperature and pressure. The engineers
is acceptable
found there to be no cracks in the tested
specimens after 720 hr of exposure.

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in the United States and/or other countries.

OIL COUNTRY TUBULAR GOODS

Following these positive results, Sandvik conducted further

assessments of the materials resistance to SSC in u-bent forms,
under the specified working condition of a sour environment
at pressure. The specimens were stressed up to 90% of their
Fig. 3. Sanicro 28 laboratory sour test result.

PERFORMANCE COMPARISON

psi
1,000
Corrosion

PH2S

100

No corrosion

Clients eld conditions

10

1
5% NaCl
0.1

100

200

300
Temperature, F

15% NaCl
Failure
Pitting, no failure
No corrosion, attack

400

yield strength, to replicate even more extreme conditions than

the gas field, to accelerate the corrosion attack. After 720 hr of
testing, microscopic examination confirmed that there were no
cracks in the specimens, which further corroborates the materials suitability for application in deepwater environments.

500

600

The performance capabilities of Sanicro 28, in different sour

well environments, were also compared to Sandvik SAF 2205,
a duplex (austenitic-ferritic) stainless steel with excellent resistance to CO2 corrosion and to sour corrosion at moderate partial pressures of H2S, with superior anti-corrosion properties to
steels of ASTM 316L type.
These comparison tests simulated the severe corrosion
conditions found in sour gas wells, while systematically varying the important parameters, to determine environments in
which the assessed materials do not corrode. The tests were
made with tensile specimens, deadweight loaded to yield
strength at the actual test temperature. These specimens were
fully exposed to an aqueous phase with defined temperature,
NaCl content and PH2S. They were then taken from tube walls
in the longitudinal direction.
If no failure due to SCC had been found to occur, the tests
were ended after the 720-hr test period. Figure 4 illustrates the
performance of Sanicro 28 against the standard 13Cr grade, and
the lines in each diagram represent the upper limit where no
stress cracking occurred. In general terms, the test shows that the
material has a higher resistance to SSC, compared to 13Cr.

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SBU140046 WO 7x4_8.indd 1

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OIL COUNTRY TUBULAR GOODS

SSC tests at 212F are illustrated in Fig. 4, featuring 13Cr

tube alongside Sanicro 28 and Sandvik SAF 2205. The test environments were H2O with different partial pressures of H2S
Fig. 4. Atmospheric pressure SSC tests on production tubes
of 13Cr 80 ksi, Sandvik SAF 2205/22Cr 110 ksi, and Sandvik
Sanicro 28 110 ksi at 100C (200F). Load = Rp0.2 at testing
temperature.

Sanicro 28
(pH 2.5) no failure

10

Failure

No failure

and NaCl contents. As is apparent in this figure, 13Cr failed,

due to SSC and pitting, at very low chloride contents and partial pressures of H2S, despite the rather high pH of the solution
(pH 3.95.0).
Both materials were tested in a solution acidified with acetic acid to pH 2.5. The addition of acetic acid is a way of decreasing the pH and, therefore, simulating the actual CO2 in
gas wells. A pH value of 2.5 corresponds to a PCO2 exceeding
1,450 psi and has a very strong effect on the maximum allowable PH2S. Despite the low pH, Sandvik SAF 2205/22Cr resisted several magnitudes higher partial pressures of H2S than
13Cr, while Sanicro 28 was resistant to cracking at 25% NaCl
and the highest possible PH2S, which was 5.5 psi, and, therefore, exhibited no failure.

PH2S, psi

CONCLUSIONS
Sandvik SAF 2205
(pH 2.5)

0.1

0.01

Failure

0.001

13Cr
(pH 3.9-5.0)

No failure
0

10

100

1,000
NaCl, ppm

10,000

100,000

Test results in accordance with ISO guidelines show that replacement Sanicro 28 tubing exhibits extremely high corrosion
resistance in strong acids, along with very good resistance to SCC
and intergranular corrosion in various environments, particularly
those where H2S is present, together with chlorides.
The materials key qualities are a higher resistance to stress corrosion, and a resistance to sulfuric acid corrosion that is superior
to traditional AISI materials. Sanicro 28, therefore, offers superior
corrosion resistance in seawater-cooled, chloride-bearing cooling
water with greater resistance to low temperatures. For these reasons, Sanicro 28 is the best-suited material to withstand prevailing conditions in deepwater offshore fields and sour wells.

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SPECIAL FOCUS: OIL COUNTRY TUBULAR GOODS

Expandable liner hanger and packer exceed

expectations for rst deepwater well in Red Sea

A newly developed,
11-in., expandable liner
hanger packer (ELHP) system
made it possible to overcome
the challenges of drilling Saudi
Aramcos rst deepwater well,
a rank wildcat in the Red Sea.

OPEYEMI ADEWUYA, SHRIKANT TIWARI,

Saudi Aramco; and ABDULLAH O. ABDELWAHED
and MAURILIO SOLANO, Baker Hughes
When a wildcat is drilled in deep water,
the challenge is magnified by the distortion and unpredictability of geopressure
and temperature gradients produced by
the presence of salt diapirs, and stressed
pre- and post-salt formation layers. So,
when Saudi Aramco drilled its first well
in the Red Sea, a rank wildcat deepwater
well, it was with the knowledge that the
The 11-in. ELHP was deployed successfully
after a short design and development cycle.

well and casing designs would need to be

robust enough to withstand all drilling and
production loads, yet be flexible enough to
accommodate possible variations. Many of
the variations were unknown, because of
the nature of the well, and the fact that it
was the first in the deepwater Red Sea.
The decision to work with Baker
Hughes, to develop and deploy an 11-in.
version of the TORXS ELHP, was based on
the expectation that, to reach the proposed
bottomhole depth, the wellpath would
need to traverse a massive salt section, subtended by an unknown length of rubble
zone. The ELHP was designed to meet and
exceed requirements for this application.
PROJECT BACKGROUND

The Red Sea, which separates Saudi

Arabia from Africa, is a fault depression
that traverses 1,300 mi, from Suez in the
north to the Bab el-Mandeb strait in the
south, where it connects to the Gulf of
Aden, and then to the Arabian Sea. The
deepest waters are over 6,000 ft, and the
seabed is rugged. Saudi Aramco drilled
its first exploration well at a 2,100-ft water

depth, approximately 48 mi off the west

coast of the Kingdom.
TECHNICAL CHALLENGES

Because the well was a rank wildcat, offset well information was nonexistent, and
data from shelf wells drilled in the 1960s
were insufficient for informed decisionmaking on temperature and pressure regimes. Formation tops and pressure predictions were based on a pre-drill analysis,
carried out on the basis of 3D seismic surveys. The presence of a massive Mansiyah
evaporite salt bed was expected. Seabed
geophysical analysis, 3D wide-azimuth
seismic, and high-definition bathymetric
surveys predicted several scenarios, that
indicated a very soft seabed, varying estimates of the top and base of the salt layer,
and different pressure trends, depending
on the formation sequence below the salt.
The project team was confident about
the post-salt formation tops and salt thickness and, as a result, developed a successful well design and drilling strategy to the
base of the salt layer. However, the pre-salt
environment was less discernible. It is beWorld Oil/AUGUST 201443

OIL COUNTRY TUBULAR GOODS

Fig. 1. Pre-drill PP-FG prediction and casing design.

060

70

80

Pressure gradient data, pcf

90 100 110 120

130

140

Casing design

150

Waterbottom

2,000

L.E.S.
4,000
6,000

2,450 ft MD
Massive Mobile Salt

Depth, fbsl

8,000

26 in.
Estimated RT-seabed-2,95 ft/
water depth-2,050 ft
20 in.
Jet 36-in. conductor pipe

3,500 ft MD

28-in. hole 24-in., 201#,

X-56, RL-4S casing

4,890 ft MD

22-in. hole 18-in.,

136#, L-80 casing

10,690 ft MD

17-in. hole 14-in., 114#,

VM-95-SS casing
Planned contingency liner:
Drill 12-in. hole 14-in.,
UR hole 11-in., 65#, Q-125,
VAM FJL liner w/ELHP

10,000
12,000
14,000
16,000
OBG

18,000
PPG

FPG

20,000

low the salt that the thin margin between

pore pressure (PP) and fracture gradient
(FG) occurs. The mud density exerts hydrostatic equivalent to the drilling fluid
column back to the rig. FG, which results
from the overburden of sediments, starts to
build, only below the seabed. Because salt
has a high FG, it can be drilled with higher
mud weight to handle possible creeping or
inclusions. This geopressure continuum
reverses in the rubble zone. Here, a lower
FG is accompanied by high levels of losses.
According to the Red Sea geological column series, the Mansiyah salt is subtended
by multilayered anhydrite-shale-anhydrite
beds. This bedding sequence distorts normal geopressure trends. Correspondingly,
PP-FG prediction and mud weight (MW)
selection for the exploration well would require astute analytical and predictive geophysical insights ahead of the bit, Fig. 1.
To address the additional challenge of
poor imaging and velocity contrast at the
base of the salt layer, high-resolution vertical seismic profiling (VSP) surveys were
acquired. The high-resolution VSP data
were inverted for acoustic impedance; the
acoustic impedance profile was converted
to interval velocities; and, subsequently,
the formation velocity profile was transformed to a PP prediction and minimum
MW recommendation.
The predictive utility and workflow
of incorporating pressure sampling from
a quad combo logging-while-drilling
(LWD) tool, and VSP inversion for MW
prediction and lithostratigraphic delinea44AUGUST 2014/WorldOil.com

11,950 ft MD

tion were explored. The combination of

VSP inversion and formation pressure tester (FPT) pressure test points was highly
instrumental in picking the PP regression.
With some precision and operational parameters, MW and projections to the PPFG trend were adjusted on a timely basis,
and as appropriate.
Drilling strategies for this well needed
to minimize equivalent circulating density
(ECD) and surge pressures, which meant
that real-time measurements of hydrostatic
pressure and formation pressure would be
required for quick decision-making. Depending on formation characteristics and
pressures, drilling a slim hole in thin-margin sections of the well could be a contingency option, if any other casing had to be
short-landed. However, an important well
objective was to reach the planned depth
without a slim hole. This objective could
be achieved only with contingency liners.
The most desirable solution was a liner
system, that could be run in tight tolerance,
provide required hang-off capacity, create
minimum surge, and provide clear indications of setting and disengaging the liner.
EXPANDABLE LINER HANGER
AND PACKER

Expandable liner hanger systems in the

7-in. range have been deployed in deepwater wells since the 1990s. The ELHP
system for the Saudi Aramco Red Sea well
was developed to extend ELHP capabilities to handle hydraulics and large-sized
formation evaluation tools, as well as sub-

sea test strings for production test flowrates. Additionally, the thick-walled casing, inherent to sour service-rated tubulars
and high production pressures, above and
across reservoir sections, required a system
that would not be compromised and not
be burst- or collapse-limited within structural and geometric constraints.
The deepwater well was planned with
five strings of casing below the 18-in.
high-pressure housing, to which the 18in. casing was attached. As is the practice
in casing design exercises, seismic-derived
PP and FG for shale and derived FG for
permeable intervals were used to identify
casing points.
To reach the proposed bottomhole
depth, the wellpath was expected to traverse a normal PP-FG trend to the top of
salt (ToS), an unknown length of rubble
zone subtending a massive salt section,
regression of trend at base of salt (BoS),
andat the time of well planningthree
divergent PP pathways that included
a total reversal to below hydrostatic
trend, if kerogens were present in the
deeper formations.
The marked inflection/regression in
the PP-FG suggested the need to use a
strong 14-in. casing with a 12.213-in. drift
to straddle the salt interval and the farthest
extent of the rubble zone. The geometric
constraint posed by this drift required an
uncompromising technical solution. Not
knowing what further challenges might exist below the PP-FG regression, the ELHP
offered the technical and deployment attributes to exceed the required hang-off
capacity and isolation integrity desired.
The 11-in. ELHP system was planned
as a contingency string, primarily to extend isolation of the rubble zone below
the salt, should the 14-in. intermediate
casing be short-landed. For the unknown
length of the rubble zone, the planned
11-in. ELHP contingency string could
preserve the use of the preferred 9-in.
high-collapse casing size across the upper reservoir section. The project team
believed that using the next casing size at
this depth9 in.may have presented
through-borehole restrictions, should it
become necessary to call for the casing
point before reaching or traversing the reservoir sections.
ELHP TECHNICAL DETAILS

The TORXS ELHP system comprises

two specific subsystems: the hanger packer
and the setting tool, also called the running

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Deepwater tubulars can make up

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More importantly, theyre the foundation of well integrity.
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Formation Evaluation

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Completion & Stimulation

Production

OIL COUNTRY TUBULAR GOODS

tool. The hanger packer consists of metal

slips and a Baker Hughes ZX-style seal element. The slips provide the hanging capacity, while the ZX element seals the liner top.
The hanger packer incorporates a liner top
extension, with a polished bore receptacle
for stabbing seals of a tieback assembly and
also includes a special profile for transmitting torque to the liner string through the
drill pipe and setting tool.
Unlike conventional liner systems, both
the hanger packer slips and ZX seal are set
by expansion forces generated by the setting tool, which consists of an adjustable
swage with a hydraulic stroker, an anchor,
a flapper assembly, and a cement pack-off.
The running tool can be released before
cementing the liner, to eliminate the possibility of not being able to release from the
hanger after cementing, Fig. 2.
The ELHP running procedure involves rotating and/or reciprocating the
system, while running in hole, if it is required. Once TD has been reached, a
ball is dropped and landed on a ball seat
within the setting tool. Pressure is applied
to the hydraulic stroker by dropping a ball
or closing the system, which causes the
adjustable swage to travel and expand the
hanger body. An overpull test will provide
a good indication that the hanger is set,
and the running tool is released. Pressure is then increased to extrude the ball
through the ball seat within the setting
tool to reestablish circulation, release the
anchor, and reset the stroker. Cementing
operations can now be completed.
After the cementing, the flapper is
closed within the setting tool, just with
pipe movement, and pressure is again applied to the stroker. This second expansion
stroke is performed to further expand the
hanger body to set the ZX seal. Pressure is
then elevated to burst a rupture disc within
the flapper to reestablish circulation. The
packer seal should be tested at this point,
and the setting tool then retrieved.
Development of the 11-in. ELHP
necessitated full concept-to-prototype
engineering development and up-scaling
of several previous ELHP components
for deepwater application. An extensive
design qualification process during the
short concept-to-prototype cycle included finite element analysis and modeling,
and exhaustive tests on components and
assemblies that made up the integral hanger/packer and tieback extension system
and the setting tool. Full function tests
also were performed for the entire hanger

Fig. 2. Close -up view of TORXS setting

tool (left) and setting tool schematic.

ENGINEERED TO FIT

Quicker
Runs with
No Surge...
TIWs Flowboss
Surge Reduction
Tool all but
eliminates the
risk of surge
pressures and
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to formations and
cementing plugs.
With its full open
bore for passing
of displacement
plugs the
Flowboss
tool provides
fewer delays
and reduces
operating costs.

packer setting sequence, followed by a

pressure test of the packer at full collapse
and burst pressures. The resulting system
combines wellbore isolation and deployment performance most suitable for preserving through-bore casing size, without
compromising pipe strength, hanger capacity, or leak-path seal integrity.
The simplicity of the new ELHP
downhole components enhances reliability by reducing susceptibility to additional
leak paths that are inherent with conventional liner equipment. Because the running tool applies the setting force hydraulically and is load-neutral during run-in-hole
(RIH), the system can be set in highly deviated and horizontal wells, and subjected
to high circulation pressures, with no risk
of prematurely activating the setting mechanism. Additional advantages include less
limitation to the setting force applied to the

TIWs guarantee
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quality means
the Flowboss
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its kind on the
market.

A Pearce Industries Company

P.O. Box 35729

Houston, Texas 77235-5729
Tel: 713-729-2110
www.tiwtools.com

World Oil/AUGUST 201447

OIL COUNTRY TUBULAR GOODS

A string of 14in. casing was set at

10,689 ft, at a casing
point below where
Kick tolerance calculation at 12,034 ft
PPest 107 pcf; MW 110 pcf; length of open hole 1,345 ft
a second streak of
140
anhydrites was con124 bbl
firmed. With the
120
101 bbl
salt behind casing,
100
the next set of chal78 bbl
80
lenges was to deter57 bbl
mine where the PP
60
transgression and
36 bbl
40
regression inflex15 bbl
ion point occurred,
20
make correct MW
0
adjustments, and
103
104
105
106
107
98
99
100
101
102
Pore pressure, pcf
refine predrill PPFG
predictions.
The drilling engineering and exploration
Fig. 4. TORXS expandable liner hanger
packer deployment process.
teams decided to use as many formationwhile-drilling measurements as possible,
to carefully navigate the PP ramp and reversal, while managing drilling parameters
and MW on the fly.
In preparation to ride the ramp, MW
was adjusted from 113 pounds per cubic
ft (pcf) to 118 pcf. As drilling progressed
from the bottom of the 14-in. casing, circulation losses occurred, despite several analytical models indicating an 18-pcf window
between PP and FG. Lost circulation material (LCM) was pumped and, with some
soak time, hole circulation was regained,
momentarily. Because only 200 ft of new
hole had been drilled below the 14-in. casing shoe, the option to run a liner to isolate
hanging slips, rapid confirmation that the losses was not acceptable. Additionally, it
hanger is set and the liner is in place, and was important to know the vertical extent
greater wall cross-sectional contact, giving of this loss zone.
The drilling BHA was modified, and
the system the potential for higher pressure
drilling continued with less-sensitive LWD
and hanging capacity.
components, and a bit with bigger jets for
spotting LCM. Difficulty troubleshootWELL CONSTRUCTION
The homogeneity of the salt section, ing the losses was three-fold: 1) a lack of
consistency, and low temperature (262F returns to surface precluded physical deVSP temp.) created benign conditions scription of the formation using cuttings;
for drilling across the salt. Approximate- 2) drilling ahead with losses prevented
ly 5,800 ft of saltmostly halitewas placing LWD sensors to get petrophysidrilled with a 17-in. hole. At 900 ft, from cal data; and 3) pressure-while-drilling
the predicted BoS, a walkaway VSP survey (PWD) data were erratic without a stable
was carried out to provide a look-ahead for annular fluid column.
Mud weight was reduced from 118 pcf
formation and pressure transitions.
Rubble zones, rugose transition planes, to 115 pcf, and then to 110 pcf, to enable
seams, welds, and protracted occurrences pumping at a higher flowrate. Dynamic
of anhydrite/shale/sand sequences were losses subsided at various modeled and
anticipated at BoS, as is expected in most indicative fracture closure ECDs, and at
subsalt exploration wells. After analysis of optimal flowrates. With a new equilibrium
the VSP and quad-combo log data, a pre- established between drilling parameters
cise location for isolating the salt rubble and formation mechanical and hydraulic
capacity, drilling progressed to section TD
zone was identified.

Why use the Tejas

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Y not!

The Tejas Tubular Products

TTNY connection is an
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body internal yield, tensile and
compressive strength. These
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e-mail:
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Web site:
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Phone:1-800-469-7549
Fax: 281-822-3401

48AUGUST 2014/WorldOil.com

Bbl

Fig. 3. Kick tolerance plot, showing diminishing tolerance margin

with increasing PP.

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OIL COUNTRY TUBULAR GOODS

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50AUGUST 2014/WorldOil.com

and a total, drilled interval length of 1,345

ft. The hole was then underreamed from
12 in. to 14 in., to minimize surge effects
with ample annular clearance for the 11in. liner and to help increase trip speed. As
MW was adjusted to achieve the overbalance to hold the gas back, the kick tolerance of the hole section diminished precariously, especially relative to the 18-in.
casing shoe strength, Fig. 3.
Given the preceding well construction
progression, the decision to run the liner
was underscored by the desire to: 1) improve the kick tolerance in the hole section;
2) isolate the lower-pressured shale formation just below the previous shoe; and 3)
increase mud weight to maintain well control in the progressively higher-pressured
zone at the bottom of the interval. As drilling progressed beyond the depth of PP
regression, the well encountered a progressively higher-pressured sandstone zone,
as indicated by increasing background gas
(average 10 to 70 units).
ELHP DEPLOYMENT

Job design and planning for the first

deployment of the evolutionary ELHP
technology required a meticulous assessment of well status, load envelopes and
paths, operational hazards, and application exigencies.
A Baker Hughes development engineer
inspected the ELHP in the shop, and noted
the larger cross-sectional area across one of
the setting tool assemblies, which necessitated a cautionary run-in-hole note to be
added to the ELHP job program.
At the wellsite, after rigging up the top
drive head, the shoe track was run in hole
and the 11-in. joints were then run in at
a rate of 5 min. per joint. After the ELHP
assembly had been made up to the liner
string, a weight check was conducted, and
a pick-up of 320,000 lb and slack-off of
340,000 lb (including 240,000 lb for the
top drive) were recorded. The hanger/
packer assembly was visually inspected
for any damage, and was assessed to be in
excellent condition. The liner hanger assembly was then lowered through the rotary, and the drill pipe (DP) slips were set
on the lift nubbin. To prevent collapse or
damage, care was taken not to set slips on
the liner hanger/packer tieback extension.
As the liner assembly progressed
downhole, mud began flowing from the
drill pipe because of liner filling and the
reduced internal diameter of the DP, compared to that of the liner. Trip speed was re-

duced from 5 to 25 min. per stand, to manage surge and piston effects of the 11-in.
liner in the 12.213-in. drift of the 14-in.
casing. With the liner string at the 14-in.
casing shoe, one liner volume of mud was
circulated at 400 gpm.
After a second weight check, 510,000 lb
of pick-up weight and 500,000 lb of slackoff weight were recorded. It was decided
not to rotate the liner string, and tripping
proceeded into the 14-in. underreamed
open hole.
Three stands before reaching TD, a 1in. ball was dropped and chased with 2-bpm
mud, to help it reach the float collar and convert from autofill to conventional. A final
weight check recorded pick-up of 530,000 lb
and slack-off of 520,000 lb. The space-out of
the liner string was carried out with depths
tide-corrected to ensure location of the liner
shoe at the required depth of 11,950 ft. The
packer element was placed, as close as possible, in the middle of a casing joint.
Pumps were activated to clear flow bypass areas and move fluid around the liner.
While circulating, returns were monitored
continuously to ensure that bridging in the
annulus would be detected promptly, should
it occur. Cementing lines were aligned and
flushed, while circulating to, further condition the hole and the mud. With circulation
completed, the 11-in. liner guide shoe
was placed at 11,950 ft, and the 2-in. OD
hanger setting ball was released.
Approximately 34 min. after being
launched, a slight pressure indication on
surface confirmed that the setting ball had
landed on the ball seat. Pressure was gradually applied to 3,500 psi, then to 4,300 psi,
and finally to 4,750 psi. The running tool
was released automatically from the liner,
and the hanger was set.
After cementing, the stroker was lowered into reset position, and the anchor
was set. Pressure was brought up to 3,500
psi. Collet release was observed at 2,800
psi, and stroke action began downhole,
with pressure rising to 4,800 psi, to indicate that the packer expansion process was
complete. Setting pressure was held at the
running tool for 30 sec, to allow the tool to
complete the second full stroke, Fig. 4.
PROJECT SUCCESS

Following a very short design and

development cycle, the 11-in. ELHP
was deployed flawlessly in its first field
application.
WEB EXCLUSIVE: Visit WorldOil.com to view acknowledgements, references and author biographies for this article.

Can we be everything to everybody, everywhere?

Were giving it our best.

Knight Oil Tools is now in

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For more than 40 years we have delivered complete excellence to our customers.
Now we are delivering it worldwide. The highest quality equipment, the most
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2014 Knight Oil Tools, All Rights Reserved.

NORTH AMERICAN OUTLOOK

Prosperity in the U.S. market continues

Despite a variety of interfering

factors, U.S. activity remains
at a high level, aided by the
industrys technical and
efficiency gains. Canada
continues to slowly rebound
on the strength of oil activity,
while Mexico remains at a
lower level.

KURT ABRAHAM, Executive Editor;

ROBERT CURRAN, Calgary; and MAURO
NOGARIN, Contributing Editor, Latin America
Drilling activity remains strong in North
Dakota, where exploitation of the Bakken
shale has resulted in statewide production
exceeding 1.0 MMbopd for the rst time,
ever (photo courtesy of Hess Corp.).

After a bit of a lull in first-quarter 2014,

U.S. drilling has resumed steady growth
over the last four months. Onshore the
Lower 48 states, oil-directed activity is
king, particularly in the larger shales, as operators strive to benefit from high liquids
prices. Offshore, the rig count is up 8%, as
activity centers on deepwater mega-projects for oil development.
The factors affecting U.S. drilling are
certainly a mixed bag. On the one hand,
producers are exploiting incredibly productive shale resources, taking advantage
of higher-than-expected oil prices, and
benefiting from drilling efficiency gains.
They are also looking to shed themselves
of surplus gas supplies, once LNG exports
begin. On the other hand, producers must
deal with regulators in Washington, who
continue to devise a host of punitive environmental and land use rules. They are

also hamstrung by the White Houses refusal to approve construction of the Keystone XL Pipeline, and must deal with a
growing anti-fracing movement within a
certain segment of the U.S population.
Nevertheless, the upstream industry is
acquitting itself wellboosting drilling,
increasing reserves and growing U.S. production. Remarkably, U.S. oil production
is running at least 15% higher than at the
same time last year, exceeding 8.1 MMbpd.
For the remainder of 2014, World
Oils forecast (Table 1) includes these
highlights:
U.S. drilling will rise 9.9%, from
22,974 wells in first-half 2014 to
25,256 in the second half
On a year-to-year basis, U.S. drilling
will increase 3.9% to 48,230 wells in
2014, from 46,405 wells in 2013; this
compares to our original 2014 forecast of 45,834 wells
The amount of U.S. footage drilled
will increase 9.8%, to 208.8 MMft of
hole in second-half 2014, from 190.3
MMft in the first half. Furthermore,
year-on-year footage drilled will gain
6.5%, to a near-record 399.1 MMft.
Given recent gains and a general
trend upward, it is conceivable that
the U.S. rig count will hit the 2,000
mark before the end of the year and
remain at that level for several weeks
Continued use of pad drilling and
further efficiency gains are resulting
in a factory-type process, whereby
E&P companies are becoming immune to flat commodity prices.
World Oils own proprietary surveys of
major drillers, and small- and mediumsized independents, support these findings. Among 14 major drillers (Table 2),
activity will increase 23.7% from first-half
2014 to the second half. These operators
will also devote 74.9% of their drilling to
oil projects during the full year. Among
the smaller 75 independents, they plan
1,508 wells, of which 56.7% will be drilled
in the second half. Within that total, 1,308
wells, or 86.7%, will be oil-directed. In all,
World Oil/AUGUST 201453

NORTH AMERICAN OUTLOOK

Table 1. Mid-year revision, 2014 U.S. drilling forecast.

2014 wells
State
First
or area
half
Alabama1
60
Alaska
78
7
Alaskaoffshore2
Arkansas
240
California
1,571
Californiaoffshore2
35
Colorado
901
138
Gulf of Mexico2
Illinois
316
Indiana
98
Kansas
2,970
Kentucky
540
551
Louisiana1
North
394
South
157
Michigan
51
132
Mississippi1
Montana
82
Nebraska
84
New Mexico
651
New York
30
North Dakota
1,130
Ohio
383
Oklahoma
1,636
Pennsylvania
1,029
South Dakota
6
Tennessee
49
8,784
Texas1
District 1
1,608
District 2
616
District 3
411
District 4
333
District 5
158
District 6
217
District 7B
361
District 7C
899
District 8
2,827
District 8A
480
District 9
522
District 10
352
Utah
417
Virginia
63
West Virginia
271
Wyoming
507
164
Others3
Total U.S.
22,974

Second
half
70
75
12
490
1,695
31
1,003
207
387
131
2,885
461
587
403
184
57
127
83
95
810
73
1,249
468
1,821
1,247
8
66
9,202
1,572
658
445
324
172
234
362
1,102
2,995
510
420
408
577
58
331
626
324
25,256

2014 footage, 1,000 ft

Year
130
153
19
730
3,266
66
1,904
345
703
229
5,855
1,001
1,138
797
341
108
259
165
179
1,461
103
2,379
851
3,457
2,276
14
115
17,986
3,180
1,274
856
657
330
451
723
2,001
5,822
990
942
760
994
121
602
1,133
488
48,230

% difference,
1st half vs.
2nd half
16.7
3.8
71.4
104.2
7.9
11.4
11.3
50.0
22.5
33.7
2.9
14.6
6.5
2.3
17.2
11.8
3.8
1.2
13.1
24.4
143.3
10.5
22.2
11.3
21.2
33.3
34.7
4.8
2.2
6.8
8.3
2.7
8.9
7.8
0.3
22.6
5.9
6.3
19.5
15.9
38.4
7.9
22.1
23.5
97.6
9.9

First
half
432.0
507.0
64.5
1,987.2
3,809.7
175.0
10,200.0
1,518.0
726.8
215.6
8,019.0
1,512.0
3,822.1
2,338.4
1,483.7
188.7
1,155.0
975.8
390.6
5,663.7
49.5
21,040.6
3,868.3
15,378.4
7,923.3
18.6
107.8
89,366.9
19,778.4
9,240.0
3,781.2
3,729.6
1,809.1
2,604.0
1,642.6
9,484.5
26,291.1
3,024.0
3,758.4
4,224.0
3,294.3
182.7
2,574.5
5,019.3
96.0
190,282.9

Second
half
525.0
457.5
198.0
4,062.1
3,771.4
170.5
10,300.0
2,173.5
890.1
288.2
7,789.5
1,383.0
4,022.1
2,297.1
1,725.0
228.0
1,111.3
1,004.3
389.5
7,047.0
124.1
23,331.3
4,726.8
17,481.6
9,352.5
110.0
145.2
93,918.9
19,021.2
9,548.0
4,361.0
3,726.0
1,978.0
2,854.8
1,607.3
11,901.6
27,763.7
3,238.5
2,982.0
4,936.8
4,558.3
168.2
3,144.5
5,759.2
205.2
208,836.8

Year
957.0
964.5
262.5
6,049.3
7,581.1
345.5
20,500.0
3,691.5
1,616.9
503.8
15,808.5
2,895.0
7,844.2
4,635.5
3,208.7
416.7
2,266.3
1,980.1
780.1
12,710.7
173.6
44,371.9
8,595.1
32,860.0
17,275.8
128.6
253.0
183,285.8
38,799.6
18,788.0
8,142.2
7,455.6
3,787.1
5,458.8
3,249.9
21,386.1
54,054.8
6,262.5
6,740.4
9,160.8
7,852.6
350.9
5,719.0
10,778.5
301.2
399,119.7

2013
wells4
165
145
18
807
3,140
78
1,845
315
764
245
5,612
751
1,176
865
311
153
256
226
155
1,280
144
2,175
696
3,215
2,245
22
125
17,162
3,228
1,233
693
669
437
375
816
1,696
5,128
987
1,135
765
988
130
565
1,165
642
46,405

2013
footage,
1,000 ft4
1,039.5
841.0
288.0
6,536.7
7,441.8
312.0
17,896.5
3,386.3
1,719.0
558.6
15,152.7
1,577.1
7,509.8
4,679.7
2,830.1
550.8
2,176.0
2,621.6
683.3
11,041.3
239.0
42,294.2
7,029.4
30,221.0
17,286.5
276.6
262.5
171,579.4
38,122.2
18,479.5
5,886.0
7,405.5
4,948.2
4,191.7
3,606.6
17,897.0
47,442.0
6,174.0
8,274.3
9,152.4
7,953.4
370.5
5,085.0
10,485.0
310.7
374,725.2

1 Excludes
3

2 Includes state and federal offshore wells.

state and federal offshore wells, which are included in the GOM total.
Includes Arizona, Florida, Missouri, Nevada, Oregon and Washington. 4 2012 estimates are based on well counts furnished by state and federal regulatory agencies, and API.

World Oils two survey groups, combined,

represent 9,300 wells, or just short of 20%
of all U.S. drilling.
U.S. prices. As this year began, there
were concerns and some expectations of
a soft U.S. oil market. Some analysts predicted that oil prices would only average,
at best, in the low $90s for the year. This
has proven not to be true. Indeed, prices
have shown remarkable resilience, buoyed
in part by violence in the Middle East and
Ukraine, and worries about security of supplies in some parts of the world. If it were

not for the gains in U.S. oil output, which

have added significant amounts of crude to
the world market, prices might be averaging at least $10/bbl above this summers
low $100s/bbl.
Meanwhile, natural gas prices at the
Henry Hub averaged $4.59/Mcf in early
June. However, they have taken a dive since
then, falling to just below $3.90/Mcf at the
end of July before leveling out. According
to the U.S. Energy Information Administration (EIA), as of midway through the
summer storage injection season, working
natural gas in storage is on pace for a record

overall build. EIA projects a record build

of close to 2.6 Tcf, from the beginning of
April through the end of October, which
would put inventories at 3.431 Tcf.
Following a colder-than-normal winter,
storage inventories at the end of the heating season were only 857 Bcf, the lowest
level since 2003, said EIA. While the refill
season began slowly in April, injections
ramped up quickly in May and have substantially exceeded five-year average levels
since then. Strong domestic production
and moderate demand for gas to generate
electricity, due to a relatively cool summer,
World Oil/AUGUST 201455

NORTH AMERICAN OUTLOOK

Table 2. Drillng plans for 14 major U.S. drillers1

Wells drilled
1st half
State or area

Total

Arkansas
215
California-onshore 1,005
Colorado
136
Gulf of Mexico
19
Kansas
40
Louisiana
54
North
29
South
25
Mississippi-onshore
22
Montana
27
New Mexico
100
North/West
14
South/East
86
North Dakota
323
Ohio
3
Oklahoma
119
Pennsylvania
155
South Dakota
2
Texas
1,049
District 1
96
District 2
238
District 3
46
District 4
1
District 5
0
District 6
3
District 7B
0
District 7C
162
District 8
395
District 8A
35
District 9
0
District 10
73
Utah
190
West Virginia
0
Wyoming
25
U.S. Totals
3,484
1 Major

Wild
cat
0
0
5
4
0
4
4
0
0
3
2
1
1
22
3
24
6
0
25
0
0
0
0
0
0
0
4
11
3
0
7
0
0
0
98

Wells to be drilled
2nd half
Field

Total

215
1,005
131
15
40
50
25
25
22
24
98
13
85
301
0
95
149
2
1,024
96
238
46
1
0
3
0
158
384
32
0
66
190
0
25
3,386

449
1,130
149
34
40
38
26
12
11
25
156
15
141
426
0
252
148
0
1,217
100
278
70
1
0
0
0
209
384
52
0
123
193
12
28
4,308

Wild
cat
0
0
7
5
0
4
4
0
0
3
2
1
1
35
0
47
5
0
18
0
0
3
0
0
0
0
0
7
1
0
7
0
1
0
127

Field
449
1,130
142
29
40
34
22
12
11
22
154
14
140
391
0
205
143
0
1,199
100
278
67
1
0
0
0
209
377
51
0
116
193
11
28
4,181

Horizontal
wells
1st
half
215
104
102
0
0
22
22
0
0
24
28
10
18
315
3
119
154
2
601
96
238
18
0
0
3
0
73
99
4
0
70
110
0
1
1,800

2nd
half
449
74
105
0
0
16
16
0
0
24
51
12
39
420
0
252
148
0
776
100
278
42
0
0
0
0
92
132
9
0
123
110
12
5
2,442

Oil Wells
1st
half
0
911
56
16
0
28
4
24
20
27
97
12
85
322
0
71
13
2
931
79
188
45
1
0
3
0
146
392
35
0
42
190
0
7
2,691

Gas Wells

2nd
half
0
1,062
59
27
0
14
7
7
11
25
147
13
134
425
0
147
15
0
1,012
86
215
61
0
0
0
0
168
358
52
0
72
193
0
12
3,149

1st
half
215
94
80
3
40
26
25
1
2
0
3
2
1
1
3
48
142
0
118
17
50
1
0
0
0
0
16
3
0
0
31
0
0
18
793

2nd
half
449
68
90
7
40
24
19
5
0
0
9
2
7
1
0
105
133
0
205
14
63
9
1
0
0
0
41
26
0
0
51
0
12
16
1,159

Total footage
1st
half
2,070,144
2,229,046
1,224,000
201,097
124,000
570,018
443,318
126,700
178,800
487,683
733,149
135,800
597,349
6,525,650
41,329
2,110,964
1,722,029
37,033
12,965,957
1,600,858
4,257,040
483,042
8,000
0
42,552
0
1,617,090
3,833,902
91,473
0
1,032,000
1,254,226
0
299,200
32,774,325

2nd
half
4,323,232
2,573,576
1,341,000
266,591
124,000
424,990
350,490
74,500
73,550
469,083
1,719,653
145,500
1,574,153
8,782,505
0
4,544,421
1,621,420
0
13,619,060
1,583,827
4,986,297
882,400
5,500
0
0
0
1,175,170
3,053,015
211,300
0
1,721,551
1,248,347
165,312
317,000
41,613,740

drillers are integrated companies and large independents with signicant drilling programs in six or more states.

U.S. rig count. As of Aug. 1, the Baker

2014, we expect to see further growth in

the U.S. rig count. It is not unreasonable
to think that it may hit 2,000 units before
the end of the year, and it could stay there
for multiple weeks.
A year ago, the oil-gas split in the Baker
Hughes U.S. rig count sat at 78% oil, 22%
gas. Since then, the split has widened further and now stands at 83% oil, 17% gas.

Hughes U.S. rotary rig count was 1,889,

up 107 units, or 6%, from the 1,782 figure of the same week in 2013. For the
first seven months of 2014, the U.S. rig
count averaged 1,825.9, up 3.7% from the
1,761.1-unit level of the same period in
2013. Most of the growth came onshore,
where the average was 1,770.0, compared
to 1,708.2 a year earlier. The nearly62-unit increase onshore can be traced
mostly to growth in three statesTexas
(up 38 rigs), Oklahoma (up nine rigs) and
Wyoming (up five rigs). Given operators
plans, nationwide, for the remainder of

State-by-state highlights. All the

trends that were in place a year ago have
continuedoil is the overwhelming target for producers, while a small amount of
gas drilling continues, primarily to hold
leases or maintain production. Liquidsrich shales are the formations of choice,
which is driving further growth in horizontal drilling. In a few key states, shale
activity accounts for an overwhelming
proportion of all drilling, as horizontal
sections continue to lengthen, and the
number of frac stages increases.

have led to this years strong injections.

Natural gas marketed production continues to set records, as new wells come online in the Marcellus and Eagle Ford shales.
EIA expects production growth to continue, and the strength of supply is reflected in
lower gas prices.

56AUGUST 2014/WorldOil.com

In Texas, the primary drivers of activity remain the Eagle Ford shale of
South Texas and the Permian basin of
West Texas. Drilling and development
in the Eagle Ford (Railroad Districts 1,
2 and 3) is running at capacity, hence the
combined number of wells forecast to be
drilled in the two primary districts1
and 2will be level with last year
at 4,454.
In the Permian basin (Districts 8,
8A and 7C), oil-directed drilling constitutes about 98% of all activity. In our
own proprietary survey of operators, a
cross-sectional group of five major drillers in District 8, along with another five
smaller independents, will drill 1,068
wells this year, of which 1,039, or 97%,
are oil-directed. This group also will increase activity 5% in second-half 2014.
Overall, we expect drilling to gain 5.9%
in District 8, 22.6% in District 7C (our
sample group up 23.5%) and 6.2% in

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District 8A. The proportion of horizontal drilling continues to increase, as does

total footage per well.
On the flip side of the oil-driven prosperity, activity is still struggling in gasprone districts. In Districts 4 (deep South
Texas, along the Gulf Coast), 5 (Barnett
shale, East Texas) and 6 (East Texas),
combined, second-half drilling will be up
a meager 3.7%, at 730 wells. For the year,
these districts will still be down 3%, at
1,438 wells.
To the north, in Oklahoma, activity is
strong and continues to grow, due almost
exclusively to oil-directed efforts. A combination of conventional and tight oil work
is responsible for pushing the oil share of
drilling to 85%. The rig count has grown
over the last 12 months from 183 to 192.
Overall, we see the states activity growing
a further 11.3% during second-half 2014,
and totaling 3,457 wells for the year, up
7.5% from the 2013 figure.
In Louisiana, according to the Department of Natural Resources Office
of Conservation, oil activity remains
steady in the northern half of the state,
while gas-directed drilling shrinks fur-

ther. Hence, while second-half drilling

will be up slightly in northern Louisiana,
the yearly total will be down 8%, at 797
wells. In the southern half, the skew toward oil has widened from 80% to 85%.
Footage per well is also rising. We expect
drilling in South Louisiana to rise 17%
in second-half 2014 and be up 9.6% for
the year.
As the industry builds further infrastructure in North Dakota, operators are
able to increase activity further. Accordingly, drilling, led by the prodigious Bakken shale oil play, will gain 10.5% during
second-half 2014. For the year, North Dakota will drill 2,379 wells, up 9.4% from
2013s level. After a lull in early 2014, the
states oil production growth resumed,
and, at mid-year, finally surpassed 1.0
MMbpd, with further growth expected.
The states leading operator is Continental Resources, with another major player
being Hess Corp.
In the Northeast, Pennsylvania is experiencing strong activity, as operators
exploit the wet gas and liquids windows
of the Marcellus shale. There is an accelerating trend, so that second-half drilling

is predicted to be 21.2% higher than in

the first half. For the year, Pennsylvania
will tally 2,276 wells, up 1.4% from the
2013 figure. To the west, in Ohio, exploitation of the oil-prone Utica shale has hit
its stride, as has conventional oil activity.
Drilling will be up 22.2% in the second
half, and will gain an equal amount for
the year at 851 wells, compared to 2013s
level. The Marcellus, is also treating West
Virginia kindly, as liquids-directed activity continues to grow. Drilling will be up
22.1% in the second half, while the annual
total will be up 6.5%, at 602.
In the Rockies, there will be strong
second-half drilling gains in Colorado
(+11.3%), New Mexico (+24.4%) and
Utah (+38.4). For the year, Colorado
will be up 3.2%, and New Mexico will
rise 14.1%, while Utah will be level with
last year. Colorado continues to benefit
from high work levels in the DJ basin
of the Nirobrara shale, along with the
Piceance basin. While oil-directed drilling has been carrying New Mexico in the
southeastern part of the state, there is
also an uptick in oil activity in the northwestern portion, as well. Two major play-

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NORTH AMERICAN OUTLOOK

ers in Utah are Newfield Exploration and

LINN Energy, and 100% of their efforts
are oil-directed.
Californias E&P activity remains almost entirely oil-directed. In fact, World
Oils survey group, which accounts for twothirds of all wells in the state, will devote
92% of its efforts toward oil development.
Leading operators include Occidental,
Aera Energy, Chevron and LINN Energy
(the latter assuming prominence after acquiring Berry Petroleum). For the second
half, producers will increase California
onshore drilling 7.9%. On an annual basis,
the states drilling will total 3,266 wells, up
4.0% from the 2013 tally.
Up in Alaska, activity in the Arctic offshore remains idle, as Shell has opted to
forego any work for a second consecutive
year, leading other operators to postpone
activity. Across the rest of the state, steps
taken by officials to ease the tax and regulatory burden have paid dividends. Activity
is up in traditional areas, as evidenced by
moderately increased rig counts. Drilling
will be split almost evenly between the two
halves of the year, with the 2014 total forecast to be 153, up 5.5%.
About these statistics. World Oils U.S.
tables are produced with the aid of data
from a variety of sources, including API,
the Texas Railroad Commission, other
state and federal regulatory agencies, and a
variety of operators. We thank all contributors for their time and effort in providing
data and analysis.

CANADA

Given consistently strong oil prices,

and recovering natural gas prices in North
America, the outlook is as good as it has
been in many years for the Canadian industry. But political forces continue to
destabilize markets across the continent,
with pipeline issues festering in Canada
and the U.S., and fear-mongering about
oil sands development rampant among
anti-industry activists.
Overall, drilling activity is up, and producers are showing improved financials
(thanks largely to a weaker Canadian dollar). They have overcome the lack of pipeline capacity growth with an enormous
shift to oil shipments by rail.
M&A activity. Testament to the upturn
seen by the Canadian oil patch this year is
C$16 billion in mergers and acquisitions
through the first half of 2014, dwarfing

the $4.3 billion in deals through first-half

2013. Increased oil and gas prices, and
the lower Canadian dollar, are big reasons
for the enhanced M&A activity. The improved financials have increased cash flow,
access to capital, and better financing opportunities. Leading the way this year was
Canadian Natural Resources Limiteds
C$3.1 billion, February acquisition of
Devon Energy Corp.s conventional Canadian energy business, which is 73% natural
gas-weighted.
In late June, EnCana sold its Bighorn
assets to Jupiter Resources Inc. for C$1.8
billion. These assets consist of 360,000
acres in west-central Alberta, representing
reserves of 1.1 Tcf of gas and liquids-equivalent, of which 75% are gas.
In March, Whitecap Resources Inc.
acquired assets in Alberta and British Columbia (B.C.) from Imperial Oil Ltd. for
C$855 million. The assets, with a 50/50
oil/gas split, produce approximately
15,000 boed. Meanwhile, in late June,
Montreal-based SNC-Lavalin Group Inc.
acquired Kentz Corporation Limited, a
London, UK-based engineering firm, in
an all-cash deal worth C$2.1 billion.
In addition, Talisman is said to be considering disposal of some, or possibly all,
of its Asian portfolio, valued at about C$4
billion. EnCana is rumored to be considering the sale of its Deep Panuke gas project offshore Nova Scotia, valued as high
as $2 billion.
Reserve additions. Canadian producers
also put up some positive reserve addition
numbers in 2013, for both oil and gas. According to Daily Oil Bulletin records, total
proved oil and liquids reserves rose to 29.5
Bbbl last year, a 10% increase over 26.74
Bbbl in 2012. Almost 84% of the booked
reserves were associated with Alberta oil
sands. On the gas side, proved reserves
rose to 36.9 Tcf, up nearly 2% from 36.3
Tcf in 2012. The increase on the gas side
is predominantly due to bookings from
liquids-rich gas plays.
The increase in oil sands reserves did
not come without cost, however. A recent
report issued by the Canadian Energy Research Institute (CERI) shows that the
cost of mining and upgrading projects
rose 5.9%, Steam Assisted Gravity Drainage (SAGD) projects increased 4.4%, and
stand-alone mine costs were up 1.6%.
CERI also forecasts that natural gas usage
by oil sands projects will increase as much
as three-fold by 2048.

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NORTH AMERICAN OUTLOOK

from the $569.35 million garnered at the

half-way point last year. The six-month
record was set in 2006, when governments took in $2.7 billion.
Despite the year-over-year decrease,
Alberta once again led the way, taking in
54% of the total at $231.55 million. That
was 44% lower than last year, when Alberta took in $411.48 million.
B.C. also showed a big decrease through
six months, with land sale revenues decreasing 29%, to $89.87
million, compared
Fig. 1. Following the trend in the U.S., pad drilling is being utilized
to $127.45 million
more frequently in Western Canada, as reected by this cluster of
in 2013. Both topumpjacks (photo courtesy of ARC Resources Ltd.).
tals are dwarfed by
the $609 million
that B.C. collected
in 2010. Bucking the downward
trend was Saskatchewan, which saw
its revenue increase
substantially
to
$109.59 million, up
274% from $29.26
million
during
first-half 2013.

Land sales. A key indicator of future activity in Western Canada is land

sales activity. Leases and licenses acquired in these sales form the basis
for future drilling plans. Optimism
about future activity may be tempered by the news that revenue from
land sales has decreased compared to
first-half 2013.
Through six months, land sales
brought in C$431.85 million, down 24%

Drilling/production. Drilling numbers

were up slightly during first-half 2014,
when 4,886 wells were drilled, up marginally over last years 4,815. Among the wells
drilled this year, 65% targeted oil, and 84%
were for development.
But, based on a stronger-than-expected
second quarter, both of Canadas industry
associations have increased their 2014 forecasts. In June, the Canadian Association of
Oilwell Drilling Contractors revised its
2014 Western Canadian forecast upward
to 11,494 wells drilled, a 6% increase over
2013 drilling. In July, the Petroleum Services Association of Canada also revised
its Western Canadian forecast upward for a
second time this year, predicting there will
be 11,460 wells drilled during 2014.
Nationally, including offshore Eastern Canada, the Canadian Association of
Petroleum Producers (CAPP) says that
10,878 wells were drilled last year, and
predicts an 8.7% jump in 2014 to 11,825
wells. CAPP says that offshore activity will
rise 47%, from 17 wells in 2013 to 25 this
year. Shadowing CAPP fairly closely, the
National Energy Board (NEB) says that
10,853 wells were drilled in Canada last

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NORTH AMERICAN OUTLOOK

Table 3. Canadian drilling, by province, 2014 vs. 20131

Province
Total
Alberta
6,397
British Columbia
568
Manitoba
537
New Brunswick
0
Newfoundland
15
Nova Scotia
0
Northwest Territories
4
Nunavut
0
Ontario
18
Prince Edward Island
0
Quebec
3
Saskatchewan
3,376
Yukon Territory
1
Totals
10,919
1 Data

2013 Wells
Onshore
6,397
568
537
0
1
0
4
0
18
0
3
3,376
1
10,905

Offshore
0
0
0
0
14
0
0
0
0
0
0
0
0
14

Total
7,000
602
600
0
12
0
1
0
18
0
4
3,275
0
11,512

2014 Wells
Onshore
7,000
602
600
0
2
0
1
0
18
0
4
3,275
0
11,502

Offshore
0
0
0
0
10
0
0
0
0
0
0
0
0
10

supplied by provincial governments in response to World Oils survey.

year, and predicts a 6.0% rise to 11,494 this

year. Curiously, NEB is calling for a reduction in offshore wells from 13 to 8.
Every six months, World Oil consults
with provincial governments across Canada. Some of the data derived is shown
in Table 3. When added together, the individual provinces parallel the CAPP and
NEB numbers very closely. They show
10,919 wells last year, with a 5.4% rise to
11,512 expected in 2014.
Meanwhile, World Oils survey of a
cross-section of Canadian operators is also
bullish on the second half, showing that
drilling will increase about 20% over firsthalf totals. Representing 21% of all Canadian drilling, based on CAPPs forecast for
2014, the survey group drilled 1,114 wells
in the first half and will boost that effort
20% during the second half. In this group,
73% of wells were targeting oil in the first
half, and that figure will rise slightly to 74%
in the second half. An overwhelming 95%
of wells were for development in the first
half, and that same figure applies to second-half drilling.
As regards production, CAPP says that
total Canadian oil output averaged 3.344
MMbpd last year, and that figure continues
to grow. This total includes 1.381 MMbpd
of conventional crude, 22,392 bpd of condensate and 1.941 MMbpd of oil sands
production. Actively producing oil wells
totaled 71,601, of which 6% were flowing
naturally. Output of natural gas averaged
14.015 Bcfd, and actively producing gas
wells totaled 145,099.
Oil transportation. There have been

some encouraging signs on both sides of

the border regarding pipelines, but skepticism abounds that neither the proposed

TransCanada Pipelines Keystone XL project, nor Enbridges Northern Gateway

pipeline, will be in service any time soon, if
ever. Oil sands producers cast a wary eye to
both; hopeful, but not counting on either.
In response, Enbridge is reviewing the feasibility of building a 140,000-bpd rail facility in Illinois, to alleviate pressure in shipping Canadian oil to U.S, markets.
As the Keystone soap opera drags on
in the U.S., the C$5.5-billion Northern
Gateway proposal got a significant boost
in June, securing approval from Canadas
National Energy Board (NEB), with 209
conditions attached. Enbridge will take
the next year or more to assess the conditions and make a decision on whether to
proceed. Despite NEBs approval, extensive opposition remains in B.C. The project would transport oil sands crude from
Alberta to the B.C. coast, for shipment to
Asian markets. Imported diluent would
also be shipped back to Alberta. Opponents have cited concerns with both the
pipeline and increased oil tanker traffic it
would generate on the West Coast. This is
despite continued opposition from B.C.s
provincial government, even though its approval is not required.
Oil sands impacts. Meanwhile, efforts to reduce greenhouse gases (GHG)
across North America have re-emerged
as an issue that may impact Albertas oil
sands. Companies fret that following the
release of the U.S. Environmental Protection Agencys Clean Power Plan, which
requires a 30% reduction in carbon emissions from U.S. power plants by 2030,
Barack Obama may be unfettered in pursuing a more aggressive stance toward
Canadas oil sands and their GHG emis-

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World Oil/AUGUST 201461

NORTH AMERICAN OUTLOOK

sions. By extension, that could be further

bad news for the Keystone XL project.
The tired GHG argument against oil
sands development has been refuted by

numerous studies, most of which have

shown that oilsands development results
in minimally higher GHG emissions than
conventional oil development. Most re-

cently, IHS CERA released a report that

found almost half of the crude utilized in
the U.S. has a GHG intensity range similar
to the oil sands.
Traditional lands questions. Further

Fig. 2. The sale of Repsol stock valued at $2.95 billion will allow Pemex to invest money
in capital projects, such as work at Cantarell and Ku-Maloob-Zap elds, that would
otherwise be reduced or not occur at all.

concern has arisen about the implications

of a ruling from the Canadian Supreme
Court on June 26, 2014Tsilhqotin Nation v. British Columbiain which the
court determined that the Tsilhqotin Nation had proved aboriginal title to almost
2,000 km2, considered by the Tsilhqotin
to be traditional lands. The case arose after
the B.C. government had granted logging
rights on these lands in 1983.
The implications of the case on oil and
gas development across Canada are unknown. Yet, speculation is rampant that
other First Nations across the country
will make similar applications to claim
aboriginal title on traditional lands impacted by other development, for which
provincial governments have granted permits or licenses.
(Mr. Curran is a Calgary-based freelance writer.)
MEXICO

DIRECT
MAILING
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the Energy Industry
Gulf Publishing Co.s mailing lists use rigid subscriber
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62AUGUST 2014/WorldOil.com

From an operational and financial

standpoint, Mexico is in a delicate transition. Two key financial items have the ability to strengthen exploration in the nation.
The first factor is the upgrading of Pemexs credit ratingto A3by Moodys
Investor Services. The upgrade results
from improved prospects afforded by
the changes proposed by Mexicos Energy Reform Law and its associated legislation. Key changes include alterations
to Pemexs corporate structure, and the
opportunities that the company has to
engage in JVs.
The second factor is Pemexs recent
sale of 104 million shares of Repsol stock,
which is 7.86% of its capital and valued
at $2.95 billion. These resources will be
available for exploratory projects, such as
the Chuc exploratory well in 2014, as well
as financing 55% of the projected capital
investment in the Cantarell (Fig. 2) and
Ku-Maloob-Zap field complexes, or provide resources for the Tsimin-Xux facilities. All of these are strategic investment
projects that are very important to Pemex,
for which, the company will finance $27.7
billion in capital investment for this year.
That figure is 6.5% higher than the investment level during 2013. About 85% of the
budget is earmarked for E&P.

NORTH AMERICAN OUTLOOK

However, it is also important to note

that the aforementioned energy reforms
will allow Pemex to set up subsidiaries
for specific activities, such as E&P, which,
in the latest version of the legislation, will
be an activity conducted by subsidiaries.
In fact, Article 59 states that Pemex will
operate through subsidiaries productive
enterprises for the exploration and extraction of hydrocarbons, through contracts
granted by the government, as well as being able to create private JVs.
Lourdes Melgar, undersecretary for
oil and gas in the Secretariat of Hydrocarbons, has said that Pemex will probably keep the exploration projects in the
southeastern part of the country (offshore
Tabasco and Campeche), where it has the
most experience, for itself. These proven

reserves are estimated at around 14 Bbbl

of oil, which would place Pemex among
the worlds five largest oil companies, due
to the value of its reserves.
All measures to consolidate the exploration sector will be implemented from now,
based on the hydrocarbon policy set out in
Round Zero. The goals of this document
are to create a balance between the resources that Pemex manages, and those that the
state administers and will give out in later
rounds. While simultaneously endowing
the necessary resources to ensure Pemexs
production levels, it multiplies investment
in exploration and extraction of oil and gas
in the country, through bidding rounds in
which participants from both the wider
industry and Pemex may compete. Taking
this into account, in the area of exploration,

Table 4. Under the reform package, Pemex has requested prospective resources equaling
34.5 Bbbl (table courtesy of Pemex).
rea, km2

Resources, Bboe

Shale
Deep water
Shallow water
Onshore
Total

13,163
46,413
35,928
65,471
160,975

8.9
8.1
9.5
8.0
34.5

2013 by AMETEK. All rights reserved.

Category

Resources, %
of accumulated production
15%
29%
63%
82%
31%

Pemex requested the prospective resources

detailed in Table 4.
Thus, Pemex will have resources equivalent to 31% of accumulated production,
with the goal of maintaining operations at
the present level of output until 2050. This
frees 407,000 km2, as of 2015which
were previously assigned to Pemexfor
the Mexican state to conduct 10 auctions
(rounds) of 20,000 km2, each.
It is hoped that these new actions and
operational tools will help to change the
results seen in the latest Pemex report on
Mexican oil production, which dropped
1.08% during first-quarter 2014, compared
to the same time last year. New statistical
analysis, conducted by Pemex, shows that
the drilling of exploration wells has decreased significantly in the last few years.
Pemex only drilled six exploratory wells
and 129 development wellsin the first
three months of 2014.
According to data for the first quarter of
this year, crude oil exports fell 1.1%, compared with the same period in 2013, from
1.204 MMbpd to 1.191 MMbpd, shipped
abroad to three main destinations: the U.S.,
Spain and India.

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UNCONVENTIONAL RESOURCES

Automated MPD in SAGD well successfully

navigates narrow-pressure window
may be forced to shut in a well and leave
substantial volumes of technically recoverable reserves in the reservoir.
BRINGING A WELL BACK

After thorough up-front

planning, Suncor and
Weatherford conducted a
successful MPD operation
in a SAGD well. A total of
2,350 ft was safely drilled
for the re-entry production
section. Automated MPD
enabled a constant BHP of
239 psi during the entire
drilling operation. Caprock
fracture pressure was not
reached or exceeded at any
time during drilling operations.

VINCENT BOUCHER, Suncor Energy Inc.;

and NADINE OSAYANDE, ELVIN MAMMADOV
and SHELDON SEPHTON, Weatherford Canada
Steam-assisted gravity drainage (SAGD)
technology is used in underground wells to
inject steam into the oil sands deposits and
collect the bitumen released by the heat
(photo courtesy of Suncor Energy Inc.).

By some industry estimates, up to

80% of Canadas oil sands reserves are
too deep to be mined, leaving in-situ
production processes, such as steamassisted gravity drainage (SAGD), as the
only viable recovery options. The typical configuration for a SAGD operation
involves drilling a pair of parallel horizontal wells, one slightly above the other. The upper well is the steam injector,
in which pressurized steam is injected
downhole to heat bitumen surrounding
the wellbore, Fig. 1. This lowers the viscosity of the heavy oil, allowing it to flow
via gravity to the lower well (the producer) and then be carried to surface.
While an increasingly popular oilsands recovery method, SAGD is not
without its problems. Drilling issues in
the form of low reservoir pressure, tight
well spacing, highly pressurized steam
injection, cap rock integrity and tight
drilling windows are among some of the
challenges facing SAGD operators today.
Without a means of successfully addressing these challenges while minimizing
any environmental impacts, an operator

This was the challenge facing Suncor

Energy as it decided how to best revitalize production from a well in Dover
field, located in the Athabasca oil sands
area approximately 45 km northwest of
Fort McMurray in Alberta. The well had
been shut-in following multiple failures
in the liner that resulted in excessive
sand production.
To repair the well and resume production, Suncor decided to re-drill the
horizontal section and install a new slotted liner. Re-drilling a producer well
in a shallow, over-pressured and hot
reservoir would be a first for Suncor
in this area, and would present some
unique challenges related to managing
wellbore pressures.
First, the formation pore pressure
was estimated to be roughly 199 psi, and
fracture pressure was estimated at approximately 345 psi, based on offset and
known pressure information in the area.
This resulted in a tight drilling window
of approximately 145 psi, leaving very
little room for misinterpreting wellbore
volumes, equivalent circulating density
(ECD) or bottomhole pressure (BHP).
Drilling with such a narrow pore
pressure-to-fracture pressure window in
a mature steam chamber, while having
adjacent steam injectors and producers
near the well in question, can create BHP
control issues. And, because the field
has been running on steam injection for
more than six years, the steam chambers
from adjacent wells have commingled
to essentially create one large, coalesced
steam chamber for all of the producing
wells in the area.
Significant fluctuations in BHP can
lead to a weakening of the caprock and
compromise wellbore stability. If the
BHP, during drilling, should exceed the
fracture pressure of the caprock, there
World Oil/AUGUST 201465

UNCONVENTIONAL RESOURCES

is a risk of losing caprock integrity, and

having oil and steam propagate to the
formations above, into the ground water,
or to the surface. The environmental impacts would be severe, and, with no current way to repair the caprock, that area
and all surrounding wells would have to
be shut-in, effectively sterilizing the production area.
Hole stability issues may also arise
from the reservoir rocks exposure to
high temperatures from steam injection

over time. The temperature of the formation increases the temperature of the
circulating fluid, which could soften the
bitumen, resulting in hole-stability issues, washout, and increasing amounts
of cuttings volume.
BRINGING MPD TO SAGD

The narrow drilling window, coupled

with reservoir temperatures expected to
exceed 320F, left Suncor with limited
drilling options. Drilling in an overbal-

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anced state, with a weighted water-based

mud (WBM), for example, would prove
problematic in a situation, where mud
circulation was interrupted resulting in
the well temperature rising. The polymer in the mud would eventually breakdown, causing the weighting material
to fall out of solution and reducing the
density of the fluid to near-water gradient. An underbalanced situation would,
therefore, result with the well flowing
into the wellbore.
The only other option, and one that
had never been attempted in a SAGD
well, was to deploy managed pressure
drilling (MPD) techniques to maintain
the downhole pressure values required
while drilling the well, Fig. 2. The advanced MPD techniques employed by
Weatherfords Microflux Control System (MFCS) were proposed, along with
a WBM of sufficient weight to drill the
well and maintain the necessary BHP to
keep the wellbore in a slightly overbalanced state. The systems ability to detect
micro influxes and losses while drilling,
combined with an automated control
system, would allow Suncor to meet its
well objectives. These include:
Safely reducing the time and cost
required to re-enter the production
section from 880 ft to 3,232 ft, MD.
Drill the well while holding a constant BHP in both dynamic and
static conditions.
Eliminate potential losses and
prevent any steam influxes, which
could result in a well control event.
Improve drilling performance and
minimize reservoir damage by
avoiding the use of weighted mud
systems that would cause formation damage.
Fig. 1. In SAGD, a pair of parallel horizontal
wells is drilled. The well on top is used for
steam injection and the lower well for oil
recovery (image courtesy of Suncor Energy
Inc.).

UNCONVENTIONAL RESOURCES

Suncor and Weatherford worked together to develop a drilling strategy and

all required parameters, which included
reviewing a detailed risk mitigation planning process to understand the perceived
risks while drilling, and how the MPD
system should be designed to minimize
these risks. Detailed work went into
modeling various mud weights, pump
rates, surface friction pressures (based
on the MPD surface equipment), and
the required surface back pressure (SBP)
while drilling and during connections.
The modeled data suggested that the
well should be drilled at a bottomhole
circulating pressure (BHCP) of roughly
239 psi, using an unweighted WBM system, with a density of 8.92 ppg. This
would result in BHCP approximately
43.5 psi above the estimated formation
pressure, thus helping to minimize reservoir damage and to control the BHCP
within the tight drilling window. Other
objectives included:
Drill the horizontal section using a
single-phase MPD technique, with
an 8.92 WBM, while setting the
BHP ECD to 10.43 ppg.
Gradually adjust drilling fluid injection rates and the choke settings,
as downhole conditions dictate, to
maintain a constant bottomhole
(BH) ECD.
Hold SBP during connections to
maintain the set BH ECD.
Once TD has been reached,
pull out of the hole and run the
slotted liner.
BRINGING THE SYSTEM ONLINE

The MPD equipment was rigged in,

consisting of Weatherfords specialized
surface equipment, which included a
rotating control device (RCD), MFCS
with two chokes, a Coriolis mass flowmeter (Fig. 3), auxiliary pump, degasser
and a flare stack.
The control system was intended to
minimize any influx into the wellbore, by
using a proprietary hydraulics model in
combination with a Coriolis mass flowmeter, to continuously measure the flowrate, volume, fluid surface temperature
and drilling mud density, Fig. 4. The
chokes would be activated automatically,
whenever the flow parameters changed
beyond pre-set limits, thus helping to
minimize the threat of a kick or an overbalanced condition, leading to fracturing
of the caprock.

The well fluid travels through the

outlet of the RCD, where it can either
be directed to the shaker (conventional
drilling) or the drill-out line (MPD).
Drilling fluid also can be directed after
the MFCS, either back to the shaker or
through the degasser, if nuisance gas is
present. Any minimal gas influx within
the wellbore would be degassed by the
surface degasser, gas flared, and the drilling fluid and solids returned back to the
drilling rigs fluid management system.
As a contingency to ensure against
exceeding the formation fracture pressure while drilling, Suncor installed a
pressure gauge in the injector well at the
halfway point (at 1,300 ft in the 2,600ft long lateral). This gave them the ability to monitor, in real time, if pressures
were beginning to approach or exceed
the maximum allowable downhole operating pressure and make any necessary corrections before caprock integrity
was compromised.

eration. The MFCS successfully calculated and adjusted accurate ECD values
throughout the drilling profile of the
entire main hole section, and the chokes
were adjusted on-the-fly, as the injection rates changed to help optimize the
drilling operation. Friction pressure was
replaced with SBP when rig pumps were
Fig. 2. MPD provides additional value for
SAGD wells by increasing safety to the
drilling process and the environment by
maintaining bottomhole properties, as
required, and as constant as possible.

RESULTS

The thorough upfront planning between Suncor and Weatherford was instrumental to a successful MPD operation in this SAGD well. A total of 2,350
ft was safely drilled for the re-entry
production section of this SAGD well
in 19.25 bit hr, with a 8.92-ppg polymer WBM, resulting in an average ROP
of 122 ft/hr.
Through the use of the MFCS,
Weatherford maintained a constant BHP
of 239 psi during the entire drilling opFig. 3. A key MPD component, the Coriolis mass owmeter, provides real-time data for
volumetric ow, uid density and return mud temperature.

World Oil/AUGUST 201467

UNCONVENTIONAL RESOURCES

Fig. 4. The Microux Control System (MFCS) is able to detect and control micro inuxes
and losses while drilling, enhancing the ability to make a successful connection, while
maintaining constant bottomhole pressure (CBHP).

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turned off, to prevent an underbalanced

condition from occurring.
Caprock fracture pressure was not
reached or exceeded at any time during
drilling operations. Consequently, no
damage to the formation was observed.
With the MPD system run in an autocontrol mode, it had the ability to detect
micro influxes and losses while drilling
and during connections. A virtual pressure relief valve (PRV) was built into the
system, and ensured that the pressures
were maintained below the expected
fracture pressure at all times during the
entire drilling operation. Should the
pressure have reached the set high limit
within the system, the chokes would
have been opened by the system to minimize any risk to the formation.
Minimal fluid losses were observed
throughout the entire well, with a total
loss volume calculated to be 272 ft3 of
WBM. Since the MFCS accurately calculates flow in, and the mass-balance
flowmeter measures flow out within tolerance of gallons, it is assumed that the
volume of fluid lost was to the formation
and not on surface.

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UNCONVENTIONAL RESOURCES

The entire drilling operation was

conducted with no injuries reported
from any of the parties involved, thanks
in part to thorough pre-job training
to ensure that all in-field parties understood the safe running of the MPD
techniques and equipment. Weatherford personnel participated in all safety
meetings, job safety analyses, assessments, stop card programs, and operational engineering meetings throughout
the project.
Once TD was reached, the well was
displaced to 11.93 ppg brine kill mud.
The displacement began by pumping
the kill mud down at a rate of 35 ft3/min.
Once the fluid hit the bit, the pump rate
was reduced to 28 ft3/min and maintained throughout the displacement.
The bottomhole ECD was maintained
at 10.43 ppg. Once the circulating pressure increased above desired levels, both
chokes were opened, and flow was directed to the gut line to reduce to friction pressure caused by the surface
line restrictions. The BHCP remained
fairly constant within 239 psi during the
entire process.

Suncor was pleased with the outcome

of the entire MPD program, which allowed the slotted liner to be installed
successfully and get production back online. The program achieved this without
any damage to the formation, contamination of neighboring wells and without
exceeding formation fracture pressure.
Such an event may exceed the caprock
integrity, and risk having a steam and oil
release to the surface.
Since being put back on production in late 2013, the well has produced
at a rate higher than expected. Suncor
is now in the process of identifying
other wells in the field that are suitable
candidates for this MPD method of
well construction.

NADINE OSAYANDE has

served as the Secure Drilling
Services engineering
manager with Weatherford
Canada since 2012. Ms.
Osayande is involved
with planning, training,
onsite operations and personnel
management related to UBD and MPD
operations. She has a BS degree in
petroleum engineering from the University
of Regina.

VINCENT BOUCHER is a
drilling engineering specialist
with the In Situ and Oil Sands
group of Suncor Energy since
2008. Mr. Bouchers work
includes the planning and
execution of SAGD wells,
SAGD inlls, delineation wells, and highprole wells involved in drilling into a steam
chamber. Mr. Boucher received his BS degree
in petroleum engineering from the University
of Alberta.

SHELDON SEPHTON is the

regional product line
manager for Weatherfords
Secure Drilling Services
group in Canada. Mr.
Sephton graduated from
SAIT Polytechnic in 1998
with a diploma in petroleum engineering
technology. He has been active in the oil and
gas industry for over 16 years in various roles,
primarily related to UBD and MPD
technologies.

ELVIN MAMMADOV is a
drilling engineer for SDS
Weatherford Canada. Mr.
Mammadovs career spans a
spectrum of drilling
engineering assignments
from directional drilling to
UBD and MPD, encompassing planning,
executing and optimization. He has extensive
expertise and experience of HPHT and SAGD
MPD wells.

World Oil/AUGUST 201469

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SAND CONTROL

Innovative sand failure analysis and prediction modeling

restore lost production in North Sea eld

In one North Sea gas eld,

production losses of up to
75% were reversed when
sand control issues in several
wellbores were remedied
through the implementation
of sand failure analysis and
prediction modeling.

LEX DE GROOT and HILBRAND GRAVEN,

GDF SUEZ; and SUREJ KUMAR SUBBIAH,
Schlumberger

Geomechanical sand failure and prediction

studies can help empower operators
to make more informed, cost-effective
decisions, at every stage of eld
development and production.

Sand production is a major problem in

many clastic reservoirs worldwide, costing
producers billions of dollars every year in
lost or restricted production, and expensive well interventions. When stresses acting on a consolidated sandstone formation
become sufficiently high, they can cause
the rock matrix to break through compressive failure, releasing fragments and
individual particles. As hydrocarbons flow
through perforations out of the formation
and into the wellbore, if fluid velocity is
high enough, sand grains may be carried
all the way to the surface. If, however, fluid
velocity is low, sand will begin to deposit
inside the wellbore, impeding the free flow
of oil or gas.
In addition to lowering, or halting, hydrocarbon production altogether, sand
abrasion and clogging can damage or destroy completion components, submersible pumps and other downhole equipment. Sanding can also interfere with
wellbore access for remedial work, and can
generate costly sand disposal problems.
Excessive stresses on a sandstone reservoir may be caused by the weight of over-

burden, superimposed tectonic stresses,

and production or injection activities. In
many cases, the effective stress increases
as the reservoir depletes over time. Fluids
within a reservoir actually provide support to the rock matrix, at least until fluid
pressure declines along with production.
Gradually, accumulated stress is transferred to the matrix, which may shatter and
initiate sand production. This can occur
unexpectedly, years after production begins. The relationship between stress and
rock strength is one of the primary factors
that influences sand failure. High-porosity
rocks tend to be weaker than low-porosity
rocks, due to less load-bearing material.
However, rock strength also depends on
the type and composition of cementation
present, as well as oil and water saturation.
Understanding all the factors involved in
sand production can be difficult.
Clearly, having the ability to predict
which intervals may suffer rock failure and
trigger sand production, under what conditions, and at what point in time is becoming increasingly critical to economic success. Only with accurate sand prediction
capabilities will operators be empowered
to make proactive, timely, cost-effective
sand management decisions. After years
of research, laboratory testing and validation in fields worldwide, Schlumberger
has developed an approach to sand failure
analysis and prediction based on in-depth
geomechanical modeling. In one North
Sea gas field, this approach enabled GDF
SUEZ to successfully re-establish economic sand-free production, Fig. 1.
K9 ROTLIEGEND GAS FIELD

In 1996, GDF SUEZ drilled the B1 exploration well in the K9ab-B Rotliegend
(or K9) field in The Netherlands sector of
the North Sea (Fig. 2), discovering natural
gas. A year later, the B2 appraisal well was
drilled in another fault block. After the
production platform was installed, both
wells were re-entered and completed. Production began in 1999. Several years later,
two additional wellsB3 and B4were
World Oil/AUGUST 201471

SAND CONTROL

Fig. 1. Due to severe sanding, two of the K9 elds four wells were shut in, reducing total gas production 75%. Following sand prediction
and remediation, production rates returned to the elds previous highest levels, sand-free.

2,000

Sand prediction
and remediation

Q gas, 103 Nm3/day

1,600
1,200
800
400

Jan. 05

July 05

Jan. 06

Fig. 2. The K9ab-B Rotliegend gas eld,

was discovered in 1996, and began
producing in 1999. In 2006 and 2007, the
B1 (center) and B2 (lower left) wells were
abandoned due to sand production.

1 km

drilled and completed, although B3 produced at a capacity below expectations.

After five years, B1 began producing
sand. A screen was installed in 2004, but apparently collapsed in 2006, at which point
the well suffered severe sand production
again and was shut in. In 2007, B2 also began producing sand, which was controlled,
initially, by producing at a lower drawdown
pressure. Eventually, however, B2 was also
abandoned. Shutting in two of the four
producing wells resulted in the loss of 75%
of the fields total gas production. At that
point, the company began investigating remedial sand control alternatives.
Normally, operators have three basic options: find ways of managing and
disposing produced sand at the surface;
reduce flowrates, so there is insufficient
energy to mobilize sand grains along with
72AUGUST 2014/WorldOil.com

July 06

Jan. 07

July 07

July 08

Jan. 09

fluids; or install a barrier or filter to prevent

sand from passing through perforation
tunnels into the wellbore. Types of mechanical sand control techniques include
cased-hole gravel packs, high-rate water
packs, frac packs, open-hole gravel packs,
and stand-alone screens.
In unconsolidated formations, of
course, screens are necessary from the very
beginning of hydrocarbon production.
Otherwise, most companies prefer screenless completions, which include oriented
perforations and chemical consolidation,
because productivity tends to be higher
and initial costs lower. If sand production
appears inevitable at some point, cautious
operators may decide to install more expensive completions up front. Although
these may ensure sand-free operations,
perhaps for the life of the field, they may
increase the wells authority of expenditure
AFE and sacrifice a certain amount of production. In addition, operators may apply
pressure maintenance, injecting produced
water back into a deeper section of the reservoir to forestall internal fluid pressure
decline, and effectively minimize stress on
the rock matrix. Determining if, or when,
to implement some type of sand management can be challenging, and mistakes can
be expensive.
In any case, the only way to predict how
the formation will behave over timeand
to select the most technically and financially appropriate completion strategy at
different stages in the life of the fieldis
by gaining an accurate understanding of
the reservoirs mechanical rock properties,
as well as the magnitude and orientation of
stresses surrounding the borehole. To that
end, GDF SUEZ engaged Schlumberger to
conduct a thorough geomechanical study
of K9 fields reservoir section.

July 09

Jan. 10

July 10

Jan. 11

SAND FAILURE ANALYSIS

AND PREDICTION

Sand failure analysis and prediction

modeling was undertaken using Schlumbergers proprietary Sand Management
Advisor (SMA) technology. Developing,
testing and refining the software has been
underway for nearly two decades, to ensure that sand predictions match both laboratory experiments and field observations
in clastic reservoirs of varying strengths,
under many different stress scenarios.
Operators have successfully applied this
proven geomechanical sand failure model
to avoid completing weak reservoir intervals; to select the right mechanical sand
control mechanism for the reservoir, when
necessary; to optimize the location, size
and orientation of perforations; to predict
the timing of sand production for specific
completion and depletion scenarios; and
to determine the drawdown pressure required to produce sand-free.
Although more oil companies realize
the need for sand prediction studies, and
outside consultants may offer fairly complex models, conventional approaches suffer from certain limitations and assumptions. Some employ overly simplified rules
of thumb, for example: if the overburden
load appears to exceed rock strength, they
may routinely recommend a screened
completion, even though it may not be
strictly necessary until later in the reservoir
lifecycle. To build a geomechanical model,
many sand failure studies focus almost exclusively on rock strength, spending insufficient time and effort calculating the full
range of stresses present, although both are
equally critical to accurate sand prediction.
Even when all key factors are considered,
sand failure analysis is often carried out at
a single depth, on the assumption that the

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SAND CONTROL

Fig. 3. Sand failure analysis of the K9 reservoir depended on construction of a mechanical

earth model, calibrated at each step with lab tests, core and log data. The Schlumberger
Sand Management Advisor used this model for sand prediction.

Data
collection

Data
correction

Data audit

Mechanical
stratigraphy
Elastic
moduli
Rock
strength
Pore
pressure

Pore pressure
from MDT, DST

Overburden
stress

Sand
management
advisor

Yes

Rock mechanics test,

scratch tests

Multi-arms caliper
borehole image

Calibration
and validation

Failure
match

Stress
direction
Horizontal
stresses

Caliper, borehole image,

sonic scanner anisotropy
Leak-off test,
MDT dual-packer
DDRs

No

Fig. 4. A typical sand prediction at a single depth within the

reservoir indicates the critical drawdown pressure required to
ensure sand-free production (green).

Failure

74AUGUST 2014/WorldOil.com

Critical drawdown pressure

Bottom hole owing pressure, psi

Safe

in computing and
calibrating rock
strength and the
2,000
state and direction
90 orientation
of stresses acting
on the reservoir.
1,600
Third, sand failure analysis and
prediction is conducted routinely
1,200
Gas
and
presented
layer-by-layer
within the reser800
voir, rather than
at just one representative location.
Gas and sand
Finally, the model
400
incorporates two
important components of sand fail0
0
400
800
1,200
1,600
2,000
ure: perforation
Reservoir pressure, psi
diameter and grain
size. Both have a
entire reservoir exhibits the same stress quantifiable effect on perforation stability.
state and rock strength. Conclusions and
recommendations based on limited mod- K9 SAND PREDICTIONS AND
els may prove erroneous, and more costly RECOMMENDATIONS
in the long term.
Sand failure analysis of the K9 reserThe SMA sand prediction model is voir depended on careful construction of
unique in several ways. First, although a mechanical earth model (MEM), which
the software is technically sophisticated, quantified the key properties that govern
it is simple and easy to apply to any con- deformation and failureYoung Modulus,
solidated sand reservoir. Second, in build- Poissons Ratio, Unconfined Compressive
ing a truly comprehensive geomechanical Strength (UCS), internal friction angle,
model, equal amounts of time are invested grain size and tensile strength. The MEM

also incorporated pore pressure, overburden stress, and the magnitude and direction of the horizontal stresses. At each step
of the workflow (Fig. 3), laboratory tests,
core data from the B2 wellthe only well
with core samplesand correlations with
log data were used to constrain and calibrate mechanical properties. Then sanding
evaluations were conducted in the producing sections of all four wells in the field using the calibrated MEM.
A typical sand prediction for a problematic point within the K9 reservoir
(Fig. 4) plots bottomhole flowing pressurecontrolled by choke size at the surfaceagainst reservoir pressure, which
declines with production. The difference
between these two represents the drawdown pressure. When bottomhole pressure (BHP) is greater than reservoir pressure at the selected depth, the well cannot
produce at all. When BHP is less than
reservoir pressure, the well will produce
sand-free, only when the drawdown pressure remains within a specified safe zone,
which can be maintained by choking. If
the drawdown pressure exceeds a critical
limit, then sand failure will occur. Sand
failure intervals can be predicted at multiple depths along a continuous well profile, and these predictions can be made at
different reservoir pressures.
Geomechanical and sand prediction modeling in the K9 field accurately
matched key events at various times in
the sanding history of both abandoned
wells. One of the most important findings was that a single thin layer with low
rock strength appeared to be the major
contributor to overall sand production
in both wellbores. The majority of other
intervals within the reservoir remained
relatively stable. However, modeling
also predicted that failure would become
likely in additional layers having even
higher rock strength as the field continues to deplete. The study identified the
zones of greatest risk.
To assess the validity of the sand prediction model, a downhole sand detection
tool was run in wells B1, B2 and B3. The
tool identified zones that were actually
producing sand, and these zones exhibited a good match with the predicted zones,
Fig. 5. As predicted, one thin interval was
the primary source of sand failure. As a
result, the study proceeded to investigate
and recommend specific ways of isolating
that zone and improving completion designs to achieve economic, sand-free pro-

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SAND CONTROL

Fig. 5. To validate the sand prediction

model, a downhole sand detection tool was
run in wells B1, B2 and B3, identifying sandproducing zones, which matched well with
the predicted zones.

P
Depth, e
m r
f

Flow

Flow %
Flow %

Rock strength
Downhole
Sand failure sand detection
prediction
Unconned
High
compressive Low
strength
Low
High Low
High

X,600

X,610

X,620

X,630

X,640

duction for the life of the field. Ultimately,

a screenless completion was designed for
one well, and cased-hole gravel packs for
the other three.
RESULTS ACHIEVED AND
LESSONS LEARNED

In the B1 well, the safest way to ensure sand-free production was to design
a screenless completion with selective,
oriented perforations, avoiding any weak
zones with a UCS below a specified value.
However, because the well was vertical,
oriented perforations would not be effective, as many orienting techniques rely on
gravity and the wells deviation to achieve
the desired orientation. Whats more, the
existing completion made the reservoir
interval inaccessible. The well was side76AUGUST 2014/WorldOil.com

tracked at the optimal azimuth and deviation indicated by the study. Although the
best solution for an oriented perforation
would have been horizontal, due to operational limitations the well was sidetracked
at 50 inclination. After casing, new data
were acquired, a petrophysical analysis was
carried out, and the geomechanical model
was updated. Sanding analysis on the revised model identified the safe interval,
the perforation diameter was optimized
for sand-free production, and the zone was
perforated with oriented guns at an angle
of 10- to 15-phasing. This type of oriented perforation allows a greater shot density
by reducing the risk of interference and
collapse between perforations and damage
to casing. Well test performance was significantly better than the original B1 well,
without producing any sand.
Because the reservoir section remained
accessible in the other three wells, casedhole gravel pack completions with screens
were designed for B2, B3 and B4. Following remedial work, the wells were started
up slowly, and later production tested.
Since June 2008, all four wells have
been producing sand-free at economic
rates again. Indeed, production rates quickly returned to the fields previous highest
levels (see Fig. 1), effectively recovering
the 75% total gas production lost due to severe sanding. Had the K9 fields mechanical rock properties and stresses been better
understood at an earlier stage of development, it might have been possible to avoid
the sand production problem altogether.
Given the nominal cost of the study
relative to its ultimate economic value,
this type of geomechanical analysis has
become standard practice for GDF SUEZ.
In addition, for new fields the company
often conducts this type of analysis much
earlier in the development process. After
drilling the first well in a field, if core analysis indicates a potential sanding problem, a proper geomechanical study will
be conducted before drilling additional
wells. This information facilitates the optimal placement of wells and selection of
completions under various production
and injection scenarios. In one oil field,
for example, where produced water injection was planned, laboratory testing and
the sand prediction study indicated that
the reservoir interval could produce sandfree with oriented perforations. However,
a different type of completion was necessary to prevent sand failure in the deeper
interval chosen for injection.

BETTER SAND MANAGEMENT

DECISIONS

When it comes to sand management,

some operators do too little, too late, or
too much, too soon. Geomechanical sand
failure and prediction studies can empower
them to make more informed, cost-effective decisions, at every stage of field development and production. Instead of completing every well in the same way at the
same time, it may be possible to produce
without sand control for a period of time,
and then to install different mechanisms,
as needed, in different intervals at different stages of production. In many cases,
more than one completion alternative may
be viable. Selecting the optimal completion strategy, intentionally designing the
wellbore for remediation at a later time,
perforating only part of the reservoir, while
avoiding weak zonesall require a thorough and accurate approach to sand prediction. Incorporating a widely proven sand
prediction model based in detailed geomechanics characterization, and considering
the grain size and perforation diameter effects on sand failure that are normally overlooked by other models, innovative sand
management technology promises to save
oil and gas companies millions of dollars
in unnecessary sand disposal, equipment
damage and lost production.
ACKNOWLEDGEMENT
This article is adapted from SPE paper 168178-MS, An innovative
approach for sand management with downhole validation, by authors Lex de Groot and Hilbrand Graven, of GDF SUEZ, and Surej
Kumar Subbiah, of Schlumberger, which was presented at the SPE
International Symposium and Exhibition on Formation Damage
Control, on Feb. 2628, 2014, in Lafayette, La.

LEX DE GROOT is an exploration and

development manager at GDF SUEZ E&P.
Mr. de Groots expertise includes reservoir
engineering, drilling and production. He
received BS and MS degrees in petroleum
engineering from the Delft University of
Technology, The Netherlands.
HILBRAND GRAVEN is a reservoir engineering
and well operations manager for GDF SUEZ
E&P Nederland B.V. in Zoetemeer, The
Netherlands. His main responsibilities are
reservoir engineering work on the Dutch assets,
reserve reporting, and the coordination of well
interventions with the companys drilling and
production departments. Mr. Graven earned an
MS degree in geology from the University of
Amsterdam, The Netherlands.
SUREJ KUMAR SUBBIAH is a geomechanics
manager at Schlumberger. He is involved in
geomechanics projects in Europe, Africa and
the Middle East. Mr. Subbiahs expertise lies
in applied geomechanics in the petroleum
industry, reservoir geomechanics, drilling and
completions. He received both BS and MS
degrees in petroleum engineering from the
University of Technology, Malaysia.

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REGIONAL REPORT

WEST AFRICA
Identication of potential pre-salt basins and improved deepwater technologies
leads to targeted licensing rounds, as several countries strive to participate
and boost activity in these frontier plays.
LAURA WHITE and ARRAN WATERMAN, Deloittes Petroleum Services Group
Since the discovery of large pre-salt
fields offshore Brazil, explorers have identified analogous basins offshore West Africa
as having pre-salt potential. In recent years,
countries, such as Angola, Gabon, Congo
and Namibia, have geared up for pre-salt
exploration in their deepwater areas. Presalt-focused rounds have encouraged the
industry to participate in these frontier
plays, as have improvements in imaging
techniques and deepwater technologies.
REGIONAL OVERVIEW

The term pre-salt defines geological

layers laid down prior to the Aptian salt
deposition. The petroleum formed from
organic-rich sediments layed down in the

pre-salt is thought to have been trapped by

this regionally extensive salt layer, creating
a simple petroleum systemplay concept
targeted by oil and gas companies today. A
series of analogous basins can be tracked
on both sides of the Atlantic Ocean.
The stratigraphies of the basins along
West Africa are not identical and do not
match their conjugate pairs in South
America; however, there are general similarities. The stratigraphy can be divided
into two main phases, rift and sag. Rifting
occurred as a result of continental extension between Africa and South America,
during which non-marine sediments and
organic-rich petroleum source rocks were
deposited. As active extension stopped,

thermal contraction and sedimentary

loading enabled subsidence, known as the
sag phase. These deposits were overlain
by Aptian salt sequences, which accumulated through repeated cycles of marine
incursion into restricted basins and shallow seas. This forms the general character
pre-salt geology, with the Aptian salt deposition marking a distinct separation of
pre-rift and post-rift domains.
The West African pre-salt is found
both onshore and offshore, from the
southern edge of the Niger Delta, down
to the Walvis Ridge offshore northern
Namibia. Pre-salt exploration in West Africa began in the 1950s, with multiple onshore and shallow-water discoveries made

The two-year-old SSV Catarina semisubmersible is drilling pre-salt exploration wells offshore Angola for Cobalt International Energy (photo courtesy of Cobalt); Eni has been
operating in Congo since 1968, and now produces from a variety of conventional offshore elds like the facility pictured. Eni also operates the Marine XII Block, where it struck
a 1.2-Bbbl pre-salt discovery in shallow water; Chariot Oil & Gas contracted the Maersk Deliverer drillship to test the Tapir South pre-salt prospect in the Namibe basin of
Namibia. Although the well failed to nd commercial resources, Chariot has been able to identify follow-on prospects (photo courtesy of Maersk Drilling).

78AUGUST 2014/WorldOil.com

since this time. Renewed industry interest

in Africas pre-salt began to focus within
the deepwater play following the Lula discovery in Brazils analogous basin in 2006.
Historically, the technology available
to accurately image the pre-salt was not
available, making it difficult to identify
pre-salt prospects and leads. Pre-salt drilling also continues to be more expensive
than conventional drilling, due to the
properties of the salt layer and the increased depth required from each well,
posing significant technical challenges.
In West Africa, these challenges restricted
deep, offshore pre-salt exploration.
As the worlds fifth-largest oil discovery, Brazils Lula field changed this. The
industrys interest in deepwater pre-salt
plays piqued, drawing attention to West
Africa as a conjugate margin to Brazil.
ANGOLA

Angolas oil industry began more than

20 years before its independence in 1975,
with sporadic drilling and small oil discoveries onshore. It wasnt until the drilling of the onshore Benfica-2 well in January 1955 that Angola discovered its first
commercial oil field. Benfica field was
brought into production in November
1956, marking the beginning of oil production in this country.

In 1968, Angolas first offshore oil

field, Malongo, was discovered and, by
1973, oil had surpassed coffee as Angolas largest export. By 1996, Angola had
become a modest-sized oil-producing
country, averaging 700,000 bpd, primarily from offshore fields.
In 1996, Elf Aquitaine (now Total)
discovered Girassol oil field, which successfully opened up a new offshore postsalt play. Girassol is estimated to contain
recoverable reserves of between 700
MMbbl and 800 MMbbl of oil, with the
reservoirs found in post-rift sandstone
conglomerates of Oligocene and Miocene
age. Follow-on discoveries that targeted
this play were also successful. This resulted in operators focusing on the post-salt
play, from which most Angolan production now comes. Pre-salt exploration was
not an industry focus until recent years.
Angolas upstream industry is run by
national oil company (NOC) Sonangol.
As the sole concessionaire for exploration in Angola, Sonangol has, since 2005,
licensed many of its blocks through announced international licensing rounds.
IOC exploration has focused on the Lower Congo basin and in the shallow waters
of the Kwanza basin. Following Brazils
Lula discovery in 2006, interest in the
Kwanza basin and deepwater opportuni-

ties increased, and Sonangol announced

plans to launch a licensing round.
In 2010, Sonangol awarded a number
of pre-salt blocks after inviting more than
20 companies to present their intentions
to bid for licenses and negotiate for deepwater acreage. Proposals were received
in December 2010, and winners were
announced in January 2011. The round
originally included six blocks. However,
upon award, 11 blocks were offered, and
contracts were finalized and signed during December 2011, Fig. 1. Successful
companies included many that already
held acreage positions in Angola.
The licenses included a number of
pre-salt-specific work commitments introduced to encourage exploration and
development. During the initial five-year
exploration phase, generally two presalt exploration wells are expected to be
drilled in each block. Three companies
Cobalt, Maersk Oil and Petrobras Oil &
Gas BVhave led the way in exploring
the Kwanza basins deepwater potential
through existing assets.
Maersk made a significant, deep offshore discovery within the Angolan presalt. Maersk acquired two blocks, 8 and
23, in 2006. In June 2011, Maersk spudded its first pre-salt exploration well,
Azul-1, in Block 23 of the Kwanza basin.
World Oil/AUGUST 201479

REGIONAL REPORT / WEST AFRICA

TABLE 1. ANNOUNCED, PRE-SALT-FOCUSED DRILLING

COMMITMENTS OFFSHORE ANGOLA.
Block

Operator

2014 Pre-salt
exploration wells

2015 Pre-salt
exploration wells

19

BP Plc

1 well (Puma)

1 well

24

BP Plc

Cobalt

1 well Q2
(Loengo)

20

Cobalt

1 well Q4
(Golnho)*

21

Cobalt

1 well Q4
(Mupa)

36

ConocoPhillips

1 well Q2 (Kamoxi)

1 well

35

ConocoPhillips

1 well Q4 (Crux)

1 well

35

Eni Spa

1 well Q1 (Ombovo)

22

Repsol S.A.

1 well Q2-Q3
(Locosso)*

1 well

38

Statoil ASA

1 well Q2 (Dilolo)

12 wells**

2 wells

2 wells (Kakonga,
Champlain)

costs. The well reportedly discovered

hydrocarbons but
was abandoned as a
dry hole, due to high
CO2 content.
With the end of
the first exploration
period approaching for the blocks
licensed in the 2010
round, a number of
companies are fulfilling pre-salt drilling commitments,
buoyed by the success of Cobalt and
Maersk, Table 1.
GABON

The oil industry

has been active in
Gabon for over 50
40
Total SA
1 well Q3
years. According to
* Dependant on rig availability
the 2012 BP Statis** Providing reservoirs are discovered with the initial Dilolo exploration well,
 irrespective of the outcome, 12 more wells will be drilled in 2015, due to the
tical Energy Survey,
 size of the structure.
Gabon had proved
oil reserves of 3.684
The well was drilled to a depth of 5,334 Bbbl at the end of 2011, equivalent to
m. It recovered two good-quality oil sam- over 40 years of current production. Gabples, with results suggesting a potential onese production peaked in the 1990s
at 370,000 bopd, and has since fallen to
flow capacity greater than 3,000 bpd.
Shortly after, Cobalt announced the 240,000 bopd. The Gabonese ministry
successful Cameia-1 discovery. Cobalt has made efforts to encourage further exfirst acquired Blocks 9 and 21 in 2009, ploration in the underexplored, deep offoutside of the normal licensing rounds, shore areas through licensing rounds.
Pre-salt exploration began onshore,
and later Block 20 in the 2010 round. Prior to Cobalt acquiring these blocks, post- where many large oil fields have been dissalt prospects had been targeted in Blocks covered below the salt, some of which are
9 and 21 by ChevronTexaco and BHP Bil- among the countrys best producers. Shells
liton. These licenses were relinquished in pre-salt Gamba field began producing in
1967. Its Rabi Kounga field, the largest in
2001 and 2002.
Cobalt took a new approach by targeting the country at 440 MMbbl of oil, began
the unexplored pre-salt play. Following the producing in 1989, reaching 150,000 bpd.
Vaalco Energy has seen a number of
reprocessing of seismic, and conducting of
new seismic surveys, the operator spudded shallow, offshore pre-salt successes on
its first pre-salt exploration well, Cameia-1, its Etame Marin Block, including Etame
in Block 21 during August 2011. In Febru- field, which was discovered in 1998 and
ary 2012, Cobalt announced that Cameia began producing in 2002. Ebouri field
was a discovery, with a 360-m gross con- was found in 2003 and came online in
tinuous hydrocarbon column. Cobalt has 2009. Also, Avouma field was discovered
since drilled four further pre-salt explora- in 2004 and came online in 2007.
Recent finds and technological adtion wells with a 100% success rate, including Lontra-1 and Orca-1 on Block 20, and vances have made producing from existing pre-salt discoveries more attractive.
Mavinga-1 and Bicuar-1A on Block 21.
In 2012, Petrobras spudded the pre-salt Two finds on the Dussafu Marin permit,
Ogonga-1 well in deepwater Block 26. The Moubenga and Walt Whitman, are under
well encountered difficulties after pen- consideration for production. Moubenetrating layers of hard mineral-rich rock ga-1 was drilled by Elf Aquitaine (now Tobeneath the salt, which impacted drilling tal) in 1981 and tested a maximum 2,730
39

Statoil ASA

1 well Q4

25

Total SA

1 well Q3

80AUGUST 2014/WorldOil.com

bopd from the Dentale formation. Walt

Whitman-1, drilled by Amoco (now BP)
in 1995, encountered a 17-m oil column
in the Gamba sandstone. The addition
of the recent Ruche (2011) and Tortue
(2013) discoveries may provide sufficient
reserves for a cluster development, now
operated by Harvest Natural Resources.
Tracts in Gabon are awarded through
licensing roundsof which there have
been 10 to dateand also through direct
negotiation. Gabon initially attempted to
launch its 10th Licensing Round in May
2010, offering 42 offshore blocks, covering
approximately 118,000 km2 of prospective, deepwater pre-salt play. This was the
first round since 1999. Yet, after a number of delays, the round was cancelled in
October 2010, following the Deepwater
Horizon disaster in the Gulf of Mexico. In
addition, new legislation was still under
design in response to trade union demands
for a limit on the number of foreign workers in Gabons oil industry. It was decided
that blocks would, instead, be left open for
direct negotiations with interested parties,
once new legislation was in place.
The licensing round was re-launched
in 2013 under new Gabonese Oil Minister Etienne Ngoubou. The Ministry
of Petroleum invited bids from selected
companies for 43 available blocks. Applications were received for 18 offshore
blocks, and successful bids were announced for 13 tracts in October 2013.
The 13 blocks cover underexplored areas,
in water depths between 200 and 4,000
m, with a total area of 26,770 km2, Fig. 1.
The announcement coincided with
postponement of changes to Gabons oil
laws planned for that year. More transparent and rigid oil laws are anticipated to
come into effect from the start of 2015. A
new company was set up to publish company and governmental data on production volumes, tax contributions, reserves
estimates and data on permits. The newly
created Gabon Oil Company is also entitled to take a stake of up to 15% in new
blocks owned by other companies.
While onshore and shallow-water presalt exploration began in the 1960s, it was
not until recently that companies ventured into Gabons underexplored deep
waters. New seismic data were acquired in
2009 before the scheduled beginning of
the license round. Totals 2013 Diaman1B well was drilled on the Diaba Block
and was the first deep offshore well to significantly de-risk this play.

Seab
Seabed
Top Miocene
M
Top Oligocene
T
O
Top Cretaceous

Fig. 1: Regional E-W arbitrary dip line from Congo MegaSurvey.

Top Albian
Top Salt
Base Salt

Time Slice 1.996s

Regional interpretation is included as part

of the Congo MegaSurvey (Figure 1).
The interpretation provides information
on palaeocurrent direction (Figure 2), and
displacement of channel systems due to
tectonic activity and halokinesis.
The Moho-Bilondo oil discovery
demonstrates the signicance of these
factors (Figure 3).
Fig. 2: Amplitude Extraction within
Top Miocene + 0.2s

Fig. 3: Fields in offshore Congo

Time Slice 2.080s

RMS amplitude extractions on PGS MegaSurvey

data is valuable for helping to locate such
reservoirs, including multiple stacked channel
complexes.
Signicant areas covered by the Congo
MegaSurvey contain numerous channel
systems that remain undrilled (Figure 4).

Congo
River

Fig. 4: Amplitude Extraction within Top Miocene + 0.48 0.65s

CONGO MEGASURVEY
Closing a Data Gap

In association with the SNPC, over 20,000 sq km of matched and merged 3D and
4000 km of 2D are available now. The petroleum system present in the Congo
offshore area contains both source and reservoir potential.
YASMIN DESTE Tel: +44 1932 376365 yasmin.deste@pgs.com
SERGEY PALENOV Tel: +44 1932 376903 sergey.palenov@pgs.com

A Clearer Image
www.pgs.com

MultiClient
Marine Contract
Imaging & Engineering
Operations

REGIONAL REPORT / WEST AFRICA

Fig. 1. Blocks on offer in the 2013 Gabon

licensing round.

Exploration in the deeper offshore,

pre-salt Gabon basin is ramping up, as
operators complete seismic surveys. At
the time of writing, Shell is drilling the
NKomi Marin-1 pre-salt well on the
BC-9 permit and may drill a second well
on BC-9, or on neighboring Block BC-10.
PuraVida Energy is farming out a portion
of its Nkembe Block in preparation for
drilling, having completed 3D seismic.
Perenco is also expected to drill the Sputnik East HPHT prospect on its Arouwe
Block in the coming months. It will target
mean resources of 206 MMboe.
REPUBLIC OF CONGO

Fig. 2. Map showing the Republic of

Congos current acreage.

Ophir drilled the Padouck Deep-1

well in March 2014 on the Ntsina Block.
The well did not encounter significant hydrocarbon shows, in line with reports of
the key pre-drill risks being trap and seal
integrity. Ophir followed Padouck Deep
with Okala-1, which was drilled in 790 m
of water, targeting gross resources of 354
MMboe in Cretaceous sands within the
pre-salt section. However, the prospect
was announced as dry in June 2014 after
encountering a thick Aptian salt section.
82AUGUST 2014/WorldOil.com

Like many West African countries,

Congos oil and gas industry has had a
long history. The countrys first oil field,
Pointe Indienne, was discovered in 1957,
and began producing in 1960. It reached
peak output in 1962 at over 2,500 bopd.
Congo struck its first pre-salt discoveries in the 1970s, onshore and in shallow
waters. Agip (now Eni) drilled the shallow-water Vandji Marine-1, and Elf Congo (now Total) drilled the Litchendjili
Marine-1, both in 1972. Elf also hit a discovery with Mengo-101 onshore in 1979.
The Mengo-101 pre-salt discovery was
closely followed by the nearby Kundji-1
and Bindi-1 pre-salt discoveries in 1980
and 1982, respectively.
Mengo, Kundji and Bindi fields make
up what is now known as the MKB permit. In 2011, Panoro Energy ASA estimated MKBs gross oil-in-place at over 1 Bbbl.
However, recovery from the reservoirs is
low. Elf originally began producing from
the MKB fields during the 1980s and
subsequently abandoned them in 1992.
The Congolese state oil company, La Socit Nationale des Ptroles du Congo
(SNPC), now operates the permit and
has drilled eight more wells on Kundji.
KUN-4bis and KUN-5 were drilled
during 2009 and hydraulically fractured.
These wells were put on a long-term
production test in 2010, where they produced over 600 bopd, more than twice
the rate seen from the original KUN-1
well. In September 2011, pilot production commenced, consisting of six wells.
The last of the six, KUN-206, was completed and began producing late in 2012.
Gross production from Kundji amounted to approximately 33,000 bbl in thirdquarter 2012. SNPC is looking to attract new partners, to further develop
the field.

The onshore pre-salt MBoundi field

was discovered by Maurel et Prom in 2001
with P50 reserves of over 260 MMbbl
and began producing in 2002. Since then,
over 90 wells have been drilled. Eni took
over operatorship in 2007, partnered with
SNPC and Tullow. The field has produced at rates of over 56,000 bopd and
100 MMcfgd.
Alfred Charles Sockarth, head of SNPCs upstream operations, has said that
Congo plans to award around 10 onshore
and offshore oil blocks in a new licensing round this year. He stated that three
blocks have already been awarded in the
Cuvette basin, and a further seven remain. Several shallow-water areas are also
reported to be made available, including
blocks previously abandoned.
The governments fiscal terms are
also becoming more attractive to companies with a super profit sharing system in place, where the states take is set
against profits made above a certain oil
price. Congos infrastructure is also welldeveloped, compared to nearby countries. The vast majority of exploration
and production occurs offshore or near
the coast, Fig. 2.
In February 2014, Eni discovered oil in
Congos pre-salt with its Nene Marine-1
well in the shallow, offshore Marine XII
Block. The most recent exploration well,
Nene Marine-3, was drilled in 28 m of
water and confirmed the extension of the
reservoir previously discovered by Nene
Marine-1 and Nene Marine-2, drilled
in 2012. Nene Marine-3 flowed at over
5,000 bpd of 36API oil during the production test. The wells encountered wet
gas and light oil. Eni estimates that Nene
Marine field contains 1.2 Bbbl of oil and
30 Bcm of gas-in-place. Combined with
neighboring Litchendjili field, the block
reportedly contains 2.5 Bboe in-place. Eni
anticipates first oil in 2016.
Nene Marine is the first major pre-salt
discovery in the shallow waters offshore
Congo, to date. Soco previously drilled the
Mindou Marine-1 well in the neighboring
Marine XI Block in late 2011. However,
the well did not encounter oil shows in
the targeted pre-salt section. Viodo field,
also on the Marine XI Block, was first discovered in the late 1980s. Soco had success re-drilling the prospect in 2009 with
Viodo Marin-4, which flowed at 2,600
bopd and 7 MMcfgd. Soco also saw limited success in their Marine XIV Block in
2011 with the Makouala Marine-1. The

Dont Miss
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September 2324, 2014 | Houston, Texas

Esteemed Speakers Include:

Register by August 26
and Save!

Discover the Latest HPHT Technology

and Solutions

Keynote:

Gregory Walz
Senior Drilling
Engineering Advisor
Anadarko Petroleum Corporation

Chris Hartley
Global Strategic
Projects Director
Weatherford

Harry Dearing
Vice PresidentTechnology Marketing
Newpark Drilling Fluids

Jueren Xie
Senior Engineering Advisor,
Drilling and Completions
C-FER Technologies Inc

Kyriacos Agapiou
Senior Scientist
Halliburton

Michael Williams

Focus on Lower Tertiary and Gulf of Mexico HPHT challenges

World Oils ninth annual High-Pressure, High-Temperature Drilling and Completions Conference will be held
September 2324 in Houston, Texas, at the Norris Conference Centers-CityCentre. This years conference will
feature a high-level, two-day technical program devoted to knowledge sharing and best practices in highpressure, high-temperature drilling. With two tracks, one devoted to exploration and drilling and the other
to completions, the agenda features sessions focused on uids, equipment, LWD & MWD, sealing technology,
tubulars/reliability/service life, testing and more.

Specic Topics to be Discussed Include:

Case histories from the Lower Tertiary Gulf
of Mexico (GoM)
Lower Tertiary GoM conditions/special
operations/equipment
Operator responsibility and plans in
HPHT environments
HPHT standards, qualications,
permitting process

Subsea trees
Controls, risers and owlines
Equipment design, development
and implementation
Sealing technology (metallic and nonmetallic)
And more

Developed by our esteemed advisory board, the 2014 conference program features top professionals at
leading companies including: Baker Hughes, Clariant, C-FER Technologies Inc, Chevron, Enventure Global
Technology, FMC Technologies, Halliburton, High Performance Tubular Technology, Newpark Drilling Fluids,
Pemex, Schlumberger, Siemens Industry Inc, Special Metals Corporation, Weatherford and more.
Opening Reception Sponsor:

Technical Program Sponsor:

Coffee Break Sponsor:

Exhibitors:

Senior Technical AdvisorSubsea Systems Engineering

FMC Technologies

HPHTConference.com

September 23, 2014 Agenda

REGISTRATION
Opening Remarks: John Royall, President and CEO, Gulf Publishing Company
Keynote Address: Developing industry solutions for 20,000 psi subsea developments
Gregory Walz, Senior Drilling Engineering Advisor, Anadarko Petroleum Corporation
COFFEE BREAK: Sponsored by Weatherford Drilling Services
TRACK 1: EXPLORATION & DRILLING

TRACK 2: COMPLETIONS

Session 1: Fluids

Session 2: Tubulars/Connections/
Sealing Technology
Metal sealing A scientic approach to seal design
and qualication Craig Hendrie, Plexus Holdings plc.

HPHT: high-performance polymer-based drilling uid

system Harry Dearing, Newpark Drilling Fluids

Metal seal technologies in offshore applications

Jacob Young, Technetics Group

Successful application of specialized synthetic polymer

in high pressured wells to mitigate differential sticking
problems by minimizing pore pressure transmission
Prakash Jadav, Baker Hughes

HPHT steam well connection compounds

Larry Vincent, High Performance
Tubular Technology

Using nanomaterials to optimize mud rheology at HPHT

wells throughout experimental work Ahmed Zakaria
Noah, School of Sciences and Engineering (SSE)
American University in Cairo (AUC)

Evaluation of tubular material reducing risks and

enhancing well integrity for HPHT wells
Stuart Cole, Vallourec USA Corporation

LUNCH
Session 3: Equipment

Session 4: Equipment

More power minus the lithium: A new generation of

downhole power systems for M/LWD, EM telemetry and
production monitoring Ricardo Signorelli, FastCAP
SYSTEMS Corporation

Case History: HPHT wellbore design exibility? Use a

Solid Expandable! Enventure Global Technology

Use of external ambient seawater pressure to offset

internal pressure in deepwater HPHT Equipment
Michael Williams, FMC Technologies

Contemplating the use of multilateral wellbores for

the lower tertiary Doug Durst, Halliburton

Drilling high temperature wells in Mexico South

Oscar Buitrago, Schlumberger

Subsurface safety valve design, development and

qualication testing considerations for Ultra-HPHT
applications Grant Thompson, Baker Hughes

Scalable power solutions mitigate risk for operators in

HPHT drilling environments David Dickert, Aggreko

Drilling and completion equipment design,

development and implementation of Kinley caliper
timer, Expro Group

COFFEE BREAK
Session 5: Regulations
Panel Discussion: Regulations: The Saga continues
CLOSING REMARKS
Opening Reception: Sponsored by Anadarko Petroleum

Dont Miss
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September 2324, 2014 | Houston, Texas

Image courtesy of Schlumberger

Register by August 26
and Save!

September 24, 2014 Agenda

REGISTRATION
Opening Remarks: John Royall, President and CEO, Gulf Publishing Company
Keynote Address
COFFEE BREAK: Sponsored by Weatherford Drilling Services
TRACK 1: EXPLORATION & DRILLING

TRACK 2: COMPLETIONS

Session 6: Drilling Technology

Session 7: Cementing

Drilling system design for 20,000 psi reservoirs

Anthony Spinler, GE Oil & Gas

Addressing cementing challenges in Ultra HP/HT wells

Vidit Mohan

EC-Drill a new MPD technology for oating drilling rigs

John H. Cohen, Technology Manager, Enhanced Drilling

Inuence of accelerators on the setting time and

strength development of calcium aluminate and
calcium aluminophosphate cements Kyriacos
Agapiou, Halliburton

LUNCH
Session 8: LWD & MWD

Session 9: Testing

Downhole MWD high temperature electronics used in the

Gulf of Thailand Chris Hartley, Weatherford
Operational challenges; drilling HP HT HD Gulf of Mexico
wells Alejandro Montiel, Pemex and Carlos Padilla,
Schlumberger Mexico
Sensitive process viscosity measurement at extremely
high pressure for downhole applications
Corentin Thierry, Applications Specialist, Sofraser

Corrosion resistance and mechanical properties of

140 ksi min and 160 ksi min alloy 945X for HPHT
applications Sarwan Mannan, Special Metals
Corporation
Completion uid induced stress corrosion cracking in
super 13Cr-110 tubing from HPHT well Wang Peng,
CTG & Tubular Strings Research Center, CNPC Tubular
Goods Research Institute

COFFEE BREAK
Session 10: Reliability And Service Life
Reliability-based design assessment for tubular connection sealability in HPHT Well Applications
Jueren Xie, C-FER Technologies Inc.
Application of nite element analysis to fatigue life and fracture mechanics in HPHT. Sam Lee, FMC Technologies
CLOSING REMARKS

HPHTConference.com

September 2324, 2014 | Houston, Texas

Hear from Leading HPHT Professionals:

2014 Conference Presentations Include:
Drilling high temperature wells in Mexico South
Oscar Buitrago, Schlumberger
Case History: HPHT wellbore design exibility? Use a solid expandable!
Tina Tallant, Enventure Global Technology
Contemplating the use of multilateral wellbores for the lower tertiary
Doug Durst, Halliburton

Downhole MWDhigh pressure electronics in Gulf of Thailand

Chris Hartley, Weatherford
Operational challenges: Drilling HP HT HD Gulf of Mexico wells
Alejandro Montiel, Pemex and Carlos Padilla, Schlumberger Mexico
HPHT steam well connection compounds
Larry Vincent, High Performance Tubular Technology
And more

As an HPHT Attendee, Youll have the Opportunity to:

Learn from the experts in the industry about the latest
technology advancements
Explore effective solutions for pressure and temperature challenges
specic to HPHT settings

Discover best-practices for improved HPHT drilling, completions

and production
Network with key professionals in this important industry segment
Gain insight from case histories from the Lower Tertiary Gulf of Mexico

Take Advantage of our Best Rates with Early Bird Registration by August 26
Discounted Price
(by August 26)

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Admission

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$880

$990

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Registration Type

Register Online at HPHTConference.com or Call +1 (713) 520-4402

For more information about the event contact: Melissa Smith, Events Director, +1 (713) 520-4475, Melissa.Smith@GulfPub.com
For sponsorship opportunities contact: Lisa Zadok, Events Sales Manager, +1 (713) 525-4632, Lisa.Zadok@GulfPub.com

WEST AFRICA / REGIONAL REPORT

well encountered hydrocarbons in the
pre-salt, but the reservoirs could not provide commercial flowrates.
NAMIBIA

Namibia is one of Africas last frontiers for hydrocarbon exploration. The

oil industry, prior to Namibias independence in 1990, was almost non-existent,
due in part to the countrys previous administrative position. Initial exploration
began during the late 1960s and early
1970s. Only one well, Kudu 9A-1, was
drilled during that time by Chevron. The
well was spudded on Dec. 13, 1973, and
discovered gas before reaching a TD of
4,536 m. Two main sandstone reservoirs
of 52 and 24 m were discovered in Barremanian-aged aeolian sandstones. Due to
high formation pressure, it was not possible to complete a DST, but results obtained indicated a flow potential of up to
200 MMcfgd. The well was subsequently
P&Ad on May 14, 1974.
Two appraisals, Kudu-9A-2 (1987)
and Kudu-9A-3 (1988), were drilled by
Swakor, the predecessor to Namibias
current NOC, Namcor. The first well,
Kudu-9A-2, encountered low permeability within the reservoir sections and
was deemed non-productive. The well
was P&Ad on Dec. 26, 1987. On Jan.
20, 1988, the Kudu 9A-3 appraisal was
spudded, reaching a TD of 4,522 m. It
successfully appraised the Kudu discovery, and was P&Ad in April 1988 as
a gas well. These results were used to
launch Namibias first licensing round
in 19911992.
There have been 24 wells drilled offshore Namibia to date; seven appraisal
wells within Kudu, and 17 exploration
wells along a 1,200-km coastline, making it
a largely underexplored country. After independence, the first exploration licensing
round was held in 19911992, with five
licenses being awarded. Three more licensing rounds were held through 2004, with
only four blocks awarded in total.
In 1999, the Namibian government invited international oil companies to apply
for petroleum exploration licenses under
an open licensing system. Although there
was a lack of activity initially, interest has
increased during the last four years. At
the time of writing, 63 blocks have been
licensed offshore Namibia, Fig. 3. Small
independents dominate Namibias licensing. Increasing interest within the country
has led to a rise in recent farm-in activity,

including the entrance of such companies

as BP, Shell and Repsol.
Namibia has similar tectonic evolution
and petroleum systems as the proved basins within Brazil and Angola. However,
to the south of the Walvis Ridge, Namibia
is characterized by the lack of an Aptian
salt layer. Therefore, exploration within
pre-salt is restricted to the northernmost
Namibe basin.
Two wells have been drilled within
the Namibe basin. Kunene-1, spudded in
April 2008, became the first offshore well
in Namibia for over 10 years. Drilled by
Sintezneftegaz CJSC, it reached a TD of
5,050 m, but did not encounter the predicted Aptian-age reservoirs. The well
did encounter significant shallow and
deep hydrocarbon shows. It was classified
as a tight hole by the Namibian government. EnerGulf Resources, a partner in
the block, stated that it is unlikely to be a
commercial producer.
Chariot drilled the second well, Tapir
South. It was the first well in Chariots
drilling campaign offshore Namibia,
spudded in April 2012, and targeting presalt turbidite and carbonate reservoirs.
The well encountered 173 m of Cretaceous reservoir sands, as well as carbonate intervals. Despite oil indications, the
reasons for the prospects failure have varied in interpretation. The well was subsequently P&Ad in May 2012.
Interest in Namibias pre-salt within
the Namibe basin continues, with companies such as Chariot and EnerGulf
announcing follow-on, drill-ready prospects, based upon the initial two wells. In
Block 1711, north of Walvis Ridge, EnerGulf is assessing three potential hydrocarbon systems involving both post- and
pre-salt plays. Following the Kunene-1
failure in 2008, the company identified follow-on prospects. Kunene Deep
and Kunene South are pre-salt Lower
Cretaceous-aged prospects, sourced locally from Lower-Cretaceous-age synrift
lacustrine source rocks. In June 2013,
the block consortium was granted a new
petroleum agreement for Block 1711,
which included a one-well commitment
to be drilled within the first four-year exploration period.
Chariot holds a number of tracts
within Namibia, including Blocks 1811A
and 1811B, which are part of its northern
acreage on the boundary of Walvis Ridge.
Following the drilling of the Tapir South
well, Chariot subsequently undertook

Fig. 3. Namibias current acreage.

petrophyscial and seismic reprocessing,

based upon the well results, to understand
where oil-charged sands might exist. The
firm has identified the Tapir North and
Zamba prospects as follow-on pre-salt
targets in these blocks.
CONCLUSIONS

West Africas cretaceous pre-salt play

has all the necessary working parts of
the petroleum systemgood, extensive
source rocks; clastic and carbonate reservoirs; salt and mud seals; and structural
and stratigraphic traps. The play, itself, is
not a new idea, with onshore African discoveries having been made in the pre-salt
over the past five decades in Congo, Gabon and Angola.
Better seismic and drilling technologies, coupled with a drive to make new
finds, are pushing companies to explore
West Africas deepwater pre-salt play. Recent finds, such as Diaman-1B in Gabon,
and the Azul and Cameia discoveries in
Angola, have helped to de-risk the frontier play and present encouraging signs
for future exploration.
LAURA WHITE is a Sub-Saharan Africa analyst
for Deloittes Petroleum Services Group in
London, joining in 2013 after graduating
from Royal Holloway, University of London,
with a BSc degree, with honors, in geology. /
laurawhite@deloitte.co.uk
ARRAN WATERMAN is a Sub-Saharan Africa
analyst for Deloittes Petroleum Services
Group in London. He graduated from the Royal
Holloway University of London with an MS in
geoscience in 2012. /awaterman@deloitte.co.uk

World Oil/AUGUST 201483

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REGIONAL REPORT / WEST AFRICA

Energy, security and understanding

the human terrain of West Africa
or by the use of intermediaries, the fact is
that, at some point, the operator will have
to engage. An operators ability to grasp
the complexity of the human terrain, and
to devise strategies to mitigate negative
behaviors and influences, will be a critical
success factor for operating in the region.
SMART SECURITY

When operators enter

underexplored areas, the
question of how best
to proceed with project
development becomes more
complex when considering
local communities.

MICHAEL KEATING, The Cormorant Group

As the Gulf of Guinea beyond Nigeria
is set to become another global center of
energy production, there are already warning signs that the industry there will face
major challenges. While Ghana has certainly demonstrated a capacity to manage
its entry into the market with confidence,
the counter example of Nigerias oil history
serves as a constant reminder that politics
and oil can be a lethal mixture.
Often lost in the discussions about the
promise of new finds in the Gulf is the
question of how the affected communiHess plans to continue its string of
exploratory successes offshore Ghana, at
its Deepwater Tano/Cape Three Points
Block. Photo courtesy of Hess Corporation.

ties are going to respond to the presence of

foreign operators, and how both operators
and governments are going to respond to
the inevitable demand for jobs and oil revenue distribution. Operators new to the
region will have to learn a great deal about
a diverse range of cultures and systems of
power and influence that will be a part of
the negotiation from day one. Failure to establish a solid presence in the community,
even if the bulk of an operation is offshore,
will likely lead to contention and costly
delays, but there are ways to avoid these
through careful planning and understanding of the human terrain.
WHAT IS HUMAN TERRAIN?

Simply put, the human terrain is the

complex set of social characteristics, behavioral norms, cultural forms, and power
and influence networks that animate any
community. Think of it as a kind of map of
all types of interactions, a kind of geology
of human behavior.
When an operator enters into the human terrain of any community, it becomes
part of that community and part of the
overall social network. No matter how
much an operator may want to distance
itself from dealing directly with the community, either by keeping a small footprint

No industry knows security like the energy industry. Many oil and gas operators
have vast security departments, extensive
procedures and private intelligence firms to
help them react to whatever threats emerge
from the environment. But how smart is
this type of security? More importantly, how
much money is being wasted on infrastructure and personnel investments that may
not be yielding true benefit?
The Chinese military strategist and philosopher Sun Tzu said that the supreme
art of war is to win without fighting. The
successful warrior wins first and then goes
to war, while the defeated goes to war and
then tries to win.
In the realm of operational security,
this suggests that you can put up all the
barbed wire you like, but, in the end, this
will only result in escalating cost and the
deterioration of good-will, as the community will interpret hard security as
exclusive and threatening. Maintain an
inappropriately weak reactive security
posture, and your operation is at risk from
security threats. Maintain an inappropriately high reactive security posture, and
your operation risks alienating local communities. Smart security is the appropriate level, and that has to be based on a
deep understanding of the human terrain
surrounding the operation.
The only way to achieve smart security,
and to reduce these costs and triggers of
conflict, is to do the necessary mapping of
the human terrain, and to make sure that
everyone on the team, ex-pats and locals
alike, are acting from the same deep understanding of who, and what, lies outside the
wire. If done properly, it may even make
the wire irrelevant.
World Oil/AUGUST 201485

REGIONAL REPORT / WEST AFRICA

CASE IN POINT: 2014 EBOLA OUTBREAK

The current Ebola pandemic, which, as of printing, has killed more than 900
people in West Africa, is a perfect example of a major threat in the human terrain. By
all accounts, the situation could have been brought under control months ago, if the
governments of the affected countries had launched even a moderately aggressive
public health campaign, and set up screening and treatment centers and isolation
wards. Instead, the general attitude was one of magical thinking, where officials simply wished the problem would go away. In the case of operators working in regions
where this kind of health emergency is a possibility, this situation suggests that a
reliance on local authoritieseven for basic informationmight be a serious miscalculation. Operators need to develop their own monitoring and evaluation screenings, and have contingency plans in place, should catastrophe strike.
IT STARTS WITH THE CONTRACT

More likely than not, an operator will

enter into a contract with a government
ministry or agency. They may have come
into the country through contact with a
national investment agency, but it is the
ministries of finance and energy that will
set the terms of the negotiation from the
countrys side. It is at this moment that an
operator has the most leverage, and the
decisions made in this phase of the project
will have a waterfall effect that will influence every aspect of upstream investment.
Due diligence is an absolute necessity here.
The problem is that, without a deep
understanding of the communities in question, these initial discussions may prove
irrelevant, as it is often the case that bureaucrats in the capital lack human terrain
knowledge or, in some cases, simply do not
care. How, and when, that money reaches
the community is another matter, and there
are many cases where large investments of
good-will on the part of operators have
bought them very little. If we recall the case
of the ill-fated Chad-Cameroon pipeline
project, social dollars were converted into
weapons purchases by the Chadian government, without the slightest hesitation.
Even the World Bank, the projects major
supporter, could only stand by wringing
its hands, as the communities along the
pipelines route vented their anger and
frustration, while the Chadian government
launched a war into neighboring Sudan.
TAKING CUES FROM KENYA

In the fall of 2013, British E&P Tullow

Oil had to suspend operations for two
weeks due to community anger in the Turkana region of northern Kenya. The story
is a classic example of an oil company being
left on its own by a national government
86AUGUST 2014/WorldOil.com

to deal with a restive community that was

ill-informed about the project scope. Despite Tullows best intentions, difficulties
in grasping many of the underlying sociocultural dynamics that animate political life
in that part of Kenya proved costly.
The underlying issue in Kenya is that
there is no clear government policy on
how operators have to deal with local communities. In fact, that is the case throughout most of Africa. Community engagementoften managed by people with no
understanding of the human terrain complexities described hereis simply improvising and reacting to immediate circumstances, rather than applying appropriate
interventions based on excellent human
terrain understanding.
These kinds of improvisations can
prove costly to the industry, as companies
climb the ladder of best practice escalation.
These best practices are often random and
not particularly based on real community
needs and interests. In fact, there is often the problem of elite capture of the
benefits of corporate social responsibility (CSR) programs, whereby companies
unwittingly exclude the local population
from the benefits of development.
AN INTEGRATED APPROACH

There is no better slogan to describe

how an operator should move into West
Africa than trust but verify. But how is
this really accomplished? There is certainly
no shortage of political risk data concerning the long-term viability of governments,
despite the fact that these basic facts are
often wrong, as evidenced by the demonstrated lack of understanding of the power
dynamics that led to the coup in Mali, or
the blindness to ethnic rivalries throughout
Nigeria. Due to the demands of the global-

ized economy, countries are now required

to publish as much macroeconomic data as
they can to attract investors. But how much
of the story does all of this public-domain
knowledge actually reveal?
The reality, as case-study after casestudy reveals, is: not much. Without a
persistent, long-term commitment to
understanding the human terrain in a
given operating environment, operators
are not likely to have anything resembling
smooth sailing.
In order to achieve smart securitysecurity that does not rely on gates, guards
and guns to protect project assetsoperators will have to make upfront investments
in human terrain mapping. The science
here is a blend of social psychology, ethnography, cybernetics, political economy
and communication theory combined
with old-fashioned intelligence gathering
and common-sense. On first consideration, this may seem overly complicated
for an operator that simply wants to spend
a reasonable amount on CSR payments
and hope that the situation remains calm.
Now that every country bordering the
Gulf of Guinea has become of target for exploration, the industry leaders should encourage every firm along the value chain to
get smart about the human terrain in West
Africa. Traditional stove-pipe approaches
that separate security planning from social
investment and community engagement
have to be revised to reflect the new reality
that they all have to work in harmony, have
to be implemented way before the first
shovel hits the earth and have to be carried
on in a persistent manner.
There is a better way to navigate the
human terrain and the companies that embrace it will yield the benefits. Using outmoded approaches to security and engagement will only yield hits to the bottom line.
As the oil patch looks into the next decade of E&P activity, West Africa stands
out as one of the most promising, yet problematic, areas. Fulfilling its promise will be
neither quick nor easy, but all sides who
deeply understand the human terrain can
surely win without fighting.
MICHAEL KEATING is a director at The
Cormorant Group, an extractive industry
consulting group focused on building
productive relationships between operators
and communities. He has over a decade of
experience working on a range of international
development projects, and is an expert on
the political economy of West Africa. Keating
is a former partner at the Boston Consulting
Group and director at Arthur D. Little/m.
keating@thecormorantgroup.com.

EAGLE FORD/PEARSALL

DEALS ABOUND, AS PRODUCTION

IN PLAY APPROACHES 1 MM BPD
JIM REDDEN, Contributing Editor

The South Texas fairway of the Eagle Ford/

Pearsall shale has taken on the feel of a more than
400-mi-long trade mart this year, as new players
shell out top dollar to gain a share of what are among
the highest recovery rates in the unconventional sector, and a play with plenty of room to grow.
As reflected in the cumulative $9.1 billion that
Devon Energy and Encana anted up in separate
acquisitions, the late-entry costs of snagging even a
comparatively modest stake in this once tightly held
fraternity does not come cheap. Nevertheless, they
and others are more than eager to pay a hefty price
as the triple-window Eagle Ford moves ever closer
to the elusive 1 MMbpd oil production milestone.
This world-class asset continues to surprise to the
upside, ConocoPhillips Chairman and CEO Ryan
Lance told analysts on May 14.
Underpinning the buying epidemic that has
grabbed much of the attention throughout 2014,
operators continue to redraw the boundaries of
the more than 50-mi-wide and 400-mi-long play.
88AUGUST 2014/WorldOil.com

As currently delineated, the Eagle Ford fairway underlies some 32 South Texas counties, stretching all
the way to the states southernmost border, Fig. 1.
Today, the eastward expansion is in full throttle, and
while the play is generally linked with the underlying Pearsall shale, the trend is moving more toward
exploring the co-development potential of the overlying and heavily explored Austin Chalk, and the
upper and lower benches of the Eagle Ford.
To the south, U.S. companies are taking a waitand-see approach on the prospects for the swatch of
the Eagle Ford that extends beyond the border. For
the time being, they are content to play the waiting
game until they see the final shape of Mexicos new
energy reform policy, and if any positive efforts will
be made to curb the illegal drug violence that has
ensnared the southern neighbor. BHP Billiton, for
one, is in no hurry to line up rigs and test the feasibility of expanding its self-described trophy asset
across the border. We think Mexico is probably going to go slower rather than faster, says Rod Skaufel,

An H&P Flex 3 rig drills for Statoil in Karnes

County, Texas. Statoil and JV partner
Talisman Energy have decided to withdraw
the announced sale of their joint Eagle Ford
acreage (photo by Mieko Mahi for Statoil
ASA).

World Oil/AUGUST 201489

SHALETECH / EAGLE FORD/PEARSALL

are as thick as 330 ft, which contributes to
what IHS Director of Equity Research Andrew Byrne concluded last year were wells
that, on average, out-produce their Bakken
counterparts by a margin of two to one.
Be that as it may, all standards of measurement suggest the heartbeat of the
triple-window Eagle Ford will continue to
pound at a marathoners rate, at least for
the foreseeable future. Baker Hughes data
show that as of July 14, operators had added five rigs over a weeks period, bringing
the total fleet to 218 active units (Fig. 2)
from the 213 drilling during the previous
week. Of course, that was the same week
that onshore rigs targeting oil hit a U.S. rig
count record at 1,563 active units.
Historical Eagle Ford rig and well
counts further attest to the efficiencies of
the new-generation rigs typical of paddominated unconventional drilling. Last
year, the mid-July rig count stood at 231,
HARDY PROGNOSIS
Thomas matter-of-fact projection is in according to Baker Hughes, which doculine with the universal sentiment attached mented 1,089 new wells drilled during the
to the Cretaceous carbonate-rich shale, second quarter. Despite the comparatively
which is defined as the world-class source smaller rig count for second-quarter 2014,
rock for the Austin Chalk, as well as the Eagle Ford operators spudded 1,186 wells,
East Texas Woodbine field. Commonly de- up from 1,178 new wells tallied in the first
scribed as an atypical shale play, the Eagle quarter. Going forward, the Texas Railroad
Ford, with its well-defined oil, condensate Commission (TRC), the states chief reguand dry gas windows, overlies the Buda lator, issued 2,659 drilling permits between
Limestone and the Pearsall. The Eagle January and June, compared to the 4,416
Ford proper is distinguished by an average permits authorized for all of last year.
Daily Eagle Ford production, likewise,
thickness of 250 ft, although some sections
is on the upswing,
according to the
Fig. 1. The latest permitting data show activity moving steadily eastward,
TRC, with reported
where operators are targeting the so-called Eaglebine formation (source:
Texas Railroad Commission).
cumulative oil production between
January and April
of 838,293 bpd,
BHP asset president of North American
Shale. Obviously, there are some security
concerns across the border, but its something that clearly were looking at. (For an
in-depth look at BHPs Eagle Ford activity,
see Technology fueling BHPs Eagle Ford
YOY improvements, page 103)
As it now stands, however, EOG Resources, the plays most active operator by
a wide margin, is among those most adamant that Eagle Ford will remain a robust
play for some time to come. In modeling
production from the Eagle Ford, we are on
a growth track for the next 10 years, before
we even begin to see production level out,
Chairman and CEO Bill Thomas told analysts during the first-quarter earnings call.
Certainly the Eagle Ford is the highest
rate of return play we have, and so the biggest amount of capital will go to that.

surpassing the 717,953-bpd average that

operators churned out last year, Fig. 3. Gas
production reached 3,588 MMcfd during that same period, compared to 3,779
MMcfd during 2013, TRC data show.
The healthy long-term prognosis for the
Eagle Ford was reinforced on June 5, when
Wood Mackenzie hiked its oil production
forecast, estimating that by 2020, the play
would increase output 23% to 2 MMbpd.
Operators, with a heavy condensate
component in their production portfolio,
also are cautiously cheering the U.S. Department of Commerce (DOC) decision
to quietly grant export permits for distilled
condensate to Pioneer Natural Resources
and Houston midstream operator Enterprise Products Partners. The decision puts a
crease, albeit a small one, in the 39-year-old
federal ban against any oil exports, but how
large a volume will eventually be shipped to
international markets remains to be seen.
In a statement after the June 25 ruling,
Pioneer, reportedly the Eagle Fords largest condensate producer, told the Dallas
Morning News the decision would affect a
large portion of its total production. The
Irving, Texas-based independent, however,
did not specify the volume of condensate
that was mixed in with the 43,000 boed
it produced in the first quarter. The latest
TRC statistics show Eagle Ford operators
producing 201,505 bcpd between January
and April, as opposed to the 221,695 bcpd
averaged in 2013, Fig. 4.
Meanwhile, the U.S. Energy Information
Administration (EIA), as part of its recently
released Annual Energy Outlook 2014, said a
sustainability evaluation of Eagle Ford wells
completed between 2008-2013 shows a
mean, average, estimated ultimate recov-

Fig. 2. A herd of iconic Texas longhorn steers grazes in the shadow of

one of the 18 rigs Marathon is running in the Eagle Ford (photo courtesy
of Marathon Oil Corp.).

90AUGUST 2014/WorldOil.com

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SHALETECH / EAGLE FORD/PEARSALL

ery (EUR) of roughly 170,000 bbl/well.
The EIA analysts cautioned, however, that
the evaluation uncovered tremendous variability, owing largely to many wells having
insufficient production history from which
to draw long-term sustainability prospects.
For instance, the report says EUR trends
ranged from more than 300,000 bbl/well
in DeWitt County to less than 25,000 bbl/
well in Burleson and Maverick counties.

Wells that are newly drilled, with fewer

data points, and therefore, greater uncertainty in the fit of their decline curves, have
a tendency to inflate the average EUR.
Older wells, which may have been drilled
and completed using technologies and
practices that are no longer representative
of future practices, tend to pull the average
down, the report cautioned.
Cabot Oil & Gas Chairman, President

and CEO Dan Dinges, however, said in the

operators first-quarter earnings call that a
typical well in the Eagle Ford has an EUR of
approximately 500,000 boe, with a completed well cost of less than $7 million, based on
approximately a 7,000-ft completed lateral.
A YEAR OF DEALS

Devons $6-billion acquisition of GeoSouthern Energy on Feb. 28 took top bill-

Fig. 3. Most recent oil (left) and gas production data from the Eagle Ford.

5,000

838,293
717,953

750,000

500,000

403,999

250,000
129,795
0

352

843

15,149

2008

2009

2010

Source: Texas Railroad Commission

92AUGUST 2014/WorldOil.com

2011

2012

2013

Jan.-April 2014

Natural gas production, 2008 through April 2014, MMcfd

Oil production 2008 through April 2014, bcpd

1,000,000

B
3,779

4,000
3,000

3,588

2,587

2,000
1,232
1,000
0

2
2008

52
2009

322
2010

2011

2012

2013

Jan.-April 2014

SHALETECH / EAGLE FORD/PEARSALL

is expected to average a yield of between
70,000 and 80,000 boed. Our Eagle Ford
acquisition is one of several bold steps we
have recently taken to upgrade our portfolio and improve the growth trajectory and
profitability of our business, said Devon
President and CEO John Richels.
With most of the Eagle Ford core now
getting well into the full-scale development
mode, the Devon acquisition, analysts say,
clearly illustrates
the natural evoluFig. 4. Latest condensate production from the Eagle Ford.
tion of the shale
250,000
plays, where the
221,695
smaller indepen210,505
dents dominate the
200,000
exploration phase,
158,861
and sell out later to
150,000
deeper pockets, as
their assets mature.
Following on
100,000
80,531
the heels of the
Devon deal, En50,000
cana Oil & Gas
18,784
(USA) on June 20
2,300
229
0
officially closed its
2008
2009
2010
2011
2012
2013 Jan.-April 2014
$3.1-billion acquiSource: Texas Railroad Commission
sition of 45,500 net
Condensate production, 2008 through April 2014, bcpd

ing in the high-dollar swap meet that drew

much of the attention in the Eagle Ford
this year. The purchase gave the Oklahoma
City, Okla., independent 82,000 net acres
in the light oil window of DeWitt and
Lavaca counties. Devon, which takes over
the 50-50 JV that GeoSouthern had with
BHP, says it plans to invest approximately
$1.1 billion to drill more than 200 wells
in 2014. Its new, largely derisked property

94AUGUST 2014/WorldOil.com

acres that Freeport-McMoRan controlled

in Karnes, Wilson and Atascosa counties.
The leasehold produced roughly 53,000
boed in first-quarter 2014 and has an estimated drilling inventory of more than 400
locations. An Encana spokesman said in
late July that the newest Eagle Ford player
has not yet announced its drilling plans for
this year. Gaining a position in this worldclass resource play replaces the natural gasweighted production from our Jonah and
East Texas assets with higher-margin oil
and NGL production, said Encana President and CEO Doug Suttles.
Contrary to analysts projections and
the prevailing trend, Houstons Sanchez
Energy on July 1 closed its $639-million
purchase of the 106,000 acres that Shell
held in Dimmit, LaSalle and Webb counties. The sale includes 176 wholly-owned
producing wells, which delivered 24,000
boed in the first quarter, but with a significantly high gas component.
In other deals:
Forest Oil Corp. and closely-held Sabine Oil & Gas officially merged, with
the new entity to be based in Houston. In addition to a highly prospective,

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SHALETECH / EAGLE FORD/PEARSALL

DRILL MULTIPLE SECTIONS IN A SINGLE RUN

In shale plays, such as the Eagle Ford, rotary steerable systems
(RSS) are being used to drill multiple wellbore sectionsvertical, curve and lateral, or curve and lateralwithout tripping
the bottomhole assembly (BHA). This approach to wellbore
construction is having a significant impact on reducing cost and
improving the ability to develop unconventional assets.
Weatherford has used its Revolution RSS system in the
U.S. shale plays, in more than 200 runs of greater than 7,000 ft
and more than 40 runs greater than 10,000 ft. The longest single-run well, to date, is 14,450 ft, and longer runs are possible.
The system is used routinely to execute curves of 10/100 ft of
build-up rate (BUR).
Single-run solution. Drilling two or three sections of the
well in one run presents multiple challenges: the vertical section must maintain a high degree of verticality; the curve must
be smooth with a BUR up to 10/100 ft; the lateral section
must maintain the selected inclination and may require geosteering. These results must be applied to simple 2D J-type
wells to complex 3D geometries. Weatherford uses a single
BHA for all directional requirements, and point-the-bit RSS
technology to maximize bit life, achieve low borehole tortuosity, and enhance borehole quality.
Fig. 1. In a series of four wells on a pad location, curve and lateral
sections were drilled in a single trip using the RSS assembly (photo
courtesy of Weatherford).

96AUGUST 2014/WorldOil.com

The Revolution RSS point-the-bit system works by producing a controllable steering tilt angle through a biasing unit
that points the bit in the desired direction, using a specially
profiled stabilizer as a fulcrum.
Proportional control continuously controls bit tilt,
which enables the drilling of a smooth, consistent hole curvature. The control avoids cycling the steering mechanism
on and off to produce the required dogleg severity. For example, if a 5/100 ft build rate is desired, the RSS is set for
5/100 ft, rather than building at 10/100 ft for half the time
and drilling straight for the other half (or some other mark/
space ratio).
Automatic drilling modes are used to assist the operation
and are particularly useful when drilling the vertical and horizontal sections. These modesseek vertical, hold inclination
(lateral/tangent), and autopilot (for 2D and 3D directional
control)save time by removing the need to constantly communicate to the RSS. The closed loop control system continuously monitors sensors and makes decisions to keep the
wellbore on track.
Drilling hazard mitigation is addressed in a holistic approach to the BHA design that considers bit selection, LWD,
and power section options to optimize the assembly for the
application. As with all rotary steerable systems, continuous
rotation of the drillstring enhances hole cleaning, which clearly reduces the risks of getting stuck. Similarly, near-bit directional measurements are continuously monitored to reduce
the risks of not meeting the well placement requirements.
Eagle Ford applications. In a series of four wells on a
pad location, curve and lateral sections were drilled in a single trip using the RSS assembly. Importantly, dogleg severity
and tortuosity in the lateral section were minimized to improve casing running and logging. Drilling operations were
faster in all four wells, with one drilled 43% quicker than estimated to save 7.5 days of drilling time. In each of the wells,
the drilling path closely matched the planned well path. The
wells were drilled uneventfully, and casing was successfully
run to TD with no issues.
The system drilled an 8-in. hole from the kickoff point
to TD, building an 8 curve and continuing the lateral section
to an average MD of 17,300 ft. Rate of penetration in the long
lateral section, where motor systems typically have trouble, averaged 104 ft/hr. While drilling, the RSS and HEL LWD system continuously monitored downhole vibrations, including
stick-slip, whirl, and lateral and axial torsional dynamics. The
information was used to adjust drilling parameters to optimize
performance in difficult sections of the Austin Chalk and Anacacho formations directly overlying the Eagle Ford.
In another Eagle Ford application, the RSS was used to
drill all three sections of an extended 2D J-type well in a single
run of nearly 12,000 ft.
The ROP was 75% faster than conventional steerable motor assemblies and resulted in the fastest well drilled in the
Eagle Ford shale. The well was completed seven days ahead of
plan, saving the operator approximately $700,000.

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SHALETECH / EAGLE FORD/PEARSALL

207,000-net-acre position in East Texas,
the asset combination includes 65,000
net acres in the Eagle Ford. In the first
quarter, Forest Oil completed six gross
wells in its southern Eagle Ford leasehold
with 30-day gross production rates of 418
boed. In mid-April, the operator was running two rigs in the Eagle Ford and three
in its East Texas holdings.
Investment company Ares Management LP acquired San Antonios BlackBrush Oil & Gas for an undisclosed
price, with plans to ramp up drilling in
the newly acquired, 160,000-net-acre
Eagle Ford leasehold.
On June 18, Panhandle Oil and Gas Inc.
closed its $80.4-million purchase of a 16%
interest in 1,775 net acres of oily LaSalle
and Frio counties. Cheyenne Petroleum
Co. will continue to serve as operator.
Sydney-based Sundance Energy Australia Ltd., on May 28, unloaded its interest in Wattenberg field of the DenverJulesburg basin. At the same time, the
company made a comparatively modest
$33-million acquisition of 5,500 net acres
in Dimmit County, elevating its Eagle
Ford leasehold to 19,500 net acres. The
seller was not identified.
Swift Energy Co., on July 15, finalized
its agreement with PT Saka Energi Indonesia to jointly develop 8,300 acres in the
Eagle Ford Fasken area of Webb County.
Saka paid $175 million for its 36% participating interest.
On the flip side, Statoil and Talisman
Energy, in May, said they were pulling
their jointly held acreage off the selling
block after no buyers came up with the
reported $4-billion price tag they had attached to the assets. Statoil and Talisman
control roughly 73,000 and 74,000 net
acres, respectively, which they operate

under a 50-50 JV. The partners have not

disclosed any specific activity plans for
the remainder of the year.
MOVE EAST CONTINUES

With Apache and Halcn Resources

leading the way, the Eagle Ford continues
to extend eastward, where it intersects
the celebrated Woodbine formation, the
source horizon for the legendary East
Texas field. The so-called Eaglebine, comprising an estimated 1,000-ft thick fusion
of sandstone and marine shale, described
as possessing excellent porosity characteristics with not a few highly prospective
source rocks, has evolved quickly as an
established target within the expanding
Eagle Ford network.
Apache holds an Eaglebine-high leasehold of 200,000 net (500,000 gross)
acres, primarily in Brazos, Burleson and
Lee Counties. As reflected in the appreciable increase in drilling permits issued
over the past year, this trio represents the
centerpiece of the increased prospects for
the Eaglebine extension. Between January
and July 20, the TRC had authorized 177
new drilling permits in the three counties,
compared to 117 approved during the like
period last year.
Apache began the year with five rigs
in the play, and, on May 28, said its Eaglebine rig count would increase to eight by
mid-year. While primarily targeting the
Eagle Ford, Apache says it also is eyeing
the co-development potential of the overlying Austin Chalk and the underlying
Buda sandstone. Apache said its four latest wells have recorded average 30-day IP
rates of just over 700 boed. The operator
recently completed a 3D seismic survey
over more than 300 mi2, with additional
studies underway.

Fig. 5. One of the 10 rigs drilling for Anadarko in the Eagle Ford (photo courtesy of Anadarko
Petroleum Corp).

98AUGUST 2014/WorldOil.com

After unloading what it considered noncore East Texas assets, Halcn Resources
now controls some 100,000 net acres prospective for the eastern Eagle Ford. In the
first quarter, the independent ran four rigs,
on average, to exploit El Halcn field, where
production averaged 7,018 boed. In its
earnings release, Halcn said much of the
focal point is optimizing well spacing and
completion designs to bring down development costs. Based on results from step-out
wells drilled to the south, combined with
results from other offset operators, we believe our entire acreage position has been
de-risked, and results are expected to be repeatable, Halcn said in a statement.
Permian basin fixture Clayton Williams Energy controls 185,000 net acres
in the Giddings area of East Texas, where
it has been active since the early 1990s.
While its holdings are prospective for
the Austin Chalk, Eagle Ford, Buda and
Georgetown formations, the independent
said the Eagle Ford is the primary target
for its current two-to-three-rig drilling
program. With 2013 proved reserves of
15.5 MMboe, the acreage produced an
average 4,734 boed in the first quarter.
Meanwhile, two-year-old Denver operator Hawkwood Energy LLC, on July
1, said it acquired East Texas acreage in
two deals that, to date, have produced an
aggregate 1,800 bopd. While no details
were made available, Hawkwood said the
combined assets it acquired separately
from Crimson Energy Partners III and
Encana include some 50,000 generally
contiguous undeveloped acres spread out
in Brazos, Leon, Madison and Robertson
counties. These assets establish the company as a significant player in the emerging
Eagle Ford and Woodbine plays in East
Texas, Hawkwood said in a statement.
STACKING, SPACING IN VOGUE

While interest in exploring the liquids

potential in the gas-prone Pearsall seems
to have cooled in 2014, after undergoing
a reawakening of sorts last year, most of
the co-development prospects now focus
on the overlying Austin Chalk. Marathon,
for instance, is conducting two pilots in
Karnes County, aimed at exploring the codevelopment potential of the Upper Eagle
Ford and Lower Austin Chalk.
Marathon said during its year-end 2013
analysts day that stacking, tighter spacing
of 40-to-60 acres, and improved completion efficiency combine to increase its potential Eagle Ford resource base by an in-

50

30

SHALETECH / EAGLE FORD/PEARSALL

cremental 1.5 BBoe. The operator said that
wells completed last year with the tighter
spacing have exhibited higher IP than offsets completed at 80-to-160-acre spacing.
Meanwhile, like all the unconventional
plays, operators in the Eagle Ford continue
to tighten well spacing to further augment
their leaseholds and increase overall recoveries. In 2010, EOG Resources thought it
would be viable to drill about five wells/
section on a 130-acre spacing scenario.
Fast forward, and the major player has
plans to drill up to 16 wells/section on 50acre spacing, which it believes will deliver
higher EUR of around 320,000 boe.
The Eagle Ford continues to demonstrate improvements in well productivity
from ongoing refinements and completion techniques, said Thomas. A number
of recent Eagle Ford wells have IP rates in
excess of 4,000 boed. The Eagle Ford continues to be our largest growth asset, with
the highest after-tax rates of return.
Marathon points out that contributing
to the improved rates are zipper stimulations from pads materially impacting
complexity and improving recovery, as
well as the evolution of fluids, volumes,
rates, cluster spacing and proppant loading, as spacing tightens.
ROBUST ACTIVITY AHEAD

Wood Mackenzie analysts estimate

that $27 billion will be invested in the
Eagle Ford this year to drill roughly 3,000
wellsan expenditure that it says will exceed the annual revenue of Bolivia. Judging from a small sampling of the firmly
entrenched players, most of which are
planning double-digit rig counts this year,
that estimate could prove conservative.
EOG Resources holds a commanding 632,000-net-acre position, of which
564,000 net acres underlie the prolific oil
window. The plays largest oil producer
said its first-quarter production jumped
62% year-over-year, pumping out 207
Mboed, net, as of March 31. Six more recent wells delivered IP rates averaging
3,503 bopd, the operator said.
The Houston-based independent
plans an aggressive 2014 drilling program,
with 26 rigs scheduled to drill an estimated 520 net wells. EOG, which says it is
continuing to investigate various completion techniques to improve production,
has managed to reduce its average completed well costs to roughly $5.5 million
from a 2011 average of $7.2 million. EOG
expects its premier acreage position to be
100AUGUST 2014/WorldOil.com

held by production (HBP) by mid-year,

which it says will add more flexibility to
the drilling program.
Anadarko Petroleum plans to operate 10 rigs (Fig. 5) and drill an estimated
400 wells on the 185,000 net (388,000
gross) acres it controls, primarily in liquids-rich Dimmit, LaSalle, Maverick and
Webb counties. The Woodlands, Texasbased operator said it has identified more
than 2,500 prospective wellsites yet to
be drilled. To date, Anadarko said it has
constructed more than 1,000 Eagle Ford
wells, averaging one new well/day being
connected to the sales line. Production,
across-the-board, increased year-over-year
in the first quarter, averaging 59,000 boed,
up 41% from the prior first quarter. Of that,
total liquids sales volume reached 40,600
bpd. In its first-quarter earnings report,
Anadarko said its 10 rigs drilled 102 wells
in an average of 8.1 days, with 110 new
wells hooked up to production.
ConocoPhillips plans to operate a
12-rig drilling program this year and has
pinpointed more than 3,000 potential
wellsites in its estimated 227,000 net acres,
though it has not released how many sites
will be drilled in 2014. After the independent exited the first quarter at 16,000
bopd, CEO Lance told investors that the
operator projects a ramp-up in production to 250,000 bopd by 2017. Last year,
at this point in time, we were talking about
ramping up to 150,000 bopd, Lance said.
So, thats a pretty substantial increase from
what we are seeing from the pilot and gives
us confidence to move forward on the development of the field.
Marathon Oil Corp. has allocated a
capital expenditure of $2.3 billion in the
Eagle Ford this year, which will include
18 rigs and the drilling of between 250260 net (385405 gross) wells. Within
its 204,000-net-acre-position, Marathon,
which forecasts production this year to
approach 120,000 boed, said its first codeveloped Austin Chalk well recorded
a 30-day IP rate of 1,600 boed in the
first quarter.
Pioneer Natural Resources and its
minority partner, Indias Reliance Industries, plan to drill 110 liquids-rich
wells this year, of which 45 are planned
for completion in the Upper Eagle Ford
as part of its continuing downspacing and
staggered drilling program. A cumulative
34 wells were drilled in the first quarter
within the estimated 212,000-net-acre
leasehold with 32 of the wells placed on

production. The partners have earmarked

a $545-million capital expenditure for the
Eagle Ford this year.
SM Energy, which holds 144,000 net
acres, recorded 20 flowing completions in
the first quarter, and expected its drilling
and completion carry with Japans Mitsui
to be exhausted by the second quarter. The
independent has not released how many
wells it expects to drill this year, but said
lateral lengths of those drilled in the first
quarter increased by roughly 25% from the
2013 average. Net production in the first
quarter rose to 76.3 Mboed from the 74.8
Mboed in fourth-quarter of 2013.
Cabot Oil & Gas plans to add a third rig
to its Eagle Ford fleet in the third quarter to
meet its planned 40-to-50-net-well 2014
drilling program. The operator recently
added 4,000 net acres, bringing its total
Eagle Ford holdings to 66,000 net acres,
of which an estimated 60% is HBP. Cabot
says 50% of its program this year will be
from pads of four wells or greater. Its sixwell pad in Atascosa County has recorded
an average IP rate of 1,045 boed, with a sustained 25-day rate of 946 boed/well.
In early April, Cabot completed its first
six-well pad in Frio County, with the wells
averaging a completed lateral link of about
6,700 ft and an average 25 stages. The wells
individually achieved an average peak, 24hr IP rate of 1,045 boed with an 89% oil
cut. Cabot says the pad drilling efficiencies
saved some $600,000/well.
Penn Virginia Corp., based in Radnor,
Pa., recorded first-quarter production of
14.8 Mboed and closed 2013 with proved
liquid-heavy reserves of 75.6 MMboe
within its 80,000-net Eagle Ford leasehold.
The independent says it is looking at increasing its net acreage position to 100,000
acres. Penn Virginia is running six rigs, with
a seventh to be added by the third quarter,
the company said, with plans to drill 64.7
net (117 gross) wells this year.
Rosetta Resources plans to run four to
five rigs this year to drill and complete between 9095 gross wells on its 63,000-netacre holding. The Houston independent
delivered 50 Mboed net production in the
first quarter, keeping it in line with its plans
to increase year-over-year production
by 20%30% over 2013. Rosetta, which
is continuing its testing of Eagle Ford
benches, said that excluding the Upper
Eagle Ford and the fully developed Karnes
Trough properties, it had completed 218
wells as of March 31 and with an additional
57 awaiting completion.

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PROFILE: BHP BILLITON

TECHNOLOGY FUELS BHPS EAGLE FORD IMPROVEMENTS

One of the most efficient drillers in the Eagle

Ford has turned its attention lately toward
capitalizing on its diverse technical toolkit, to
both increase and sustain production rates.
Modeling and benchmarking are keys to
optimizing drilling and ultimate recovery.

JIM REDDEN, Contributing Editor

It was one of the seminal observations that provided a pivotal stimulus in BHP Billitons methodical completion and stimulation strategy, aimed at increasing reservoir recovery within its
considerable North American shale operations.
In one of our dry gas fields, we started seeing an acceleration of decline rate in quite a few wells, often at about the
same bottomhole flowing pressure, said Rod Skaufel, BHP
asset president of North American Shale. Our (frac) modeling suggested only 36% of vertical frac height was effectively
propped. We saw an opportunity to increase EUR (estimated
A frac spread at work beneath a South Texas sunset within the
estimated 300,000 net acres that BHP controls in the Eagle
Ford (courtesy of BHP Billiton).

ultimate recovery) by 20%60%, with improved vertical coverage and frac conductivity.
Today, BHP has extended that scientifically oriented approach to all four of its onshore unconventional plays, including
the Eagle Ford. There, improving proppant placement and frac
geometry are just two elements in a multi-component completion and frac evaluation, which includes both numerical and
analytical modeling with diagnostics validation, directed at optimizing completion designs.
We hear a lot of discussion about IP (initial production)
rates, but IP is not the game. A sustainable rate is the game. In
shale, you need to be relentless at this, he said. Were a technical company, and we believe technology drives innovation,
innovation drives performance, and thats what were all about.
Theres some really high-end technical work being done in our
teams, and Im very proud of the technical aspects of the work
that we do.
The technology-centric focus is reflected in its studied and
BHP admitsmore expensive approach to its frac and completion programs, an approach that the company says is starting
to pay significant dividends. In the fiscal year ended June 30,
BHPs Eagle Ford leasehold produced more than 130,000
boed, well on track toward its target of breaking 200,000 boed
by FY2016. Cumulative, 90-day, sustained production rates of
select BHP wells, meanwhile, are trending appreciably higher
than comparative offsets.
We could do a cheap completion using slickwater, but if our
productivity is lower, ultimately we would be better served by
funding a more expensive completion, to have better productivity on a well. Were willing to spend more money to get more
EUR, Skaufel told a Houston media gathering in June. Shale
is about continuous, year-on-year improvement. I want my next
well to be cheaper than my last well, but I want my next well to
be more productive than my last well. This puts a premium on

Were a technical company, and

we believe technology drives
innovation, and innovation
drives performance.
- Rod Skaufel, asset president,
North American shale
World Oil/AUGUST 2014103

SHALETECH / EAGLE FORD/PEARSALL

Fig. 1. BHPs Black Hawk and Hawkville Eagle Ford leaseholding.

Fig. 2. The advanced H&P Flex rigs with walking/skidding packages have
been widely recognized as key contributors to BHPs drilling efficiency
gains in the Eagle Ford.

your organizations ability to learn and learn fast.

Skaufel echoed BHP Billiton Petroleum and Potash President
Tim Cutt, who told a similar media assembly in late December
that experimentation with new completion techniques and technologies has increased up-front costs, but also ultimate reservoir
drainage. In the Eagle Ford, our completions are probably $1
million to $1.5 million more expensive than some of our competitors, but we also are seeing higher EUR.
ROOM TO STUDY

BHPs field lab comprises a leaseholding of about 300,000 net

acres, spread out between its Hawkville and Black Hawk fields,
Fig. 1. Late last year, the operator also accessed options for an
additional 70,000 net acres prospective for the underlying Pearsall formation, where the first well was undergoing testing at yearend. We believe the Pearsall holds potential for additional liquids production, Cutt said last year.
And, like most of its peers, liquids are the commodities of
choice for BHP, which holds an aggregate 1.5 million net acres
within the oily Eagle Ford and Permian basin, and the dry gasdominant Haynesville and Fayetteville shales. BHP has earmarked
some $4 billion per year for its U.S. shale operations, and roughly
75% of its activity is focused on the liquids-rich Eagle Ford.
Consequently, of the 25 rigs that BHP is operating in its onshore U.S. drilling campaign, a fleet of 17 new-generation H&P
Flex rigs, Fig. 2, with walking/skidding packages is stationed in
the Eagle Ford, where they will drill an estimated 294 wells in the
current fiscal year. In FY2014, BHP averaged 19.3 rigs in the play
and drilled a cumulative 305 wells.
Reflecting the emphasis on liquids, Skaufel said 14 of the Eagle
Ford rigs are making hole in the condensate-laden Black Hawk
field in DeWitt County, which BHP now operates under a 50-50
joint venture with Devon Energy (which earlier this year acquired
former JV partner GeoSouthern). The Black Hawk is as good as
it gets in the Eagle Ford. It is the best of the best. Weve got 58,000
net acres there, and much of our technical work is focused in this
area, just because this is where our activity is so high.
SETTING THE PACE

Skaufel acknowledges BHP faced more than its share of

growing pains upon entering the U.S. shale sector, which re104AUGUST 2014/WorldOil.com

quired scaling a steep learning curve, and quickly. The petroleum arm of the Australian mining conglomerate made its
onshore U.S. shale debut in 2011, with the purchase of Chesapeake Energys Fayetteville shale holdings in Arkansas, which it
followed shortly afterward with the $12.1-billion acquisition of
Eagle Ford pioneer Petrohawk Energy. Skaufel acknowledged
that despite its extensive experience in deep water, BHP was a
bit surprised at the remarkably different set of dynamics in the
shale theater.
We were primarily a deepwater company going into an onshore game, where your systems and processes really were built
around that. Our costs were high initially, as I dont think we really had an appreciation for how intricate the work environment
is and how well coordinated it needs to be, he said.
Compared to the offshore arena, Skaufel said the then-new
shale player also had to cope with a third-party workforce that
was relatively inexperienced in the oil and gas industry, with
many workers having transitioned from other industries. Accordingly, the incident rates were considerably higher than the
average elsewhere within BHPs global petroleum operations.
Thus, the early emphasis was on working closely with contractors to bring the total recordable incident frequency (TRIF)
rates more in line with the rest of the organization. By 2012,
he said the H&P rigs drilling for BHP had become the safest
rigs in their entire fleet, which we attribute to the partnership
we have with our contractors.

EAGLE FORD/PEARSALL / SHALETECH

Our total reportable incident rate for petroleum is about
three incidents per million man-hours. When we got into shale,
we saw incident rates of six or seven. Weve quickly worked that
down to where its competitive with the rest of our business.
Since its conception, BHPs Houston-based shale organization has grown exponentially, now boasting a workforce of more
than 2,000, including engineers and geologists recruited from
nearly every major shale player, Skaufel said. The petroleum division also broke ground last year on a new 30-story office tower
in Houston.
In addition, to help maximize efficiencies, Skaufel said the
Eagle Ford shale group also focused on establishing strategic partnerships with select contractors and service providers, namely
H&P and Schlumberger, which he described as philosophically
well-aligned around what we want to do.
Skaufel cites the distinctive pacesetter initiative, in tandem
with benchmarking best practices, as key elements in driving
both drilling and completion efficiencies. The pacesetter program individually evaluates the surface casing, production casing and horizontal laterals of the typical, three-string Eagle Ford
wellbore. Benchmarking takes over from there and explores
which rig drilled each section the fastest.
We look at how they did it, and then we try to replicate that
across our entire rig fleet, he said. Weve seen a 25% improvement in both time and cost. Weve done that through retendering of contracts, fit-for-purpose specifications, elimination
of waste and reducing variability in our drilling. But, it all got
started with the benchmarking exercise that we started about a
year-and-a-half ago.
What we try to do with benchmarking is ask if the things
were doing are working. Or is somebody doing it better? If
youre going to benchmark in the Eagle Ford, youve got to be
very geographically specific, because the variability across the
play is tremendous.
One should count V.P. of Drilling and Completions Derek
Cardno among the most ardent devotees of both the pacesetter
and benchmarking initiatives. When youre running 17 rigs, everybody has an opinion of what works best. We use facts to tell us
what is the best, which we adopt and combine with the drive for
continual improvement in each section of the well.
The results are clearly evident in the comparatively deeper
and hotter Black Hawk field, where average rig time, from spud
to release, has dropped more than 26% since the first quarter of
FY2013. Skaufel said drilling costs for Black Hawk wells, likewise,
have dropped year-on-year by more than 24%, to an average of
just over $4 million.
Our costs have come way down over the last year, and its
because now weve got time to actually be able to look at what
were doing, analyze our data, and improve, Skaufel added.
Last year, we were running 45 rigs in all our shale plays, and
today were running 25, and were drilling almost as many wells
with 25, as we did with 45 rigs. When we were running at that
higher pace, it was just unsustainable.
Our floor is a lot lower than $4 million a well. Again, I think
weve got a mentality right now in the organization that helps
drive that performance.
Meanwhile, cost containment even extends to how BHP
monitors its daily unconventional well operations. Rather than
rely on elaborate and cost-intensive remote operations centers,
BHP provides its pertinent engineers Tablets downloaded with

Fig. 3. Production log and microseismic data prompted BHP to alter its
frac designs from longer to shorter stages with fewer clusters, with the
aim of creating uniform frac geometry.

Previous design: longer stage length

Concept: shorter stage length

readily available software. This allows them to monitor drilling

and completion and critical operations anywhere and at anytime, Cardno said.
Well placement is another area occupying much of the evaluations nowadays, in particular the avoidance of inter-well communication and the ensuing frac hits that can occur, as wellbores become more tightly spaced. Frac hits are a real problem, both for
completions and drilling, said Cardno. Were developing what
we call focus areas, where we drill and complete all the wells in a
given area. We try to build up stresses, when we complete them
and break up as much rock as possible. Otherwise, what weve
found is that when you drill a well to hold acreage by production,
you typically get a frac hit when you go back and complete other
wells, which hurts the parent well. Also, when you drill into a fracture, you will likely have a well-control issue.
OPTIMIZING COMPLETIONS

Capturing production-enhancing wellbore stresses and altering frac geometry are among the completion optimization
experimentation that BHP is undertaking in the Eagle Ford. At
the foundation of the operators steadily advancing evaluations of
completion and stimulation designs is extensive use of numerical
and analytical modeling. We truly believe that you can use both
numerical and analytical models to drive your trials, and to guide
your pilots. We also invest heavily in diagnostics, in order to validate our models and to gather additional insights, Skaufel said.
As a case in point, BHP has used fracturing and reservoir simulation models to determine that very poorly propped fracs
were at the root cause of rapid decline in select wells. These
were slickwater jobs, and so you were getting a little bit of gel
without a lot of carrying capacity. The frac modeling suggested
World Oil/AUGUST 2014105

SHALETECH / EAGLE FORD/PEARSALL

Fig. 4. Field observations supported the modeling results seen as part

of the BHP-University of Texas stress shadow study.

that when we drill the first well and frac it, a stress field is generated. You drill the second well and frac it, and it also generates a stress field. Because youve generated in-situ stresses, the
middle well is more highly stressed, so it will have more complex fracturing. Thats the concept, but, of course, production
performance is the variable thats going to determine whether
its successful. But, were encouraged enough to where this is
our standard practice, he said.
Weve been doing some work with the University of Texas,
and theyve got a program, where theyre looking at a concept
called stress shadowing. Theyve been doing some modeling
work on our behalf.
GOOD NEIGHBOR POLICY

that youre only getting sand transport on the very bottom of

the frac. Youre not getting much carrying capacity throughout
the entire vertical section.
The reservoir simulation model, which he said were consistent with parameters used in the frac model, showed a spike in
EUR proportionate with propping higher percentages of the
vertical frac height. Right now, we are test-driving alternative
completion designs in this field under the premise that if we can
improve the vertical propped coverage in this frac, we have got a
huge opportunity, Skaufel said.
In addition, after microseismic and production logging data
confirmed disproportionate contribution by individual frac clusters, BHP turned to the Schlumberger BroadBand Sequence fracturing technique, which essentially creates chemical diversion to
improve stimulated rock volume and create a more uniform distribution across clusters.
According to Schlumberger, the BroadBand technique
uses a composite fluid, comprising a proprietary blend of degradable fibers and multimodal particles to enable sequential
stimulation of perforated clusters or open-hole intervals. In
the Eagle Ford, Schlumberger claims that the capacity to maximize wellbore coverage and reservoir contact has resulted in
more than 20% increases in per capita production from new
completions, and up to a 600% increase in the productivity
index from refracing operations.
Weve done a lot of diagnostic work, both in terms of production logging as well as microseismic. What it implied is that were
not getting uniform distributions of the frac. Production logs
show that one or two clusters are providing the predominance of
flow. In fact, youre not seeing flow from multiple clusters when
we go ahead and log this. You want uniform distribution. So what
weve done is experiment with both mechanical and chemical diversion. Early results have been encouraging, Skaufel said.
We used to run longer stages, but now theyre shorter with
fewer clusters, Fig. 3. The concept is that if we can get higher
rates per cluster, then we may mechanically divert and achieve a
more uniform fracture distribution. The shorter stage length is
now standard in our operation. We also continue to test chemical
diversion, and the results have been promising.
Also standard in BHPs Eagle Ford completion toolbox is a
methodology for capturing in-situ stresses, with the aim of generating more complex fracturing, which, in turn, the theory holds,
should contribute to higher and longer production rates, Fig. 4.
Our standard of development right now is that we frac
from the outside in to capture in-situ stress. The concept is
106AUGUST 2014/WorldOil.com

In July, the American Petroleum Institute (API) issued community engagement guidelines that direct operators on how to
build lasting and successful relationships with the local residents. Skaufel said that BHP had developed its own societal
initiatives much earlier, employing the same methodical exercise
that it uses to optimize efficiencies and maximize production to
foster relationships with community stakeholders throughout its
U.S. onshore operations.
The communities that we work in are extremely, extremely
important to us, and I just cant emphasize that enough. Youre
in peoples back yards. We go through a very, very rigorous process in terms of determining where we are willing to put our
time, and where we put our money. It starts with a social baseline study, and then we move to a community perception survey, in order to be able to assess what are the key quality-of-life
indicators. Of course, youll always see a push to minimize environmental impacts, he said.
FOCUS ON VALUE

Preceding all its top-drawer technical experimentations, BHP

conducts equally analytical calculations to determine which assets will deliver the most incremental value, based on current
commodity price levels. Consequently, immediate priority today
is given to the liquids-rich assets, as illustrated in the higher activity levels in the condensate- and oil-rich Black Hawk field, as
opposed to the gassier Hawkville to the south.
For every single operated well, we calculate the optimum
timing to drill that well, based on our views for price projections, as well as the forward cost learning curve. Then, we look
at it to see how sensitive it is to timing. So what weve seen, as
weve run through this, is that you typically have three groups
of wellsthose you want to accelerate and develop now; wells
that are insensitive to timing; and wells that you defer for value, Skaufel said. This capital allocation methodology drives
you towards drilling your liquid-rich wells now. The returns
on those wells are also significantly better than dry gas.
According to Cutt, it all boils down to not necessarily drilling and completing the most wells, but rather getting the most
out of the wells that are drilled. We concentrate on value over
volume, and we see real opportunity in the shales, which have
a great deal of economic flexibility. The shift to liquids reflects
our focus on value, though we do produce a huge amount of
gas. We make prioritized investment decisions, based on maximizing shareholder value, while conserving the value of other
opportunities for the future. That is where the flexibility of the
shale plays gives us real advantages.

The moment of truth:

Where do your fracs (and your well investment) go?

W

REAL WORLD (unpredictable)

PLANNED

K

PLANNED

REAL WORLD (unpredictable)

Dh

PLANNED

REAL WORLD (predictable)

Plug-and-perf simply cannot deliver predictable frac results, and neither can open-hole packers
Dh
right where you plan them and proppant volume in every frac is exactly what you want. Cemented,


>

WZ,^

ncsfrac.com
+1 281.453.2222
info@ncsfrac.com
Leave nothing behind.

2014, NCS Energy Services, LLC. All rights reserved. Multistage Unlimited and Leave nothing behind. are trademarks of NCS Energy Services, LLC. Patents pending.

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SUBSEA ADVANCES

Pipelay technology, vessels set North Sea

pipe-in-pipe installation record
Rochelle development. The contract scope
encompassed full project management and
detailed design, procurement, fabrication,
installation and pre-commissioning of 30
km of production pipe-in-pipe, flexible
riser, free-issue umbilicals, subsea isolation valves and manifolds. It also included
construction and tie-in of spools to the
wellhead structure, plus trenching, backfill
and rock-dumping work. A further contract award for a 7-km extension to connect the West Rochelle well to the East
well followed the initial agreement. Both
wells are tied back to the production facilities on the Scott platform through a subsea
isolation valve umbilical (SSIV) and manifold. Other work on the project included
platform flexible and umbilical pull-ins and
commissioning, crossings installation, surveys and pre-commissioning. The water
depths along the pipeline route range from
137 m to 146 m.
PROJECT CHALLENGES

A team from Technip

engineered fabrication and
spooling technology to install
37 km of subsea pipeline in
25 days at the UK North Seas
Rochelle eld.

NICK RITCHIE, Endeavour, and HARRY

McINTOSH, Technip UK

Technip employed the Apache II to reel and

lay 37 km of pipe-in-pipe at Rochelle eld
in the UK North Sea.

With an increasing number of developments in deeper water, and more challenging environments, the infrastructure, and
its associated installation, has to be adaptable and capable of coping with a range of
unique conditions.
Endeavour Internationals Rochelle development in the UK North Sea saw first
gas production from the Scott platform at
West Rochelle in October 2013, Fig. 1.
The field is approximately 185 km northeast of Aberdeen, and is a combination
of two gas condensate fields. Discovered
in April 2000, the East Rochelle development is on Block 15/27; the nearby
West Rochelle field encompasses Blocks
15/26b and 15/26c, and was discovered
in October 2010. The Rochelle unit area is
jointly owned by Endeavour International
(44%), Nexen Petroleum UK (41%) and
Premier Oil (15%).
In June 2011, Endeavour Energy UK,
a wholly-owned subsidiary of Endeavour
International, awarded Technip an engineering, procurement, construction and
installation (EPCI) contract for the East

Field surveys carried out prior to work

commencing on Rochelle indicated soils
of a soft clay nature and multiple pockmarks (seabed depressions) throughout
the field. This resulted in detailed engineering analysis, to ensure adequate pipeline support at the trench transitions and
crossings. Using initial field feedback from
both survey and trenching vessels, Technip
identified and correlated the information
required to ensure an efficient, offshore
construction operation.
The contractor used its extensive
trenching database to predict the risks of
trenching in clay ranging from soft to very
soft. Shorter transition lengths at the in and
out locations, as well as buoyancy and soft
soil skids, were implemented to prevent
excessive sinkage. The soil-bearing capacity for the mid-span support, to allow the
10-in./14-in. pipe-in-pipe to cross two 30in. pipelines, was also assessed. Stress analysis using ABAQUS finite element analysis, regarding soil settlement, was carried
out in the 30-in. pipeline, to ensure that the
pipe was not at risk of buckling.
World Oil/AUGUST 2014109

SUBSEA ADVANCES

Fig. 1. Endeavour International operates

Rochelle, which includes the East and West
wells, and ties-in the production to the
Scott platform.

Fig. 2. Hydraulic pushframes were used at the Evanton spoolbase to fabricate the rigid
pipe-in-pipe used in the project.

Fig. 3. After spooling at the Evanton facility, the Apache II laid the necessary subsea pipe
in ve trips, for a record 25-day installation.

Rochelle pipelay project

750,000

37 km

Man-hours

Incidents

Vessels

Pipe-in-pipe
installed in 25 days

110AUGUST 2014/WorldOil.com

NEW PIPELAY TECHNOLOGY

Technips recently upgraded Evanton,

Scotland, spoolbase (Fig. 2) was used for
both the fabrication and spooling of the
10-in./14-in. pipe-in-pipe. The size and
wall thickness of the pipe-in-pipe utilized
for the Rochelle project had high-magnitude stiffness levels. The project team developed engineering solutions to facilitate
reeling the fabricated pipe-in-pipe onto the
pipelay vessel, Apache II. The rigid, reelable
pipe-in-pipe was welded at the companys
spoolbase, while the flexible riser was manufactured at the flexible manufacturing
unit in Le Trait, France.
The contractors revised approach incorporated reelable and end bulkheads; a
pawn head with split-head adaptor system
to connect the pipe to the vessel reel; and
fixed pipeline laydown lengths within the
subsea target boxes. The development and
introduction of the reelable bulkheads dramatically reduced the vessel offshore time.
The number of welds was also reduced,
along with a decrease in non-destructive
examination (NDE) being carried out
offshore; the amount of time required to
perform the connections onboard was reduced similarly. With these innovations,
the required weather window for pipelay
offshore was also reduced. As well as saving time offshore, the adoption of the pawn
head and adaptor system minimized the
amount of time the vessel spent in port,

SUBSEA ADVANCES

The making of pipe-in-pipe

stalks for subsea production
Fabrication. Individual, 12-m pipe lengths are fabricated into pipe stalks
at Technips custom-built Evanton spoolbase in the Cromarty Firth. Following
numbering and a pre-weld inspection, the pipes are rolled onto an alignment
welding station, where the ends are pre-heated. This is the start of a welding
line and cycle that welds the sections in to 1-km pipe stalks. At predetermined
cycle times, a new pipe section is added to the stalk, and each joint receives the
required amount of welds at up to eight separate stations.
Inspection. Following welding, the pipe moves through the visual weld inspection area to the non-destructive examination (NDE) area. The primary
examination techniques are traditional radiography, digital radiography, automated ultrasonic examination backed up by manual ultrasonic, magnetic particle and/or dye penetrant inspection, as required. The coating of the weld area
is the next stage in the process. This is carried out in the field joint coating
area; generally, mechanized three-layer polypropylene tape wrap, or injectionmolded polyurethane or polypropylene, is used.
The 1-km pipe stalks are fabricated for both the outer carrier pipe and the
inner flowline in a pipe-in-pipe application. The completed pipe stalks are
stored on the stalk racks, or on the causeway, waiting for pipe-in-pipe assembly.
Assembly. Technip has designed and manufactured portable, hydraulically
operated pushframes to push the inner flowline pipe stalks into the outer carrier pipe stalks. The carrier pipe stalk, fitted with a bell mouth guide, is secured
in a fixed clamp at one end of the pushframes, and the inner flowline pipe stalk
is held in a sliding trolley clamp at the opposite end. There is a 4-m workspace
between the two sets of clamps to allow the spacers and insulation to be fitted
to the inner flowline. A hydraulic mechanism, capable of 100 t of force, pushes
one pipe stalk inside the other, 4 m at a time. It takes around 250 pushes to
produce a 1-km pipe-in-pipe stalk. The completed pipe-in-pipe stalks are then
stored, awaiting spooling onto the reel lay vessel being used for the project.
Spooling. The first pipe-in-pipe stalk is pulled through a tie in station, situated within the hydraulic pushframe. It is pulled along the spooling rollers and
through a set of approach rollers up onto the vessels reel. A pawn-head/splithead adaptor system is used to connect the larger carrier pipe lead string to
the vessels reel. The next pipe stalk is then ready to be connected to the first.
This is done in the hydraulic pushframe, and involves first welding the ends of
the two inner flowlines together. Once NDE of the weld has been carried out,
the stick-out areas are then covered with insulation. A fire-retardant blanket
is fitted over the insulation before the landward carrier pipe stalk is pushed
over the inner flowline weld area. After completing the carrier tie-in weld, the
trailing end of the inner flowline stalk is cut to the desired 500-mm stick-out,
re-beveled and cleared by NDE as ready for the next tie-in. The whole process
is repeated until the required pipe-in-pipe pipeline is onboard the relay vessel
in one continuous length, ready for deployment in the field. Each vessel trip is
dependent on reel capacity, which, in turn, dictates either total pipeline weight
or volume.
Vessels. Once offshore, advanced technology on Apache II delivers all the
additional advantages of the reel-laying method. During the pipelay process,
a pipe straightener and tensioner system are utilized prior to the pipe passing
through a welding station situated on the ramp. Here, anodes, valves, flanges,
T-pieces and miscellaneous equipment can be attached to the pipe as, and
when, required. Thereafter, a monitoring system ensures lay catenary parameters are maintained on deployment of the pipe. On multiple trip applications,
subsequent tie-in welding, NDE and field joint coating are carried out on the
next trip, as required.
112AUGUST 2014/WorldOil.com

while the pipe-in-pipe was reeled and loaded onto the vessel. Fixed laydown lengths
subsequently saved time on vessel topsides
work during the laydown of the pipe-inpipe. The savings to the vessel and in terms
of operational time at the spoolbase were
roughly 15%.
With the aforementioned adjustments
and special considerations for the pipe-inpipe thickness and rigidity, the installation
was carried out in record time. The Apache
II (Fig. 3) was deployed to undertake the
installation and took just five trips, lasting
a total of 25 days, to lay the required 37 km
of pipe-in-pipe. This represents a reduction of approximately 32% against the initial time estimate for this work.
The ability to reduce the in-field laydown times for each trip was especially
invaluable, as some of the work took place
during the winter months. Traditionally,
operations carried out at this time of year
in the UK North Sea are subject to fewer,
and smaller, weather windows, due to
wind speeds and sea states that are incompatible with the necessary operations.
Technips engineering department
received recognition for its work during the course of the Rochelle installation project in the form of the Technip
Jacques Franquelin internal award; a
companywide initiative that recognizes
and rewards innovative design, engineering and operations.
ABERDEEN HARBORS
LARGEST VESSEL

During the course of the Rochelle project, the Skandi Arctic diving support vessel
(DSV) became the largest-ever vessel to
enter Aberdeen Harbor, Fig. 4. This was
possible, due to an $8.5-million program
that improved access to the harbor and
deepened the navigation channel. The
DSV, which measures 27 m in breadth and
156 m in length, is wider than any other
vessel that has entered the port. With a
gross tonnage of 18,640, it also surpassed
the previous record of 18,500 t. The capacity for the Skandi Arctic to enter Aberdeen
Harbor promotes larger subsea infrastructure construction in the UK region, maximizing project efficiencies by reducing
transit times to North Sea fields.
The Skandi Arctic and Apache II are
two of nine vessels that were used during the course of the work carried out by
Technip. With so many vessels involved in
the project, effective and efficient scheduling and communication were vital to

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ensure the continued, safe progress of the

offshore campaign. At times, up to six vessels took part in simultaneous operations.
A core part of the communication process
entailed interface meetings between the
vessels, the client, project partners and the
contractors team.

Three guard vessels were also involved

in the project. The Scottish Fishermens
Federation (SFF) supplied vessels and
trained personnel from the commencement of trenching through to the completion of matting and rock dumping. The
guard vessels were intended to divert local

Fig. 4. At 156 m long and 27 m wide, the Skandi Arctic diving support vessel (DSV) was
the largest-ever vessel to enter Aberdeen Harbor.

fishing vessels away from the area, protecting the seabed infrastructure, and the fishing vessels and their equipment.
NICK RITCHIE is the Rochelle
Development Project director
for Endeavour. He has more
than 15 years of experience in oil
and gas eld development and
operations in the North Sea,
Singapore, West Africa and
Egypt. Ritchie has held a
number of senior technical and leadership
positions in the North Sea for CNR, Paladin,
Centrica and Talisman. He was a projects and
operations manager supporting various UKCS
and international developments, prior to joining
Endeavour. His experience includes predevelopments, project execution and operations
support, as well as asset management. He has
wide knowledge of FPSO and subsea systems,
having been part of the Ross and Blake eld
developments, and the lead commissioning
engineer for the Baobab deepwater
development offshore West Africa. Ritchie
graduated from University of Strathclyde in 1996
with a rst-class BS degree in naval architecture
and offshore engineering.
HARRY MCINTOSH is the UKBU Project
Manager, Subsea Construction, at Technip
UK. In this role, he gives a full account on the
companys approach during the Endeavour
Rochelle project throughout the delivery
process. McIntosh has worked across a number
of vessels with Technip since 1987, and is a
former marine superintendent.

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STAFF, HAS BEEN IN SCREEN MANUFACTURING BUSSINESS SINCE 1984
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114AUGUST 2014/WorldOil.com

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DEEPWATER REGULATORY COMPLIANCE

Role of class in deepwater regulatory

compliance evolves with industry needs
a Safety and Environmental Management System (SEMS), in accordance with the U.S. Code of Federal Regulations 30 CFR Part
250.1900. This new regulation is based on API Recommended
Practice 75, but has an expanded scope incorporating additional
elements not contemplated in the API document.
The objective of the SEMS requirement is to give confidence that the production of oil and gas offshore can be carried
out in a manner that promotes the security of life and property
and preserves the natural environment. There must also be concentrated, multi-disciplinary efforts to comply with the more
strict regulatory measures aimed at these objectives, not only
because it is required, but also because the public has demanded
increased transparency.
ESTABLISHING A BASELINE

As activity accelerates, regulatory

compliance in the deepwater Gulf of Mexico
touches more and more of the supply chain.
Increased emphasis is being placed on
the certication of new technologies not
deployed previously in the region.

BRET MONTARULI and LUIZ FEIJO, ABS

Since 2010, the Bureau of Safety and Environmental Enforcement (BSEE) has developed and ensured compliance with
standards and regulations that enhance operational safety and
environmental protection on the U.S. Outer Continental Shelf
(OCS). In pursuit of that goal, BSEE has issued major rulemaking changes that impact deepwater drilling operations.
One of BSEEs most significant changes is that operators in
the U.S. Gulf of Mexico (GOM) must implement and maintain
The Gulfstar One classic spar was installed at Tubular Bells eld
in the deepwater Gulf of Mexico in March 2014. The unit, which
will be classed by ABS, is the rst spar-based oating production
system with major components built in the U.S. Hull fabrication
was completed in Port Aransas, Texas, and topsides fabrication
took place in Houma, La. (photo courtesy of Williams).

Throughout their history, classification societies have developed rules and procedures for evaluating shipsfocusing
on structural and mechanical aspectsand have awarded class
certificates to ships in compliance with these rules. In the early
days of offshore activity, owners and operators thought to apply the same approach, and used class certificates for insurance
purposes and as proof of compliance with international regulatory requirements. Over the decades since the first mobile offshore drilling unit (MODU) began working in the GOM, class
requirements have evolved to address industry needs and the
changing regulatory landscape.
Today, the offshore industry uses classification rules as a starting point in evaluating the safety of its operations, to evaluate
asset and equipment reliability, and to better protect on-board
personnel. Companies also seek approval in principle (AIP) as
the first step in designing new solutions and innovative concepts.
As independent, externally audited third parties, class societies are integral to the compliance verification process for new
technologies and floating structures used for offshore oil and gas
operations in many global safety regimes. By reviewing plans and
conducting surveys during construction, class societies verify
that offshore structures, and their principal machinery and equipment, have been designed and built in accordance with technical
rules and standards developed by the class society.
Class rules and guides help regulatory bodies develop acceptance criteria often these technical standards are used to establish a baseline. As a recent example, in 2013 the U.S. Coast
Guard (USCG) issued a policy letter to provide guidance for
regulatory compliance for floating offshore installations (FOIs)
and FPSO projects on the OCS. The Policy Letter establishes
alternative standards for certifying FOI and FPSO design and
equipmentin addition to existing policies and procedures
and identifies three optional classification services to assist with
compliance, with ABS maintaining its authorization to act on
behalf of the USCG. Because the USCG has limited techniWorld Oil/AUGUST 2014117

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Global Trends in Oil and Gas: Shale

Janet Weiss, President Alaska Operations, BP

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George Boyajian, V.P. Business Development, Primus Green Energy

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DEEPWATER REGULATORY COMPLIANCE

cal requirements specifically tailored to

FOIs or FPSOs, determining the compliance matrix is challenging. Class societies, on the other hand, have developed
specific requirements for each type of
facility, based on experience and sound
engineering principles. In the case of
the USCG Policy Letter, concept-specific requirements from class rulesin
addition to other recognized industry
standardsare used as a baseline, along
with additional requirements related to
lifesaving, firefighting and fire-extinguishing equipment, and electrical and
piping systems.

Fig. 1. Noble Corp.s Noble Globetrotter I, a dynamically positioned, ultra-deepwater

harsh-environment drillship under ABS class, began operating in the U.S. GOM in July
2012 (photo courtesy of ABS/Cris DeWitt).

INVOLVING INDUSTRY
IN RULE-MAKING

Class societies, operators, drilling

contractors and the agencies regulating
offshore operations periodically convene industry working groups focused
on strategies that raise the bar for safety.
These groups are working with class societies to develop more comprehensive
risk management and accident preven- Fig. 2. For the industrys rst integrated DGD drillship project in the GOM, Chevron
ABS as the CVA. In addition to reviewing the surface equipment, ABS prepared
tion plans. A number of joint indus- enlisted
design reviews of the DGD systems subsea components, including the mud lift pump,
try projects and academic technology subsea rotating device and solids processing unit (image courtesy of Chevron Corp.).
research initiatives also are underway,
with the goal of improving deepwater
risk management.
The move toward risk-based facility
inspection programs and more specialized services has led to greater recognition of the contribution that a class
society can make to facilitate installation safety and integrity. Offshore asset integrity management programs are
one example of how structures, equipment, traditional survey regimes and
prescriptive class rules are being complemented with more proactive risk
management processes.
Led by Executive Director Charlie
Williams, the industry-sponsored Center for Offshore Safety (COS) was established in 2010 to promote offshore
safety in the GOM and address compliance with SEMS regulations. The COS
Such industry input is critical to improving classification criwas vocal about involving established entities, such as ABS,
teria. Rulemaking committees invite industry experts to particifrom the beginning. It is important to note that SEMS compate in the development process to identify key issues and gaps
pliance in the GOM must be verified by a third-party audit
and to propose changes and improvements to existing rules and
service provider. Members of ABS Quality Evaluations Inc.
requirements, based on practical application. As an example,
(QE) have served on the COS audit committee, helping to deABS has announced plans to form the ABS Offshore Equipment
velop guidelines used for SEMS audits for evaluating SEMS
Advisory Committee, which will bring together a group of indusimplementation and maintenance. The company is accredited
try experts focused on equipment safety, to further develop and
by the COS to conduct audits for COS member companies, a
modify specific requirements for critical equipment and systems.
group that comprises more than 30 owners/operators, drillIn a separate working group meeting recently convened,
ing contractors, service/equipment providers and affiliated
and as an example of this collaboration, the ABS Mobile Offindustry groups.
World Oil/AUGUST 2014119

DEEPWATER REGULATORY COMPLIANCE

shore Unit Committee gathered industry participants to address improvement of emergency shutdown (ESD) systems
on deepwater MODUs equipped with dynamic positioning
(DP) systems, such as a drillship, Fig. 1. The focus of the discussion was unintended blackouts that disable DP capability.
According to the working group discussion, the possible
occurrence of spurious or errant signals can initiate ESD 0, or
total unit shutdown. Another possible incident that can occur
is an unwanted MODU blackout on location due to manual
activation of the ESD system, either intentional or accidental.
Recommendations generated from the working group discussion include a proposed requirement that prevents a single
operation from causing a complete unit shutdown, and for a
fire and gas detection cause-and-effect chart to be a required
submission to the organization classing the MODU.

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Immediately following the Deepwater Horizon accident,

former U.S. Interior Secretary Ken Salazar issued a report
through the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) titled, Increased safety
measures for energy development on the Outer Continental
Shelf. Included in the reports recommended changes, the
Interim Drilling Safety Rule (effective Oct. 14, 2010) called
for prescriptive requirements addressing subsea and surface
BOPs, well casing and cementing, secondary intervention,
unplanned disconnects, recordkeeping, well completion and
well plugging.
On Aug. 15, 2012, BSEE issued the Final Drilling Safety
Rule, which established new standards for casing and cementing, including integrity testing requirements; third-party certification and verification requirements; BOP capability, testing and documentation obligations; and standards for specific
well control training, including deepwater operations. The
Final Rule also addresses requirements for compliance with
documents incorporated by reference; enhancing the description and classification of well control barriers; defining testing
requirements for cement; clarifying requirements for the installation of dual mechanical barriers; and extending requirements for BOPs and well control fluids to well completions,
workovers and decommissioning operations.
A significant change to the inspection and certification
process was the requirement of third-party verification. A
third party is defined as a technical classification society; an
API-licensed manufacturing, inspection and/or certification
firm; or a licensed professional engineering firm capable of
providing the required verifications. The third partys role is
to verify that a subsea BOP stack is designed for the specific
equipment used on the rig, that it is compatible with the specific well location, well design and well execution plan and
that it was not damaged or compromised during prior service.
CERTIFYING NEW TECHNOLOGIES

While BSEE has regulations for many pieces of existing

equipment, it does not specify requirements for new technology concepts. Such was the case with Chevrons dual-gradient
drilling (DGD)system (Fig. 2) on the Pacific Santa Ana drillship operating in the ultra-deepwater GOM. For the industrys first DGD integrated drillship, certification/verification
became a project requirement in developing and implement-

DEEPWATER REGULATORY COMPLIANCE

ing the technology, with BSEE requesting that the DGD

system be verified independently by a Certified Verification
Agent (CVA). As part of the acceptance process for the new
technology application, ABS was nominated as the CVA and
provided a review for the primary system components following the guidelines outlined in 30 CFR 250.912.
Knowledge-sharing on such projects provides a foundation
for performing the CVA scope of work and classification. It
also allows the class society and operator to establish the proper standard that must be met while certifying new technology
and, ultimately, providing the framework for developing new
rules and requirements addressing this type of technology.
SAFETY IS CRITICAL

Best safety practices are most effective when they are developed and implemented impartially and objectively. The
industry can only continue pushing the boundaries of what
is possible if the new and enhanced offshore technologies
applied in areas such as the GOM are safe and reliable, particularly in deep water, where risk and operational complexity are compounded. While owners and operators elect to
maintain offshore vessels and facilities in class as part of asset integrity management, the classification process ultimately helps to keep units in compliance with technical and
regulatory requirements.
A major component of class is facilitating information exchange for rule development and enhancement of classification services to the industry. Because industry continues to

advance, class societies have to continue to update requirements to reflect the evolving needs of industry.
Independent organizations like ABS remain uniquely
positioned to assist offshore stakeholders with regulatory
compliance, based on global experience developing technical standards that promote safety and reliability on offshore
structures, honed since the industrys inception. Class will
continue to work closely with industry and regulatory agencies to support the technical innovations that further expand
responsible energy production for future generations.
BRET MONTARULI is V.P. of Offshore Technology for
ABS. His role is to support R&D projects related to
MODUs (including jackups, semisubmersibles and
drillships), as well as oating production installations
(such as spars, TLPs and FPSOs). Mr. Montaruli joined
ABS in 1981, and has held numerous engineering
positions throughout his career, most recently as V.P.
of engineering for the ABS Americas Division. He received a BE
degree from SUNY Maritime College, and an MBA from Texas
A&M University.
LUIZ FEIJO is manager of Energy Development for ABS.
He supports business and project development
activities related to the offshore industry, primarily in
the production sector, which includes oating
production installations. He works as account manager
for offshore production clients and servesas the ABS
point of contact with BSEE. Mr. Feijo joined ABS in 2001
as project manager, and later held the position of manager of project
management for the ABS Americas Division. He received a BE degree
from Rio de Janeiro State University in Rio de Janeiro, Brazil, and is a
certied Project Management Professional (PMP) by the Project
Management Institute (PMI).

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PEOPLE IN THE INDUSTRY

MELANIE.CRUTHIRDS@WORLDOIL.COM

Halliburton promoted
Jeff Miller, currently the
companys executive V.P.
and COO, to president,
and appointed him to
the companys board of
directors, both effective
Aug. 1. In this new role,
Miller will complement the
leadership of Dave Lesar,
Halliburtons chairman
and CEO. Miller has served
as Halliburtons executive V.P. and COO since
2012, after beginning his
career with the company
in 1997, holding various
senior management roles
in the companys global
operations and business
development areas.

Occidental Petroleum
Corporation (OXY) has
appointed the leadership
team for its subsidiary,
California Resources
Corporation (CRC),
including Todd A. Stevens
as president and CEO,
and William E. Albrecht
as executive chairman
of the board. CRC will
be an independent
E&P company focused
on high-growth, highreturn, conventional and
unconventional assets
exclusively in California.
Stevens, a 19-year OXY
veteran, has served as
V.P., corporate development, since August
2012. Albrecht has been
president, Occidental Oil
and Gas - Americas, and
V.P., Occidental Petroleum,
since 2011.

Tore D. Langballe
announced that he will
resign from his position as
senior V.P., corporate communications, at Petroleum
Geo-Services ASA by the
end of the year, to take
a position as senior V.P.,
corporate communications
and IR, and chief of staff,
at Akastor ASA, an Akerowned company.

The Society of Petroleum

Engineers (SPE) has
named D. Nathan Meehan,
senior executive adviser
at Baker Hughes, as
2016 president of the
international professional
society. Based in Houston,
Meehan will take office
as president-elect on
Oct. 29, at the close of
SPEs Annual Technical
Conference and Exhibition
in Amsterdam, The
Netherlands. He is a World
Oil editorial advisor.

Desh Deepak Misra has

taken over as the director
of human resources at
Indias Oil and Natural
Gas Corporation Limited
(ONGC). Misra took
over the role Aug. 1, and
oversees a workforce of
33,000-plus individuals.
He received a masters
degree in public administration from the University
of Lucknow, and joined
ONGC in January 1985.
Misra began his career
in the companys Baroda
office and later relocated
to Dehradun.

Weatherford International
has appointed Dianne B.
Ralston as executive V.P.,
general counsel and corporate secretary. Ralston joins
Weatherford with more
than 20 years of combined
legal, compliance and contractual experience in the
oil and gas industry. Her
most recent positions with
Schlumberger were deputy
general counsel, corporate,
as well as deputy general
counsel, government affairs
and litigation. William
B. Jacobson, senior V.P.,
co-general counsel and
chief compliance officer,
and Alejandro Cestero,
V.P., co-general counsel
and corporate secretary,
have both left to pursue
other opportunities, said
Weatherford.

Sergey Gustov has been

appointed director general
of Gazprom LNG Saint
Petersburg. He has a doctorate in engineering, and
is a graduate of Plekhanov
Saint Petersburg State
Mining Institute. From
1998 to 1999, Gustov was
deputy director for cooperation with state-funded
entities of Mezhregiongaz,
a Gazprom affiliate in the Leningrad
Region. He was later
deputy director general of
Peterburgregiongaz (1999
to 2004) and director
general of PeterburgGaz
(2004 to 2008). Most
recently, Gustov was director general of Gazprom
Gazoraspredeleniye,
serving from 2008.

Sigma Cubed Inc. has

appointed Dr. Alan J.
Cohen as chief technology officer (CTO) and
Reservoir Characterization
Center of Excellence
(COE) leader. Cohen
brings more than 37
years of multi-disciplinary
reservoir characterization,
interpretation and seismic
processing experience to
his new role.

Borets, U.S., has named

Keith Russell president;
Jeremie Alley as the
companys global
marketing manager, in
Houston; and Mark Wynot
as V.P. of operations in
Tulsa, Okla. Russell was
promoted to president
after six months as V.P.
of international marketing. Alley joins Borets
with extensive sales and
marketing experience,
including eight years with
John Crane Production
Solutions in two directorial positions. Wynot has
25 years experience in
consumer products, and
a decade of experience in
the manufacturing field.

Randi Martinsen, principal

with Hydrocarbon InSight
in Laramie, Wyo., has
assumed the presidency of
the American Association
of Petroleum Geologists
(AAPG). Her one-year
term began July 1.
Martinsen is a former longtime senior lecturer on
petroleum geology at the
University of Wyoming,
Laramie. She previously
served on the AAPG
Executive Committee as
treasurer in 200608,
and received the AAPG
Distinguished Service
Award in 2009. She began
her association with the
University of Wyoming
in 1981, and started
Hydrocarbon InSight in
2012. Joining Martinsen on
the Executive Committee
is John Hogg, president of
Skybattle Resources Ltd.
in Calgary, Canada, who
was voted president-elect,
and will serve as AAPG
president in 201516.

Cummins Inc. has

announced that Steve
Charlton, V.P. and CTO Engine Business, retired
from the company, effective July 1. The company
also announced that
Jennifer Rumsey had been
named V.P., Engineering
for the Engine Business,
succeeding Charlton.
Charlton joined Cummins
in 1993 as the director of
Advanced Engineering. He
became executive director,
Research, in 1999, and was
named executive director,
Advanced Engineering in
2001. In 2004, Charlton
was appointed technical
leader on the project
to develop Heavy Duty
Engine products to meet
the 2007 EPA emissions standards. He was
named V.P., Heavy Duty
Engineering, in 2008 and
went on to become V.P.
and CTO for the Engine
Business in 2010.

The board of directors for

the Research Partnership
to Secure Energy for
America (RPSEA) has
named James M. Pappas,
P.E., as acting president,
effective June 1. His
appointment follows the
resignation of Dr. Robert
W. Siegfried II. Pappas
most recently served as
V.P., Ultra-Deepwater
Programs, for RPSEA since
2011. Prior to his employment at RPSEA, Pappas
held various positions
with Devon Energy,
including global technology coordinator; as well
as drilling, completions,
production, reservoir, and
A&D engineering positions
with Santa Fe Snyder, Fina,
UPRC and Amoco.

The board of directors of

UK independent Premier
Oil has appointed Tony
Durrant as CEO. He joined
Premier in June 2005,
and has served as finance
director since then. Prior
to joining the company,
he worked at Lehman
Brothers, most recently
as managing director and
head of the European
Natural Resources Group.

As the 2014 Energy

Services Entrepreneur
Of The Year, Blackhawk
Specialty Tools, LLC
President and CEO
Billy Brown is now
eligible for consideration
for the Ernst & Young (EY)
Entrepreneur Of The Year
National Program, with
winners to be announced
in November. Honored at
the EY Entrepreneur Of
The Year Award Gala for
the Gulf Coast area, Brown
was recognized for leading
his company through a
shift in focus from the Gulf
of Mexico to the U.S. shale
markets, following the
Deepwater Horizon
drilling moratorium.

World Oil/AUGUST 2014123

COMPANIES IN THE NEWS

EDITORIAL@WORLDOIL.COM

Tenaris has entered into

a long-term agreement
with KPO (Karachaganak
Petroleum Operating)
for the supply of OCTG,
TenarisHydril premium
connections and field
services for the companys
developments in the
Karachaganak field, in
northwest Kazakhstan.
Partners in the Karachaganak venture are BG Group, Eni, Chevron,
Lukoil and KazMunayGas. To support local operations, Tenaris will
invest $40 million to build a new premium threading facility with
a capacity of 45,000 tpy in Aktau. The supply agreement will last
from 2014 to 2017, with an optional two-year extension.

Total, with its partner DONG, has

decided to launch the development of Edradour gas field in the
West of Shetland area, and has
also acquired a 60% interest in the
neighboring Glenlivet discovery.
The tiebacks of Edradour and
Glenlivet to Laggan-Tormore
are expected to add reserves of
more than 65 MMboe. Following
Totals entry into Glenlivet with
a 60% interest, DONG will retain
a 20% interest, along with Faroe
Petroleum (UK) and First Oil
Expro, each holding a 10% interest.

Halliburton has signed an agreement with SPT Energy Group

affiliate, Petrotech (Xinjiang)
Engineering Co., to establish a JV
focused on hydraulic fracturing
and production enhancement
services in Xinjiang. The new
company, Xinjiang HDTD Oilfield
Services Co. Ltd., will provide
fracture stimulation services,
including design and analysis,
data acquisition, and pumping and
chemical services in the Xinjiang
Uygur Autonomous Region. This is
Halliburtons first JV for hydraulic
fracturing services in China.

Petronas, Petronas Carigali and

Shell Malaysia have expanded
the terms of the 2011 Baram Delta
(BDO) production-sharing contract
(PSC) for enhanced oil recovery
(EOR) projects, offshore Sarawak,
to include gas rights. With the
signing of the heads of agreement (HOA) for Baram Delta Gas
Gathering Project 2, associated
and non-associated gas rights
linked with the Baram Delta operations will be incorporated into the
2011 Baram Delta EOR PSC. Tukau
Timur field, previously part of the
SK307 PSC, will also be integrated
into the 2011 Baram Delta EOR
PSC, enabling non-associated gas
to be developed as part of a single,
integrated development project.

With the expansion of the original

PSC, Shell and Petronas Carigali
will gain access to gas rights not
included previously.

Statoil said it will suspend its

contract with Saipem for the
Scarabeo 5 rig from the fall of
2014, provisionally for the
remainder of the year, citing an
overcapacity in its rig portfolio. The
rig will be laid up for a brief period,
but Statoil is planning to recommission it after the end of the
year. The rig is engaged in
operations on Visund and was
scheduled to complete its work
there this month. The rig is on
contract until 2017, and will be
used for the drilling and completion of production wells on various
NCS fields. Photo credit: Kjetil
Alsvik/Statoil.

Baker Hughes Incorporated

reported that it has achieved
the highest rating for any public
company in the energy sector, in
Newsweeks 2014 Green Rankings,
placing 11th among the 500 largest
U.S. companies, and 20th among
the 500 largest global companies.
Newsweeks Green Rankings
rates companies on a variety
of corporate sustainability and
environmental impact factors.

Technip was awarded a new

framework agreement by Statoil,
Exxon Mobil and Gassco for
diving, subsea intervention and
repair contingency services.
Under the terms of this framework

124AUGUST 2014/WorldOil.com

agreement, a replacement for an

existing frame agreement held for
eight years, Technip will provide
these services during the next four
years. This contract also includes
an option for additional periods
up to seven years. The services
comprise diving and remote operations using the groups dedicated
diving support vessels (DSVs) and/
or construction vessels.

Sakhalin Energy and Sovcomflot

have signed contracts for the construction and long-term operation
of three multifunctional, icebreaking standby vessels to serve
the Sakhalin-2 offshore energy
platforms. Operations under the
contract will continue for 20 years.
The contracts are a continuation of
the memorandum of understanding, and the contract for supply,
of the multi-task, ice-class supply
vessel for Sakhalin-2 offshore
platforms, signed between the two
companies in April.

Wood Group has reached an

agreement with Agility Group
to acquire Agility Projects AS, a
Norwegian engineering, procurement, construction management,
installation and commissioning
company, for a total consideration
of approximately $164 million.
The wholly-owned subsidiary
is focusing on activities on the
Norwegian Continental Shelf
(NCS) and has operations in Oslo,
Stavanger, Bergen and Moss, and
an engineering office in Shanghai.
Agility Projects will operate within
Wood Group Mustangs offshore
business.

Santrol, a Fairmount Minerals

company, reported that
Chesapeake Energy termed its
Propel SSP proppant transport
technology a technical success following seven field trials,
according to a presentation from
mid-June. The trials occurred in the
Eagle Ford, Marcellus, Mississippian
Lime and Utica shales. Marcellus
and Utica production results are
pending. Four-month Eagle Ford
results showed a slight production
increase with 7% less proppant.
Mississippian Lime production
increased 25%, to date. Additional
trials will be performed to verify
results. The results noted that the
technology was not affected by
harsh environments.

Steelhead LNG Corp. and the

Huu-ay-aht First Nations (HFN)
have signed an opportunity

development agreement that

will see them work together
to explore developing an LNG
project on HFN-owned land at
Sarita Bay, Vancouver Island,
British Columbia. The project
could ultimately represent an
investment of $30 billion, and
would include a liquefaction
facility that would run for at least
25 years. On July 8, Steelhead
LNG applied to Canadas National
Energy Board for a license to
export up to 30 MMtpy of LNG
for 25 years. Development of the
Sarita Bay site would be split into
four, 6-MMtpy LNG trains.

A JV of five industrial auction

companies announced that it
will sell the physical assets of the
McDermott fabrication facility
in Amelia, La. McDermott, an
engineering, procurement,
construction and installation
specialty firm, continues to
operate its fabrication facilities at
multiple locations worldwide. The
auction is scheduled to run
Sept. 812, at 2317 Highway 662
South, Amelia (Morgan City),
La., 70340. The offering will be
conducted throughout a 300-acre
complex via a multi-day, on-site/
online public auction sale.

Energy industry corporate finance

advisory Simmons & Company
International Ltd has advised on
an oilfield services deal worth
an estimated $500 million in the
Middle East. The firm played a
role in the acquisition of National
Petroleum Services (NPS) by a
consortium of investors, led by
sovereign-backed investment firm
Fajr Capital. The deal, which was
completed in late June, is believed
to be the biggest oil services M&A
transaction in the Middle East to
date, according to estimates from
Simmons & Company.

NuPhysicia, Inc., a global

telemedicine technology and care
provider, will deploy telemedicine
and electronic medical records
(EMR) throughout Canadian
locations with its latest partner,
Atlantic Offshore Medical Services
(AOMS). AOMS is rolling these
advancements out at 10 of its
operated facilities throughout
Canada. AOMS now enables
on-site medical staff to beam
in a physician for diagnosis and
treatment. Doctors and patients
can see and speak to each other,
and healthcare workers can share
charts, vitals and medical information in remote situations.

NEW PRODUCTS AND SERVICES

EDITORIAL@WORLDOIL.COM

Mats offer big foot, soft print in eld

Dragons patent-pending ECOmat combines a compression
strength of 1,000 psi with static and UV inhibitors, in addition
to other tested features, to offer an alternative to traditional
wood mats in a variety of rig, pipeline and construction site
applications. Dragons synthetic product does not have a
hollow core, like many other composite mats. The ECOMat does
not absorb liquids, and thus reduces collection of mud and
debris. This reduces freight-out and cleaning costs, as the ECOmat has a lighter post-job weight;
the mats weigh roughly 2,750 lb ( 2%), to start. Offered in multiple designs, sizes and colors, the
mats include recessed, galvanized D-Ringsrated to 2,400 lb, eachwhich are designed for easier
loading, offloading, laying and moving. Dragons three-ply synthetic mat is rated to 2,750 lb per
mat, and the four-ply digging mat is rated to 3,750 lb per mat. The product is approved for overhead
lifting, meets ASME B30 lifting standards, and includes no nails, for extended strength.

High-availability
BOP control
system introduced

www.oilfieldrigmats.com

Trace gas analyzer

plays key role in
mobile monitoring
Los Gatos Research (LGR), a
member of the ABB Group, has
successfully applied its laserbased Fast Greenhouse Gas
Analyzer to mobile monitoring
of methane leakage from oil and
gas production and distribution
pipelines. The analyzer is a key
contributor to an automobilebased system that makes possible
real-time mobile measurements
of greenhouse gases and
pollutants. The LGR trace gas
analyzer works in conjunction with a global positioning
system, sonic anemometer, and
real-time graphical display for
visualizing acquired data. It is
mounted within, or on, a car. A
fast-flow vacuum pump pulls
samples through the analyzer in
less than 0.2 sec, to enable high
spatial resolution, while driving at
highway speeds. The mobile measurements enable quantification
of time-related variables, such as
shifting winds, pulsed emissions
or multiple, shifting emission
sites. The company said it expects
these mobile systems to supplant
or supplement fixed measurement
stations and/or lab analysis.
www.abb.com/measurement

Total execs book addresses future

supply, demand balances

Sikorsky Aircraft Corp. has begun delivering S-76D helicopters equipped

for executive transport services. The company delivered the first S-76D
to Bristow Group, Inc., for offshore oil worker transportation in December.
Sikorsky also announced that it has begun delivering S-76D helicopter
equipped for search-and-rescue (SAR) service. By the end of this year,
the company said it expects to deliver S-76D helicopters equipped for
emergency medical services; the fourth and final mission segment for
the S-76D helicopter. S-76D helicopter VIP options include a customized
interior with seating for five to eight passengers. The helicopters baseline
equipment includes Pratt & Whitney Canada PW210S engines; a THALES
TopDeck integrated avionics system and four-axis autopilot; a health and
usage monitoring system (HUMS) incorporated into fleet monitoring and
analysis; active vibration control; and all-composite, flaw-tolerant main
and tail rotor blades. A rotor ice protection system (RIPS) for all-weather
capability will be available as an option.

Cameron has introduced the

Mark IV control system, featuring a redundant, three-Point of
Distribution (POD) design, as an
option for its subsea BOPs. The
company introduced the first multiplex BOP control system for subsea drilling, and has developed
a patent-pending, three-POD
stack design, which will provide
drillers with additional operational
reliability through redundancy.
Adding a third POD can improve
the subsea control systems availability to as much as 98%, and
reduce the likelihood of a PODrelated stack pull by up to 73%.
Actual system availability will vary
with conditions, the company
notes. In addition to redundancy,
the design of the POD for the new
control system increases reliability. Each POD has been designed
to offer increased functionality in
a smaller, lighter package. The
simpler design can reduce leak
paths by utilizing 50% less tubing,
compared to Camerons previous
two-POD design. Additionally,
the number of available functions
has increased 33% to accommodate newer, eight-cavity stacks.
POD size was reduced 26%,
and the company says weight is
one-third less than competitors
control PODs.

www.sikorsky.com

www.c-a-m.com

A new book from author Philippe Charlez, manager of unconventional

resources for the Total Group, addresses potential changes in the global
energy dynamic to 2035, as fossil fuels continue to make up the largest
share of the worlds energy mix. In Our energy future is not set in stone:
How can the demand for oil and gas in 2035 be met?, Charlez analyzes
technical, political, economic, social and human factors that could
potentially accelerate or delay the maintenance and redevelopment of
mature producing fields, as well as the discovery and development of
new conventional and unconventional resources. The author aims to
take a closer look at how energy producers and consumers will strike
a balance in future supply and demand, emphasizing that our energy
future is not set in stone.
www.editionstechnip.com

Helicopters equipped for executive

transport, search-and-rescue

Safe, efficient, solar-powered wireless

load cell works on pumping units

Bolt-on pump package for offshore

applications

Bright Automation, a designer and manufacturer of monitoring and

control products, has introduced a fully solar-powered, wireless load
cell, designed for use on oil field pumping units. The Bright Wireless
Load Cell has a solar-powered battery, transmitting data via a 2.4-GHz
wireless digital communication protocol. Based on its wireless design,
the Bright Load Cell provides easier, faster installation, according
to the manufacturer, and reduces shutdowns associated with cable
failure. The receiving module output generates a standard 4-20-mA or
0-10-mV signal.

BBA Pumps has introduced a bolt-on pump package, featuring a

sub-frame assembly that caters to the offshore industry, where there
is no need for a complete skid and/or canopy. The units can include a
range of BA-C pumps, coupled to a diesel engine, including the control
panel, and mounted on a galvanized sub-frame. The frames can be
customized with lifting bales, protection bars, etc., should such
equipment be required. The auto-prime pumps have a capacity of
100 m3/hr, to a maximum of 1,750 m3/hr, and a head, up to a maximum
of 250 mwc.

www.brightautomation.com

www.bbapumps.com

World Oil/AUGUST 2014125

MARKETPLACE
CLASSIFIED@WORLDOIL.COM / +1 (972) 816-3534

SUNCOR SURPLUS NEW

ELECTRIC MOTORS FOR SALE
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ADVERTISERS IN THIS ISSUE

American Petroleum Institute .........................................39
www.api.org/Q2Apply

Ametek Drexelbrook ..........................................................63

www.drexelbrook.com/cutmonitor

Arnco Technology.............................................................. 66
www.hardbanding.com

Ashman Company ............................................................. 60

www.ashmancompany.com

Baker Hughes .......................................................................28

www.BakerHughes.com/SandControlLeader

Blue Spark Energy ..............................................................58

www.bluesparkenergy.net

Bristow Group Inc .............................................................. 115

www.bristowgroup.com

BWA Water Additivies ......................................................68

www.wateradditives.com

C-FER, Inc..............................................................................69
www.cfertech.com/production-operations

Cameron .................................................................................. 5
www.c-a-m.com

Chevron ................................................................................. 111

www.chevron.com/careers

CNPC GWDC ........................................................................77

www.cnlc.cn

Distribution Now ................................................................. 10

www.distributionnow.com

Dragon Products, Ltd ........................................................97

www.dragonproductsltd.com

Expro Americas ...................................................................45

www.exprogroup.com/eqs

Exterran .................................................................................95
www.exterran.com
www.flotekind.com

FMC Technologies................................................................14
Forum Energy Technologies, Inc. ...................................33
www.f-e-t.com/yourforum

Gardner Denver .....................................................................6

www.gardnerdenverpumps.com

Global Geophysical Services .......................................... 99

www.globalgeophysical.com

Gulf Publishing Company

Events - GasPro............................................................... 129
Events - HPHT ........................................................ 82A, 113
www.HPHTConference.com

Events - WGLC ................................................................. 118

www.WGLNetwork.com

US Gas Plant Directory .................................................. 116

www.HydrocarbonProcessing.com/GPPD

World Oil Awards............................................................. 121

www.Awards.WorldOil.com

World Oil Marketplace .................................................. 126

Halliburton .............................................................................. 8
www.Halliburton.com/boots-coots

Hardbanding Solutions By Postle Industries ........59, 61

www.hardbandingsolutions.com

Industrial Rubber .........................................................................4

www.iri-oiltool.com

Intellian ..................................................................................73
www.intelliantech.com

JEM Industrias Metalurgicas S.A. .................................. 50

www.jem.es

JFE Steel................................................................................24
www.jfe-steel.co.jp/ENERGY

JONELL, INC .........................................................................54

www.jonellinc.com

K-B Industries ......................................................................42

www.kb-industries.com

K+S KALI GMBH ...................................................................41

www.kali-gmbh.com

Knight Oil Tools ..........................................................................52

www.knightoiltools.com

M-I SWACO, A Schlumberger Company ......................22

www.slb.com/hpht

MTU ........................................................................................101
www.2-cycle.mtu.online.com

MTU ........................................................................................101
www.mtu-online.com/valueexchange

National Oilwell Varco ......................................................... 2

www.nov.com/wo/grantprideco

National Oilwell Varco ........................................................18

www.nov.com/wo/hardbanding

NCS Energy ........................................................................ 107

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Newpark Drilling Fluids.................................................... 30

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NOV Fiber Glass Systems ................................................ 64

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OneSubsea, A Cameron & Schlumberger Company ..108

www.onesubsea.com/realtimemonitoring

ORR Safety Corporation ....................................................51

www.konggloves.com

Packers Plus ........................................................................ 20

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Parker Hannifin Corporation........................................... 131

www.parker.com/underpressure

PGS Exploration (UK) LTD ................................................81

www.pgs.com

N / WorldOil.com

ON, DRILLING AND PRODUCTIO

APRIL 2014 / DEFINING

TECHNOLOGY FOR EXPLORATI

PT PIPA MAS PUTIH .......................................................... 114

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Rushmore Associates Ltd. ................................................93

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OTC 2014

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Schlumberger .................................................................... 132

www.Drilco.com

Scott Safety ......................................................................... 84

www.UniversalByScott.com

SMU-Cox School Of Business ......................................... 40

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Spina Group SRL ...............................................................120

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Momentive Specialty Chemicals ....................................92

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Flotek Industries .................................................................57

Mechanix Wear Inc .............................................................75

www.spinagroup.com

Superior Energy Services ................................................ 49

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Supreme Services, Inc. ..................................................... 94

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Tam International ................................................................26

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Tejas Tubular Products, Inc. ............................................ 48

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Tenaris .....................................................................................12
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Tesco Corporation ..............................................................37

www.tescocorp.com

Tiger Industrial Rentals ......................................................91

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TIW Corporation .................................................................47

www.tiwtools.com

Trade House TMK ................................................................70

www.tmk-group.com

U.S. Steel Tubular Products .............................................34

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Volant Products Inc. ......................................................... 102

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Weatherford ........................................................................ 46
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Well Control School ............................................................13

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World Oil/AUGUST 2014127

WO0514_Circ_TRDV.indd 1

5/6/14 8:49 AM

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128AUGUST 2014/WorldOil.com

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Tim Rollenhagen, PE, PEng

Lead Process Engineer
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Robert Schosker
Team Lead Interface Technologies
Product Manager
Pepperl + Fuchs, Inc

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We invite you to join us on September 1617 at the Hyatt Regency Houston for this exciting,
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knowledge-sharing and best practices.

Specic topics to be discussed include:

NGL/LNG
Alternative Uses
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Development
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Equipment
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Compressors/Equipment
Process Improvement
Reliability
GTL/Modular Construction
View the complete agenda online at GasProcessingConference.com

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THE LAST BARREL

KURT S. ABRAHAM, EXECUTIVE EDITOR

Tracking the enemy from within

In the U.S. these days, there is much
concern about whether unrest and turmoil in various regions, whether it be in
the Middle East, Ukraine or somewhere
else, will affect U.S. trade, prosperity and
national securityand, by extension,
the health of the upstream oil and gas
industry. Yet, as relates to the U.S. E&P
industry, the greatest threat to its health
is posed not by groups overseas, but by
the single largest force within our own
borders, the Executive Branch of the U.S.
federal government.
More specifically, the White House is
conducting a calculated agenda against
upstream activity, using over-reaching
rulemaking by the Environmental Protection Agency (EPA), the Bureau of
Land Management, U.S. Fish and Wildlife Service and others. The motive behind this effort seems to be rooted in
two things shared by some White House
advisors: 1) A misplaced, nave belief
that if fossil fuels are eradicated, climate
change will end; and 2) An in-your-face,
watered-down Marxist ideology that
would make Joe Stalin (or maybe Vladimir Putin) blush with embarrassment.
There is no doubt that the administrations lead attack dog is the EPA, led by
its left-leaning administrator, Gina McCarthy. A career bureaucrat and life-long
environmental activist, McCarthy is more
than happy to push the White Houses climate and anti-industry agenda.
To see why EPA is such a threat, consider five recent actions. First, in April
2014, EPA compiled a white paper on
methane emissions and VOC leaks from
oil and gas production, processing, transmission and storage, with an eye toward
crafting much more stringent rules than
those in force. Second, on July 1, EPA
made good on its threat by proposing
updates and clarifications to its 2012
New Source Performance Standards for
the industry, which would, indeed, make
life more difficult.
Third, in a move related to the previous two items, McCarthy & Co. on May
130AUGUST 2014/WorldOil.com

22 issued notice of a proposed rule, to

manage emissions from oil and natural gas production in Indian Country.
Fourth, on June 2, EPA issued its plan to
cut Greenhouse Gas Emissions (GHGs)
from power plants by 30% by 2030.
While not tied directly to oil and gas, it is
another example of EPAs fossil fuels attitude. Last, and perhaps most insidious,
EPA announced on July 8 that it has the
authority to unilaterally garnish the wages
of individuals, who have been accused of
violating its rules, and floated a proposed
rule to that effect.
Taken together, much of this daunting, federal executive over-reach may
be illegal. Furthermore, none of these
items requires consultation with, and approval by, Congress. Yet, precious little
has been done to stop this out-of-control
rulemaking. So far, very few people have
tried to explain to the American public
how this bad laundry list will cost them
money and endanger their freedoms. But
someone shouldthe first two items, on
methane emissions and VOC leaks, will
require equipment retrofits; create a lot of
extra paperwork; and cost a ton of money
and potentially some jobs.
The third item, production emissions
on Native American lands, could potentially discourage new development, and
that would cost various Indian tribes
some of their oil and gas income. The
fourth item, reducing power plant GHGs,
has elicited the most reaction, since so
Worried coal miners protested EPAs power
plant GHG plan in Pittsburgh on July 30
(source: Pittsburgh Post-Gazette).

many coal mining and electricity generation jobs are threatened. Indeed, the
United Mine Workers of America staged
a protest (see photo below) in Pittsburgh
during late July, while EPA conducted
public hearings on this proposed plan.
This is one union, for which Mr. Obamas
shtick no longer works.
On the fifth item, garnishing wages,
the Debt Collection Improvement Act of
1996 gives all federal agencies the power
to conduct administrative wage garnishment, but only the Internal Revenue Servicewhich traditionally has had this
rolehas taken it seriously. Yet, EPA now
says that it has this authority without first
obtaining a court order. This should put
chills down the spines of all industry executivesif their corporations are found
to be in non-compliance with EPA rules,
they could be held liable, too.
Beyond the coal miners, condemnation of EPAs behavior is slowly growing.
Last month, Republican Senators David
Vitter (La.), Mike Enzi (Wyo.) and John
Barrasso (Wyo.) sent a letter to McCarthy, in which they lectured her that EPAs
new wage garnishment procedures provide an agency prone to regulatory abuses
with even more power over Americans.
Two weeks later, Sen. Jeff Sessions (Rep.
Ala.) told McCarthy during a committee
hearing, The American people run this
countryyou dont run this country.
Yet, an ever-defiant McCarthy responded that a Supreme Court endangerment
finding on carbon pollution gave the EPA
plenty of authority.
There are some in the natural gas sector, who think its okay for the feds to dismember the coal industry, because that
would open up a wider window for gas
generation of electricity. But thats shortsighted thinkingthe EPA is still going
to attack oil and gas, whether or not the
coal industry survives. Instead, we should
all band together in a greater effort to fight
off these federal tyrants.

KURT.ABRAHAM@WORLDOIL.COM

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Technology and Business Information for the Global Gas Processing Industry

GasProcessingNews.com | JULY/AUGUST 2014

SMALL-SCALE
GAS PROCESSING
SOLUTIONS
SHRINKING TECHNOLOGY
Leading companies discuss
big impacts from small plants

LNG DESIGN
Design considerations for LNG
and regasification equipment

MIDSTREAM BUSINESS
Diversification drives
North American M&A activity
Special Supplement to

Mission Critical
Equipment

Brazed Aluminum Heat Exchangers,

Cold Boxes, Air Cooled Heat Exchangers
at the heart of gas processing

chart-ec.com

JULY/AUGUST 2014
GasProcessingNews.com

SPECIAL REPORT:
SMALL-SCALE GAS
PROCESSING SOLUTIONS
23

Velocys shrinks GTL

hardware, offers technology
solutions for gas producers
R. Lipski

25

Small-scale GTL technology

cuts production costs
for drop-in fuels
G. Boyajian

29

61

S. Gill

41

25

Valerus CEO: Modularization

is key to gas industry
evolution
Consider technology
implications for small-scale
Fischer-Tropsch GTL
A. de Klerk

49

Planning small-scale LNG?

Manage engineering risk
to maximize returns
E. H. Rodriguez

BONUS REPORT: LNG

55

Simplify BOG recondenser

design and operation
Part 2
S. P. B. Lemmers

61

15

Uruguay inds loating

regasiication solution to LNG
growth
M. Nogarin

Gas Processing News .....................................................................................6

GAS PROCESSING IN
NORTH AMERICA

US Industry Metrics ...................................................................................... 12

63

DEPARTMENTS

Whats New in Gas Processing Technology ............................................. 69

COLUMNS

Diversiication drives
North American
gas processing M&A activity
J. Stell

Editorial comment ................................................................................................... 4

Small-scale gas processing offers flexibility, adaptability
and cost-effectiveness

Regional perspective: Canada ............................................................................15

Canadas gas processing industry faces
three challenges, and more opportunities

Boxscore Construction Analysis ................................................................. 21

Alaska LNG JV eyes FID amid growing competition

Cover Image: The Velocys smaller-scale GTL pilot

plant and customer training center in Plain City,
Ohio has been in operation since March 2013. It
includes microchannel Fischer-Tropsch and steam
methane reforming reactors. The pilot plant is testing
commercial plant configurations at commercially
relevant operating conditions. Note: Pilot-plant
workers are not required to wear hard hats.

EDITORIAL COMMENT

Small-scale gas processing

offers flexibility, adaptability
and cost-effectiveness

www.GasProcessingNews.com
P. O. Box 2608
Houston, Texas 77252-2608, USA
Phone: +1 (713) 529-4301
Fax: +1 (713) 520-4433
Editorial@GasProcessing.com

PUBLISHER
Bret Ronk
Bret.Ronk@GulfPub.com

ADRIENNE BLUME,
Managing Editor

Small-scale gas processing technologies and facilities

provide alternative ways of producing synthetic crude oil,
transportation fuels and chemicals from stranded, small or
associated gas reserves and biogas. These technologies are
becoming more refined, allowing for special-purpose adaptations and designs.
With several companies preparing to transition from the
pilot-plant stage to the demonstration/commercial stage,
the small-scale GTL arena is gearing up to make significant
inroads into localized fuel markets. The July/August special
report examines technology selection and market development for small-scale gas processing solutions, from both a
technical and commercial perspective.

Shrinking hardware, expanding efficiency. From a technical angle, the implications

of technology decisions associated with the processing steps in small-scale GTL facilities
are discussed, as is the construction of the necessary processing capacity and infrastructure to deliver LNG to customers. Small and mid-sized, purpose-built GTL and LNG
production facilities can be constructed close to natural gas fields. They are dedicated to
customers that need energy or to producers seeking to make use of marginal gas supplies.
Mobility and adaptability equal profit. From a commercial viewpoint, the success of

small-scale GTL technologies will be determined by market needs, as well as by the growing shift in production from site-specific to distributed processing. Velocys CEO Roy Lipski discusses the challenges inherent in transporting natural gas, which is a cheaper and
more environmentally friendly fuel than oil or coal. These challenges can be turned into
opportunities with the help of smaller-scale production facilities that are positioned
closer to gas gathering and processing sites. Such smaller-scale production networks are
more flexible, robust and adaptablea view also shared by Valerus CEO Steve Gill.
Valerus sees the industry as being challenged to focus on building facilities that meet a
wide range of process conditions, enable quick installation and have scalability. In this way,
small-scale gas processing solutions help expedite cash flow, which has become a main
concern for producers as they continue to build gathering and processing infrastructure.
Feed flexibility enhances production options. Additionally, the vice president of

business development for Primus Green Energy, George Boyajian, speaks to Gas Processing about the importance of feedstock flexibility to successful small-scale fuels production.
He explains how Primus technology uses a variety of carbon-rich feedstocksincluding
natural gas, biomass, municipal solid waste and othersto make high-quality syngas.
The mix of engineering and commercial perspectives in this months special report
provides a comprehensive picture of the evolving small-scale gas processing industry, and
how these technologies can be applied to create custom solutions for large, mid-sized and
small gas processors alike. Additionally, a bonus report on LNG examines the design and
operation of boiloff gas recondensers for liquefaction operations, as well as the construction of a new offshore regasification facility in South America. GP

4JULY/AUGUST 2014|GasProcessingNews.com

EDITORIAL
Managing Editor
Adrienne Blume
News Editor
Melanie Cruthirds
Associate Editor
Helen Meche
Director, Data Division
Lee Nichols
Editor, Hydrocarbon Processing
Stephany Romanow

MAGAZINE PRODUCTION
Vice President, Production
Sheryl Stone
Manager, Editorial Production
Angela Bathe
Artist/Illustrator
David Weeks
Graphic Designer
Amanda McLendon-Bass
Manager, Advertising Production
Cheryl Willis

ADVERTISING SALES
See Sales Offices, page 70.
Copyright 2014
by Gulf Publishing Company.
All rights reserved.

President/CEO
John Royall
Vice President
Ron Higgins
Vice President, Production
Sheryl Stone
Editor-in-Chief
Pramod Kulkarni
Business Finance Manager
Pamela Harvey
Part of Euromoney Institutional Investor PLC.
Other energy group titles include:
Hydrocarbon Processing, World Oil and
Petroleum Economist.

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GAS PROCESSING NEWS

M. CRUTHIRDS, News Editor

Dual-fuel engines for worlds rst LNG icebreaker

A new icebreaker being built
by Arctech Helsinki Shipyard
for the Finnish Transport Agency
will be powered by Wrtsil
dual-fuel engines capable of
operating on both LNG and
low-sulfur diesel fuel. When
launched in late 2015, it will be
the first LNG-powered icebreaker
in the world. By enabling LNG to
be used as the engine fuel, both
exhaust emissions and fuel costs
will be reduced.
The full scope of supply
calls for one 8-cylinder Wrtsil
20DF engine; two 9-cylinder
Wrtsil 34DF engines; and two 12-cylinder Wrtsil 34DF engines. The contract was signed in March,
and delivery of the equipment to the yard will be made in spring 2015. The vessel will be able to move
continuously through 1.6-m-thick ice, and be capable of breaking a 25-m-wide channel with 1.2-m-thick ice
at a speed of 6 knots. It will also be able to reach an average assistance speed of 9 knots to 11 knots, and, in
open water, the service speed will be a minimum of 16 knots.
While the main purpose of the vessel is icebreaking, it will independently be able to perform oil spill
response operations and emergency towing under demanding conditions, both in winter and summer.
Image courtesy of Wrtsil.

LNG bunkering
report addresses
regulations
ABS, a provider of
classification services to the global
marine and offshore industries, has
released a report on the bunkering
of LNG-fueled marine vessels in
North America. The objective of
the report is to provide guidance
to potential owners and operators
of gas-fueled vessels, as well
as LNG bunkering vessels and
facilities, to help them obtain
regulatory approval for projects.
The report, developed by
ABS and ABS Group, takes a
broad look at the requirements
of various regulatory bodies,
including the International
Maritime Organization, the US
Coast Guard (USCG), Transport
Canada, the US EPA, and the
many state and local authorities
involved in a bunkering project.
Included in the report is
a recommended process for
meeting those requirements
and obtaining approval for the
LNG bunkering infrastructure
project. The report touches on
a number of key considerations
for any LNG bunkering project,
including reviewing potential
bunkering options; identifying
potential hazards and risks,
and recommending potential
safeguards; presenting state,
local and port-specific issues;
summarizing applicable
regulations; and outlining a
process for meeting those
requirements and obtaining
project approval.

Technology selected for Malaysian

FLNG project
Air Products, a provider of
LNG technology and equipment,
has signed an agreement
with JGC Corp. to provide its
proprietary LNG technology,
equipment and process license
for Petronas second floating LNG
(FLNG) project, PFLNG 2, to be
located off the coast of Malaysia.
PFLNG 2, which will draw
natural gas from the Rotan field
in the South China Sea offshore
Sabah, Malaysia, will use the
companys proprietary AP-N
LNG process and equipment. Air
Products will manufacture the
equipment, including coil-wound
heat exchangers and compressorexpanders, at facilities in the US,
and the economizer cold boxes in Tanjung Langsat, Malaysia.
The equipment will be shipped from the Air Products manufacturing
facilities for assembly into modules, and then installed on the PFLNG
2 vessel. The AP-N LNG process was also selected for Petronas
previously announced PFLNG 1 project, which is under construction in
South Korea. Image courtesy of Air Products and Chemicals Inc.

Louisiana LNG secures funding, contractor

Louisiana LNG Energy (LLNGE) has acquired funding from an
affiliate of ArcLight Capital Partners for the companys mid-scale LNG
export terminal under development in Louisiana, along the Mississippi
River. The project, which is expected to start up in late 2017, will have an
export capacity of 2 MMtpy, possess deepwater access for very large gas
carriers (VLGCs), and utilize modular construction for speed to market.
Additionally, LLNGE announced that it has selected Chart Energy
and Chemicals to perform advanced engineering for the project, based
on the companys 500,000-tpy standard LNG liquefaction plant design.
The plants will feature Charts proprietary liquefaction technology, with
in-house design and manufacture of all mission-critical equipment. The
project has also procured four manufacturing space reservations with
Chart, to ensure that the 2-MMtpy LNG plant can be online in the fourth
quarter of 2017.

6JULY/AUGUST 2014|GasProcessingNews.com

EPA nalizes
ONEOK GHG permit
The US Environmental
Protection Agency (EPA) has
issued a final greenhouse gas
(GHG) Prevention of Significant
Deterioration (PSD) construction
permit to ONEOK Hydrocarbon.
The company plans to expand
operations at its existing NGL
processing plant in Mont Belvieu,
Texas. The permit allows the
company to construct two new
units at its Mont Belvieu facility,
east of Houston.
The units will use fractionation
to process NGL into products
such as propane and butane. The
estimated project cost is $800
million (MM). After the expansion
is complete, the company will
add 15 to 25 permanent jobs.
The EPA issued a previous GHG
permit for this facility in July 2013.
In June 2010, the EPA finalized
national GHG regulations, which
specify that, beginning on January
2, 2011, projects that increase
GHG emissions substantially will
require an air permit. The EPA has
finalized 44 GHG permits in Texas,
proposed an additional seven
permits, and has 19 additional GHG
permit applications under review.

Magnolia LNG les

export application
Magnolia LNG LLC has filed
an application with the US FERC
seeking authorization for the
siting, construction, ownership
and operation of the proposed
Magnolia LNG project. Located
along the Calcasieu River, near
Lake Charles, Louisiana, Magnolia
LNG is a wholly owned subsidiary
of Australia-based Liquefied
Natural Gas Ltd.
The FERC filing follows
extensive work performed by the
Magnolia LNG team on front-end
engineering design (FEED),
pre-filing consultation and the
preparation of 13 draft resource
reports for FERC. The work,
which has been ongoing since
early 2013, has also involved
consultation with other federal,
state and local agencies, such
as the Louisiana Department of
Environmental Quality, the US
Department of Transportation
(DOT) and the US Coast Guard.
Magnolia LNG anticipates
receiving all approvals during
2015. Construction will begin
shortly thereafter, with first LNG
exports planned for the second
half of 2018.

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GAS PROCESSING NEWS

M. CRUTHIRDS, News Editor

Permian basin
midstream
gas deal inked
Canyon Midstream Partners
has entered into gathering and
processing agreements with
Apache and XTO Energy, a
subsidiary of Exxon Mobil, for
midstream services on Canyons
James Lake System. In addition,
Canyon said it expanded its
cryogenic gas processing plant
at the James Lake plant in Ector
County, Texas, from 70 MMcfd to
100 MMcfd, by adding a 30-MMcfd
cryogenic turboexpansion train.
The James Lake plant is part
of Canyons James Lake system,
which includes 60 mi of 12-in.
trunkline and six field compressor
stations providing low-pressure
gathering services to Ector,
Andrews, Martin, Dawson and
Gaines counties, Texas.
When completed in late 2014,
the James Lake system will deliver
residue gas into the El Paso gas
pipeline, and deliver NGL to the
Sand Hills and Chaparral pipelines.
Canyon is also developing Phase 2
of the James Lake system, which
will consist of a second 100-MMcfd
cryogenic gas processing plant in
Martin county and 60 additional
mi of 12-in. trunkline, which will
expand the systems service
territory into Howard and Borden
counties, Texas. Canyon expects
Phase 2 to commence operations
in the first half of 2015.

FEED work
awarded for
Goldboro LNG
CB&I has been awarded a
contract by Pieridae Energy
for FEED for the Goldboro LNG
project located in Guysborough
County, Nova Scotia, Canada.
Under the FEED contract, CB&I
will design and engineer two LNG
trains and associated facilities in
preparation for the EPC phase.
Goldboro LNG will produce up
to 10 MMtpy of LNG and will
have onsite storage capacity of
690,000 m3 of LNG.
Pieridae is in advanced
discussions with several
natural gas producers, pipeline
operators and LNG customers,
the company reported. In June
2013, Pieridae entered into a
20-year sales agreement with
E.ON Global Commodities, a
subsidiary of one of the worlds
largest investor-owned power
and gas companies, to deliver
approximately 5 MMtpy of LNG
from Goldboro LNG to E.ON.

FERC approves Cameron LNG project

Sempra Energy announced
that its subsidiary, Cameron LNG,
has received authorization from
the US Federal Energy Regulatory
Commission (FERC) to site,
construct and operate a natural
gas liquefaction and export facility
at the site of the companys LNG
receiving terminal in Hackberry,
Louisiana.
The FERC permit is one of the
last major regulatory approvals
required to start construction
on the $9 B$10 B LNG facility.
The authorization approves the
development of the three-train
liquefaction facility, which will
provide an export capability
of 12 MMtpy of LNG, or approximately 1.7 Bcfd. The FERC also authorized a subsidiary of Sempra Energy to
construct a 21-mile, 42-in. natural gas pipeline expansion of the Cameron Interstate Pipeline, a new compressor
station and ancillary equipment that will provide natural gas transportation for the liquefaction facilities.
Earlier this year, Cameron LNG was awarded conditional approval from the US Department of Energy
(DOE) to export LNG to non-free-trade-agreement countries, including Japan and several European nations.

Gulf LNG awards FEED work

KBR has been awarded a
contract by Gulf LNG Liquefaction
Co. to provide FERC FEED
engineering and FERC report
pre-filing services. The contract is
aimed at supporting the addition
of 10 MMtpy of liquefaction and
export capabilities to Gulf LNG
Energy LLCs existing LNG import terminal in Jackson County, Mississippi.
Under the terms of the contract, KBR will perform FERC FEED
engineering for two LNG trains of 5 MMtpy each, and associated
facilities based on KBRs reference design using APCI C3MR technology.
Additionally, KBR will provide FERC technical documentation.
The terminal will retain its current capability to receive, store, regasify
and deliver natural gas into the interstate pipeline system as originally
constructed, thereby making the Gulf LNG terminal bidirectional.

Regency to build out gas processing

in Louisiana
Regency Energy Partners plans to construct a new processing plant
and NGL pipeline at its Dubberly facility in northern Louisiana. The
project will include the addition of a 200-MMcfd cryogenic processing
plant at the existing Dubberly facility, which will accept gas directly from
Regencys recently completed Dubberly gathering trunkline.
In addition, Regency will construct a 160-mile, 8-in. and 10-in.
NGL pipeline from Dubberly for delivery to fractionation facilities.
The pipeline will have an initial capacity of 25,000 bpd, and it will be
expandable via additional pump stations.
Combined project costs are expected to be approximately $260 MM,
and both projects are expected to be completed in mid-2015.

Algerian gas project in execution phase

A project consortium that includes RWE Dea has signed a $976
MM contract for the construction of a natural gas processing plant and
infrastructure in the Algerian Sahara for the Reggane Nord project.
Representatives of the Groupement Reggane, of which RWE Dea
is a partner, signed the contract to construct the natural gas processing
facilities and corresponding infrastructure, including the gathering
network and export pipeline, on May 15. The contract was awarded to
Petrofac International LLC, and it stipulates completion of the facilities
within 36 months.
After completion, the plant will be operated with a gas throughput
capacity of around 283 MMcfd.

8JULY/AUGUST 2014|GasProcessingNews.com

Dominion receives
favorable
FERC review

Dominion Energy has received

an assessment from the US FERC
that finds the natural gas export
project proposed at the existing
Cove Point LNG facility in southern
Maryland can be built and
operated safely, with no significant
impact to the environment.
Cove Point is the fourth LNG
export project to receive an
environmental document from
FERC. The cooperating agencies
that participated in the FERC
environmental assessment for the
Cove Point export project were
the US DOE; the Army Corps of
Engineers; the US DOT, including
the Pipeline and Hazardous
Materials Safety Administration;
the US Coast Guard; and
the Maryland Department of
Natural Resources.
The construction of the export
project, which is estimated to
cost between $3.4 B and $3.8 B,
will create thousands of skilled
construction jobs, 75 permanent
jobs and an additional $40
MM in annual tax revenue to
Calvert county. The county today
receives $15.7 MM/yr from the
LNG import facility.

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GAS PROCESSING NEWS

M. CRUTHIRDS, News Editor

Canada approves
LNG export
licenses
Canadas National Energy
Board has approved two
applications for 25-year natural
gas export licenses. A license was
approved for Aurora Liquefied
Natural Gas Ltd. to export LNG.
The export point would be in
the vicinity of Prince Rupert,
British Columbia, at the outlet of
the loading arm of a proposed
liquefaction terminal.
A license was also approved
for Oregon LNG Marketing
Company LLC to export natural
gas. The export point would be
in the vicinity of Kingsgate and
Huntingdon, British Columbia,
via existing natural gas pipelines.
The issuance of both licenses is
subject to the approval of the
Governor in Council.

Diesel-to-gas
engine picked
for pilot program
Omnitek Engineering Corp.
has been selected for a Little
Rock, Arkansas pilot program
intended to demonstrate
the economic benefits and
environmental effectiveness of
the companys EPA-approved
diesel-to-natural-gas engine
conversion technology for the
Navistar DT466E heavy-duty
truck engines used by the citys
municipal truck fleet.
Werner Funk, president and
CEO of Omnitek, noted that the
converted natural gas trucks will
use Little Rocks new CNG fueling
station, resulting in an estimated
savings to the city of $2.50/
gal$3/gal equivalent, compared
to the retail price of diesel fuel.

Pembina plans new NGL fractionators

Pembina Pipeline plans to build a 55,000-bpd NGL fractionator at

its Redwater complex in Alberta, Canada. The fractionator, named RFS
3, will be the third NGL fractionator at the Redwater site. It is expected
to be in service by the third quarter of 2017.
The propane-plus RFS 3 fractionator will raise Redwaters total
fractionation capacity to 210,000 bpd. A planned deethanizer tower
on RFS 3 could later raise overall site capacity to 228,000 bpd.
The RFS III project remains subject to standard regulatory and
environmental approvals.
In conjunction with building RFS 3, Pembina plans to construct
a new high-vapor-pressure (HVP) pipeline lateral into the Willesden
Green area in south-central Alberta. The project entails installing
approximately 56 km of new HVP pipeline, along with other associated
infrastructure.
The new pipeline will be connected to Pembinas Brazeau pipeline
and will be capable of transporting ethane-plus (C2+) NGL from
the field for delivery into the Fort Saskatchewan area. Subject to
regulatory and environmental approval, Pembina expects the new
C2+ lateral to be in service in mid-2015. Photo courtesy of CNW Group/
Pembina Pipeline Corp.

Cameron brings
CryoCAM plant
online
Camerons CryoCAM plant
is now operating at Nuevo
Midstreams Ramsey processing
facility in Reeves County, Texas.
The 200-MMscfd cryogenic gas
processing plant was built for the
Phase III expansion of Nuevos gas
gathering, processing and treating
system in the Delaware basin near
Orla, Texas.
The new CryoCAM plant brings
the total cryogenic gas processing
capacity of the Nuevo system to
300 MMscfd, nearly tripling its
current capacity. Cameron has
introduced two new standardized
modular configurations of
its CryoCAM cryogenic gas
processing plants for maximum
NGL recovery using NGL-MAX
technology from Randall Gas
Technologies. Cameron offers
standard 75-MMscfd and
200-MMscfd cryogenic gas
processing plants.

LNG Canada
chooses FEED
contractors

Technip wins work for Chinese LNG, CNG

The French firm has been awarded an engineering, procurement
and technical assistance contract by Fengzhen Wanjie Gas for an
LNG plant in Fengzhen City, Inner Mongolia province, China. The
plant will consist of a 1.3-MM-Nm3/day LNG train and a 0.3-MM-Nm3/
day compressed natural gas (CNG) station. The contract covers
basic engineering design (BED) of the process plant; BED and
detailed engineering design of an LNG tank; and procurement of
key equipment. The LNG plant will be based on an Air Products
liquefaction process. Technips operating centers in Shanghai, China
and Kuala Lumpur, Malaysia will execute the contract, with plant
startup scheduled for the second half of 2016.

MarkWest to expand NGL complex

MarkWest Energy Partners and The Energy and Minerals Group (EMG) plan to add capacity at their Hopedale
fractionation and marketing complex in Harrison County, Ohio. The move aims to meet growing NGL production
in the Utica and Marcellus shale regions under new contracted commitments from producer customers.
The expansion will double the propane and heavier fractionation capacity at the Hopedale complex to
120,000 bpd, and it is expected to be operational in the first quarter of 2015.
Once the Hopedale expansion is complete, MarkWest will operate 300,000 bpd of ethane and heavier
fractionation capacity at four complexes in the US Northeast. The company also has an NGL gathering pipeline
connecting its Hopedale complex to its existing NGL infrastructure in the Marcellus shale.

Yamal LNG awards EPC contract

Technip and its partners have together finalized the award by JSC Yamal LNG of a major contract for an
LNG facility with a capacity of 16.5 MMtpy. The project will comprise three liquefaction trains of 5.5 MMtpy
among the worlds largestand it will make extensive use of modularized construction in yards.
For the past 14 months, Technip has been involved in providing project planning, detailed engineering,
estimation and procurement work for the project; handover of the first train is planned for 2017. The scope of
work for this contract will consist of engineering, procurement and module fabrication on a fixed-price basis,
and site construction on a reimbursable basis.

10JULY/AUGUST 2014|GasProcessingNews.com

A JV of Foster Wheeler,
Chiyoda, Saipem and
WorleyParsons was awarded a
contract by LNG Canada for the
provision of front-end engineering
design (FEED) and project
execution services for a proposed
LNG export project in Kitimat,
British Columbia.
The LNG Canada project
is planned as a phased
development that will initially
comprise two processing trains,
each with a production capacity
of approximately 6 MMtpy of
LNG, with an opportunity for an
additional two trains.
The release to proceed with
the project execution phase is
subject to regulatory approvals
and a financial investment decision
by LNG Canada, which is expected
to be made in the next few years.
LNG Canada comprises Shell
(50%) and affiliates of PetroChina
(20%), Korea Gas Corp. (15%) and
Mitsubishi Corp. (15%).

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US INDUSTRY METRICS
A. BLUME, Managing Editor

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12JULY/AUGUST 2014|GasProcessingNews.com

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REGIONAL PERSPECTIVE: CANADA

Canadas gas processing industry faces

three challenges, and more opportunities
J. STELL, Contributing Writer

One hundred years ago, the success of

Calgary Petroleum Products Co.s Dingman No. 1 well in Alberta changed Canadas economy and led to the nations first
natural gas processing plant, marking the
beginning of the modern era of Canadian
oil and gas exploration and processing.
The plant, built in Turner Valley approximately 60 km south of Calgary, contributed to the successful development of
the Turner Valley oil field, which became
western Canadas first commercial petroleum-producer well on May 14, 1914.
Despite Canadas long history of successful oil and gas development and production efforts, the nation has been experiencing new challenges over the past
several years.
Processing issues. Firstly, its major

market for exports, the US, no longer

needs as much imported natural gas or
NGL as it has in the past, due to the nations increasing development of unconventional resources. In fact, the US is
Canadas only significant foreign market
for oil and gas, comprising some 98% of
its petroleum exports and 100% of its
natural gas exports, according to the Canadian Chamber of Commerce.
Although new gas export markets can
be found throughout Asia, Canada lacks
the infrastructure to move its products to
the region. The country reportedly loses
billions of dollars each year due to its lack
of energy export transport infrastructure.
As a result, NGL production levels have
declined during the past decade, according to a March report by the Canadian Energy Research Institute. Fortunately, that
trend has leveled off during the past few
years, with industry statistics showing a
slight uptick in NGL extracted per unit of
gas produced. Also, a larger percentage of
gas is being processed in Western Canada.
The second challenge is that excess
gas processing throughout Canada is

squeezing profit margins as plants operate well below their nameplate capacities.
Thirdly, some historical gas plant configurations are not efficient for processing Canadas new rich gas plays. Not all
producers have deep-cut (or ethane/light
NGL extraction) plants, so more ethane is
now kept in the pipeline gas stream, which
is showing up at export straddle plants.
Meanwhile, pentanes-plus production is
declining, ethane and butane output is
flat, and propane production is increasing
rapidly, according to recent reports.
At present, Canada has ample processing capacity of approximately 30 billion cubic feet per day (Bcfd) (TABLE 1),
along with a robust natural gas gathering and transportation pipeline network.
Canadas gas processing plants are running at a total aggregated average of 50%
utilization after the 2014 spring gas plant
turnaround season. Generally, gas plant
turnarounds take place every four years,
with operators staggering their facility
turnarounds to ensure sufficient available
capacity to serve upstream operators.
Specifically, Canada has more than
500 thousand barrels per day (Mbpd) of
NGL extraction capacity and significant
sales gas reprocessing/ethane extraction
plant capacity of 14.7 Bcfd.
Meanwhile, in late 2012, Canadas
National Energy Board (NEB) released

a study showing that gas production in

Western Canada has fallen 15% from
20082012, to just over 13 Bcfd. However, the NEB forecast that production
could rise to 18 Bcfd by 2035.
New projects in the pipeline. Despite

these market and processing challenges,

some new projects for processing Canadian gas are underway. According to
David Smith, president and COO of
midstream company Keyera Corp., one
factor behind the buildout is that many
plants in Alberta were originally built
for a less-rich product blend and cannot
handle todays liquids-rich gas stream.
For example, sour gas production has
been in steady decline, and the processing facilities that serve those plays are
now underutilized, or, as in the recent
case of the Balzac sour gas plant north of
Calgary, closed down. As a result, Keyera
plans to lay down new feeder pipe at its
Rimbey gas plant in central Alberta and
is constructing a $210-million (MM)
turboexpander to enhance the recovery
of ethane and other NGL.
Similar to Keyera, other Canadian gas
processing companies are planning upgrades and expansions of their facilities.
Not the least of these are the new liquefied natural gas (LNG) export facilities
being proposed, planned or constructed

TABLE 1. Canadian gas processing capacities, estimated

Province

Estimated no. of plants

Estimated processing capacity, MMcfd

Processing plants
Alberta

620

23,700

British Columbia

70

5,800

Saskatchewan

20

190

600

10

14,000

750

Nova Scotia
Reprocessing plants
Alberta
British Columbia

Gas Processing|JULY/AUGUST 201415

REGIONAL PERSPECTIVE: CANADA

at various locations. These new terminals,

when completed, will present export opportunities for upstream operators and
midstream gas processing companies
alike, as detailed in the following sections.
AltaGas Services. This year, AltaGas
Services Inc. made significant progress
developing its LPG export business. The
companys AltaGas-Idemitsu joint venture ( JV), which has a two-thirds ownership of Petrogas, is driving its LPG export
initiative forward. Also contributing to
AltaGas LPG portfolio is Petrogas acquisition of the Ferndale LPG export terminal in Washington.
AltaGas has a goal to reach 60 Mbpd
of export capability through Ferndale and
one other export facility by the end of the
decade, according to its first-quarter 2014
operating highlights report. LPG shipments are planned to begin in the second
quarter of 2014 and increase during the
next few years. In addition to the Ferndale
site, the JV continues the development
of an LPG export terminal on the west
coast of Canada. Terminal sites and refrigeration technology have been identified,
and front-end engineering and design
(FEED) studies are underway.
Meanwhile, AltaGas is continuing its
LNG export initiative, the Triton LNG
project, which received approval from the
NEB on April 16 to export 2.3 million metric tons per year (metric MMtpy) of LNG.
AltaGas owns natural gas gathering
and processing assets in southern Alberta,
including working interests of 65% in the

Parkland gas plant, 70% in the Mosquito

Creek gas plant, and 5% in the Vulcan
gas plant. These facilities have a gross
throughput of 27 million cubic feet per
day (MMcfd), 32 MMcfd and 43 MMcfd,
respectively. The Parkland and Mosquito
Creek sweet gas plants are interconnected
through 70 km of gathering lines.
Overall, the companys infrastructure
handles more than 2 Bcfd of natural gas
in Canada via its assets, which include six
extraction plants, five natural gas transmission systems, three NGL pipelines,
more than 70 gathering and processing
facilities and a 6,500-km network of gathering and sales lines.
Apache. In early 2013, Apache Canada

Ltd. began a JV with Chevron Canada

Ltd. to build and operate the Kitimat LNG
project and develop shale gas resources at
the Liard and Horn River basins in British Columbia. Apache and Chevron will
each assume 50% ownership of Kitimat,
the associated Pacific Trail Pipeline, and
644,000 gross undeveloped acres in the
Horn River and Liard basins. Chevron
Canada will operate the LNG plant and
the pipeline, while Apache Canada will
operate the upstream assets.
Kitimat LNG will be built on Bish
Cove near the Port of Kitimat, about 640
km north of Vancouver, to reach LNG
markets in the Asia-Pacific region (including South Korea, China and Japan),
the largest importer of LNG in the world.
The Kitimat LNG project has undergone a number of ownership changes

FIG. 1. The Dingman No. 1 well led to the development of Canadas first gas processing plant.
Photo courtesy of Alberta.com.

16JULY/AUGUST 2014|GasProcessingNews.com

since it was first announced, and yet it

remains the Canadian LNG project that
is furthest along in development. Barring significant setbacks, first shipments
of LNG are scheduled to begin in 2018.
Once both phases of the project are
completed, Kitimat will have an export
capacity of 10 metric MMtpy of LNG.
Going forward, Apache Corp. chairman
and CEO Steve Farris suggests that the
company would be open to a possible
Chinese partner, such as Sinopec, joining the venture.
Additionally, after Apaches recent
success in the Glauconite play, the companys West 5 team in the Alberta foothills is reviewing economic and production scenarios for full-field development
of the formation. Such a development
could lead to the drilling of more than
100 wells in the play and the expansion of
Apaches Leafland gas plant.
ARC Resources. The oil and gas company has completed construction of a new
gas plant and liquids handling facility
at its Parkland property in northeastern
British Columbia. The plant has a design
processing capacity of 60 MMcfd of gas
and 8 Mbpd of liquids, including 5 Mbpd
of oil and 3 Mbpd of NGL. Construction
began in late 2012 and was completed
in the fourth quarter of 2013. ARC will
systematically bring on wells throughout
2014 to fill the new facility.
Aux Sable. Aux Sable Canada continues

to be a significant contributor to Canadas

gas processing capacities. The companys
Heartland Offgas processing plant in the
industrial area of Fort Saskatchewan,
commissioned in September 2011, is a
conventional cryogenic extraction plant
that uses propane refrigeration.
The Heartland facility was the first
processing plant in Alberta to produce
valuable products such as hydrogen, ethane and other NGL from a refinery offgas stream supplied from Shells Scotford
complex. The plant has a licensed capacity of 20 MMcfd.
Sited in Northeastern British Columbia, Aux Sables Septimus sweet gas processing facility, purchased in late 2009,
was expanded from its initial capacity
of 25 MMcfd to 60 MMcfd in 2011. In
2013, work began on the installation of
an additional compressor to further expand the plants capacity.

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REGIONAL PERSPECTIVE: CANADA

Aux Sables Septimus pipeline transports sweet, liquids-rich gas from the
Septimus facility to the Alliance Pipeline for downstream processing at Aux
Sables Channahon NGL extraction and
fractionation facility. The pipeline was
constructed and sized to accommodate
potential future volumes from the liquids-rich Montney gas play.
Encana. The company signed an agree-

ment with a third party to invest $244

MM to expand its Resthaven plants gas
processing and NGL extraction capacity by an additional 200 MMcfd in two
phases. Completion of the first phase is
expected in mid-2014. The plant is sited
in west-central Alberta.
Encana Corp. has a 70% ownership
interest in the Resthaven gas plant, which
has a processing capacity of about 100
MMcfd (net 70 MMcfd to Encana). Encana has additional processing capacity
of about 85 MMcfd at other gas processing plants in the area.
Also, Encana has a processing capacity
of 235 MMcfd at its Musreau plant under

an eight-year commitment. Musreaus

deep-cut facility was commissioned in
February 2012, and it has a net liquids
production of approximately 5.5 MMbpd after royalties.
In 2011, Encana began the initial steps
to establish a strong position in Canada
with its $1.1-B investment in the development of the Cabin gas plant in the
Horn River basin in northeastern British
Columbia, which has growth potential
from future development.
Ferus Natural Gas Fuels. In late April,
Ferus acquired Encanas 50% share in the
proposed Elmworth, Alberta LNG plant.
The Elmworth plant is a 190,000-liter/
day LNG production facility that will
retain key Encana technical and management personnel. As a result of this transaction, Ferus is the 100% owner/operator of the largest merchant LNG plant in
Canada, with plans for future expansion.
Phase 1 of the Elmworth LNG facility became operational in May 2014. The
plant is in close proximity to the active
Alberta-British Columbia Deep basin oil

and gas region, and it will produce LNG

for use in drilling rigs, pressure-pumping
services and heavy-duty trucks.
Keyera. In January, Keyera Corp. began
an expansion of its NGL fractionation
and storage facility in Fort Saskatchewan. The project will involve more than
doubling the facilitys existing C3+ fractionation capacity from 30 Mbpd to 65
Mbpd. The project, which will include
new product receipt facilities, operational
storage, and pipeline interconnections,
has an estimated total gross cost of $220
MM. Detailed engineering work is ongoing, with completion targeted for the first
quarter of 2016.
The new fractionator will process a
C3+ mix stream of NGL (propane, butane and condensate) in addition to a
deethanizer project that will fractionate
30 Mbpd of a C2+ mix stream (ethane,
propane, butane and condensate).
Pembina. In mid-May, Pembina Pipe-

line Corp. reached binding commercial

agreements to begin construction of a

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REGIONAL PERSPECTIVE: CANADA

new 55-Mbpd propane-plus fractionator, called RFS III, at its existing Redwater fractionation and storage complex.
It also began work on a new high-vaporpressure pipeline lateral that will extend
the gathering potential of its Brazeau
Pipeline in the Willesden Green area of
south-central Alberta.
The $400-MM RFS III fractionator,
which is supported by long-term takeor-pay contracts with multiple producers, will be the third fractionator at
Pembinas Redwater complex and will leverage the design and engineering work
completed for Pembinas RFS I and RFS
II fractionators.
RFS I, with an operating capacity of
73 Mbpd, will be debottlenecked to bring
capacity to 82 Mbpd in the fourth quarter of 2015. When combined with RFS
II, which is expected to come into service
at the same time, the companys fractionation capacity will nearly double to 155
Mbpd. With the addition of RFS III, Pembinas fractionation capacity will total 210
Mbpd, making the Redwater complex the
largest fractionation facility in Canada.

The site will be designed to accommodate a deethanizer tower, which will allow a capacity of 73 Mbpd and bring the
total capacity at Redwater to 228 Mbpd.
Subject to regulatory and environmental
approval, Pembina expects RFS III to be
in service by the third quarter of 2017.
At present, Pembinas Redwater West
NGL system includes the Younger ex-

traction and fractionation facility in British Columbia; a 73-Mbpd fractionator,

6.8 MMbbl of cavern storage and terminal facilities at Redwater, Alberta; and
third-party fractionation capacity in Fort
Saskatchewan, Alberta. Also located at
the Redwater facility is Pembinas railbased condensate terminal, which serves
the heavy oil industrys need for diluent.

FIG. 2. The sun rises over the Ricinus gas plant in Apache Canadas West 5 operating area
in central Alberta. Photo courtesy of Apache Corp.

Gas Processing|JULY/AUGUST 201419

REGIONAL PERSPECTIVE: CANADA

Pembinas condensate terminal is the largest of its size in western Canada.

Elsewhere, Pembinas Empress East
NGL system includes a 2.1-Bcfd interest
in the straddle plants at Empress, Alberta, along with 20 Mbpd of fractionation
capacity and 6 MMbpd of cavern storage
in Sarnia, Ontario. The Empress East
system extracts NGL mix from natural
gas at the Empress straddle plants. NGL
mix is also purchased from other producers and suppliers. Ethane and condensate are generally fractionated out of
the NGL mix at Empress and sold into
Alberta markets.
The remaining NGL mix, consisting
primarily of propane and butane, is shipped
on Pembinas 50%-owned Kerrobert pipeline to third-party pipelines for transport to
Sarnia, Ontario, where it is then fractionated into specification products.
Petronas and Japex. The two compa-

nies plan the Pacific NorthWest LNG

complex on Lelu Island in Port Edward,
British Columbia. At its completion, the
three-phase project will have a cumula-

tive capacity of 18 MMtpy, requiring a

feedrate of 2 Bcfd. First shipment is expected in 2018.
Shell Canada. In March, Qatar Petroleum International and Centrica Plc
formed a partnership, known as CQ Energy (CQE) Canada Partnership, to acquire a package of natural gas assets from
Shell Canada in the Foothills region of
Alberta. As part of the transaction, Shell
will receive CQEs interest in the Burnt
Timber gas processing plant and its interest in the Waterton undeveloped lands in
southwest Alberta.
Shell Canada is the major owner and
operator of the Burnt Timber complex,
which includes a gas processing plant, six
compressor stations, and operations for
seven gas fields. Burnt Timber is one of
four Shell gas complexes in southern Alberta, contributing to a combined overall
production average of 300 MMcfd of gas.
Elsewhere, Shells Groundbirch venture includes five gas processing plants,
more than 250 wells, and more than 900
km of pipeline. Groundbirch is still be-

ing explored, so the current drilling program includes a mix of single-well and
multiple-well pads. Eventually, most of
the wells will be drilled on pads containing up to 26 wells, with two such pads for
every 3 square miles of land.
Future prospects. Despite the challenges faced by Canadas gas processing operators, the industry segment continues to
expand and to supply its nation, and the
US, with much-needed oil and gas products. Going forward, as proposed and
planned LNG export capacities come
onstream, Canadian gas processors are
expected to see an uptick in both expansions and future profits. GP
JEANNIE STELL is an award-winning
freelance writer and editor focused
on the upstream, midstream and
downstream energy industry. Her
articles have been published in
several languages and referenced in
white papers by Microsoft and
Iranian National Oil Co., and her photographs have
been featured on industry magazine covers and in
feature editorials. Ms. Stell is the founder of Energy Ink
and can be reached at jstell@energyink.biz.

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BOXSCORE CONSTRUCTION ANALYSIS

Alaska LNG JV eyes FID

amid growing competition
A. BLUME, Managing Editor
Adrienne.Blume@GulfPub.com

The Alaska South Central LNG (Alaska LNG) project,

which was in the late conceptual stage in late June, would involve the construction of an LNG plant, an LNG storage terminal, a gas treatment plant and two new pipelines.
A joint venture ( JV) of ExxonMobil, ConocoPhillips, BP,
TransCanada and the state of Alaska, the project is estimated to
cost $45 billion (B) to $65 B, in 2012 dollars.1
Mega-project scope. The Alaska LNG project, if completed,

will be a massive development. A 58-mile (mi) pipeline would

be built to carry gas from the in-development Point Thomson
gas field to Prudhoe Bay in Alaskas North Slope region, where
a large-scale gas treatment facility would be constructed to remove carbon dioxide and other impurities from produced gas.
The facility would include four amine trains with compression,
dehydration and chilling, as well as infrastructure and utilities.
The plant would be modularized and sea-lifted to Prudhoe
Bay, and then assembled onsite.
An 800-mi, 42-inch pipeline with eight compression stations would be built to carry the treated gas from Prudhoe
Bay to Nikiski, Alaska, located along Cook Inlet. The pipeline
would be designed to manage both continuous and discontinuous permafrost regions. Additional gas compression and/or
expansion capacity could be added, if necessary.
At Nikiski, an LNG terminal, storage tanks and shipping
facility would be constructed. The terminal would produce
17 million metric tons per year (metric MMtpy) to 18 metric
MMtpy of LNG from 2.2 billion cubic feet per day (Bcfd) to
2.4 Bcfd of natural gas. The plant would consist of three trains
with a capacity of approximately 5.8 metric MMtpy each. A
small volume of stabilized condensate would also be produced.
Storage would consist of two to three 160,000-m3 LNG tanks.
The marine offloading facility would comprise one or two conventional jetties, two berths and a marine support system. FIG.
1 shows the computer-rendered conceptual layout of the proposed LNG terminal.
The Prudhoe-to-Nikiski pipeline would be designed to
transport 3 Bcfd to 3.5 Bcfd of treated gas. Some of this gas
would be consumed directly by resident Alaskans, and the
remainder would be used to operate the pipeline and as feedstock for the LNG terminal. FIG. 2 shows the planned layout of
the entire project and the locations of each segment.
Project progress and target market. In April, the Alaska
Legislature approved legislation to allow negotiations between
pipeline firm TransCanada and North Slope gas producers for
the development of the Alaska LNG project. The modified laws

will pave the way toward the state of Alaska becoming an equity
partner in the project. An agreement to this effect was anticipated to be signed by the end of June. The agreement would move
the project into the pre-front-end-engineering-and-design (preFEED) stage, which could see completion in 2015 or early 2016.
The projects partners are targeting the nearby expanding
Asia-Pacific demand market, which could double in volume by
2025. However, a number of LNG projects in British Columbia, Canada, are also eyeing this market. The huge volume of
LNG that would be produced from the project would enter the
market at once, forcing the JV partners to ensure outlets for
the product prior to making a final investment decision (FID).
The FID will likely take several years; Black & Veatch,
which is advising the state of Alaska on the project, reports that
an FID could come in 2019, at the earliest. The FID for Alaska
LNG is heavily dependent on securing LNG buyers and project permits. Pre-FID spending, which is typically less than 10%
of the total cost of a project, is estimated at $2.4 B for Alaska
LNGs pre-FEED and FEED. It is customary for large-scale
LNG projects to secure commitments from customers for the
majority of the LNG output before the FID is made.
Alaska LNGs $45 B$65 B costthe majority of which covers the LNG plant and the 800-mi pipelinehas been called
prohibitive by some analysts. If the large-scale gas project is
scrapped because the projected profits would not be worth the
high project cost, a second option could be to convert stranded
gas on the North Slope into GTL. A smaller-scale GTL plant

FIG. 1. Computer-rendered conceptual layout of the proposed Alaska

LNG facility at Nikiski, Alaska. Image courtesy of Alaska LNG.
Gas Processing|JULY/AUGUST 201421

BOXSCORE CONSTRUCTION ANALYSIS

would be an ideal option for the North Slope, where large-scale

facilities are cost-prohibitive and difficult to permit.
The GTL products could be shipped to markets through the
under-utilized Trans-Alaska Pipeline system. Such a plan would
still generate revenue for the state of Alaska, despite the lack of a
short-term, mega-construction boom of the kind that would be
required by Alaska LNG. Instead, steady construction demand
of 10 years or more would support a small increase in construction employment, particularly fabrication work.2
In Alaska LNGs October 2012 work plan, the JV partners
acknowledged that possible challenges in the lead-up to FID
include protracted resolution of fiscal terms, permitting
and regulatory delays, legal challenges, changes in commodity
market outlook, time to secure long-term LNG contracts, labor
shortages, material and equipment availability or weather.3
In late June, ConocoPhillips CEO Ryan Lance said that the
mega-project can be developed under the right conditions, despite a rising number of competitors. Although the project has
not filed for any permits, it is ready to move on practical fiscal
terms and supply costs, Mr. Lance said.4
Next steps for Alaska LNG. The next steps to be taken durFIG. 2. The Alaska LNG development would be one of the largest
in the world and would include a gas treatment plant, two pipelines,
an LNG terminal, storage tanks and a shipping facility. Image
courtesy of Alaska LNG.

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ing the pre-FEED stage include securing state and federal

government support for the project, building out the business
structure and financing plan, assessing potential commercial
viability, and securing permits and land-use agreements.
If these goals are reached, then the FEED stage will begin.
During the FEED stage, financing permits will need to be secured, stakeholder agreements must be signed and commercial
agreements will need to be struck. Also, commercial viability
will need to be confirmed and engineering, procurement and
construction (EPC) contracts will be issued. At this time, an
FID would need to be made. During the EPC stage, final engineering, fabrication, logistics, financing and permitting issues
would be resolved.
In a March presentation prepared for the Senate Finance
Committee by the Federal Coordinator for Alaska Gas Line
Projects, the coordinator advised patience during state LNG
investment. Although returns on investment from a project on
the scale of Alaska LNG will take time, the project will give an
extended payback. If [Alaska] wants to act like an oil and gas
business, then it must think like oneand think long term,
the coordinator advised.5
The next few years could bring fluctuations in the LNG
market that may prompt the JV to issue an FID before the onset of the next decade. It remains to be determined if the scope
or scale of the project will change, and whether or not adequate
LNG offtake commitments can be secured. The JV partners,
along with the state of Alaska, are working diligently to make
Alaska LNGs potential profits worth the projected cost. GP
LITERATURE CITED
Alaska Natural Gas Transportation Projects, Office of the Federal Coordinator,
Alaska LNG project, April 20, 2014.
2
Bradner, T., Without LNG, whats our Plan B? Anchorage Daily News, June 15, 2014.
3
DeMarban, A., ConocoPhillips CEO says Alaska LNG project has potential,
Alaska Dispatch, June 24, 2014.
4
Lee, J., Final investment decision: The big breakthrough, Office of the Federal
Coordinator, April 8, 2014.
5
Persily, L., Federal Coordinator for Alaska Gas Line Projects, Alaska gas pipeline
project: Whats different this time? March 10, 2014.
1

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+1 (713) 520-4426
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22JULY/AUGUST 2014|GasProcessingNews.com

Esteemed Speakers
Include:

KEYNOTE: Rick Cargile

President, Midstream
Energy Transfer Partners

Tim Rollenhagen, PE, PEng

Lead Process Engineer
URS Corporation

Robert Schosker
Team Lead Interface Technologies
Product Manager
Pepperl + Fuchs, Inc

September 1617, 2014 | Houston, Texas

GasProcessingConference.com

Join The Experts at GasPro and Learn

about the Latest Developments in
North Americas Gas Market
We invite you to join us on September 1617 at the Hyatt Regency Houston for
this exciting, two-day, dual track, technical conference focusing on the latest
trends, technologies, opportunities and challenges in North Americas
natural gas market. Were thrilled to announce that Rick Cargile, President,
Midstream, Energy Transfer Partners will be delivering the opening
keynote address. In addition, youll hear from other leading professionals
at top operator and service companies, connect with key players in the
industry and engage in knowledge-sharing and best practices.

Specic topics to be discussed include:

NGL/LNG

Alternative Uses

Stranded Gas/Sour Gas

Separation Technology/Catalysts

North American
Infrastructure Development

Dehydration/Cryogenics

Equipment

Compressors/Equipment

Methane

Reliability

Process Improvement

GTL/Modular Construction
View the complete agenda online at GasProcessingConference.com

Who Should Attend:

George Boyajian
Vice President, Business Development
Primus Green Energy

Dale Winterhoff
Principal Engineer
Flowserve Corporation

Those who are involved in natural gas gathering, compression, treating,

processing, storage and marketing, as well as those involved in natural gas
liquids fractionation, transportation and storage and marketing.
Individuals involved in the following roles will benet by
attending: Chief executive officers, chief operating officers,
chief technology officers, presidents, vice presidents,
senior vice presidents, managing directors, managers,
directors, executive directors, country managers,
regional managers, project managers, chief
engineers, engineers and technical directors.

September 1617, 2014 | Houston, Texas

GasProcessingConference.com

September 16, 2014 AGENDA

REGISTRATION
OPENING REMARKS: John Royall, President and CEO, Gulf Publishing Company
KEYNOTE ADDRESS: Shale revolution driving industry transformation Rick Cargile, President-Midstream,
Energy Transfer Partners Midstream

COFFEE BREAK

TRACK 1

TRACK 2

Session 1: NGL

Session 2: Dehydration/Cryogenics

Removal of CO2 from liquid NGL streams by membranes

Tim Rollenhagen, P.E., P.Eng., Lead Process Engineer,
URS Corporation

Determination of trace H2O using TDLAS for LNG and gas

processing applications Patty Summers, Director of Marketing,
Sales and Application Support, SpectraSensors, Inc

LNGL: Managing uncertain LNG market growth with

integrated LNG and NGL technology Leslie Agee, ManagerCommunications & Marketing, Linde Process Plants, Inc.

Sime DWC solution for sweetening and dehydration Domenico

Tedeschi, RM&D Project Engineering Manager and Matteo Baggiani,
Program Manager, Sime

Flare gas recovery for LNG and NGL recovery is supercool

Trey Brown, VP, Engineering & Construction, S-Con, Inc.

The Fiscal impact of accurately measuring hydrocarbon

dew point Keven Conrad, Central and Gulf Coast Regional
Sales Manager, Michell Instruments, Inc.

Flexible Sulfur Recovery Processes for Sweetening Natural

Gas Howard S. Meyer, R&D Director, Energy Conversion,
Gas Technology Institute

Fast track engineering and construction of an LPG

cryogenic plant Miguel Wegner, CEO and Ivan Grosman,
USA Country Manager, Hytech

LUNCH

Sessions 3 and 4
The Future of Long Term LNG Contracts Peter Hartley, PH.D.,
Baker Institute Faculty Scholar, Rice University (Invited)

Velocys Fischer-Tropsch Reactors: Enabling GTL at a

Distributed Scale Michael Williams, V.P. Strategy
and Marketing, Velocys

Ethane to Gasoline Blendstock Edward Peterson, PhD, P.E., Synfuels International

Redefining GTL Fundamentals: Significantly improving the cost of gas to liquids processes via a single loop thermochemical technology
George Boyajian, Vice President Business Development, Primus Green Energy

COFFEE BREAK

Session 5: North American Infrastructure Development:

Expanding to Meet Future Needs
Panel discussion: Gas infrastructure development Invited participants include: BG; Energy Transfer Partners, MarkWest;
Juniper GTL; Apache Corp and others
CLOSING REMARKS

September 1617, 2014 | Houston, Texas

GasProcessingConference.com

September 17, 2014 AGENDA

REGISTRATION
OPENING REMARKS: John Royall, President and CEO, Gulf Publishing Company
KEYNOTE ADDRESS: MarkWest (invited)

COFFEE BREAK

TRACK 1

TRACK 2
Sessions 6 and 7

Wireless monitoring of rotating equipment using intelligent sensors

with mobile capability Dale Winterhoff, Principal Engineer,
Flowserve Corporation

Natural gas processing for sulfur removal with fixed bed

technology Holli Garrett, BU Catalysts, Gas Processing Business
Development, Clariant Corporation

Titan System and Reliability Modeling Analysis of a North

American Gas Plant Mike Strobel, Principal, Fidelis Group, LLC

Application of Deep Eutectic Solvents for the Separation

of Aromatics from Aliphatics Nasser A. Al-Qahtani,
Saudi Aramco Company

EOR design & economics: CO2 supply & breakthrough gas processing options Richard Wissbaum, , P.E. P.Eng.,
Technology Director, URS Corporation
Natural Gas/Electric Compressors David Coker, V.P.,
Energy Transfer Technologies

Acid gas cleaning Manya Garg, Product Manager,

Aspen Technology, Inc

LUNCH

Sessions 8 and 9
Invoking the Equivalency clause in NFPA standards for designing compliant burner management systems
Charles M. Fialkowski, CFSE Siemens Industry
Explosion prevention: A comparison between intrinsic safety vs. explosion proof Robert Schosker, Team Lead Interface
Technologies Product Manager, Pepperl + Fuchs, Inc
Adam Hedayet, Vice President, Business Development,
Sea NG Corporation (invited)

GT- DWC Dividing wall column saves cost and energy

Manish Bhargava, GTC Technology

COFFEE BREAK

Session 10
Panel discussion: Transportation Fuels Invited participants include: Sea Star Line -Tote Maritime; EnCana Corp, Canadian
Govt - Go With Natural Gas; Waste Pro of Florida, Inc; Primus Green Energy Inc.
CLOSING REMARKS

September 1617, 2014 | Houston, Texas

GasProcessingConference.com

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Knowledge Sharing/Best Practices
Information on the Latest Trends and Developments in North America

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According to Michael Smith,

chairman and CEO of Freeport
LNG Development,

The appetite for LNG

just keeps growing
and growing.

SPECIAL REPORT: SMALL-SCALE

GAS PROCESSING SOLUTIONS

Velocys shrinks GTL hardware,

offers technology solutions for gas producers
ROY LIPSKI, CEO, Velocys

Velocys, a leading smaller-scale GTL

technology firm and solutions provider
to the upstream, midstream and downstream markets, is making quick strides
in integrating its smaller-scale reactors in
downsized GTL applications. The time
is right for a shift in production from sitespecific to distributed processing, according to Velocys CEO Roy Lipski. Here,
Mr. Lipski discusses with Gas Processing
the evolution of small-scale GTL and the
companys role in this journey.

ROY LIPSKI has been heading fast-growing

technology companies for more than 17 years. He
has pioneered modular GTL since 2005, when he
helped found Oxford Catalysts, leading it through
an initial public offering and the subsequent
acquisition of Velocys Inc. Velocys, a world leader
in microchannel process technology, has raised
over $130 MM from institutional investors. Mr.
Lipski holds an honors degree in biochemistry
from the University of Cambridge in Cambridge,
UK. He began his career working at Goldman
Sachs in London, UK.

GP. Youve spoken about an

overall shift in manufacturing
practices that includes a change in
production from site-specific to
distributed processing. Do you view
this movement as a sea change
for gas processing, or as a
complement to traditional, largescale processing operations?

RL. We are entering the age of gas, and

with it will come far-reaching changes.
The industrial age began with coal; it provided power, lighting and chemicals. Then
we moved to oil. Both coal and oil are
easy and cheap to transport, which gave
birth to the centralized production model.
However, gas is harder and more expensive to transport, so its forcing a rethink.
The answer is smaller-scale production closer to the source, at gas gathering
and processing sites. I see these developing into mini-industrial sites where gas is
used to make an array of basic building
blocks for society: fuels, fertilizers, chemicals and electricity.
Centralized facilities will persist
theres too much invested in thembut
I envision the future as being about the
growth of a distributed network of production. Such a network would be more flexible, robust and adaptable. By definition,
these smaller and cheaper facilities are

within reach of many more customers

not just the largest corporations.
GP. What has the evolution of
smaller-scale GTL allowed the
industry to accomplish so far,
and how do you see this journey
developing into the future?

RL. Six years ago, the mere idea of an

economical small-scale petrochemicals facility was almost against the laws of nature.
Then, about three years ago, people began
to accept that smaller-scale GTL might be
possible, but few believed there was any
real need for such facilities. Around a year
and a half ago, the industry came to realize
that this was going to happen.
Beginning at the end of 2013, with cost
escalations and delays plaguing more and
more large-scale projects, like LNG
and, in some cases, even causing projects
to be canceledit started dawning on
people that this may actually be the way to
build infrastructure, rather than the large
plants. Smaller-scale, standardized, shopfabricated modular facilities are leading
the way, like the 3,000-bpd plant were enabling through Pinto Energy in the heart
of the Marcellus.
I foresee smaller-scale GTL becoming
an integral part of the gas infrastructure,
providing locally produced diesel fuel,
an alternative and complementary route
to market for gas production, and an increasingly significant source of new demand for gas.
GP. Where does Velocys fit into
this journey?

RL. Velocys has been at the forefront,

pioneering the smaller-scale GTL industry for the production of fuels and chemicals from as little as 15 million standard
cubic feet per day (MMscfd) of gas, to as
much as 150 MMscfd per facility.
Gas Processing|JULY/AUGUST 201423

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

It all began in the 1990s, at one of the

US national labs, where they reinvented a
chemical reactor so that it could be taken
into space, making it small and light. The
technology was spun out into a company
called Velocys; now, almost 20 years and
$300 MM later, weve built on these early
innovations to produce a complete and
cost-effective modularized smaller-scale
GTL plant, just as the shale revolution has
gotten to the point where what we have
can make a big impact. Its a very exciting
time for the industry and for Velocys.
GP. Do you view projects such as
your joint venture (JV) with
Waste Management, which will
convert biogas into GTL, as an answer
to the need for achieving energy
and environmental sustainability?
Will Velocys become involved in
similar projects in the future?

RL. This JV is focused on converting biogas (e.g., from landfills) into fuels
and chemicals using our smaller-scale
GTL technology. To my knowledge, this
is the only market-ready approach that
can actually produce third-generation
alternative fuels cost-competitively with
conventional ones.
The first project will be at East Oak,
Oklahoma, and the JV aims to roll out
several of these plants across the country. Outside of this JV, Velocys sees itself
getting increasingly involved in projects
with producers, midstream companies
and refiners that are seeking a more diversified and profitable approach to the
natural gas business.
GP. What are the benefits of smallerscale GTL to midstream companies
and their clients?

FIG. 1. This Velocys Fischer-Tropsch reactor

is considerably smaller than the reactors used
in large-scale GTL plants.

24JULY/AUGUST 2014|GasProcessingNews.com

RL. Without alternative opportunities to monetize gas, such as smaller-scale

GTL, midstream companies and their
customers can find themselves locked
into gas pricing (at offtake levels), which
can both negatively impact the volume of
gas being processed, as well as the underlying margins.
Colocating a smaller-scale GTL plant
at, for example, a gas processing facility
would enable midstream companies to
provide an attractive new service to their
customers while realizing their ultimate
goal of processing more gas. Customers
will be able to diversify from gas pricing into oil, moving more gas to market
without impacting gas prices, while capturing greater margins and supporting
higher fees.
GTL gets gas into vehicles without
the high switching costs of CNG and
LNG. It is also a way of moving gas to
market where no gas pipelines exist,
or where potential production exceeds
available infrastructure.
Finally, since GTL plants can be configured to operate on NGL as well as on
dry gas, they provide the luxury of feedstock flexibility by allowing the lowestvalued BTU at any particular time to be
directed to the GTL facility, leaving the
higher-valued molecules to access the
market through more conventional, but
likely capacity-limited, infrastructure.
GP. How is Velocys strategy evolving?

RL. In the past, Velocys has been

viewed as a technology provider, but really we are an enabler of an exciting new
economic proposition to gas producers,
midstream companies and downstream
players alike. As pioneers of smaller-scale
GTL as a means of distributed production,
our business has been evolving toward facilitating access to the benefits of smallerscale GTL for a broad range of companies,
by minimizing the risks and barriers to
deployment. We are partnering with industry leaders to provide to our customers
all the necessary components of a GTL
project, from opportunity identification
to final plant delivery and operation.
For example, we recently announced
the acquisition of Pinto Energy, one of
North Americas leading developers of
smaller-scale GTL projects. Were now able
to help with the practicalities of developing
a project to completion for those customers that dont want to do it themselves.

Another example is our JV with Waste

Management, NRG Energy and Ventech,
where, in addition to providing technology, we are also participating as equity
investors in the actual projects.
GP. How is Velocys applying
best practice?

RL. In addition to its cutting-edge

technology, Velocys is partnering with
leading technology and service providers, who, along with us, are committed to
continually improving our smaller-scale
GTL solutions.
For example, developing a relationship with Ventech Engineers was an obvious choice; several of the benefits of
smaller-scale GTL arise from the use of
modular plant construction methods that
are enabled by our smaller reactors. Ventech is an established leader in the design
and construction of modular refineries,
and together were bringing this expertise
to modular GTL.
Another, possibly less obvious example,
is our relationship with Shiloh Industries.
Shiloh is a leading supplier of engineered
metal products and lightweight solutions
to the automotive industry. With Shiloh,
weve developed mass-manufacturing capabilities for the production of our reactors
(FIG. 1) that harness state-of-the-art manufacturing technology and quality systems
from the automotive industrycapabilities that, to date, have rarely been applied
in the oil and gas industry. This will allow
us to meet strict quality control standards,
access economies of volume, ensure shortterm and long-term cost competitiveness,
and rapidly increase manufacturing capacity to satisfy anticipated demand growth.
GP. How do you see the GTL
landscape changing over the
next few decades, particularly
with regard to economics?

RL. I think where we are today is like

the cellular phone of the 1980sa big
brick in the hand; but, for its time, it was
revolutionary and opened up a whole
new market. It was also the beginning of
a voyage that ultimately led to the smartphones of today.
The journey were on will continue
to reduce the size required for economic
facilities and bring the means of production into the hands of the manyone
day producing only what we need, where
we need it, and when we need it. GP

SPECIAL REPORT: SMALL-SCALE

GAS PROCESSING SOLUTIONS

Small-scale GTL technology

cuts production costs for drop-in fuels
GEORGE BOYAJIAN, Vice President of Business Development,
Primus Green Energy, Hillsborough, New Jersey

Primus Green Energy is one of a small

group of companies leading the technology revolution in small-scale gas processing. Its STG+ process directly converts
natural gas and biomass into drop-in liquid fuels. Primus vice president of business development, George Boyajian, talks
with Gas Processing about applications
for STG+ technology and the companys
progress on a commercial-scale plant.
GP. How does Primus Green Energys
STG+ technology cost effectively
turn natural gas and biomass into
transportation fuels on a small scale?

DR. GEORGE BOYAJIAN is a technology entrepreneur with 18 years of experience as a senior

executive. He has launched several companies,
including a plant genetic engineering venture and a medical device company that was
acquired by GE Healthcare. Dr. Boyajians expertise includes business development, licensing,
public relations, raising financing, vendor relations and government relations. Prior to his
business career, he was an assistant professor
for six years at the University of Pennsylvania.
He received his BA degree in geology from the
University of Pennsylvania and his PhD in geology from the University of Chicago.

GB. Primus STG+ technology fundamentally improves the efficiency and

economics of GTL and liquid fuel synthesis technologies. STG+ boasts very high
efficiency, which means that commercial
facilities are expected to cost one-third to
one-tenth as much as traditional alternative fuel and GTL facilities.
An important advantage that contributes to improved process efficiency and
economics is our feedstock flexibility. We
can use any carbon-rich feedstock that
can be turned into a high-quality syngas,
including natural gas, biomass, municipal
solid waste and others.
STG+ is not the only GTL process that
uses syngas. Unlike competing technologies that convert syngas into liquid end
products via multistage processes, Primus STG+ technology converts syngas
directly into gasoline via a proprietary,
single-loop process. To produce syngas,
Primus uses a standard commercial technology called steam methane reforming
(SMR) to convert natural gas into syngas,
as well as other commercially available
systems for the conversion of biomass
into syngas, a fuel precursor composed
primarily of hydrogen and carbon monoxide. Primus can reform the natural gas

into syngas on its own, or buy the syngas from a supplier. The syngas is then
scrubbed to remove carbon dioxide and
other impurities, such as sulfur, prior to
the liquid fuel synthesis process. Primus
STG+ technology can utilize syngas from
a variety of sources, as long as the syngas
meets its specifications.
After the syngas is produced and
scrubbed, the STG+ process uses four
separate reactors to transform that gas
into liquid fuels. In the first reactor, syngas
is converted into methanol. The second
reactor converts the methanol into dimethyl ether. The third reactor produces
heavy gasoline, which has an undesirable
durene content. The fourth reactor cleans
the heavy gasoline by converting durenes
into other compounds, with a finished
transportation fuel being produced at the
end. The end product depends partly on
the catalysts used in the four-reactor system. Primus uses standard catalysts similar
to those used in other GTL technologies.
By reducing the number of steps in its
process, Primus has made its STG+ technology more efficient, less expensive to
build, and more scalable than competing
GTL technologies, which include methanol-to-gasoline (MTG) and FischerTropsch (FT), the most common GTL
process in use today. The cost effectiveness of Primus STG+ technology has
been validated through a cross-examination of data provided by Christodoulos A.
Floudas, a professor at Princeton University. In a study comparing FT with MTG
processes, he demonstrated that MTG is
consistently more cost-effective, in terms
of both capital and overall costs, than FT
at small, medium and large scales. Because
Primus STG+ process is more energetically efficient and less costly to build than
MTG processes, it promises to be more
efficient, cost effective and scalable than
Gas Processing|JULY/AUGUST 201425

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

The STG+ experience: Present and future

In October 2013, Primus Green
Energy successfully commissioned its
100,000-gpy pre-commercial demonstration plant (FIG. 1), which converts natural gas directly into drop-in
90-plus-octane gasoline via Primus
proprietary STG+ single-loop GTL
process. This plant was designed as a
scaled-down version of the companys
first commercial plant, enabling Primus
to optimize the process at its Hillsborough, New Jersey headquarters, thereby
significantly mitigating any technological risk to scale-up.
At the time of commissioning, the
demonstration plant was operated continuously for over 720 hours (hr)a
major milestonewith excellent results. The purpose of the demonstration plant run was twofold: To identify
opportunities to fine-tune the STG+
process and to verify the quality of the
drop-in gasoline produced.
Operations at the demonstration
plant provided Primus with significant
insight to inform its commercial operations. The company learned that the
requirements for the composition of
syngas used in its STG+ process are less
stringent than anticipated. Originally, it
was believed that a hydrogen-to-carbonmonoxide ratio of 2.1 to 1 would be
required to produce high-quality liquid
products. The company also discovered
that lower-quality syngas can be used,
with the relaxed requirements resulting
in a 40% savings in feedstock costs for
the first commercial plant.

FIG. 1. Primus Green Energys 100,000-gpy

pre-commercial demonstration plant in
Hillsborough, New Jersey converts natural
gas directly into 90-plus-octane gasoline.

26JULY/AUGUST 2014|GasProcessingNews.com

Additionally, Primus learned through

continuous operation that the catalysts
used in the STG+ processwhich include molecular size- and shape-selective zeolite catalysts and commercially
available shape-selective catalysts, such
as ZSM-5last much longer than expected. The catalysts will only need to
be regenerated every two years, instead
of every six months. This advantage will
also enable the company to save significant costs during the operation of the
first commercial plant.
Importantly, these results were confirmed by a third partyspecifically, an
independent engineering firm. An independent engineers report, prepared by
E3 Consulting LLC, concluded that the
STG+ system and catalyst performance
exceeded expectations during plant operation. The report noted that the demonstration plant has substantially met
the goal of fully integrated operations;
that it is a successful demonstration of
the scalability of the technology; and
that the gasoline quality consistently
meets or exceeds industry standards.
As Paul Plath, president of E3 Consulting, stated, The data resulting from
the initial 720-hr continuous operation
of Primus natural gas-to-gasoline demonstration plant has exceeded initial
expectations. The data shows that Primus STG+ technology, when applied
at commercial scale, can be expected to
be efficient, cost-effective and able to
produce a premium transportation fuel
product.
The demonstration plant results also
verified the high quality of the 90-plusoctane drop-in gasoline. Previously, two
independent testing laboratories, including Bureau Veritas, tested the gasoline produced at the pilot plant, which is
also at the Hillsborough complex. More
recently, gasoline produced by the demonstration plant in September and October 2013 was continuously sampled
and analyzed by Primus and by the independent laboratory Bureau Veritas.
In all instances, the tested gasoline
quality of the demonstration plant gasoline samples met or exceeded ASTM

International standardsthe gold

standard by which gasoline is measured today. Specifically, as compared
to traditional gasoline, the produced
gasoline exhibited far lower sulfur
content (less than 1 parts per million
[ppm] vs. 30 ppm), lower benzene
content (0.16% vs. 0.62%), minimal
corrosion and the lowest degradation
possible. Furthermore, the gasoline
demonstrated far less durene content
(< 0.1%, as compared to < 1%), making
it a much more desirable fuel.
In addition to the results outlined
above, Primus gasoline was also tested
for oxidation (i.e., fuel stability) and
corrosion potential in accordance with
standard ASTM International test procedures. Both oxidation and corrosion
potential results were excellent. During
the run, Primus intentionally varied the
operating conditions (recycle ratios, operating pressures, temperatures, etc.) to
better understand how the process responds, and to explore operating condition boundaries. During this run period,
Primus optimized its process by identifying specific operating conditions that
would repeatedly produce optimum
product, including high (> 91) octane.
Following the successful run in
October 2013, Primus completed a
900-plus-hr run of its demonstration
plant in May. This latest run again confirmed the system performance and
capital and operating expenditure findings from the initial run.
Operation of the demonstration
plant has validated Primus patentprotected STG+ process, confirming
its commercial readiness. Primus is
working to finalize site selection and
financing for its first commercial plant,
on which it expects to break ground in
2014. The plant is expected to produce
28 MMgpy, beginning in 2016. The
company will co-locate its first commercial plant near established feedstock delivery infrastructure. Since the first commercial plant is expected to use natural
gas as the primary feedstock, natural gas
pipeline infrastructure is a key criterion
in selecting the final location. GP

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SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

these competing GTL processes for a large

range of GTL applications, even at scales
as small as 6,000 bpd or smaller.
At present, Primus is leveraging the
low cost of natural gas to enhance the economics of its GTL process. Primus plans
to incorporate biomass feedstock into its
business model after the economics of
gasifying such feedstocks improve.
GP. A patent application for the
STG+ technology was accepted
by the US Patent and Trademark
Office. What does this mean for the
future of Primus Green Energy?

GB. The approval of this patent is an

important milestone, as it confirms that
the single-loop feature of the STG+ process is truly novel. In addition, this new
patent allows Primus to strengthen its intellectual property portfolio.
GP. What types of feedstock are in
use at Primus demonstration plant,
and what fuels are being produced?
Also, how have the produced fuels
been tested, and what results have
been achieved?

GB. Our demonstration plant uses natural gas as a feedstock to produce 90-plus
octane gasoline directly, via a single-loop
process. We plan to begin the production
of jet fuel and diesel fuel later this year, in
addition to the development of solvents.
As mentioned, we plan to incorporate biomass feedstocks into our business model
once the improving economics of biomass
gasification yield a more economically attractive biomass-derived syngas.
Our drop-in gasoline has undergone extensive third-party testing, and it has been
verified to meet or exceed all ASTM International standards by independent laboratories, including Bureau Veritas; ASTM
is the industry metric by which gasoline is
measured. Specifically, as compared to traditional gasoline, our gasoline exhibits far
lower sulfur content, lower benzene content, minimal corrosion and the lowest degradation possible. In addition, our gasoline
was also tested for oxidation (fuel stability)
and corrosion potential, in accordance with
standard ASTM International test procedures. Both oxidation and corrosion potential results were excellent. The gasoline
produced at our demonstration plant has
consistently produced these results.
Furthermore, because of its high quality and low sulfur and benzene contents,
28JULY/AUGUST 2014|GasProcessingNews.com

our gasoline exceeds the US Environment

Protection Agencys proposed Tier 3 standards for sulfur content and carbon emissions, and it has a lower GREET score than
petroleum-based fuels. (GREET is the
Greenhouse gas, Regulated Emissions, and
Energy use in Transportation model, developed by Argonne National Laboratory.)
GP. Primus is breaking ground on
a commercial-scale plant in 2014.
What essential operations data
and lessons learned will Primus
incorporate into this project from
the demonstration plant run?

GB. Operations at our demonstration

plant, which was designed as a scaleddown version of our first commercial
plant, have enabled us to identify opportunities to fine-tune the STG+ process.
Most importantly, weve learned key lessons related to two factors: syngas quality
and catalyst performance.
Specifically, weve learned that the requirements for the composition of syngas
used in our process are less stringent than
anticipated. The relaxed requirements
will result in a 40% savings in feedstock
costs at the first commercial plant. Weve
also learned that the catalysts used in our
process last much longer than originally
expected. Instead of regenerating the
catalysts every six months, this will only
have to be done every two years, which
will also result in considerable savings.
GP. Does Primus plan to build
any more plants?

GB. Our focus is on the first commercial plant, which is expected to produce
more than 28 million gallons per year
(MMgpy) of fuel, starting in 2016. We expected to start construction on that plant
later in 2014, with the exact location to be
determined. We do foresee the construction of additional large-scale commercial
plants in the future, though we are focused
on the first plant.
There is also a sizeable market opportunity for our STG+ technology at a small
scale, to address the problems of flared gas
and stranded gas.
GP. At which types of locations,
and in which world regions, do you
see investment opportunities
for small-scale GTL technologies,
in general, and for STG+ technology,
specifically, going forward?

GB. The opportunity for large-scale

GTL plants that use the STG+ technology is a global one. Any location that
offers a cost-effective source of syngas
(produced through any carbon-rich feedstock, including natural gas) can benefit
from our technology. For example, here
in the US, natural gas is a domestically
abundant resource, and gas prices are at
or near 10-year lows. This scenario presents a highly lucrative opportunity to
cost-effectively produce liquid products
directly from natural gas, helping the US
reduce its reliance on petroleum and reduce carbon emissions (since natural gas
produces a cleaner-burning fuel than does
petroleum-based fuels).
Additionally, because our STG+ technology is cost-effective at scales of 6,000
bpd or smaller, there is a huge opportunity
for flared gas or stranded gas applications,
which are a major challenge for the oil and
gas industry. According to estimates from
the World Bank-led Global Gas Flaring
Reduction (GGFR) Partnership, which
strives to overcome barriers to the reduction of flaring, about 5.3 Tcf of gas are being flared globally. The US is the fifth-largest flaring country, topped only by Russia,
Nigeria, Iran and Iraq. In total, flared gas is
a $20 billion global opportunity.
The economics and practicality of
deploying offtake technologies at small
scales have been the main challenges in
flared gas reduction, but STG+ has been
proven to produce liquid products economically, at scales as low as 350 bpd.
STG+ provides an end-to-end, unattended solution that converts flared gas into a
variety of liquid fuels, including drop-in
gasoline and diesel or a product that is
miscible in crude oil. Furthermore, our
flared gas GTL units, designed to produce
500 bpd or 2,000 bpd, are fully fabricated
and tested in the factory and then trucked
to the site. Onsite, they are placed on a
pad, bolted together and connected to local inputs and outputs. The units can be
readily disassembled, moved to another
location and reassembled. STG+ represents the first truly small-scale GTL solution, enabling it to be easily deployed
onsite, at oil fields around the world, to
reduce flare gas.
At present, we are in discussions with
potential partners about flared gas applications, and we look forward to announcing news on these discussions in
the future. GP

SPECIAL REPORT: SMALL-SCALE

GAS PROCESSING SOLUTIONS

Valerus CEO: Modularization

is key to gas industry evolution
STEVE GILL, CEO, Valerus

Valerus, headquartered in Houston,

Texas, is a key player in natural gas wellhead production, handling, compression, processing and treating. The company provides integrated service and
distribution solutions for gas producers
and consumers worldwide. In this viewpoint interview, Valerus CEO Steve Gill
discusses gas processing in the age of
shale, and how modular and mobile gas
processing trends are transforming the
energy landscape.
GP. How has the shale boom in
North America transformed the
business models and offerings of
oil and gas handling companies?
STEVE GILL is the CEO of Valerus. He has
worked for the company since 2008, serving
as senior vice president for the international
and product lines segments, followed by senior
vice president of the commercial segment. Prior
to his employment with Valerus, Mr. Gill spent
over 13 years with Hanover and Exterran as vice
president of international and vice president of
total solutions. Previously, he spent 15 years with
Dresser-Rand, specializing in rotating equipment
sales. Mr. Gill holds a BS degree in mechanical
engineering from Texas A&M University.

SG. Much like our peers in the downhole services sector, the need to develop
these resources quickly and efficiently is
driving a need for lean manufacturing,
plug-and-play designs, and modularizationa standardization mindset, if
you will. There has been much talk of
this model being applied during drilling
and production, where a bulk of CAPEX
[capital expenditures] is spent.
Handling and processing also allow
for a standardization mindset, especially
in terms of optimizing facility development time lines and the ability to deploy
facilities with flexible, plug-and-play
designs. After all, it is the handling and
processing facility that stands between
production and getting gas to market.
GP. There has been much attention
recently on modular and mobile gas
processing solutions. How is Valerus
responding to this trend? Does the
company plan to add to or modify
its services to fit the changing gas
processing landscape?

SG. For Valerus, this is not a trend,

but rather a core operating model. As

producers continue to build processing

and gathering infrastructure in oil and gas
plays throughout the world, the focus has
changed to expediting cash flow, which
has challenged the industry to focus on
designing and building facilities that meet
a wide range of process conditions, enable
quick installation and have scalability.
As one of the only companies in the
world that not only fabricates comprehensive surface facility equipment but
also engineers, procures, constructs and
commissions full facilities, this is the Valerus sweet spot: standard, modularized
facilities that can be engineered and constructed more quickly and efficiently.
Modularization means that we reduce
the amount of stickbuilding and welding
in the field, which improves safety and
quality; it also means design flexibility,
where processing and handling capacities can be adapted over time. We believe
a move toward modularization will also
drive innovation in a sector that has been
largely commoditized over the last two
decades in terms of process engineering
and lean manufacturing.
There is, however, a caveat to the
progress of modularization. Adding another layer of complexity is that facility
standards are nonexistent or vary widely among countries, regions and even
operators. As a result, the traditional
approach has been to conduct extensive front-end engineering and design
studies, and to implement rigorous and
complex specifications that often mean
standardization and a modular approach
are not possible. This approach has a
significant impact on project cost, scope
and time line.
It will be imperative across the industry to try to change, as the economic
benefits to move toward modularization
can be significant.
Gas Processing|JULY/AUGUST 201429

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

GP. How do you see the North

American and South American
markets evolving for oil and gas
handling, operations and services
over the next 510 years?

SG. According to most sources, the

outlook for North America and South
America over the next few years is strong.
ExxonMobils latest energy outlook indicates that North America and Latin America, combined, will provide approximately
15 million barrels of oil equivalent per day
(boepd) in liquids production between
2010 and 2040, which is over half of all
global projected liquids production; and
that North America will become a net exporter of natural gas in the next few years.
Latin Americas success in this area will
also be strong, but will be more dependent
on geopolitical factors in terms of success.
Due to these factors, producers will
continue to spend money to build the
necessary processing and handling infrastructure required. In the US, where
producers often partner with midstream
companies to handle and process hydrocarbons, the outlook continues to show

processing capacity additions over the

next 510 years. As a result, compression
requirements will continue to grow as additional infrastructure is added and aging
facilities are updated.
In South America, the challenge will
be building new infrastructure, often in remote locations, to accommodate production. This requirement means that service
companies must be equipped to handle
not only the facility itself but often the associated infrastructure required.
GP. How do you see the North
American NGL market changing
over the next decade?

SG. Most industry analysts believe

that NGL demand is expected to continue
to grow in North America, which is one
of the few markets outside of the Middle
East where most steam cracking facilities
are designed to use NGL over the more
expensive oil-based feedstocks used in
Europe and Asia. This scenario will likely drive growth in the North American
chemicals industry, boding well for the
upstream and midstream natural gas sec-

tors. In fact, according to some industry

analysts, tight oil and NGL will account
for almost 35% of liquids production in
North America by 2040.
GP. What factors will shape CNG
fuel markets going forward?

SG. Economics will always be the

main influence. It is still more economical to use gasoline in terms of the driving
range, cost of vehicles and access to refueling. Even in the US, where natural gas
is produced, it is still more expensive to
purchase a CNG vehicle than a gasolinepowered car; however, we do see signs of
change in the near future.
GP. How has the integration of
Valerus oil and gas handling
services into parent company
Kentzs portfolio broadened the two
companies business opportunities?

SG. Kentz is a global engineering

specialist solutions provider, and it has
provided engineering, construction and
technical support services to clients for
more than 90 years. As a result of the acquisition, we can now leverage additional
engineering and project management capabilities from Kentz to complement our
existing portfolio of equipment and services to develop surface facilities globally.
In addition, Kentz and Valerus have
tremendous synergy geographically. Valerus has experienced great success in
North and South America, while Kentz
has a large presence in the Eastern Hemisphere. This joining of forces will benefit
our customers across the globe and create
additional opportunities.
GP. Health, safety and environment
(HSE) is a priority for Valerus.
How does the company integrate
HSE principles into its operations?

SG. It is not just a priority, but the priority. We have consistently maintained a
total recordable incident rate well below
the industry average for the last few years,
due to significant vigilance, implementation of standard work procedures, and,
most of all, culture. Our target zero mentality starts with me and is driven into every employee from day one. We have manufacturing facilities that have operated for
years without an incident. We pride ourselves on this track record, as we believe
we have one of the best track records in
our sector, if not the best. GP
30JULY/AUGUST 2014|GasProcessingNews.com

Esteemed Speakers
Include:

KEYNOTE: Rick Cargile

President, Midstream
Energy Transfer Partners

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CATALYSTS
Design fixed-bed sulfur removal systems for offshore natural gas C34
CORPORATE PROFILE
BASF C39
COVER PHOTO
Courtesy of BASF. An international, downstream, catalysts provider,
BASF is headquartered in Ludwigshafen, Germany.

2014

CATALYSTS

DESIGN FIXED-BED SULFUR REMOVAL

SYSTEMS FOR OFFSHORE NATURAL GAS
H. GARRETT, Clariant Corp., Louisville, Kentucky

Today, natural gas is not just a source of fuel. It is a feedstock

for many chemical and petrochemical processes, and it is increasingly becoming a significant source of clean fuel for power
generation and vehicles. Regardless of its end use, natural gas
must often be treated to remove contaminants, such as sulfur,
mercury, and arsine.
Cleanup of onshore natural gas is relatively straightforward.
Several options exist for the location of the treatment facility, size
of vessels, and transportation of treatment chemicals to the facility. Such logistics are not as predictable in offshore environments.
With a growing focus on offshore markets, such as Latin America,
extensive assessment, planning and economic study are required
to design the most efficient system for processing gas.
FPSO VESSELS

Floating production, storage and offloading (FPSO) vessels

have brought great advantages to offshore oil and gas producers.
All necessary equipment is available on the FPSO ship or barge,
allowing for onsite processing, treatment and storage.
The design of sulfur-removal systems on FPSO vessels is of
particular importance. With various technologies available, understanding their different performance and commercial characteristics will help offshore producers select the most suitable
option for optimizing return on investment.
LIQUID VS. FIXED-BED SYSTEMS

The main sulfur-removal technologies available for sweetening

natural gas are fixed-bed systems based on adsorbents, and liquid
systems based on chemicals, such as amines. There is a considerable amount of literature available on liquid sulfur-removal systems
for onshore and offshore applicationsin particular, amine-based
liquid systems for the removal of hydrogen sulfide (H2S). However, fixed-bed systems deserve greater consideration, as they can
significantly improve cost efficiency and offer a longer lifespan.
For FPSO sulfur-removal systems, an important factor to consider is the effect of sea motion on the performance of processing
equipment. This could be particularly challenging for liquid systems. Nevertheless, if the sulfur content of the natural gas stream
is significantly high, a liquid amine system is a viable option, as it
may lower operating costs. Consequently, there is no one-sizefits-all solution for removing sulfur from gas produced on FPSO
vessels. Achieving the most efficient and profitable results relies
on key criteria such as performance, reliability and total cost.

Furthermore, adsorbents are continuously consumed and

must be regularly replaced; therefore, the design of fixed-bed
systems should balance reactor configurations with associated
costs. Since performance, operating conditions, and costs vary
for each type of catalyst, selection should be based on the unique
needs of the gas processing company.
METAL-OXIDE ADSORBENTS

The adsorbents in this class chemically adsorb sulfur molecules in an irreversible reaction with water as a byproduct. They
are typically selected when the gas stream is dry, and water injection is not possible. Available in several formulations, these
adsorbents can contain zinc, copper or other transition metals. A combination of these metals may also be used to achieve
maximum efficiency.
The choice of metal oxide adsorbent depends on the contaminant to be removed. These adsorbents operate at a broad
range of temperatures, with some providing greater pickup capacities at higher temperatures.
IRON-BASED ADSORBENTS

The most common solid adsorbents for sulfur removal in gas

processing are iron-based materials. These adsorbents utilize
iron in various forms, such as magnetite or hematite, to react with
H2S and water. In many regions, natural gas streams contain sufficient water vapor to promote the chemical reaction needed to
remove H2S. In situations where the gas is dry, a water-injection
system can be added to ensure optimal performance. Iron-based
adsorbents are often preferred, as they are typically low-cost yet
high-performance solutions.
BRAZIL OFFSHORE STUDY

After the initial discovery of oil and gas off the coast of Brazil,
a major oil-producing company approached one company to help
with the challenges of treating gas at sea. In response, the company
designed a set of experiments to test different adsorbent compositions under various conditions, including a range of sulfur concentrations, gas compositions, velocities and water-saturation levels.
The studies allowed the company to define the most important parameters for the design of fixed-bed sulfur-removal systems, and to develop new adsorbents with ideal performance
and kinetics. This systematic approach is still used today to create adsorbent solutions for customers.

FIXED-BED TECHNOLOGY

ASSESSING THE SOURCE

In fixed-bed sulfur-removal systems, the adsorbent has a direct

impact on operating costs. Spent materials handling, footprint,
energy requirements, logistics and cost per kilogram (kg) of sulfur are some of the factors that should be assessed.

A thorough assessment of the natural gas stream is essential

when designing a fixed-bed system. The questions in TABLE 1
provide the critical information needed to select the appropriate adsorbent technology. This data is also helpful in building

C34

CATALYSTS|JULY/AUGUST 2014|GasProcessingNews.com

CATALYSTS

a model for the total cost of ownership (see the Economic

study section of this article). The parameters shown have a
direct impact on vessel size and lifespan of the adsorbent.
For example, carbon dioxide can reduce sulfur pickup with
some iron-based adsorbents. It can also alter the laminar flow
or turbulence of the gas stream. Furthermore, as flowrate increases across the adsorbent bed, a greater volume of adsorbent may be required. Conversely, higher pressure enables
more efficient sulfur removal as it increases the contact time
between H2S molecules and adsorbent. However, this may require vessels with thicker walls, and it may raise capital costs.

drain and purging times. This prevents the water from becoming slurry due to contact with other components. If necessary,
the height of the vessel containing stored water should be increased at this stage.
As demonstrated in FIG. 1, the fixed-bed sulfur-removal unit
can be located at different positions in the FPSO vessel, provided that the right adsorbent type and unit size are selected.
Since the reaction between the H2S molecules and adsorbent is
facilitated by the presence of water in the gas stream, the ideal
position is prior to the dehydration unit.
LOADING AND UNLOADING

EVALUATING ADSORBENT PROPERTIES

Since numerous adsorbents are available, their chemical

and physical properties must be carefully evaluated when designing fixed-bed systems. As explained in TABLE 2, these properties impact all areas of gas treatment, from loading to operation and unloading.
REACTION RATES AND MASS TRANSPORT

During adsorption, contaminants (in this case, H2S) are at

a molecular level, while the rest of the gas is at a macro level;
therefore, contaminants are transported more slowly than the
remaining gas across the adsorbent bed.
The flow pattern is influenced by motion and interactions,
and it can be predicted using Reynolds number. Other factors
affecting chemical reaction rates include gas characteristics,
such as hourly space velocity, viscosity and compressibility.
POSITION OF SULFUR-REMOVAL UNIT

One of the advantages of fixed-bed sulfur removal is that it

requires minimum equipment. Typically, two vessels are sufficient, and can be arranged in either a parallel or lead-lag flow
arrangement. The lead-lag configuration is recommended, as
it optimizes adsorbent usage and offers greater flexibility in
scheduling bed replacement.
During the design stage, the volume of water formed in
each operating vessel must be calculated to predict vessel

Compared to onshore fixed-bed sulfur-removal applications,

an FPSO vessel requires a more modular design to minimize
equipment footprint and weight. The configuration of the vessels should allow the unit to operate continuously during loading and unloading. Once the sulfur-removal unit reaches maximum sulfur breakthrough, the solid should be unloaded and
replaced with fresh material.
Inert spheres or a foam filter are used to support the adsorbent during loading. This prevents adsorbent particles from
flowing though the bottom of the mesh screens. The mechanical properties of the product, such as crush strength and attrition loss, should be considered to minimize adsorbent fines
during loading. The bulk bags filled with adsorbent should
TABLE 1. Factors affecting the design of fixed-bed
sulfur-removal systems
Assessment of natural gas stream
What is the gas flow per day?
What is the H2S level in the gas stream to be treated?
What is the outlet sulfur level?
How much CO2 and O2 does the gas stream contain?
How much water does the gas stream contain?
What are the temperature and pressure of the gas stream?

TABLE 2. Effect of adsorbent properties on sulfur removal

Adsorbent property

Description and impact on performance

Pickup capacity

Capacity of adsorbent to remove sulfur, expressed in mass of sulfur per volume of adsorbent (sulfur kg/m of adsorbent),
or mass of sulfur per weight of adsorbent (sulfur kg/kg of adsorbent). Amount of sulfur removed can be determined based on
the adsorbents composition.

Lifespan

The lifespan of the adsorbent bed must be long enough to prevent premature sulfur breakthrough.

Porosity

Resulting from different production methods, porosity contributes to the surface area where chemical adsorption occurs.
Sulfur molecules must move into the pores to react with the active sites.

Surface area

Active sites are distributed on the surface where adsorption takes place. The amount and nature of active sites play a critical
role in adsorption.

Particle size/shape

Promote activity, provide strength and influence pressure drop. Selection of particle shape and size is governed by the
required adsorbent volume and vessel size.

Crush strength

Dependent on shape, size and formulation, crush strength measures the amount of force that adsorbent particles can withstand
before cracking. It is important to provide continuous operation of the gas treatment unit without reduction in production
capacity or shutdown due to pressure drop or plugging.

Density

Helps determine the amount of sulfur removed from a certain volume or weight of adsorbent.

Attrition

Measures the propensity of the particle to generate dust, fines or powder during operation. Can be a problem for units
with high gas velocities where the adsorbent can move.
GAS PROCESSING|JULY/AUGUST 2014|CATALYSTS

C35

CATALYSTS

TABLE 3. Simulation results for operating expenditure and capital expenditure on a relative basis
Technology version

Iron-based original formulation

Iron-based improved formulation Iron-based new formulation

Relative total flowrate

100

100

100

Relative H2S content at inlet

100

100

100

Relative H2S content at outlet

100

100

100

Number of vessels (lead lag)

Number of vessels for unloading

Relative activity of adsorbent

100

114

375

Relative density

100

54

110

Example
Flowrate, Nm3
Inlet sulfur, ppmv

170

170

170

Outlet sulfur, ppmv

Relative bed life

100

100

100

Time spent unloading and loading fixed beds

100

50

50

Relative operational cost per year

100

87

53

Relative cost of material per year

100

128

364

Relative operational cost per unit mass of sulfur removed

100

77

14

Position
2

Position
1
Lower-pressure
Blower A

Position
3

Higher-pressure
Dehydration

Well uid

FIG. 1. Possible positions for the fixed-bed sulfur-removal unit.

be carefully transferred into hopper sulfur-removal units to

prevent misdistribution, uneven loading density, and particle
breakageall of which can cause channeling, and premature
sulfur breakthrough.
Typically, spent adsorbents are free-flowing, and unloading
is done without water to accelerate adsorbent turnaround. Onshore systems have shown that adsorbents can agglomerate and
prolong unloading. To counteract this issue, new formulations
of sulfur adsorbents should be considered, since they have a
lower tendency to agglomerate. Furthermore, the vessel should
be blanketed with nitrogen during unloading to prevent dust
accumulation and undesired reactions with latent natural gas.
MANAGING LOGISTICS

Due to space limitations on FPSO vessels, the management of

logistics and advance planning are essential. First, basic site preparation and equipment mobilization should be performed. Once
these are completed, unloading and loading of the adsorbent can
follow. Depending on the size of the vessels, this can take four to
seven days, with two shifts per day. The final tasks are cleanup
and removal of equipment and personnel from the FPSO vessel.
Logistical factors to consider for loading and unloading include:
Area required for fresh product
Area required for spent product
C36

CATALYSTS|JULY/AUGUST 2014|GasProcessingNews.com

Area required for equipment

Area required for crane handling
Daily loading capacity (volume)
Daily unloading capacity (volume).

PLANNING TRIPS

Usually, there is not enough space on an FPSO vessel to

perform loading and unloading in one step. Furthermore, it is
necessary to transport the solid adsorbent using a support boat.
The adsorbent packaging is also transported on the support
boat, and its capacity influences crane-safe operations; the cost
of this service must be considered as well. If the support boat
does not have enough capacity to transport all of the equipment
in one trip, then a plan can be established as follows:
First trip: Fresh adsorbent and equipment; back empty
Second trip: Fresh adsorbent; back with spent adsorbent
Third trip: Fresh adsorbent; back with spent adsorbent
Fourth trip: Go empty; back with spent adsorbent
and equipment.
ECONOMIC STUDY

Limited space and intricate logistics make offshore sulfur

removal a more complex and costlier task than onshore applications. The most effective way to minimize expenses is
through the use of high-performance sulfur-removal technology. Iron-based adsorbents are the preferred choice for FPSO
vessels, as they combine lower total costs with a higher capacity for sulfur removal.
COST COMPARISON OF IRON- AND
COPPER-BASED ADSORBENTS
FIG. 2 simplifies an exercise in evaluating iron-based technologies for fixed-bed sulfur-removal systems. Relative costs
change dramatically depending on the technology selected
and its performance (i.e., its capacity to react with H2S). While

CATALYSTS

lower-cost materials are often selected for budgetary reasons, a

more expensive adsorbent that yields higher performance can
result in a lower total cost of ownership.

100

HIGHER-COST ADSORBENTS CAN REDUCE TOTAL COSTS

70

100%
87%

80

Relative cost

Other factors that affect cost analysis are shown in TABLE 3.

The major cost drivers are the adsorbents pickup capacity and
the cost per replacement after the adsorbent is spent. For liquid
and fixed-bed systems, a common comparison between adsorbents is the cost of operations per unit of sulfur removed. As adsorbents become more advanced, their cost increases. However,
when costs are added to a ratio that takes turnaround expenses
and maintenance into consideration, the ratio drops.

90

60
50

53%

40
30
20
10
0

TAKEAWAY

The design of offshore sulfur-removal systems requires careful planning and consideration. A modular setup and efficient
logistics will help minimize equipment footprint and overcome
space limitations on FPSO vessels.
When selecting a technology, it is important to remember
that, while fixed-bed systems require regular replacement, they
can offer greater cost efficiency and a longer lifespan than liquid systems. Choosing between fixed-bed adsorbents that are
based on either iron or metal oxide depends on the producers
goals and the characteristics of the natural gas stream. A detailed
analysis of all costs will result in the lowest total cost per ton of
sulfur removed, while also reducing risk and complexity. GP

Fe original

Fe improved formulation

Fe new formulation

FIG. 2. Relative cost analysis for copper- and iron-based adsorbents.

HOLLI GARRETT has extensive experience in the oil and gas industry,
particularly in diesel and gasoline refining processes. She is the
North American account manager for Clariants Gas Processing group.
Ms. Garrett has directed multiple complex projects, and she has successfully
achieved compliance with the Environmental Protection Agencys
regulations for clean fuels. She previously worked for Total in Houston,
Texas, and Brussels, Belgium, where she was responsible for scaling-up
and implementation of new catalytic technologies in refineries. Ms. Garrett
holds an MBA degree from the Solvay Brussels School of Economics and
Management in Brussels, Belgium, and a BS degree in chemistry from
the University of Texas of the Permian Basin in Odessa, Texas.

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C37

We create
chemistry
that makes natural gas
love solutions.

BASF offers a broad range of technical solutions based on the appropriate

absorbent (solvent), adsorbent, and catalyst. Moreover, BASF supports its
customers in the design and operation of gas treatment plants by providing
process design and engineering support and a range of technical services
such as debottlenecking and process optimization, troubleshooting and
revamps, analytics, and training.
At BASF, we create chemistry for a sustainable future.
www.catalysts.basf.com/adsorbents

BASF

BASFTHE GLOBAL LEADER IN CATALYSIS

Helping our customers become more successful through global catalyst innovations

BASFs Catalysts division is the global market leader in catalysis.

The division develops and produces mobile emissions catalysts as well
as process catalysts and technologies for a broad range of customers
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leading role in catalyst technology through continuous process and
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Innovation in catalysis is crucial for all our product groups. For
mobile emissions catalysts, the focus is on improved products to meet
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adsorbents, which offer guard bed and catalyst intermediate technologies for purification, moisture control and sulfur recovery.

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Formed in 2012, the Battery Materials global BASF business unit
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SPECIAL REPORT: SMALL-SCALE

GAS PROCESSING SOLUTIONS

Consider technology implications

for small-scale Fischer-Tropsch GTL
A. de KLERK, Department of Chemical and Materials Engineering,
University of Alberta, Edmonton, Alberta, Canada

Small-scale GTL processes aim to produce transportable

liquid products from smaller natural gas reservoirs that cannot be profitably connected to pipeline infrastructure. The size
of small scale GTL processes is a byproduct of the nature of
such natural gas reservoirs. There is no specific size limit beyond which GTL processes should no longer be considered
as small-scale. Rather, it is contended that the design of smallscale GTL processes should be inherently different from that
of large-scale GTL processes.
Smaller natural gas reservoirs unconnected to pipeline infrastructure have some characteristics that must be considered
when selecting a small-scale GTL technology:
Remoteness. When connection to pipeline infrastructure is unprofitable, it implies that the reservoir is remote
with respect to the main utility grid. Access to basic utilities such as water, electricity and sewage disposal is likely
to be limited.
Accessibility limitations. The roads leading to the
reservoir will have a more limited carrying capacity for
heavy loads, which limits the size and weight of prefabricated equipment that can be transported.
Transience. The productive lifetime of the reservoir
will, in many cases, be limited. The first implication is
that the GTL facility must be easily relocateable so that
the service lifetime of the GTL facility is decoupled from
the lifetime of the reservoir. The second implication is
that site remediation must be easy and inexpensive.
Location. The actual location of the reservoir matters.
The climate, seasonal variability, access to skilled labor
and legislation are a few of the factors that will affect the
design and operability of the facility.
The design of small-scale GTL processes is still in the development phase. The challenge for new entrants into the
field of GTL is the steep technological learning curve. The
individual technologies that comprise a GTL process (FIG. 1)
are licensable. The remaining challenge lies in the efficient
integration of these technologies to produce a small-scale
GTL process. At each step of the integration, the technology
selection has implications, some of which are not immediately apparent.
The purpose of the subsequent discussion is to provide
some insight into the implications of technology decisions.
The discussion will be limited to Fischer-Tropsch (FT)-based
GTL, although many of the points are equally applicable to
methanol-synthesis-based GTL.

GAS PRETREATMENT
The first step in any GTL process is gas pretreatment. The
purpose of gas pretreatment is to make the gas suitable for the
downstream processes. There are two groups of compounds
that are usually present in natural gas and that should be removed during pretreatmentthe associate NGL and the sulfur-containing compounds. Some natural gas reservoirs may
also have other trace components that must be removed, but
these are not discussed here.
Associated NGL. The reasons for recovering the associated
NGL are twofold. First, since the objective of the process is to
produce liquid products from natural gas, products that are already in liquid form should be recovered. Second, the design
of the natural gas reformer depends on the gas composition.
Hydrocarbons heavier than methane are more easily converted
and are more prone to carbon formation under some reforming conditions. By recovering the associated NGL, the natural
gas is less prone to carbon formation.
The recovery of NGL is a physical separation. The technology
selection must be tailored to the reservoir characteristics. The efficiency of liquid recovery is dependent on the technology selection, and the downstream impact is localized to the gas reformer.
Desulfurization of natural gas. In large-scale GTL facilities,

desulfurization is typically performed by passing the natural gas

with a co-feed of hydrogen (H2 ) over a hydrotreating catalyst,
followed by desulfurization over a packed bed of porous coppercontaining zinc oxide (ZnO). The initial hydrotreating step
is necessary to convert sulfur in mercaptan (thiol) and sulfide
(thioether) compounds to hydrogen sulfide (H2 S). The ZnO
reacts with H2 S to capture the sulfur as zinc sulfide (ZnS), and
Natural gas

Pretreatment

Water

Oxidant
Water

Reforming

Water
Steam

CO2

Conditioning

FT

Recovery/
rening

Gas
Oil products
Water products

FIG. 1. Generic FT-based GTL process.

Gas Processing|JULY/AUGUST 201441

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

the packed bed is typically operated at 350C400C. Once the

packed bed reaches capacity, the ZnS can be regenerated by controlled oxidation. It is, therefore, customary to apply two packed
beds in parallel.
Selecting ZnO-based desulfurization technology for smallscale GTL has some implications:
A source of pure H2 is required as utility. The issue is not
H2 availability, but rather the need to include an H2 purification unit, or an external source of pure H2 in the design.
During regeneration, a sulfur-dioxide-(SO2 )-rich offgas
is produced as effluent. Depending on the location, the
offgas can be disposed of through a stack, or it can require
gas treatment before release.
Other gas treatment strategies will have different requirements and implications. For example, spent FT catalyst makes
a good sulfur trap. Gas treatment and spent FT catalyst disposal
can be integrated, instead of using ZnO.

The energy to drive this reaction can be provided in two ways:

directly, as part of the conversion process, or indirectly, through a
utility stream. When the energy is provided directly, the oxidant is
introduced into the process stream, and part of the natural gas feed
is oxidized to provide energy for the steam reforming reaction.
The oxidant is, therefore, a process feed, and it enters the gas
loop. The advantage of doing so is that the reformer becomes
more compact in design. When the energy is provided indirectly,
as a utility, no oxidant is introduced into the process stream and
the oxidant does not enter the gas loop. Steam reformers tend
to be bulky in design, but the advantage of keeping the oxidant
separate from the process will become evident during the subsequent discussion.
Another important reaction in natural gas reforming is the
water-gas shift reaction (Eq. 2), which governs the equilibrium
composition of the syngas:

NATURAL GAS REFORMING

The purpose of the natural gas reformer is to produce syngas (H2 and CO) as feed for the FT synthesis, which converts
the syngas into heavier products. The flow of syngas through the
GTL facility, which passes from one unit to another and may include one or more recycle streams, is called the gas loop. The
gas loop design is central to the overall GTL process, and the
reforming technology selection has a tremendous impact on the
gas loop design.
The selection of a specific reforming technology determines
the importance and the impact on the gas loop of methane
(CH4 ) conversion, the nature of the oxidant, syngas composition, and operating pressure. Before delving into the details of
each, it is worthwhile to examine the technology options for
natural gas reforming (FIG. 2).
The steam reforming reaction (Eq. 1) is very endothermic
(H r,298 K = 206 kJ/mol), and it requires significant energy input
to proceed:

The reforming temperature affects this equilibrium, with

lower temperatures favoring the production of H2 . The reforming temperature, in combination with the reforming catalyst (if
used), determines the reaction rates in Eqs. 1 and 2, which, in
turn, affects the extent of CH4 conversion and the approach to
water-gas shift equilibrium.

CH4 + H2O r CO + 3 H2

(1)

Natural gas
Water (steam)
Oxidant

Non-catalytic partial oxidation (gasication)

Syngas
Autothermal reforming (ATR)

Direct heating
Natural gas reforming
technologies

Catalytic partial oxidation

Indirect heating

Steam methane reforming

To stack

Natural gas
Water (steam)
Oxidant
Fuel gas

Syngas

FIG. 2. Classification of natural gas reforming technologies.

42JULY/AUGUST 2014|GasProcessingNews.com

CO + H2O i CO2 + H2

(2)

Methane conversion. Unconverted methane will remain in the

syngas as an inert. Unless the gas loop is designed with a recycle
of gas from the recovery section back to the reformer (recycle
not shown in FIG. 1), any methane that is not converted during
reforming remains methane. The methane then becomes part of
the gas product. The gas product is, at best, a low-quality fuel gas
and it is a much lower-quality fuel than the natural gas feed. The
gas product has a lower quality, because the non-combustible
inerts that entered the process concentrate in this stream. For example, if the natural gas contained some N2 , that N2 will end up
at higher concentrations in the gas product and thereby reduce
the calorific value of the gas product.
Oxidant selection. Oxidant selection is critically important if
the reforming technology uses direct heating (FIG. 2), because
the oxidant becomes a process feed and it is no longer a utility
stream. The trade-offs are complex:
Pure O2 . When pure O2 is used as an oxidant, the least
amount of inert material will be introduced with the O2
into the process. The main contaminant introduced with
O2 is usually argon. In large-scale GTL facilities, pure O2 is
invariably used. However, it either requires the availability
of an onsite air separation unit, or the continual purchase
of liquid O2 as process feed. Considering the characteristics of small-scale GTL, neither of these options are attractive prospects, despite the obvious process advantage of
employing pure O2 .
Air. When air is used as an oxidation agent, a large volume
of inert material is introduced into the process. Although
the inert material does not participate in the downstream
conversion, it affects the process design in three ways.
First, it reduces the concentration of the reactive components, which causes a decrease in the rate of reaction during reforming and FT synthesis, which makes separation

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SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

less efficient. Second, it increases the size of all equipment

and piping, because the gas volume is increased by the inert components in the gas. Third, it necessitates an open
gas loop designi.e., no recycle of gas back to the reformer. For the most part, the implications of using air as an
oxidant are negative. Yet, there may be pragmatic reasons
for using air in a small-scale facility to avoid the complexity associated with the use of pure O2.
Operating pressure. Most large-scale GTL facilities operate

with a gas loop pressure in the range of 1.9 MPa2.5 MPa (275
psi360 psi). FT synthesis can be conducted at near-atmospheric pressure, but the reaction rate increases and the equipment size
decreases as the operating pressure is increased. There are also
costs involved with operating at higher pressure. Any operating
pressure above the production pressure of the natural gas from
the reservoir requires additional gas compression. Furthermore,
when the reforming technology involves direct heating (FIG. 2),
the pressure of the oxidant co-feed must also be increased.
Compressors are expensive capital equipment that are costly
to operate and that have a large utility footprint. The operating
pressure of the gas loop, in conjunction with the technology selection for gas reforming, determines the compressor requirements. The reliability of the compressor type and the utility requirements associated with the compression needed to achieve
the operating pressure must be carefully considered in relation
to the location of the small-scale GTL facility.
Syngas composition. The syngas composition produced by

the natural gas reformer largely depends on the technology selected in combination with the feed gas composition. What is
of importance to the downstream process is the H2:CO ratio
in the syngas. If the H2:CO ratio does not match the downstream process requirements, then the H2:CO ratio will have
to be changed during syngas conditioning. The H2:CO ratio
increases with decreasing outlet temperature and increasing
steam-to-carbon ratio in the feed to the natural gas reformer:
non-catalytic partial oxidation (approximately 12) < autothermal reforming (approximately 24) < steam methane reforming (approximately 35).
Syngas conditioning. The syngas produced by natural gas

Alpha-values
0.65 (mole)
0.80 (mole)
0.90 (mole)
0.95 (mole)
0.65 (mass)
0.80 (mass)
0.90 (mass)
0.95 (mass)

Mole fraction, open symbols

30C360C
boiling range

10

20

30

40
50
60
Carbon chain length

70

80

90

FIG. 3. Mole fraction and mass fraction distribution of different

alpha-value FT products.

44JULY/AUGUST 2014|GasProcessingNews.com

Mass fraction, solid symbols

reforming is also called raw gas to differentiate it from the

100

conditioned syngas feed used for FT synthesis. Syngas conditioning involves one or more of the following three steps:
Condensation and recovery of water from the raw gas
Separation and recovery of some or most of the CO2
from the raw gas
Water-gas shift conversion of the raw gas to manipulate
the H2:CO ratio of the raw gas.
Of these processing steps, only the condensation and recovery of water are always necessary, as well as beneficial. The
removal of CO2 and manipulation of the H2:CO ratio depends
on the requirements imposed by the gas loop design and the
technology selected for FT synthesis.

FISCHER-TROPSCH SYNTHESIS
FT synthesis is the process step that is responsible for converting the syngas into heavier products. The product obtained from
FT synthesis is a mixture of hydrocarbons, oxygenates and water.
The three most common organic compound classes that are produced are paraffins (Eq. 3), olefins (Eq. 4) and alcohols (Eq. 5):
n CO + (2n + 1) H2 r CnH2n + 2 + n H2O

(3)

n CO + 2n H2 r CnH2n + n H2O

(4)

n CO + 2n H2 r CnH2n + 1OH + (n 1) H2O

(5)

Other organic compound classes can also be formed, such

as carbonyls (aldehydes and ketones), carboxylic acids and
aromatics.
The carbon chain length, n, follows a fixed distribution,
which is called the Anderson-Schulz-Flory (ASF) distribution.
The ASF distribution is a consequence of the way in which the
products are formed on the FT catalyst. For every step of the
reaction, there is a chance that the molecule being synthesized
will either increase in length by one carbon, or leave the catalyst
as a final product.
The probability that the molecule will increase in length is
expressed in terms of a single variable, , called the alpha-value.
The alpha-value is determined by both the FT catalyst and the
operating conditions. The mole fraction of compounds with (n
+ 1) carbons will be related to the mole fraction of compounds
with n-carbons by Eq. 6:
xn + 1 / xn =

(6)

Using the relationship shown in Eq. 6, it is possible to calculate the ASF product distribution that will be obtained from
FT synthesis with a known alpha value. The impact of choosing different alpha values on the resulting product distributions is illustrated in FIG. 3. The only two carbon numbers that
do not follow this relationship are C1 and C2. Normally, the C1
mole fraction is higher than predicted from Eq. 6, and the C2
mole fraction is lower than predicted from Eq. 6. The values for
C1 and C2 compounds are, consequently, not shown in FIG. 3.
Other subtleties affect the product distribution, as well, but the
ASF distribution is usually a good approximation of the carbon
distribution that is obtained during industrial operation.
The selection of the FT technology holds implications for the
upstream and downstream design of the GTL process. These implications will be discussed in terms of the key parameters that
can vary. Note: It is possible to create new FT technologies by
combining these parameters into different groupings. This is one

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

of the main advantages of FT synthesis, because it provides the

design engineer with ways to manipulate the nature of the product to best fit the application. It is unfortunate that the technology
selection for recent industrial GTL facilities has created a more
monochromatic impression of what is desirable and what is not.
FT alpha-value. The alpha-value cannot be selected independently of the FT catalyst type, reactor type and operating
conditions. Nevertheless, it is advisable to estimate what alphavalue best suits the design intent of the small-scale GTL facility.
The alpha-values of industrial GTL processes are in the range
of 0.600.95.
A high alpha-value limits the production of normally gaseous lighter products while producing a broad distribution of
products (FIG. 3), including a significant fraction of waxes. A
low alpha-value produces a significant fraction of lighter products, including naphtha and normally gaseous products, but
the boiling range distribution is narrow, and almost no heavier
products are produced (FIG. 3).
In a small-scale GTL facility, gaseous light products and
waxes are usually undesirable products. The following implications should be considered:
Normally gaseous light products (C1C4 ). Just like the
natural gas feed, the problem with the normally gaseous
products that are produced by FT synthesis is transportability to the market. The olefinic C2C4 gases can be
converted into liquid products using oligomerization
technology. For example, high conversion of light olefins
to naphtha and kerosine boiling-range products is possible over a solid phosphoric acid catalyst. The paraffinic
C1C4 gases are inert to this type of conversion. Although
some of the light gases will also dissolve in the oil product, most of the light paraffinic gases are undesirable FT

products in a small-scale GTL facility. In this context, the

light paraffinic gases effectively have the same value as
the natural gas feed at that location, because the gaseous
products cannot be brought to market.
Waxes. In large-scale GTL facilities, waxes are desired
products. In small-scale facilities, the presence of waxes
creates a challenge in terms of production, conversion
and marketing. Heavy waxes readily congeal in cold
spots, and all process equipment in contact with waxes
must be rigorously heat-traced. To convert waxes into liquid oil products, a hydrocracker is needed. Hydrocracking technology requires high-pressure purified H2 and a
fired preheater, which are both onerous requirements in
a small-scale GTL facility. Alternatively, the waxes can be
recovered as a slack-wax product that can be marketed
separately from the oil product.
FT catalyst type. All industrially used FT catalysts are based

on either iron (Fe-FT) or cobalt (Co-FT). The selection of one

catalyst type over the other is a process-specific selection that is
based on the different characteristics of the catalysts (TABLE 1).
The comparison assumes that the Fe-FT and Co-FT catalysts
are both state-of-the-art, industrially produced catalysts that are
skillfully operated. The implications of the catalyst selection for
the process follow from the catalyst characteristics.
Many of the characteristics stem from the hydrogenation activity of the two metals. The hydrogenation activity of iron is lower
than that of cobalt. The main advantage of lower hydrogenation
activity is that Fe-FT catalysts can be operated over a much wider
temperature range than can Co-FT catalysts. At higher operating
temperatures, Co-FT catalysts become strong methanation catalysts. The main disadvantage of lower hydrogenation activity is
that the product from Fe-FT synthesis contains more oxygenates.

TABLE 1. Comparison of iron- and cobalt-based FT catalyst characteristics

Description

Fe-FT

Co-FT

Low to very high

Usually high; > 0.8

Lower

Higher

Olen selectivity

Higher

Lower

Oxygenate selectivitya

Higher

Lower

Water-gas shift activity

High

Minimal

Catalyst cost

Cheap

Expensive

Complexity of catalyst manufacturing

Lower

Higher

Metal toxicity of spent catalyst

Low; can be waste

Toxic; must reclaim

Catalyst lifetime

Months

Years

Temperature range of typical operation

220C340C

190C230C

Sensitivity to feed H2:CO ratio

Lower

Higher

Sensitivity to H2S in syngas

Deactivation

Deactivation

Product properties
Alpha-value
a

Methane selectivity
a

Catalyst properties

Operating properties

Sensitivity to NH3 in syngas

No effect

Deactivation

Sensitivity to halogens in syngas

Deactivation

Deactivation

Comparison made at same operating conditions

Gas Processing|JULY/AUGUST 201445

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

In addition to the implications that stem from the characteristics of the two catalyst types shown in TABLE 1, there are two
issues of common misconception:
CO2 footprint of Fe-FT vs. Co-FT. The net CO2 footprint of an FT-based GTL process is determined by the
reaction stoichiometry and energy requirements of the
process. The stoichiometry of FT synthesis, shown in Eqs.
35, is similar for Fe-FT and Co-FT catalysts. The main
difference between Fe-FT and Co-FT is the step in the
process where most of the water-gas shift conversion (Eq.
2) takes place. In the case of Fe-FT, water-gas shift conversion takes place in parallel with FT synthesis, but this does
not mean that Fe-FT has a larger CO2 footprint than does
Co-FT. The overall CO2 footprints for Fe-FT- and Co-FTbased GTL processes are similar.
Fe-FT catalyst lifetime. The reported catalyst lifetimes
for Fe-FT catalysts span a wide range. The catalyst lifetime is based partly on the operating temperature, as well
as on minimum acceptable activity and alpha-value. At
operating temperatures typical of high-temperature FT
synthesis processes (typically > 320C), catalyst lifetime is mainly determined by activity loss. However, at
lower operating temperatures, which are more typical of
low-temperature FT synthesis, acceptable activity can be
maintained for much longer, but at the expense of a slight
decrease in alpha-value (i.e., lower wax selectivity) and an
increase in olefin content of the product. For small-scale
GTL applications that aim to produce oil or fuels, catalyst
lifetimes in the order of a yearand possibly longer
can be anticipated.
FT operating conditions. The operating temperature is the
most important of the operating conditions to select. The selectivity profile of FT synthesis is sensitive to the operating temperature, especially for Co-FT, which has a narrow operating
window compared to Fe-FT (TABLE 1). An increase in operating
temperature leads to a decrease in alpha-value. The implications
associated with changes in the alpha-value have already been
discussed. Generally speaking, higher operating temperature
disqualifies Co-FT and places more emphasis on the need for
an oligomerization process downstream from FT synthesis.
Low-temperature FT
with alpha-value of 0.90
240C
25C
2 MPa
0.1 MPa
Vapor
Organic
Organic
liquid
and
water
vapor
Aqueous
product

Organic
liquid

High-temperature FT
with alpha-value of 0.65
320C
25C
2 MPa
0.1 MPa
Vapor

Organic
and
water
vapor

Organic
liquid

Aqueous
product
Solid
wax

FIG. 4. Product phases during FT synthesis and at ambient conditions.

Inert gaseous compounds, CO2 and unconverted syngas were excluded
from the vapor-phase product.

46JULY/AUGUST 2014|GasProcessingNews.com

Another important aspect of the operating temperature is

the quality of the steam that is generated by removal of reaction heat during FT synthesis. FT synthesis is very exothermic;
about 20% of the calorific value of the methane feed is released
during the FT reaction. This makes the steam production during FT synthesis a meaningful energy flow in relation to the
overall GTL process. The higher the operating temperature, the
higher the steam temperature and pressure, which makes the
steam more useful. The importance of producing high-quality
steam in a small-scale GTL facility depends on the design of the
GTL facility and its location.
Operating pressure affects the alpha-value and volumetric
reactor productivity. The pressure will likely be determined by
the technology selection for gas reforming.
The syngas composition is important, and it is affected by
the design of the FT gas loop. When the gas loop includes one
or more syngas recycle streams, the H2:CO ratio produced by
the reformer is less critical.
Generally speaking, the FT synthesis becomes more sensitive to the H2:CO ratio of the syngas feed at higher per-pass conversion in the reactor. The increased sensitivity to the H2:CO
ratio at high conversion is because H2 and CO are consumed in a
specific ratio (Eqs. 35). Co-FT is more sensitive to the H2:CO
ratio of the feed. Fe-FT is water-gas shift-active and will tend to
produce a more H2-rich syngas due to the water-gas shift equilibrium (Eq. 2) at low temperature that favors H2 over CO.
FT reactor type. The reactor type must be selected in combi-

nation with the nature of the catalyst and operating conditions.

Heat management is central to the design of reactors for FT
synthesis. Although near-isothermal operation is preferable, it
is important to understand the origin of this requirement.
Activity and selectivity during FT synthesis is sensitive to
temperature. If waxes are the preferred products (as is often the
case in large-scale, low-temperature FT GTL facilities), then
any localized temperature increase results in a loss of wax selectivity. In small-scale GTL facilities that aim to produce oil, the
stringency of this requirement can be relaxed for Fe-FT and, to
a lesser extent, for Co-FT, due to its narrower operating window (TABLE 1). Depending on the extent of the deviation from
isothermal operation, there is a risk that methane selectivity
will be increased, or that catalyst deactivation will be increased.
These are general reaction-engineering concerns and are not
just specific to FT synthesis.
The process implications for the main reactor types employed in FT synthesis are:
Fixed-bed. Multitubular or microchannel fixed-bed reactors approach ideal plug-flow reactor behavior. The main
advantages for small-scale GTL facilities are their robustness of operation and the localized deactivation of catalyst
when there are impurities in the syngas. The main disadvantages are the need for manual loading/unloading and
the inability to replace catalyst while onstream. Size and
cost can be minor disadvantages.
Slurry bubble column. Slurry bubble column reactors
can only be used when the alpha-value of FT synthesis is
high enough so that there is a liquid phase present at synthesis conditions. Slurry bubble column reactors have behavior that can be approximated by one to three continu-

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

ous stirred tank reactors in series. The main advantages are

high heat transfer for near-isothermal operation and the
ability to add and remove catalyst while onstream. The
main disadvantages are difficult catalyst/product separation and bulk poisoning of the catalyst when there are impurities in the syngas.
Fluidized bed. Fluidized-bed reactors can only be used
when the alpha-value of FT synthesis is low enough so
that there is a no-liquid phase present at synthesis conditions. Therefore, this reactor type is found only with hightemperature FT synthesis using Fe-FT catalysts. The main
advantages are simplicity of construction (fixed-fluidized
bed) and the ability to add and remove catalyst while onstream. The main disadvantage is bulk poisoning of the
catalyst when there are impurities in the syngas.

PRODUCT RECOVERY
The product from FT synthesis at ambient conditions consists of gaseous compounds, an organic oil phase, a solid wax
phase (when the alpha-value is high) and an aqueous phase that
contains dissolved short-chain oxygenates (FIG. 4). The relative
amounts and the composition of each product phase depend
on the nature of the FT synthesis and the conditions of product
recovery. The product from FT synthesis is not a single-phase
hydrocarbon oil, and although product recovery seems like a
simple matter of condensation and phase separation, the vaporliquid-liquid equilibrium is complex.

The nature of the product separation associated with the

product recovery affects the downstream design and the efficiency of the FT gas loop. The impact of poor product recovery
design on downstream operation should not be underestimated
and is not necessarily apparent from calculations. For example,
if the design does not allow complete recovery of short-chain
carboxylic acids in the aqueous product, then the oil phase will
become corrosive, affecting the material selection of downstream equipment. The composition of the different product
fractions produced during product recovery also affects the efficiency of product refining units.
Product refining. The extent of refining that is required in
small-scale GTL facilities depends on two decisions, both of
which affect the economics of the overall process. First, there
is the nature of the products that must be produced for the intended market, which is a business decision. Second, there is
the refining units needed to convert light gaseous hydrocarbons
and/or solid slack waxes into liquid products, which are needed
to improve the overall liquid yield of the GTL facility.
The incremental cost associated with FT refining can usually
be economically justified by the increased value of the refined
products. However, the primary aim of small-scale GTL is to
produce a transportable product. Value addition to the transportable liquid product can take place in a centralized, largerscale facility, and it does not need to be part of the small-scale
GTL facility. Generally, two refining units should be considered

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Gas Processing|JULY/AUGUST 201447

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

for possible inclusion in a small-scale GTL design: olefin oligomerization and wax hydrocracking. The relative need and importance of each is a consequence of the FT technology selection and, in particular, the alpha-value of FT synthesis.
Olefin oligomerization. The importance of olefin oligomer-

ization in a small-scale GTL facility increases as the fraction of

light olefins in the FT product increases. By not including an
olefin oligomerization unit, much of the light olefins will remain as vapor-phase product with the same lack of transportability as the natural gas feed.
There are many olefin dimerization and oligomerization
technologies from which to choose. Most technologies are based
on the use of an acid catalyst in a fixed-bed reactor. Oligomerization proceeds by successive dimerization reactions (Eq. 7):
2 CnH2n r C2nH4n

(7)

Luckily, most olefin oligomerization technologies are fairly robust and well suited for small-scale implementation. In the context of a small-scale GTL facility, it is preferable to select an oligomerization technology that has the following characteristics:
Feed flexible. It is necessary for the oligomerization
process to be effective with a range of feed compositions.
The implication of selecting a technology with limited
feed flexibility is that changes in the alpha-value of the FT
catalyst will hamper the efficiency of light olefin recovery.
Moderate operating temperature. The oligomerization process should not require feed preheating beyond a
temperature that can be provided by the steam generated
from cooling the FT reactor. Furthermore, oligomerization is thermodynamically favored by low temperature.
The implication of selecting a technology with more
onerous preheating requirements is that a fired heater will
be required. Fired heaters are both expensive and bulky.
High selectivity to heavy naphtha and distillate. The
objective is to recover the light olefins by converting them
into liquid products. Ideally, most of the olefinic product
should be heavy enough to be easily recoverable by condensation. The implication of selecting a technology that
favors dimerization is that some products will be in the
light naphtha range, which is more difficult to recover.
High once-through liquid yield. The olefin oligomerization technology must be able to convert the olefins efficiently, even at low olefin partial pressure in the gaseous
feed. The implication of poor conversion at low olefin
partial pressure is a decrease in overall process efficiency
and profitability.
Product quality. Depending on the intended market,
some olefin oligomerization processes may produce better-quality products that can be sold as blending components. Although this will increase the logistical complexity of the operation, there might be sufficient economic
incentive to do so.
Wax hydrocracking. Despite the prevalence of wax hydrocrackers in large-scale GTL facilities, it is not a technology
that is easy to implement on a small scale. The need for a wax
hydrocracker is the consequence of the decisions to make use
of a high alpha-value FT technology and to produce a liquid
48JULY/AUGUST 2014|GasProcessingNews.com

product. By changing either of these decisions, the inclusion

of a wax hydrocracker can be avoided.
A wax hydrocracker will meaningfully increase the cost, size
and complexity of a small-scale GTL facility, due to the inherent
requirements of hydrocracking technology mentioned previouslythe need for pure H2 and the need for a fired preheater.
Need for pure H2. Wax hydrocracking consumes little H2,
but the required feed ratio of H2 to wax far exceeds the H2
consumption. Sufficient H2 partial pressure is needed to
suppress catalyst deactivation by coking. The unconverted
H2 is recycled. However, the partial pressure of H2 can be
reduced by any inert materials that build up in the recycle
loop. In a small-scale GTL facility, H2 is available from the
syngas, but the H2 must be purified before it can be used
for the hydrocracker. The implication is that some H2 purification technology, such as pressure swing adsorption,
must be included in the design. Furthermore, it is likely
that there will be a difference in the H2 pressure required
by the hydrocracker and the pressure at which the pure H2
is produced. Consequently, there will be additional gas
compression requirements associated with both the H2
purification and the H2 recycle loop on the hydrocracker.
Need for a fired preheater. Hydrocracking typically
takes place at temperatures of 350C and higher. Fired
heaters are bulky and costly. In addition to these requirements, there is also the need for wax recycling. The oncethrough conversion of wax by hydrocracking is limited
by the liquid selectivity that can be obtained at high conversion. In practice, the per-pass conversion is limited to
around 70%, which implies that there is a distillation step
that must be included in the process design. Since the recycled product is unconverted wax, the distillation step
has a bottom temperature that is also around 350C, and
it also requires a fired heater.

TAKEAWAY
The development of small-scale FT-based GTL facilities is
an exciting future prospect. These facilities will likely be very
different in design to their larger-scale counterparts.
Technology decisions associated with the processing steps
in small-scale GTL facilities have many implications. By pointing out the implications of design decisions, which transcend
unit boundaries, the selection and integration of commercially
available technologies can be optimized to produce more efficient designs.
Here, the absence of recommendations related to the technology decisions is deliberate. It underscores the interrelatedness of the technology decisions and emphasizes the message
that it is inadvisable to make such decisions in isolation. GP
ARNO DE KLERK is a registered professional engineer in
Alberta, Canada, with around 20 years of experience in FischerTropsch-based gas-to-liquids and coal-to-liquids conversion. He
spent around 15 years working for Sasol in South Africa, where
he was the technical manager of its Fischer-Tropsch Refining
Catalysis group. In 2009, he relocated to Canada to take up a
position in the Department of Chemical and Materials
Engineering at the University of Alberta, where he is the Nexen Professor of
Catalytic Reaction Engineering. He consults globally on topics related to carbonbased conversion processes. His publications include monographs on different
aspects of the Fischer-Tropsch process in addition to various papers.

SPECIAL REPORT: SMALL-SCALE

GAS PROCESSING SOLUTIONS

Planning small-scale LNG? Manage

engineering risk to maximize returns
E. H. RODRIGUEZ, OnQuest Inc., San Dimas, California

The attractiveness of natural gas as a principal source of

fuel for a range of uses is predicated on several factors. Principal among these factors is readily available supply. The twin
technological breakthroughs of reliable horizontal drilling and
hydraulic fracturing have meant that fields formerly considered
too costly to exploit are now economically viable. In turn, plentiful supply drives down prices.
Geopolitical factors also play a role. Given turbulence in
major oil-producing nations worldwide, from Iraq and Iran to
Venezuela and Nigeria, the appetite for a domestic source of
high-horsepower fuel has only increased.
Another driver is environmentalfrom increasingly stringent regulation on coal-fired power plants to public concerns
about nuclear power, greenhouse gases and air quality. In the
US, opposition to crude oil from Canadian oil sands has become a concern for producers on that front as well. Natural gas
exploration and production are not without environmental impacts. However, technology advances and environmental regulations suggest that these can be controlled.
The most important driver for continued reliance on US
shale gas as a fuel source is its plentiful supply and its discounted
cost when compared to crude oil. At high-volume use in highhorsepower applications, this cost differential reaches hundreds
of thousands of dollars per year.
Opportunity for purpose-built plants. Developers of natu-

ral gas fields, prospective investors in natural gas liquefaction,

and commercial buyers of LNG may wish that enormous supplies of methane were always located within reach of existing
transportation, and/or in close proximity to prospective buyers.
Unfortunately, this is not always the case.
Domestic LNG supply and consumption are both constrained by a lack of transportation infrastructure. Building
larger-scale plants and infrastructure is costly and presents
imposing regulatory challenges. To be transported safely and
cost-effectively, natural gas is reduced in volume using cryogenic technology. Moving large volumes of supply to consumers is expensive, and requires refrigerated pipelines (which are
impractical), massive fleets of LNG tanker-trucks, rail cars
and/or barges.
This challenge translates into opportunity for investors in
purpose-built facilities. Building processing capacity and the
necessary infrastructure to deliver LNG to customers where
they need the fuel is critical. Smaller, purpose-built, dedicated
LNG production facilitiesso-called mini- and micro-LNG

plantscan be constructed close enough to natural gas supply and closer to customers that need energy.
The rise of the micro-plant. Large LNG infrastructure projectsoffshore platforms, production facilities, terminals and
pipelinescost billions of dollars. They entail complex and
sometimes politically fragile coalitions of exploration and production (E&P) companies, government entities and lenders.
Almost always, the engineering contractor is billing time and
materials (T&M) on a project that could take a decade from
conception to commissioning.
Because of their size, smaller-scale LNG plants present an attractive economic proposition, if construction budgets are well
managed (FIG. 1). Developers of smaller LNG facilities typically
plan to spend between $50 million and $200 million upfront.
Most are already familiar with the technologies available to
purify and liquefy natural gas; frequently, they have already selected one and secured a site for the facility by the time they
commit to an engineering contractor. Most likely, they already
know where they can sell the LNG once it is processed, and may
even have a contract. Developers will also have forecast capital
costs and return on investment (ROI).
Investors and facility owners interested in developing purpose-built micro-scale and small-scale LNG plants for transportation fuel requirements or for high-horsepower uses in oil
or gas production must forecast profitability to establish their

FIG. 1. Smaller LNG plants present attractive economics, if budgets

and planning account for elements of risk.
Gas Processing|JULY/AUGUST 201449

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

return on invested capital (ROIC). They need to assure equity

partners and lenders of adequate returns.
Planning for success. Forecasts of financial returns are typically based on assessing initial capital costs for the requisite
technology, and include the anticipated cost of design, engineering, procurement and construction for so-called balanceof-plant construction of the processing facility.
Other parameters for financial modeling include estimates
of facility operating costs, including projections of feedstock
prices (or futures contracts), personnel costs for operators, facility maintenance, and a forecast of the price for LNG that the
investor has either contracted for or reasonably expects to command in the market.
Understanding the engineering and technical risks inherent
in building smaller-scale LNG facilities is critical. Anything that
interferes with projected profitability must be carefully assessed
and accounted for in cost models; the same is applicable to
LNG process plant construction.
For smaller LNG plants, economic feasibility analyses typically forecast onstream production within 18 to 20 months, and
a ROI in year three. Developers must still mitigate any risk to
achieving projects on schedule and on budget; the plant must
begin operating as soon as possible. On smaller LNG projects,
a 3% or 5% cost overrun on construction, a six- or nine-month
permitting process, or a holdup in the fabrication of key equipment can seriously squeeze profitability. These are just a few of
the critical factors that can affect timelines for completion and
costs.
Economic forecasts may miss key engineering complexities
and other considerations. Variables include the attributes of the
proposed site and its proximity to feedstock and utilities, engineering alternatives for various plant functions, the prevailing
regulations and environmental requirements in the specific jurisdiction, health and safety considerations and others.
LNG production: Gauging execution risk. LNG develop-

ment projects share a similar project planning profile to other

Site
location

Regulatory and
permitting

Equipment
delivery

Availability
of utilities

Project
protability
(ROIC)

Technology
specications

Feedstock
quality

Limited
suppliers

Force majeure
(weather)
Subcontractor
performance

Logistics

FIG. 2. Forecasting risk: A model for LNG development projects.

50JULY/AUGUST 2014|GasProcessingNews.com

hydrocarbon and chemical processing facilities. These include

specific site requirements, health and safety considerations,
permitting requirements, transportation infrastructure, the
availability of key utilities, and air and wastewater treatment.
Often overlooked in financial models, however, is a range
of engineering and associated project risks that can affect nearterm profitability. The range of these challenges is depicted in
FIG. 2. Natural gas treatment facilities present their own technical challenges. Available cryogenic technologies have different ranges of processing capacity and energy requirements;
these can alter design parameters and operating costs based
on production volume.
Other variables include the volume and purity of methane
gas supply. They include the challenge of separating, processing
and storing NGL, along with managing their sale and transport.
New and emerging environmental factors. Methane is a

greenhouse gas more potent than CO2 , and its emission has
recently become a significant environmental concern. Controlling emissions during production and transportation is becoming more important.
Challenges also arise during plant construction, due to unforeseen design modifications, scope changes, inaccurate or
incomplete materials specifications, the incompatibility of key
process components, and the execution risks inherent to any
technology construction project. All of these risks interfere with
timely project completion and can affect the timeline for ROI.
Modeling risks to manage outcomes. A comprehensive tech-

nology project risk assessment can give investors a clearer forecast

of total installed cost, infrastructure requirements, and operating
and utility requirements in advance of breaking ground. This allows for a more accurate financial model and ROI assessment,
including the liquefaction technology selected and balance-ofplant costs. It also allows investors to model ROI under different
circumstances, from best-case scenarios to higher-risk ones.
Developers and investors should consider adopting a risk
model (FIG. 2) that identifies potential hurdles to timely, onbudget completion. In partnership with their technology provider and engineering contractor, they can then articulate a
strategy for managing each of those risks based on key factors:
criticality (i.e., relative importance to realizing the project on
time), severity (i.e., the financial impact and/or cost-to-cure)
and likelihood (which depends on an informed estimate of possible incidence). Importantly, the coincidence of two or more
risks during the balance of plant design, engineering, and construction can contribute to a complex interplay of factors that
affect project schedules.
Financial planners and analysts can build sophisticated predictive models that will forecast profitability and cash flows
based on multiple operating and market base-cases. Developers and investors know how to project ROI based on feedstock
and process costs. However, variables that affect project cost
and timeline for construction are often overlooked during the
early stages of a feasibility analysis.
Those variables can be identified, examined and frequently quantified; they can be plotted on a timeline that identifies
which risks belong to which phase. As shown in FIG. 3, most
of these risks belong to the earliest planning stages, with the

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

second-highest number occurring in the construction phase.

With sufficient planning in advance of groundbreaking, many
of these risks can be mitigated or even eliminated.
The experience and qualifications of the engineering partner
on an LNG production facility are key factors in circumventing
certain types of financial risk. For smaller-scale facilities, a developer can cap or contain costs relating to risks in the design,
engineering, procurement and construction (EPC) phases of
the project by involving the engineering partner to address these
risks during the development phase, and by agreeing to terms
with a provider willing to work for a predetermined fixed fee.
A typical micro-LNG plant will require 18 to 20 months for
engineering, procurement and construction up through commissioning, or four to six months after receiving the key piece
of process equipment.
Procurement is criticalfrom specifications, to fabrication,
to delivery. The critical activities are chiefly based on acquiring
specific equipment to the necessary specifications:
Brazed aluminum heat exchanger required for the
cold box
Refrigeration compressor(s)
Turboexpander.
Delivery and/or onsite construction of the LNG storage
tank(s) may also be on the critical path to completion, depending on source limitations.
In some states, an air permit can be obtained in parallel with
design engineering. In others, securing a permit can add 8 to
12 months prior to the start of engineering/procurement. Construction will take 7 to 10 months, depending on the plant size,
location and whether work can continue throughout the winter.
Variables affecting project cost. Following are some details
on variables that can affect construction cost and impact shortterm ROI.
Natural gas supply. Several factors come into play immediately in considering the most fundamental decisionplant
location. The principal factors are the source of supply and the
planned or contracted demand. LNG plants require a reliable
natural gas feed, delivered at a volume and pressure capable
of meeting full production capacity. Reviewing the design of
proposed delivery systems for the feedstock is imperative. Low
natural gas pressure may require a compressor, which adds significantly to the capital outlay and facility operating cost. Normally, natural gas is supplied by a local gas provider, with supply
contracted before the plant is built.
Adjacent gas processing facility. Sometimes, locating an
LNG plant near a gas processing facility can offer substantial
capital cost savings. Being able to rely on a supply of leaner feed
gas can eliminate propaneand, therefore, the need for a separate depropanizer unitand it can lessen the need to remove
heavy ends (such as ethane) in the gas. It can also simplify feed
gas handling, and it can simplify pretreatment by eliminating
the amine system in cases with low levels of carbon dioxide
(CO2 ) in the feed.
However, the potential capital cost savings realized by colocating the LNG facility adjacent to a gas processing facility
may be offset by the higher cost of feed gas from that supplier,
because of the requirement that the gas be treated more extensively before it arrives at the LNG facility.

A more viable option may be to sweeten the gas at the new

facility once it arrives onsite, and to return the LNG heavy
ends (i.e., ethane and heavier NGL) to the gas processing facility. This eliminates the need for the planned facility to handle
and store NGL, and to have the corresponding loading system.
Since ethane and NGL can also be used as fuel, it creates another potential source of revenue for the developer.
Natural gas demand. On the demand side, the plant should
be strategically located with respect to proposed or contracted
markets, to reduce transportation cost. This means considering
how the LNG will be delivered to buyers: The type of tractor
used, the tractor/trailer storage location, whether the tractor
needs to return to home base in a day, and whether to use company-owned tractor-trailers or contract for bulk delivery.
In undertaking economic modeling, owners and developers
must account for the contracted costs of transportation. Piping
the LNG is not practical, as it requires expensive insulated piping. Sometimes, however, transportation and customer delivery
are still being debated during the engineering feasibility stage,
affecting the length of planning time, decisions about facility
size, transportation infrastructure, and applications for local
and county permits.
Plant size. Another factor often determined in advance
but, on occasion, without full consideration of the engineering
demands of building a plantis the size of the property required.
The size will depend on the capacity of the plant to be built, and
should take into account any requirements for berms surrounding LNG storage; LNG loading, including tanker staging and
parking; standalone fire-prevention equipment; and other site
safety provisions, such as overflow retention impoundments.
The site must also be large enough to meet the offsets to property
boundaries resulting from gas dispersion and radiation studies.
Plant developers also need to consider whether demand forecasts allow for later expansion. Economies of scale dictate that
a larger plant is more cost-effective than multiple smaller ones,
but the initial installation of a larger plant may not be the best
economic option due to available markets for LNG, investment
constraints (cash/financing) and the impact on operating efficiency of running a plant at less than its designed capacity.
Local community and taxation. Preferably, developers will
want to locate new LNG facilities in areas where petrochemical facilities have already been permitted and approved, and/or
in communities or regions already familiar with gas processing
and even cryogenic processing. Local building departments and
agencies, as well as fire departments, will have more experience
Contract sales price for LNG
Liquefaction technology
Site location
Siting studies
Design/engineering Dening design basis
Phase 1 planning

Feedstock availability
Feedstock price and supply
Regulatory and permitting
Engineering resources
Fire dept. requirements

FERC permissions
Utilities supply
Vendor information
availability
Timely decision-making

Timely order release

Deliveries

Procurement

Shortage of equipment
suppliers
Logistics

Construction

Subcontractor performance Equipment deliveries

Labor availability
Force majeure (weather)

Commissioning

Experience of operators

Construction permitting
Rework

FIG. 3. LNG project timeline with risks by phase.

Gas Processing|JULY/AUGUST 201451

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

Building processing capacity and the

necessary infrastructure to deliver LNG
to customers where they need the fuel is
critical. Smaller, purpose-built, dedicated
LNG production facilities can be constructed
close enough to natural gas supply and
closer to customers that need energy.
in permitting and inspecting such facilities, and a shallower
learning curve facilitates faster decision-making.
Municipalities that derive tax revenues from these types of
facilities should be of particular interest. From the standpoint of
taxation, these are friendlier than others and, furthermore, likely
far less hostile from a regulatory point of view. Some may provide
tax-increment financing (TIF), or other financial incentives, to
encourage development and job creation. Developers will want
to investigate such economic development zones for industry.
Utilities requirements. Reviewing utilities available at the

siteand road access to the siteshould also be included in

upfront analysis.
Water. Water is required for some process uses in all LNG
production facilities. For certain processes, usage is high, and at
least some percentage of supply needs to meet particular degrees
of cleanliness and chemical composition. Consumption is highest in plants with cooling towers. Water may also be needed for
firefighting use, based on regulatory requirements.
Water can be provided by a local utility, from a well specifically drilled for the LNG plant use, or from a neighboring
property. Local regulations control the drilling of wells and, in
some cases, may not allow it due to contracted obligations on
the water table, existing demand or environmental regulation.
In many jurisdictions, wastewater treatment requirements also
must be considered.
Electrical. Power is normally provided by a local utility, but
it can be generated onsite if necessary. In one recent LNG facility
construction project, the available electrical power supply was
sufficient for continuing operations, although it was inadequate
for the initial demand load required to start the compressors
electric motor. The solution meant specifying a variable frequency drive to allow use of available power, without needing
to add new electrical supply lines from the municipal power suppliera cost that would have been passed on to the developer.
The extent of an LNG plant owners investment in power-line
and gas-supply pipeline extensions will depend on negotiating
terms with local suppliers. Accounting for the costs of electrical
power supply will be important to calculating ROI.
Sewer. Sewers are not a necessity for an LNG plant, but
ready access to a municipal system makes disposal of wastewater from water treatment and control-room facilities simpler and
less costly. If the proposed design includes cooling towers, the
cooling tower blowdown will be the largest waste stream. The
volume and flowrate of the waste stream is directly proportional
to concentration cycles in the cooling tower, and it is affected by
the quality of available water. Wastewater from the gas purification system is the second-largest stream.
52JULY/AUGUST 2014|GasProcessingNews.com

Both waste streams will have a higher concentration of total dissolved solids (TDS) than the available water source. Depending on that concentration and the water quality of the waste
stream, local regulations may allow discharge into storm-water
ponds or injection into the ground. In a worst-case scenario, water may have to be piped or trucked offsite. In this case, a process
design that calls for the use of a cooling tower would not be costeffective, and an alternative design should be considered.
Highway access and condition. Once an LNG plant is up
and running, tanker-truck traffic places continual demand on
transport infrastructure: roads, bridges, and viaducts. At an
LNG plant producing 100,000 gallons per day (gpd), operators can expect 10 to 14 tanker trucks to arrive at the facility,
load, and leave on a daily basis. A fully loaded tanker weighs
65,000 lb to 80,000 lb; this means significant stresses on roadways and bridges.
Especially in less-developed rural areas, infrastructure may
not be able to sustain this continual loading. Securing an operating or use permit from the local municipality or county may
require the LNG plant owner to invest in road upgrades or maintain a budget for yearly maintenance. The closer the facility is to
major highways, the smaller this investment could be.
Layout and process design variables. Examining variables

that can affect a projects cost and the timeline for successful
completion is not a linear or sequential process. Instead, engineering feasibility reviews inform the developer/owners financial planning, modeling should be performed during the first
few months of design development, and the technical risk model
should be used as a reference and be updated as work continues.
By preparing a layout and site plan, developers and their engineering consultants can use them as a basis/input for the modeling; the results offer management guidance about whether design changes are required. Once changes are implemented, the
models can be adjusted to confirm compliance with standards
and regulations.
Determining what cryogenic process will be optimalnitrogen cycle, mixed-refrigerant, or another processis a vitally
important early decision. However, process design is also the single-largest variable in ongoing operations cost. The purity, supply volume and pressure at which the feed gas supply is delivered
are critical. Often, pretreatment processes are necessary, and, in
some circumstances, source pressure needs to be adjusted with
the supplier to deliver the requisite volume.
Other considerations also affect design, construction and
permitting time, as outlined below.
Cooling system. Process cooling can be accomplished via
evaporative coolers (cooling towers) or air coolers. A typical air
cooling system uses a bank of centrally located air coolers to cool
a water/glycol stream that is used to provide cooling to all users. Alternatively or in combination, air coolers can be used to
directly cool the process stream (FIG. 4).
Air coolers are easier to secure permits for and do not require
water makeup or handling purge waste streams. Water cooling,
using evaporative coolers such as cooling towers, provides more
efficient cooling but requires makeup water supply and disposal
of purge streams. Given the scarcity of water in many of the regions where natural gas is sourced and processed, it can be difficult to secure permits for systems with high water consumption.

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

Evaporative coolers may also emit contaminants into the atmosphere and may require an air emissions permit. In addition,
operating an evaporative water cooling system requires operators to budget for chemical additives and keep close watch on
water chemistry.
Process heat. Process heating is required for the amine reboiler and for regenerating the adsorption capacity of the molecular sieve(s). Both fuel-based and electric heat are technically
feasible, but heating requirements differ based on plant size and
production method.
For larger systems, developers should consider a central fuelfired hot oil heating system, although a fire tube or hot oil heater
may create emissions that, in turn, pose permitting challenges.
For other systems, developers can plan on a feed gas-supplied
fire tube or electric heating. The installed cost of an electric
heating system is higher, but it is simpler to operate and maintain and easier to permit.
Process water. Water is required for the amine system that
removes hydrogen sulfide and carbon dioxide from the feed gas,
and to supply makeup water to the evaporative cooler system.
The extent of water treatment required is a function of the quality of the feed water. Possible treatment can include water softening, reverse osmosis or demineralization.
Nitrogen supply. Nitrogen is used for purging and makeup in
nitrogen-based cryogenic liquefaction systems. Nitrogen can be
transported to the plant by tanker truck, and it can be stored in
liquid form at pressure, or it can be generated onsite using a nitrogen generator. Some plants do both, allowing operators to supplement supplies based on the nitrogen consumption of the plant.
Operation and maintenance access. An LNG plant resembles a small gas processing plant more than it does a petrochemical refinery unit, and the plants footprint is typically limited to
reduce overall cost. Equipment is packaged and erected on skids
to the maximum extent possible, and interconnecting pipe is run
along pipe sleepers, which require stiles for operator access/mobility within the plant. This means access to equipment is often
limited to one of its sides. Maintenance considerations are not
too different from those at natural gas plants: For example, providing access to a crane for the removal of heavy equipment (e.g.,
compressors), and providing an area that allows operators to pull
tubes from heat exchangers.
Pressure drop. Feed gas travels from pretreatment to liquefaction to storage to loading. The longer the lines, the greater
the pressure drop, which, in turn, affects power consumption
and correlates to operating cost. Engineering design must,
therefore, strive for the optimal balance between compactness
and efficiency on one hand, and access and safety considerations on the other.
Of particular importance in LNG plants are the net positive
suction head (NPSH) requirements for the LNG line between
the storage tanks and the loading pump, and the goal of minimizing expensive cryogenic lines from cold box to storage and from
storage to loading.
LNG storage tank. Storage requirements will be derived
from the specific objective of the plants construction: To whom
the LNG will be sold and supplied, and with what frequency
the customer plans to order it. Some plans call for peakshaving,
which demands a higher capacity for long-term storage as well
as proportionally larger valving, pumping and offloading capac-

ity. For storage capacity of greater than 500,000 gal, a single flatbottomed tank may be more cost-effective and require a smaller
footprint than multiple bullet-type freestanding tanks.
Regulatory and environmental considerations. A number of permitting considerations also exist for developers and
owners. Air permitting and wastewater treatment requirements
differ significantly by jurisdiction, with some states and regions being more attractive to industry than others. Proposed
developers and facility owners should conduct a preliminary
site review, and the engineering and financial feasibility study
should acknowledge and address the specific requirements for
new construction and/or any proposed expansion. Owners/developers will want their legal and/or environmental advisors to
determine which agency will take the lead on permitting in their
jurisdiction, and will want early on to establish a list of permits
they will require.
NFPA and DOT requirements. Depending on a plants
proposed capacity, both National Fluid Power Association 59A
and Department of Transportation Code of Federal Regulations
Title 49, Part 193, have standards and regulations for its design.
Both require gas dispersion and radiation studies to verify that
conditions comply with regulations and consider terrain, ambient conditions, wind patterns and equipment arrangement to
determine gas concentration and radiation levels at a propertys
fenceline. The single most common reason for increasing the
size of the property is the result of these studies.
Emergency egress. Any engineering firm undertaking EPC
scope for an LNG facility must consider how to ensure safety
for operating personnel while servicing different processing
units, as well as to anticipate regulatory requirements. Although
spacing requirements established by OSHA will be incorporated into the design, other factors may increase a plants required
footprint. For example, the local fire department may require a
perimeter road for access/egress. These and other factors could
affect project cost.

FIG. 4. Cryogenics technology and plant cooling systems are major

components of cost analysis, supply risk and utilities demand.
Gas Processing|JULY/AUGUST 201453

SPECIAL REPORT: SMALL-SCALE GAS PROCESSING SOLUTIONS

Storm-water retention. State and local requirements dictate how storm water is to be handled. Runoff is typically collected in retention ponds and released in a controlled manner
consistent with county requirements. Depending on the size of
the required retention basin, this may affect property size.
LNG firefighting. Fighting an LNG fire is unique and not
normally understood by most fire departments. As with many
chemical fires, water is not the preferred method of extinguishing an LNG fire; instead, using water on a burning LNG pool is
actively dangerous, because it increases the rate of vaporization
of the LNG. Counter-intuitively, therefore, it has the opposite
effect of feeding the fire rather than extinguishing it. Most nitrogen-based gas liquefaction plants do not have firewater systems.
However, the property owner may still be required to obtain the
approval of the local fire department.
Firewater tank. In the event a fire system is mandated and
a supply of firewater is not available, a dedicated firewater tank
with pumps will be required. The tank will be sized during the
development of the fire prevention and control plan. As with
storm-water retention ponds, the need for a firewater tank may
affect the required size of the property.
Emergency power systems. Emergency power should, at
minimum, allow the plant to safely shut down. Backup power
can be an independent power feed (not typical) or an electric
generator designed to provide power to control systems and
for emergency lighting. The generator can be fueled by diesel
or feed gas. Both fuel sources have benefits and drawbacks. An
owner may want to include the LNG pump and instrument air
compressor loads in the emergency circuit to allow truck loading to continue during power outages.
Instrument air. Instrument air (I/A) options depend on
owner reliability requirements and operating standards. In a
typical design, the I/A system is provided with a 100% backup
system. Alternatives include providing backup I/A using available nitrogen, and using nitrogen for all I/A needs and eliminating the I/A system.
Other safety features. Plants will always require some system for fire detection and suppression, including ultraviolet
and infrared sensors for detection, monitoring equipment to
detect combustible gases, smoke detectors, manual fire alarms,
security cameras and a system to shut the plants processes
down, if necessary.
Other requirements include fire control of ignition sources
(inspection, work permits, hot work permits, lockout/tagout,
training); spill control, including drainage systems specifically to
manage an LNG excursion; building sprinkler systems; an electrical control room; and fire suppression systems, such as halon.

A larger-capacity inlet power line, including power

disconnect and transformers
Available volume and pressure at the source
of the water supply line
Allowances for an expanded instrument air system
Capacity of the water treatment system
Ability to generate sufficient emergency power
for a larger configuration
Flare sized for future capacity.
At the Clean Energy LNG facility completed in 2010 at
Boron in the Mojave Desert in California, the plants modular
design allowed for replication of certain systems for a third liquefaction train alongside the original two trains. This required
awareness of the costs for construction at project inception, as
well as an understanding of the implications of adding a third
train on all of the plants utilities, systems, power demands, and
permit applications.
Takeaway. In summary, many variables and practical consid-

A note about expansion. If an owner/developer is seeking

erations affect project execution risk in developing a smallto mid-sized LNG plant. While managing financial risk falls
strictly within the purview of the developer/investor, technical and engineering risks can impact financial projections, and
must be factored in.
In conducting feasibility analyses, risks can be identified before project inception, costs can be anticipated and/or funds reserved for contingencies, and, importantly, certain types of risks
can be addressed and eliminated. It is important to remember,
however, that these variables do not occur sequentially; each
should be considered concurrently, as part of an engineering
study that helps the economic analysis team to model outcomes
based on different selections.
Investors looking to realize returns from LNG developments
will, therefore, want to look to process engineering contractors
with an established project management approach, a holistic awareness of various risks that can affect profitability, and
the ability to develop accurate cost estimates before breaking
ground on new projects. Such a provider should be able to impart experience in process design; in mechanical, civil, and electrical engineering and other technical disciplines; in materials
supply and technology procurement; and in the construction
and operation of similar process plants.
Advance design planning helps ensure successful execution,
and total installed cost can be better predicted once variables
are assessed. As the project moves forward, the developers and
engineering firms integrated business and project execution
risk model can be used as a baseline for monitoring and addressing risk and cost on an ongoing basis. In this way, a turnkey EPC
provider can protect investors and developers ROIs. GP

to build a smaller plant and considering adding capacity in the

future, the engineering firm should be tasked with determining the minimum space that will be sufficient to accommodate
new liquefaction trains. If an expansion is highly probable, the
owner may want to consider pre-investment in some areas to
reduce the overall cost.
Pre-investment ideas include sizing the equipment to handle
future capacity, such as:
A larger feed gas line, with appropriate instrumentation
and valving

EDUARDO H. RODRIGUEZ, vice president of process operations

for OnQuest Inc., joined the company in June 2002. He has over 32
years of experience in the environmental, chemical, petrochemical
and water treatment industries. Mr. Rodriguez attended Arizona
State University, followed by California State Polytechnic
University (Pomona), where he received his BSc degree in
chemical engineering in 1980. Immediately after graduating, he
joined Lawrence-Allison and Associates West Inc., which was purchased by KTI Corp.
in 1981. In 1995, he completed the Construction Management Program at Texas A&M
University. Mr. Rodriguez has been a registered professional chemical engineer in
California since 1983. He also holds a contractors license in the state of Louisiana.

54JULY/AUGUST 2014|GasProcessingNews.com

BONUS REPORT: LNG

Simplify BOG recondenser design

and operationPart 2
S. P. B. LEMMERS, Vopak LNG Holding BV, Rotterdam, The Netherlands

An LNG receiving and regasification terminal connects the

intermittent process of LNG carrier unloading and/or loading
with the mostly continuous process of LNG vaporization and
gas transmission into a sendout pipeline system.
In addition to these LNG carrier operations, truck/train
loading operations can take place simultaneously. During all
operational modes of the LNG terminal, boil-off gas (BOG) is
produced, which requires processing to avoid flaring or venting (under normal operating conditions) and to minimize the
environmental impact of the facility.
Part 1 of this article discussed optimal designs for BOG recondensers used in LNG terminals. Here, operational aspects of
BOG recondensers, based on the designs selected, are examined.
For the two BOG recondenser designs commonly used in
the industry, there are several operational and process control
elements to consider with respect to pressure and level control.

ANNULAR SPACE TYPE

In FIG. 1, an annular space type of BOG recondenser is
shown. This type is used in many LNG terminals, both older
and newer. There are a number of advantages and disadvantages to this design.
The LNG and BOG enter the packed section. This type of
BOG recondenser works by adjusting the amount of packedsection area available for condensing, by means of partial flooding of the packed bed. To achieve partial flooding while ensuring a constant level and net positive section head (NPSH) for
the high-pressure (HP) pumps, a physical separation between
the two packed sections and the annular space is required.
The level and pressure in the annular section are kept constant. The level and pressure in the packed section can be distinct from those in the annular section. Both the pressure and
level in the packed section self-adjust in response to varying
BOG/LNG ratios.
At high BOG/LNG ratios, the liquid level in the packedbed section decreases automatically, through pushing of liquid
to the annular space, as the pressure in this section increases.
This process exposes more of the packed bed, increasing the
heat transfer/condensation area to create equilibrium conditionscommonly referred to as the auto-regulating effect.
Likewise, a lower BOG/LNG ratio tends to reduce pressure
in the packed section, which then results in a level increase in
the packed section. In other words, this type of recondenser
tends to adjust itself. Both the level and pressure in the two sections are different.

Pressure control. For stable operation of the BOG recon-

denser, the BOG compressor discharge pressure and annulus

pressure must be controlled. Also, the annulus level and the
BOG recondenser outlet temperature must be guarded to ensure sufficient NPSH for the HP pumps. The following examples of pressure control have been proven in the industry.
Example 1. The BOG compressors compress the BOG
into the BOG recondenser. The BOG entering at the top of
the BOG recondenser is condensed by contacting the BOG
with subcooled LNG from the discharge of the low-pressure
(LP) pumps over a packed bed in the BOG recondenser.
The pressure (and, therefore, the level) in the packed bed
of the BOG recondenser varies with the ratio of LNG vs. supplied BOG. When the BOG/LNG ratio increases, the pressure in the packed section will rise, and the level in this section
(which differs from the level in the annular section, as does
the pressure) will decrease. This results in an increase of the
available area for recondensation, thereby establishing a new
equilibrium where all incoming BOG is fully recondensed.
The discharge pressure of the BOG compressors is controlled via pressure controller PC1 , and the pressure in the annulus is controlled via pressure controller PC2 :
PC1 is a split-range controller that maintains the pressure
in the discharge of the BOG compressors via the control
BOG from compressors
PC1

Padding gas

LNG from LP pumps

PC2

H
L

To BOG header

LC

To HP pumps

FIG. 1. Operation of an annular space BOG recondenser.

Gas Processing|JULY/AUGUST 201455

BONUS REPORT: LNG

valve, which regulates the flow of BOG to the packedbed section. If the BOG compressors discharge pressure
becomes too low to guarantee sufficient NPSHrequired
for the HP pumps, then PC1 will introduce padding gas
from the HP natural gas system or fuel gas system.
PC2 is a split-range controller that maintains the
pressure in the annulus of the BOG recondenser.
Even in the annular space, there will be some
recondensation of BOG into the LNG at the interface.
Therefore, to maintain pressure, some BOG must
be fed into the annular space. On the other hand,
ambient heat in-leak generates BOG, counteracting the
above process. There is a need for split-range pressure
control (i.e., bringing in BOG or venting to the BOG
compressor suction head, as required). When the
pressure rises, this controller will first close the control
valve on the incoming BOG that bypasses the packed
bed. Then, when the pressure rises further, PC2 will
open the control valve to the LP BOG head upstream
of the BOG compressors.
The control characteristics of both pressure controllers are
depicted in FIG. 2.
Example 2. To maintain both the correct pressure control (FIG. 3) of the annulus pressure and the NPSHrequired for
the HP pumps, transmitters connected to the annular space
provide an input to three pressure controllers to deal with low
(PC1 ), medium (PC2 ) and high (PC3 ) pressure conditions:

0%
(closed)
100%
0%

lve
t va

e
arg
sch
r di
sso
pre

ve

val

as
Com

ass

gg

50%
Controller output, %
(controller direct acting)

Valve
position
%

PC2

Byp

din

0%
(closed)
0%

Pad

Valve
position
%

100%
(open)

PC1

Ven

100%
(open)

50%
Controller output, %
(controller direct acting)

100%

FIG. 2. Pressure control characteristics.

BOG from compressors

Padding gas
DPC

LNG from LP pumps

PC2 PC1 PC3

H
L

To BOG header

LC

To HP pumps

FIG. 3. BOG recondenser pressure control.

56JULY/AUGUST 2014|GasProcessingNews.com

Under normal conditions, the pressure in the annulus

will be maintained by gas from the BOG compressors
by means of the PC2 pressure controller, which controls
BOG flow into the annular space.
If there is less BOG available, then the pressure in the
annulus will tend to fall, and the pressure controller
will introduce padding gas. Under normal conditions,
the padding gas control valve will be closed.
If the pressure in the annulus becomes too high, then the
PC3 pressure controller will allow BOG to pass through
the vent to the LP BOG head upstream of the BOG
compressors. Similar to the padding gas control valve,
this control valve will be closed under normal conditions.
A differential pressure control valve will be provided in the
line from the BOG compressors downstream of the split
to the recondenser annulus and center section, to maintain
positive BOG pressure upstream of the BOG recondenser.
Level and total volume control. To ensure constant HP

pump conditions, the LNG level in the annular space of the

BOG recondenser is controlled via manipulating the LNG inlet
valve to the packed-bed section of the BOG recondenser. The
level controller must be tuned so that moderate fluctuations in
the BOG recondenser level are allowed to prevent unacceptable disturbances to the LP pump operation. The control valve
should have a high turndown ratio and high resolution.
As discussed previously, the level in the packed-bed section
is not directly regulated; it will vary as a result of the BOG/
LNG ratio. The higher the BOG/LNG injection ratio, the
less contacting area is required for recondensation, and the
higher the level will reach. When there is less contacting area,
the pressure will rise and the level will decrease due to the increased pressure.
Conversely, when the BOG/LNG ratio is high, the pressure in the packed section will rise and the level will drop. This
results in an increase of the available area for recondensation;
the pressure will fall, and the level will rise again.
A practical result of this floating packed-section level is the
following inverse-response phenomenon. If the BOG/LNG
ratio increases, then the level in the packed bed will decrease,
and the level in the annulus will initially increase because the
pressure in the central section increases (pushing LNG from
the packed section into the annular space), which forces the
level controller (LC) to close the LNG inlet valve. This reduces the level in the packed-bed section even further.
To avoid this inverse response of the level control system,
an LNG total volume control, based on both the level in the
packed section and the level in the annulus, has been developed and implemented. This response, which is potentially
caused by uncontrolled introduction of padding gas, may displace liquid from the packed-bed section to the annulus and
vice versa, making the simple annulus level an unstable parameter for controlling the flow of LNG into the recondenser.
For total volume control, liquid levels in both the BOG
recondenser annulus and the BOG recondenser packed bed
will be measured and used for calculation of total LNG volume in the BOG recondenser. The calculated total LNG volume, rather than the level in the annular space, is controlled by
regulating the flow of LNG to the packed bed. By using total

BONUS REPORT: LNG

volume control, any transient conditions are ignored and the

inverse response is eliminated.
The total volume of LNG in the BOG recondenser is calculated as shown in Eq. 1:
LNG volume = Vf Rb2 Lb + ( Rv 2 Rb2) La (1)
where:
Vf = Volume of fractional voids
La = Annulus level
Lb = Core section level
Rb = Packed-bed radius
Rv = Vessel radius.
Application of total volume control is depicted in FIG. 4.
Bottom level and ratio control. All process control examples

described so far include LNG flow through the BOG recondenser packed section. At high LNG terminal sendout rates,
this can result in a continuous recycle of padding gas from
downstream of the LNG vaporizers to maintain pressure in the
BOG recondenser, since the LNG sendout rate is significantly
higher than that required to recondense all generated BOG.
This operation is not energy efficient; therefore, some annular space type designs have introduced an LNG inlet into
the holdup section. This reduces the BOG/LNG ratio in the
packed-bed section and minimizes the requirement for padding gas. The downside is that it influences the effectiveness of
the auto-regulating effect (when level is maintained predominantly below the packed bed), compared to a BOG recondenser without a bottom inlet.
Some of these annular space BOG recondenser designs have
introduced ratio control for the ratio of LNG to the packed
bed and BOG. The balance of the LNG goes directly into the
holdup section of the BOG recondenser. Since BOG and LNG
compositions and temperatures can change, the pressure in the
BOG recondenser packed section is a result of the setpoint of
the BOG/LNG ratio controller.
FIG. 5 shows the described level and ratio control scheme.
The installation of a bottom LNG inlet that is controlled by
level can influence the effectiveness of the auto-regulating effect, which is the main feature of the annular space type design.
The selection of an annular space BOG recondenser should,
therefore, be reconsidered.

trol for this type are depicted in FIGS. 2 and 5 of Part 1. Similar
to the annular space type, this BOG recondenser receives BOG
from the BOG compressors for recondensation, and it also
provides holdup and NPSHrequired for the HP pumps.
For the top packed-bed section BOG recondensers, the liquid level is normally below the bottom of the packed bed. As
such, the heat transfer area constantly allows for a simple and
proven pressure control scheme. To control the BOG recondenser pressure, only some of the LNG is routed to the packed
bed, with the balance of the incoming LNG being routed directly to the bottom holdup section. This type of BOG recondenser requires two LNG inlets.
Pressure control. The main objective of the pressure control
is achieved by the flowrate of the subcooled LNG from the bottom LNG inlet line to the packed section, to keep the BOG
recondenser at a pre-set operational pressure. This control enBOG from compressors
PC1

Padding gas

LNG from LP pumps

PC2

To BOG header

LIC
FY

LIT

H
L

H
L

LIT

To HP pumps

FIG. 4. Total volume control applied to the BOG recondenser.

BOG from compressors
FI2

Padding gas

Ratio control and pressure override. When the BOG/

LNG ratio controller is not programmed and/or configured
correctly, there is a possibility that either padding gas will need
to be introduced by PC1 (when the LNG-to-packed bed/BOG
ratio is too high), or BOG will need to be directed to the BOG
suction head by PC3 (when the ratio is too low). Either scenario results in a loss of operational energy efficiency.
To resolve this issue, overrides from PC2 can be configured
to control the BOG recondenser pressure when the bypass
valve around the pressure differential controller (i.e., the bypass of BOG to the annular space) is already closed. This scenario is depicted in FIG. 6.

TOP PACKED-BED SECTION TYPE

A typical top packed-bed section type of the BOG recondenser is depicted in FIGS. 7 and 10. The pressure and level con-

FRC

DPC

FI1
PC2 PC1 PC3

LNG from
LP pumps

H
L

To BOG header

LC

To HP pumps

FIG. 5. Introduction of level bottom inlet and BOG/LNG ratio control.

Gas Processing|JULY/AUGUST 201457

BONUS REPORT: LNG

ables stable HP pump and BOG compressor operation. Output from the pressure controller is cascaded as setpoint to the
LNG quench (LNG to packed bed) flow controller.
If the pressure increases, then more LNG is routed to the
packed bed, reducing the pressure and preventing the opening of
the connection to the BOG compressor suction head. If the pressure decreases, then the pressure controller will increase the LNG
flowrate via the quench flow controller, to prevent the opening of
the padding gas supply. With this type of BOG recondenser, it
is easy to adjust the operating pressure of the BOG recondenser
(typically between 6 barg and 10 barg) in LNG operations.
When no quench flow controller or flow measurement is
provided, the pressure controller can directly act on the quench
flow valve. A cascade configuration provides more stability with
respect to change in flow, which will be picked up directly by
the flow controller before it affects BOG recondenser pressure.
BOG from compressors
FI2

Padding gas
>

FRC

FY
DPC

FI1

PC2 PC1 PC3

H
L

LNG from
LP pumps

To BOG
header

LC

To HP pumps

FIG. 6. Level bottom inlet control with pressure override.

BOG from compressors
FI

Padding gas

SP
X

FX

PC2

PC3

To BOG header
PIT

FC1

LNG from
LP pumps

H
L

LC

FC2

To vaporizers
HP pumps

FIG. 7. BOG/LNG ratio control with the objective to predict

operating pressure.

58JULY/AUGUST 2014|GasProcessingNews.com

Level control. The LNG liquid level in the BOG recondens-

er is controlled by manipulating the bottom LNG inlet valve

to the BOG recondenser. The level controller can be loosely
controlled, since neither operation nor the process requires
tight level control in the BOG recondenser.

PROCESS CONTROL EXAMPLES

AND LESSONS LEARNED
Process control scenarios can be applied to both types of
BOG recondensers, showing control schemes that work, as
well as schemes that have failed to work, in practice.
Ratio control with pressure prediction. For both BOG recondenser designs, the BOG/LNG ratio control between the
LNG quench flow to the packed bed and the incoming BOG
has been applied. FIG. 7 depicts this control scheme for a top
packed-bed section type.
The objective of this control scheme is to establish a pressure setpoint that is converted into a flow setpoint to the
quench flow controller. The scheme in FIG. 7 is a simplification; an implemented control scheme uses a ratio of massflow of LNG to BOG, corrected for BOG and LNG quench
temperature and BOG recondenser operating pressure. The
final volumetric quench flow setpoint is based on actual LNG
quench flow density calculations, shown in Eqs. 24:

LNGtoBOGmassratio = UncorrectedRatio
BOGTCorrection LNGTCorrection

(2)

ActualVolLNGtoBOGmassratio =
LNGtoBOGmassratio / LNG

(3)

ActualVolFlowLNG = ActualVolLNGtoBOG
massratio BOGmassflow

(4)

The control schemes objective is to predict the pressure

in the BOG recondenser on the basis of Eqs. 24. However,
multi-process variable control resulted in an offset between
the desired pressure in the BOG recondenser and the actual
pressure. This result proved that, even by creating a rigorous
mathematical model of the involved thermodynamics, the
pressure in the BOG recondenser could not be predicted.
LNG operations then changed the input to the model (i.e.,
the desired pressure in the BOG recondenser) so that the desired pressure was reached. This resulted in manual feedback
control by the operator. For instance, if 6 barg was the desired
pressure, the operator keyed 6.32 barg into the distributed
control system. However, when the composition changed, the
resulting value was 6.65 barg. LNG operations used trial-anderror to achieve the desired setpoint pressure.
Pressure override on ratio control. Some designs for both
types of BOG recondensers have a pressure override controller on the BOG/LNG ratio control. When the pressure reaches the HP setting, this pressure controller will take over from
the BOG/LNG ratio controller.
As an alternative to this pressure override controller, a pressure controller with a gap could be considered; this controller
acts only on the quench on HP to avoid opening the control
valve to the suction of the LP compressors. On LP, it acts on
the quench to avoid the unnecessary supply of padding gas.

BONUS REPORT: LNG

Some fundamental questions to ask are, If the pressure

must be controlled, can a pressure controller be installed on
the quench? and What are the real advantages and benefits
of BOG/LNG ratio control and a floating pressure? This argument is especially true for the top packed-bed type of BOG
recondenser. Furthermore, the original annular space type
without a bottom LNG inlet requires a floating pressure for
the auto-regulating effect.
By installing the override from PC2 , it has become obvious
that BOG recondenser control based on ratio control is not
essential. Also, the main pressure control is better located on
the bypass, and the quench LNG flow should be located at the
top (FIG. 8).

Control of recondenser bottom pressure. One design that

uses bottom pressure control in an attempt to maintain stable
suction conditions to the HP pumps is shown in FIG. 10. At a fixed
BOG recondenser pressure, the HP pump suction pressure is a
direct function of the LNG level, so the PC4 effectively replaces
the normal level controller, manipulating the control valve to the
holdup section. However, this pressure control scheme is not advised, since 0.5 bar of pressure in the suction needs to be compensated with approximately 10 meters of LNG, which will result
in unstable level and pressure control of the BOG recondenser.
Compressor type and pressure control. The type of com-

pressor chosencentrifugal or reciprocatingsets require-

Padding gas stability. For stable padding gas control of the

BOG recondenser pressure, the padding gas control valves

should be installed at a certain distance to the BOG recondenser to provide adequate control time for the control loop to
stabilize. Typically, a few seconds are required for the padding
gas control loop to stabilize. An unstable padding gas control
loop results in violent opening and closing of the valve. In one
example, LNG operations decoupled the padding gas control
loop due to valve issues.
Full operational bypass without pumps holdup. A BOG
recondenser with full operational bypass directly to the HP
pump suction is depicted in FIG. 9. In this configuration, the
majority of the LNG completely bypasses the BOG recondenser and is fed directly into the suction of the HP pumps,
while the balance of the LNG is fed to the packed bed, as required to control the pressure in the BOG recondenser.
Successful application of this system has demonstrated
that there is no need for substantial liquid holdup in the BOG
recondenser. The one potential operational disadvantage of
this control scheme is that the LNG in the BOG recondenser
can be at bubble-point conditions (rather than subcooled, as
is the pumped LNG from the LP pumps), and a sudden inflow of warm LNG (resulting from the interruption of colder
LNG flowing directly from the LP pumps) can upset HP
pump operations. This upset would happen at a high level in
the aforementioned example, where the valve supplying subcooled LNG from the LP pumps is closed, and only relatively
warm LNG from the BOG recondenser is fed into the HP
pump suction cans.

BOG from compressors

Padding gas
FI2

PC2

To BOG header

FRC
PC1
FI1

LC

H
L

LNG from
LP pumps

To HP pumps

FIG. 9. Full operational bypass without holdup for HP pumps

with operational bypass.
BOG from compressors

Padding gas
FI
x
FX

SP

>
PC2

FY2

PC3

To BOG header
PC1

FC1

BOG from compressors

Padding gas

FI2
FRC

H
L

LNG from
LP pumps

>

FY

LC

<
FY1

FI1
PC2

LNG from
LP pumps

FIG. 8. Pressure override and padding gas stability.

PC1

PC3

To BOG
header

PC4

FC2

To vaporizers

HP pumps

FIG. 10. Control of BOG recondenser bottom pressure.

Gas Processing|JULY/AUGUST 201459

BONUS REPORT: LNG

Surge line
Operation point 2

Polytropic head, kJ/kg

Surge points

Operation point 1

Polytropic head, kJ/kg

Speed 2

Speed 1

Stonewall
points

Dynamic pressure loss

Static pressure loss

Suction volume ow, m3/s

FIG. 11. Typical variable centrifugal BOG compressor curves

(either by inlet guide vanes or speed).

ments on the BOG recondenser pressure control. The more

commonly used reciprocal compressors are reasonably insensitive to fluctuations in BOG recondenser discharge pressure.
Conversely, the less commonly used centrifugal compressors can easily move between the surge area (at high BOG recondenser pressure) to the stonewall area (at low BOG recondenser pressure) as a result of discharge pressure fluctuations
(FIG. 11). Therefore, when using centrifugal BOG compressors,
the BOG recondenser pressure must be tightly controlled.

OPERATION AND PROCESS CONTROL TAKEAWAY

Several conclusions can be drawn with respect to the information presented on operation and process control of both
types of BOG recondensers. For the annular space type of
BOG recondenser:
Various pressure control schemes have been successfully
implemented in the industry, and are functional
An annular space design having an LNG inlet only to
the top packed-bed section can suffer from an inverse
response when configured to operate on level control
only; therefore, total volume control is required
for stable operation
The aforementioned type can also introduce the
requirement of continuous recycle of padding gas
from the gas sendout system (in the case of high BOG/
LNG ratio), at the expense of overall energy efficiency
To avoid continuous recycle of padding gas to the
BOG recondenser, an LNG bottom inlet controlled
by level can be introduced at the cost of reducing
the effectiveness of the auto-regulating effect
Selecting a top packed-bed type of BOG recondenser
should be considered when a bottom LNG inlet is
installed in combination with an annular space type of
BOG recondenser, since its main feature, the
60JULY/AUGUST 2014|GasProcessingNews.com

auto-regulating effect, will not work when the

level remains predominantly controlled below
the packed bed.
For the top packed-bed section type:
Trying to predict the resulting operating pressure on
the basis of BOG/LNG ratio has proven not to be
feasible in practice
When the operating pressure must be controlled, a
simple pressure control loop (see FIGS. 2 and 5, Part 1)
has proven its effectiveness
BOG/LNG ratio control is feasible, but pressure
remains a fluctuating process variable
Controlling the BOG recondenser bottom LNG outlet
pressure by controlling level has proven to be unstable
in practice, since a small change in pressure results in a
large change in BOG recondenser level.
For both types:
For BOG recondenser types with a bottom LNG inlet,
BOG/LNG ratio control can be used when a fluctuating
pressure in the BOG recondenser is acceptable
When installing BOG/LNG ratio control and
pressure overrides, the designer should consider
installing pressure control with a gap, or just a
simple pressure control
For stable padding gas control, the padding gas control
valves should be installed at a certain distance to the
BOG recondenser to provide adequate time for the
control loop to stabilize
In top packed-bed section type BOG recondensers
that have operational bypass directly into the HP pump
suction cans, a sudden inflow of warm LNG from the
BOG recondenser can disturb HP pump operations
When a centrifugal BOG compressor is applied, stable
pressure control is required to ensure stable BOG
compressor operation. The top packed-bed section
type with pressure control on the LNG quench is more
suitable for this process than is the annular space type.
Less is more. An overview of the most commonly used process

control and operational tactics of BOG recondensers reveals the

advantages and disadvantages in BOG recondenser operation.
BOG recondensers of both typesannular space type and
packed-bed typehave been installed and operated successfully.
As a general recommendation, BOG recondenser designers
are advised to consider simple designs and operational process
control mechanisms.
End of series. Part 1, May/June 2014. GP
ACKNOWLEDGMENT
The author thanks Michiel Baerends from Fluor BV and his colleagues at Vopak
LNG Holding BV (part of Koninklijke Vopak NV), as well as Gate terminal BV,
for reviewing the article prior to publication.
SANDER P. B. LEMMERS has more than 17 years of experience in both the
technical and business facets of the global engineering, procurement and
construction industry. He holds a BSc degree and an MSc degree in industrial
engineering and management, and an MSc degree in chemical engineering, from
Twente University for Technical and Social Sciences in Enschede, The Netherlands.
At present, Mr. Lemmers is involved in the development of LNG and other liquefied
gas terminals in Southeast Asia, Scandinavia, France, and The Netherlands.

BONUS REPORT: LNG

Uruguay finds floating

regasification solution to LNG growth
M. NOGARIN, Contributing Writer

Uruguay is quickly becoming the second-largest importer of LNG in South

America after Chile, with the opening of
its new floating storage and regasification
unit (FSRU) near Punta Sayago, and its
growing exports of natural gas.
The dynamics of energy policy in the
region show the tendency to invest vast
amounts of capital in technology to promote economic development. This trend
not only increases economic profitability,
but it also decreases dependence on oil
imports in favor of more environmentally
friendly natural gas.

NEW FSRU IS AN
ECONOMIC BOON
Construction of the new LNG regasification plant, GNL del Plata (FIG. 1), is the
first step in Uruguays energy policy to
2030. The goal is to achieve energy self-sufficiency over the next decade by increasing
Uruguays energy matrix to include 50%
non-subsidized renewable energies, and
by decreasing oil imports (TABLE 1). The
GNL del Plata regasification plant, which
required an investment of $1.1 billion (B),
will generate 10 million cubic meters per
day (MMcmd) of natural gas. Half of this
volume will be used for internal consumption, and the rest will be exported.
Several direct economic benefits will be
gained from the new regasification plant:
A decrease in the cost of generating
electricity by substituting natural gas
for gasoline
Increased profits for Uruguayan oil
company ANCAP for transportation
and distribution of natural gas
A decrease in the price of natural gas
for domestic users, both residential
and commercial
Increased revenue for the government.
At the beginning of October 2013,
GDF Suez signed a build, own, oper-

ate and transfer (BOOT) contract for 15

years with Gas Sayago SAa partnership
of ANCAP and national electric company
UTEto provide shipping and receiving
services for the LNG, as well as storage and
regasification services.
GDF Suez began construction of the
FSRU in January. The plant has an area
of 345 m in length by 55 m in width,
which will allow a storage capacity of 263
thousand cm (Mcm) and a regasification capacity of 10 MMcmd. Regasification capacity can be later expanded to 15
MMcmd (TABLE 2).
The regasification plant will be anchored 4 km off the coast of Montevideo
(FIG. 2). The LNG terminal will have the
capacity to receive ships up to 218 Mcm
through an access channel being dredged
by Administracin Nacional de Puertos.

PROJECT PROGRESS
Until the new FSRU is delivered at the
end of 2016, the GDF Suez ship Neptune
(FIG. 3) will be used for the temporary
regasification of LNG, which will allow
commercial activities to begin at the terminal in 2015.

The other components of the new terminal are a receiving unit for the storage
and regasification of LNG, an underwater gas pipeline that will unload gas to the
onshore terminal, the gas transfer station,
and a pipeline that will move the gas to
the junction with the already existing
Cruz del Sur gas pipeline, which connects to Argentina.
TABLE 1. Primary energy matrix
for Uruguay, 2011 and 2016
2011,
actual

2016,
forecast

Oil

53%

39%

Hydroelectric

13%

14%

Biomass

13%

10%

Wind energy

5%

7%

Natural gas

2%

5%

Imported electricity

1%

Bioelectricity

5%

Bioheat

15%

Biocombustibles

3%

Solar

2%

Energy type

Source: Uruguay Ministry of Energy

FIG. 1. General map of the new FSRU vessel. Image courtesy of Gas Sayago.
Gas Processing|JULY/AUGUST 201461

BONUS REPORT: LNG

TABLE 2. FSRU technical specications

Storage capacity

170 Mcm263 Mcm

Regasication capacity

10 MMcmd, with possible expansion of 15 MMcmd

Reception capacity of LNG tanks

70 Mcm190 Mcm

Source: Uruguay Ministry of Energy

FIG. 2. Marine port of Montevideo. Photo

courtesy of Universidad de la Repblica.

FIG. 4. Three-dimensional computer rendering

of the GNL del Plata FSRU. Image courtesy
of GDF Suez.

will charge an annual fee of $120 MM

for the use of its FSRU and for operation
of the plant.

FIG. 3. GDF Suezs FSRU vessel, Neptune.

Photo courtesy of Hegh LNG.

The connecting gas pipeline from the

regasification plant to the Cruz del Sur
pipeline has two parts, one under water
and one on land. The first part will be
buried beneath the sea floor from the
terminal at Punta Yeguas and cover a
distance of 2.3 km. From Punta Yeguas,
the land portion will travel 13 km, have
a diameter of 24 in. and connect with the
existing gas pipeline of Cruz del Sur. The
overland portion of the gas pipeline will
be buried in its entirety, except at two
points: the transfer and metering station,
and the pressure-regulating station.
The LNG project (FIG. 4) also includes
construction of the breakwater and loading docks, which, at the end of the 15-year
contract with GDF Suez, will become
property of UTE and ANCAP. Sayago
Gas will rent and operate these facilities
and the regasification tanker ship for another five years, with the option to extend
the contract for an additional five years.
GDF Suez is also obligated to build
mooring and unloading docks, as well as
a protective breakwater. The company
62JULY/AUGUST 2014|GasProcessingNews.com

PROJECT SPECIFICATIONS
The major providers of LNG in the Atlantic region are Uruguay, Nigeria, Equatorial Guinea, Angola and Trinidad and
Tobago. However, Marta Jara, the general
manager of Sayago Gas, does not discount
buying LNG from Middle Eastern producers such as Qatar, Yemen, Abu Dhabi,
Libya, Algeria, Egypt and other countries.
Major domestic demand for natural
gas will come from electricity-generating
companies. Gas will complement other
renewable energy sources being developed in Uruguay in accordance with Uruguays energy matrix plan to 2030.
To meet these goals, a combined-cycle
turbine will be used, which burns gas and
produces electricity, and also uses the
generated heat to create water vapor that
will move a third turbine, which will also
produce electricity. Additional demand
will come from the residential, industrial
and commercial markets. Natural gas will
also be used in the transportation market
to move passengers and cargo, on land as
well as by water. These secondary markets
have been unable to develop in the past
due to the scarcity of natural gas in the
country. Uruguays total gas consumption
should increase to 4.6 MMcmd, which
means there will be an excess of 5 MMcmd available for export markets.
According to the preliminary business
plan drafted by the Ministry of Energy

of Uruguay, the excess gas will be sold to

Argentina. The latter countrys energy
matrix depends on natural gas, which accounts for 51% of its energy consumption.
Natural gas can be delivered to Argentina by two methods: The excess gas can
be shipped through the Cruz del Sur gas
pipeline, or the excess capacity of the plant
can be made available to Argentina to process its own LNG. The second option
would increase the total volume of LNG
Argentina processes at its regasification
installations in Bahia Blanca and Escobar.
At the end of April, a commission
made up of representatives of the three
companies began work to reach a final
agreement by the end of the year. Ancap,
Uruguays national oil monopoly, foresees two possible outcomes. YPF can use
20% of the capacity of the regasification
plant, which is the low-range and worstcase scenario. The income generated for
Ancap during the useful life of the plant
would be $126 MM, from selling excess
capacity during eight months of the year
until 2024. A more optimistic scenario is
for YPF to sell excess capacity during 12
months of the year, which would generate
an income of $571 MM for Uruguay over
the useful life of the regasification plant.
The economic benefits for national
electric company UTE, by substituting
natural gas for gasoline, would be a savings of $826 MM to $1.059 B. Ancap will
also reap savings of $155 MM and generate tax revenue of $105 MM.

REGASIFICATION OPERATIONS
Once the LNG ship reaches the regasification terminal, the LNG is transferred via pump to the FSRU. The facility
contains a regasification unit to convert
LNG to its gaseous state. The regasification facility sources water from the Rio
de la Plata. There is a large difference in
temperature between the LNG, which is
stored at 162C, and the river water. The
process by which heat is exchanged never
allows the LNG to come into direct contact with the river water.
The water, which cools during the process of regasification, is returned to the
river at a distance from the degasification
facility, so as not to affect the overall temperature of the river. The returned water recovers its temperature rapidly. During peak
demand, one LNG ship will arrive every
month and will be docked while the LNG
is offloaded over a period of 24 hours. GP

GAS PROCESSING IN NORTH AMERICA

Diversification drives North American

gas processing M&A activity
J. STELL, Contributing Writer

investments and energy infrastructure

projects. At present, Alerian has more
than $17 billion (B) directly tied to the
Alerian Index Series through exchangetraded products, delta one notes, and
separately managed accounts.
We expect interest in gas processing
MLP M&A activity to continue, says
Feng (FIG. 1). The factor which may
temper that would be a function of bidask spread, as sellers seek to take advantage of valuations above the historical
average and buyers seek to be disciplined
in their capital deployment. That might
reduce the likelihood of a lot of deals getting done, but, as far as interest level, I
would say it is fairly high.
The new wave of deals is driven primarily from a market standpoint and

is based on publicly held MLPs, he explains. The activity is fueled by the MLP
investor market, which is showing value
that comes from economies of scale, and
which is being rewarded by the market
through premium valuation (TABLE 1).
Players that have scale and exposure
to multiple basins are being rewarded
by the markets, both from a financing
perspective, through cheaper debt, and
from an investor perspective, due to liquidity in the equity, Feng says. That
will be something that may drive more
of those conversations.
CrosstexDevon merger. One of the

more significant mergers of 2014 occurred on March 10, when Crosstex Energy Inc. officially merged its assets with

Cana-Woodford
Ohio River Valley

OKLAHOMA Arkoma-Woodford

Utica

OHIO

Permian basin

WEST VIRGINIA

LOUISIANA
Barnett shale

TEXAS

Haynesville and
Cotton Valley
Austin Chalk

Marcellus

PENNSYLVANIA

This decades dramatic growth of gas

resources from what used to be considered unconventional sourcesshale,
mostlymakes one issue perfectly clear:
the increasing need for new, long-lived
infrastructure. New gas processing facilities and systems have become an energy
industry priority. As a result, gas processing owners and operators are looking for
growth through geographical and asset
diversification to serve their exploration
and production (E&P) customers and to
attract and retain investors.
To that end, a number of mergers and
acquisitions (M&A) deals have come
to fruition during the past 12 months,
and the trend is expected to continue,
according to midstream industry guru
Kenny Feng, president and CEO of investment consultancy Alerian. The company provides market information designed to help investors make decisions
about master limited partnership (MLP)

Tuscaloosa Marine

Miocene-Wilcox
Eagle Ford shale

Processing
Processing and
fractionation
Fractionator
Condensate stabilizer
Brine disposal well

FIG. 1. Kenny Feng, president and CEO of

Alerian, expects interest in gas processing
MLP M&A activity to continue.

Rail terminal
Barge terminal
Storage
Crude and brine
truck station

North Texas Pipeline

NGL Parker System
North Texas Gathering
Acacia Pipeline
Bridgeport Gathering System
East Johnson Gathering System
Deadwood Gathering
Mesquite Liquids System

Bearkat Gathering
PNGL-Cajun Sibon Pipeline
PNGL System
ORV Crude Pipeline
Howard Energy
Cana Gathering
Arkoma Northridge Gathering
LIG System

FIG. 2. Crosstex Energy Inc. merged its assets with Devon Energy Corp., creating a new company
called Enlink Midstream LLC.
Gas Processing|JULY/AUGUST 201463

GAS PROCESSING IN NORTH AMERICA

TABLE 1. Stock values for gas gathering and processing MLPs and general partners1
NYSE ticker
symbol

Stock price,
US$

Market cap,
US$

Float adjusted
market cap, US$

Yield,
%

Trailing 30-day
average volume

Access Midstream Partners LP

ACMP

63.40

12,779

5,766

3.63

424,835

American Midstream Partners LP

AMID

29.23

505

293

6.33

55,742

Atlas Pipeline Partners LP

APL

33.40

3,154

2,485

7.43

411,071

Atlas Energy LP

ATLS

42.50

2,188

2,062

4.33

587,313

Crestwood Equity Partners LP

CEQP

14.86

2,769

1,573

3.70

372,772

Crestwood Midstream Partners LP

CMLP

21.96

4,127

3,099

7.47

463,958

DCP Midstream Partners LP

DPM

55.22

5,711

4,615

5.40

278,619

Enable Midstream Partners LP

ENBL

24.21

10,064

605

4.75

361,451

EnLink Midstream LLC

ENLC

41.94

6,858

1,835

1.72

242,890

EnLink Midstream Partners LP

ENLK

31.77

7,281

2,903

4.53

484,214

Marlin Midstream Partners LP

FISH

20.00

356

143

7.10

41,266

Company

Midcoast Energy Partners LP

MEP

21.45

970

455

5.83

118,472

MarkWest Energy Partners LP

MWE

64.97

11,301

10,175

5.36

969,692

Targa Resources Partners LP

NGLS

68.29

7,675

6,764

4.47

257,034

QEP Midstream Partners LP

QEPM

24.89

1,329

572

4.34

57,518

Regency Energy Partners LP

RGP

29.01

10,549

8,514

6.62

868,252

Summit Midstream Partners LP

SMLP

45.59

2,439

654

4.39

44,837

Southcross Energy Partners LP

SXE

18.82

668

368

8.50

102,307

TRGP

120.40

5,077

4,519

2.15

253,167

Western Gas Partners LP

WES

74.69

8,808

4,995

3.35

124,388

Western Gas Equity Partners LP

WGP

52.63

11,521

1,009

1.90

78,918

Williams Companies Inc.

WMB

47.68

32,633

32,516

3.57

4,578,564

Williams Partners LP

WPZ

52.99

24,598

8,430

6.83

564,269

Targa Resources Corp.

1
2

All values in table are current as of June 6, 2014.

Types are limited partnership (LP) and general partnership (GP).

the midstream assets of Devon Energy

Corp. creating a new company called
Enlink Midstream LLC (FIG. 2). Both
Enlink Midstream and its MLP, Enlink
Midstream Partners, are now trading on
the New York Stock Exchange (NYSE).
To complete the merger, Crosstex and
Devon combined their gathering, processing, fractionation, transportation and logistics assets in the Permian, the Cana and
Arkoma Woodford basins, and in the Barnett, Eagle Ford, Haynesville, Utica and
Marcellus shale plays. The assets include
7,300 miles (mi) of gathering and transportation pipelines, 12 processing plants,
six fractionators, barge and rail terminals,
product storage facilities, wastewater disposal wells and a crude oil truck fleet.
Almost immediately, the new entity
launched plans to build a 35-mi, 12-inchdiameter pipeline to carry natural gas out
64JULY/AUGUST 2014|GasProcessingNews.com

of the Permian basin. Although the merger is a recent event, it has been a long time
coming, says Feng.
Crosstex attempted to get a transaction done with Devon two previous
times, and the third time was the charm.
Crosstex had a relationship with Devon
on the producer side. Certainly, Devon
had its own midstream footprint before
it was transformed into EnLink, but the
deal was driven by the fact that the companies had a previous relationship.
Feng and the analysts at Alerian have
seen a similar level of interest across
other platforms, such as Williams Companies taking a general partnership into
Access Midstream, which was formerly a
Chesapeake business.
Williams Companies. Last year, Williams completed its investment in previ-

ously privately held Access Midstream

Partners GP LLC, with a total of $2.25
B (including transaction costs) for the
companys investments in the Access
Midstream entities (FIG. 3). That amount
was reduced from the previously reported amount of $2.4 B, primarily due to
Access Midstreams capital-raising activities and closing adjustments. The deal
gave Williams a 50% interest in Access
Midstreams general partner, which includes a 2% interest in Access Midstream
and incentive distribution rights.
The deal followed Williams separation into two standalone, publicly traded
corporations in early 2012. The companys former exploration and production
business, WPX Energy Inc., began trading on the NYSE on January 3. The spinoff was completed with the distribution
of one share of WPX Energy common

GAS PROCESSING IN NORTH AMERICA

TABLE 1. Stock values for gas gathering and processing MLPs and general partners1 (cont.)
Most recent quarterly
dividend, US$
General partner

Main office location

Tax

Type2

IPO

Oklahoma City, OK

K-1

LP

7/28/10

0.5750

Williams Companies Inc., Global Infrastructure Partners

Denver, CO

K-1

LP

7/26/11

0.4625

ArcLight Capital Partners LLC, American Infrastructure MLP Fund LP

Pittsburgh, PA

K-1

LP

1/28/00

0.6200

Atlas Energy LP

Pittsburgh, PA

K-1

GP

7/20/06

0.4600

Management

Houston, TX

K-1

GP

7/25/01

0.1375

Houston, TX

K-1

LP

12/15/11

0.4100

Crestwood Equity Partners LP

Denver, CO

K-1

LP

12/01/05

0.7450

Spectra Energy Corp., Phillips 66

Oklahoma City, OK

First Reserve Corp.

K-1

LP

4/10/14

0.2875

OGE Energy Corp., CenterPoint Energy Inc.

Dallas, TX

1099

GP

1/12/04

0.1800

Dallas, TX

K-1

LP

12/11/02

0.3600

EnLink Midstream LLC

Houston, TX

K-1

LP

7/25/13

0.3550

W. Keith Maxwell III

Houston, TX

K-1

LP

11/06/13

0.3125

Englewood, CO

K-1

LP

5/20/02

0.8700

Management

Houston, TX

K-1

LP

2/08/07

0.7625

Targa Resources Corp.

Denver, CO

K-1

LP

8/08/13

0.2700

QEP Resources Inc.

Dallas, TX

K-1

LP

1/30/06

0.4800

Energy Transfer Equity LP

Dallas, TX

K-1

LP

9/27/12

0.5000

General Electric Co., Energy Capital Partners

Dallas, TX

K-1

LP

11/01/12

0.4000

Charlesbank Capital Partners LLC, Management

1099

GP

12/06/10

0.6475

Houston, TX

Enbridge Energy Partners LP

The Woodlands, TX

K-1

LP

5/08/08

0.6250

Western Gas Equity Partners LP

The Woodlands, TX

K-1

GP

12/06/12

0.2500

Andarko Petroleum Corp.

Tulsa, OK

1099

GP

10/23/57

0.4250

Tulsa, OK

K-1

LP

8/17/05

0.9045

Williams Companies Inc.

stock for every three shares of Williams

common stock.
Today, Williams Partners owns and
operates gas processing and pipeline assets across Texas, Louisiana, Mississippi,
offshore Gulf of Mexico, Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, Pennsylvania,
New Jersey, New York, New Mexico,
Colorado, Utah, Wyoming, Idaho, Oregon and Washington. Its NGL and petrochemical services segment extracts, fractionates, treats, stores and sells propane,
propylene, n-butane, isobutene, butylene
and condensate to users in the energy and
petrochemical industries. The companys
Access Midstream Partners segment provides gas gathering, treating and compression services to multiple producers.
We are seeing a lot more of this type
of activity because the investor market

is rewarding those companies that have

diversified geographic risk, as well as a
diversified exposure to multiple producers, Feng explains. Thats why we think
that interest in M&A activity is at an accelerated level.
Regency EnergyPVR acquisition.
Like Williams, risk diversification is a
major theme of the recent slate of M&A
activity. For example, Regency Energy
Partners LP recently took the philosophy
to the next level when it acquired crude
and water gathering assets, then a fellow
midstream company, and it now plans to
acquire Eagle Rock Energys assets.
First, on February 3, Regency Energy Partners LP announced that it had
closed its acquisition of the midstream
unit of Hoover Energy Partners LP for a
combination of cash and Regency com-

mon units. Regency issued more than

4 million (MM) Regency common units
to Hoover and funded the cash portion
of the consideration with borrowings
under Regencys revolving credit facility.
The acquisition adds to Regencys
footprint in the Delaware basin in West
Texas and expands its suite of producer
services by adding crude and water-gathering services in one of Regencys core
operating regions. The Hoover assets are
connected to Regencys existing Permian
basin rich gas system.
Then, on March 21, Regency Energy
and PVR Partners LP completed their
merger, which makes Regency one of the
largest independent gas gathering and
processing MLPs in the country. The deal
created a fully integrated midstream partnership platform by expanding Regencys
network of gas pipelines and processing
Gas Processing|JULY/AUGUST 201465

GAS PROCESSING IN NORTH AMERICA

plants in the Granite Wash shale in the

Mid-Continent and adding a strong footprint in the Marcellus and Utica shales in
the Appalachia basin, as well as coal and
natural resource properties in the Appalachian, Illinois and San Juan basins.
Lastly, on May 27, Regency announced that it is conducting an exchange
offer and consent solicitation for its pending acquisition of Eagle Rocks midstream
business. Regencys general partner is
owned by Energy Transfer Equity LP.
Kelcy Warren of Energy Transfer
has long been a proponent of growth
through acquisitions, as evidenced by the
RegencyPVR transaction, says Feng.
At the Energy Transfer Equity LP level,
investors in the stock now own general
partner interests in a number of MLPs,
including Regency, Energy Transfer
Partners LP, Sunoco Logistics Partners
LP, and an LNG MLP that will be filed
later this year.
The MLP market is undergoing bifurcation, where investor interest is in lowyield names with multi-year visibility to
double-digit distribution growth through
asset drop-downs on the one hand, and
high-yield, low-growth value names on
the other hand. Regency is one of the
few MLPs with an above-average yield
and visibility to above-average growth,
explains Feng.
Income-oriented investors will be attracted to Regencys above-average yield,
and distribution growth is expected to
be comparable to the industry average.
If management is able to integrate the
newly acquired assets well over the next
several quarters, then concerns about execution risk should decrease and investor
interest should grow.

FIG. 3. Williams Companies, which owns

the Willow Creek facility (pictured) in the
Piceance basin of western Colorado through
its subsidiary Williams Partners, gained a
50% interest in Access Midstream Ventures
LLC in 2013.

66JULY/AUGUST 2014|GasProcessingNews.com

Philosophy and financial position.

Each companys M&A strategy will depend on its unique situation, Feng says.
The factors that are likely to determine
interest in deal-making are a companys
management team, its growth philosophy, and what it needs to do to continue
its forward momentum.
A higher-growth company, like Access Midstream, for example, at least at
the LP level, might be less inclined to do
acquisitions because they already have a
significant growth platform organically.
They are not looking for ways to move
the needle from an idle position, so to
speak, says Feng.
While management philosophy is a
significant driver of M&A activity, equally important is the strength of the companys underlying business, says Feng. If a
particular companys distribution growth
is going to be muted over the near term,
it might have to acquire a higher-growth
platform from a third party to get that
distribution growth number back into a
place where it will interest investors.
The third significant factor that drives
M&A activity is the basin issue, says
Feng. If a company is not in a particular
basin, it will probably need to acquire, to
think about M&A activity, to get a foot
in the door. Thats what we saw with the
WilliamsCaiman deal several years ago.
The same holds true for the CastletonAnadarko asset deal, which gave
Castleton a larger footprint in a significant market.
WilliamsCaiman
acquisition. In
2012, Williams Partners spent $2.5 B to
acquire Caiman Energys wholly owned
subsidiary, Caiman Eastern Midstream
LLC. Williams funded the purchase price
of the acquisition with a combination of
$1.78 B in cash and the issuance to Caiman of approximately 11.8 MM Williams
Partners common units valued at approximately $720 MM.
Williams made an additional investment in Williams Partners of $1 B to facilitate the acquisition, and it purchased
16.3 MM Williams Partners limited partner units. The company also agreed to
temporarily waive the general partner incentive distributions through 2013, with
respect to the limited partner units to be
issued to Caiman and Williams, and it
completed the acquisition in the second
quarter of 2012.

The acquisition provided Williams

with a significant footprint and growth
potential in the liquids-rich portion of
the Marcellus shale. Caiman Eastern
Midstream was an independent gathering
and processing business in West Virginia,
Pennsylvania and Ohio that included a
gathering system, two processing facilities and a fractionator.
Immediately after the sale, Williams
began planning expansions to the gathering system, processing facilities and the
fractionator, and it also planned an ethane pipeline. At the time of the transaction, the assets were anchored by longterm contracted commitments, including
236,000 dedicated gathering acres from
10 producers in West Virginia, Ohio and
Pennsylvania, and processing commitments in place of 100 MMcfd (FIG. 4).
CastletonAnadarko asset acquisition.
While many gas processors consider geographical diversification, other companies
consider portfolio diversification to be attractive to investors and to the M&A market. One example is Castleton Commodities International LLC (CCI), which has
a highly diversified energy portfolio. Castleton was formerly called Louis Dreyfus
Highbridge Energy.
In May, the privately held US commodities merchant acquired a gas processing plant in Kirtland, New Mexico,
and about 225 mi of gas gathering pipelines. The seller was Anadarko Petroleum
Corp. The San Juan plant has a capacity
of 75 MMcfd and can process sour gas
and recover NGL through its 20-MMcfd
cryogenic processing unit. About 150 mi
of its 225 mi of gathering pipelines connect into CCIs existing Lisbon gas plant.
The acquisition was a logical expansion
of the companys existing upstream and
midstream assets in Colorado, Utah and
New Mexico.
Elsewhere, the company owns the
Cyrus River terminal on the Big Sandy
River in Kenova, West Virginia, which is
a blending terminal where 5 million tons
per year (MMtpy) of coal are aggregated,
stored and blended to higher specifications, and then loaded on barges and
trucks. The facility has over 1 MM tons
of surface storage and a fleet capacity of
13 barges. It can load one barge per hour,
and can load 50 (and unload 340) trucks
per day. Castleton also owns the Slones
Branch terminal in Pike County, Ken-

GAS PROCESSING IN NORTH AMERICA

tucky, which is another coal-blending terminal with a capacity of 3 MMtpy of coal.

The terminal can load 110 to 135 car unit
trains in four hours.
In addition to gas processing and
coal, Castleton has interests in power
generation. It owns the Wichita Falls cogeneration plant, a 77-megawatt (MW)
electric-power-generation facility that
supplies power to the Electric Reliability Council of Texas (ERCOT) market
during periods of peak demand and/or
supply volatility. It also owns the Rensselaer cogeneration plant near Albany, New
York, which is an 80-MW combined-cycle electric power-generation facility that
interconnects to the New York Independent System Operator (NYISO) in Zone
F. Just north of New York City, Castleton
owns Roseton, a 1,210-MW facility capable of running on both natural gas and
fuel oil. The facility supplies power to the
NYISO Zone G market.
In its upstream portfolio, Castleton has
Paradox basin upstream and midstream
assets in the Four Corners region of Utah
and Colorado. The assets consist of 180
oil and gas wells and 150,000 net acres in
mineral leases, as well as a midstream gas
processing facility and a 262-mi gas gath-

ering system. The companys Robinsons

Bend field is in the Black Warrior basin
in Tuscaloosa County, Alabama, and includes more than 500 gas wells and about
44,400 net acres in mineral leases.
QEP asset dropdown. Yet, not all gas
processing M&A is via unrelated companies. Often, parent companies and general
partners drop down assets into their associated MLPs. Recently, QEP Midstream
Partners LP acquired 40% of the outstanding membership interest in Green
River Processing LLC for $230 MM from
QEP Field Services Co., a wholly owned
subsidiary of QEP Resources Inc. The
transaction represented the partnerships
first acquisition following its initial public
offering (IPO) in August 2013.
Green River Processing owns four
processing plants with total processing
capacity of 890 MMcfd and a fractionation capacity of 15,000 bpd. The system includes interconnections to six interstate natural gas pipelines and direct
pipeline access to the Mont Belvieu and
Conway NGL markets. In 2013, total inlet volumes for Green River Processing
were 201 MMBtu, of which 65% were
processed under fee-based processing

agreements and 35% were processed under keep-whole processing agreements.

QEP Midstream Partners is in a
unique place, says Feng. The formation
of the company itself was driven by shareholder interest in enhancing the value of
the parent through the isolation of midstream assets from the rest of the companys base business. Weve also seen that
on the refining side, where several refiners
have recently created their own logistics
subsidiary MLPs, such as PBF Logistics
LP, MPLX LP, or Phillips 66 Partners LP.
The same is true for QEP, he says,
which is an E&P company with a significantly sized midstream subsidiary, QEP
Field Services. Its just the reverse of
what Williams Companies did, explains
Feng. In Williams case, they spun off
their E&P subsidiary, WPX Energy, and
WMB became a pure-play general partner. The same thing is happening with
QEP, except in reverse. The remaining
entity is QEP, the E&P company, and it
will spin off the field services business,
which will retain the general partnership
interest in the subsidiary QEPM.
This speaks to a trend that began
many years ago at a measured pace but
is now accelerating, which is that energy

Fort McMurray
Rocky Mountain
Foothills

Redwater

Powder River

San
Joaquin

Opal
Uinta-Piceance
Willow Creek

Echo Springs
Appalachian
Denver

Aux Sable Blue Racer

Parachute
Conway West
Conway East
Paradox
Mitchell
Conway
Chemical plant
Gulf olens
Milagro Ignacio
Cherokee
Fractionator*
Laurel Mountain Midstream
Kutz
Raton
Platform
Gas plant
Overland Pass pipeline
San Juan
Anadarko
Arkoma
Offshore platform
Northwest pipeline
Ardmore
Underground storage
Ohio Valley Midstream
Marietta
Susquehanna supply hub
Piceance
TX-LA-MS
Fort
Canada
Purity pipelines
Permian Worth
Salt
Port Allen
Discovery*
Southwest Wyoming
Marfa
Mobile Bay
Western
Four Corners area
Transco
Geismar
Paradis Canyon Station
Gulf Markham LaRose
East Gulf Coast
Wamsutter
West Gulf Coast
ACMP**
Devil's Tower
Gulfstream*
Blue Racer**
GI 115
GA A244
*Partially owned **Partially owned and not operated by Williams

FIG. 4. Williams Partners continues to grow its US asset base.

Gas Processing|JULY/AUGUST 201467

GAS PROCESSING IN NORTH AMERICA

... The investor market is rewarding those companies

that have diversified geographic risk, as well as
a diversified exposure to multiple producers.
Thats why we think that interest in M&A activity
is at an accelerated level.
companies with a non-midstream-base
business that have midstream assets are
isolating those assets to enhance value at
the parent company, either due to shareholder activities or to an internal review
of how to drive the companys valuation
higher, says Feng.
North American renaissance. Even as

M&A players eye other US companies

and their assets on the market, many of
those same companies are looking across
the border for deals that might be a good
fit in their portfolios, or for potential
buyers of unwanted companies and assets, or for sellers. According to Feng,
this trend will, and should, continue.
We launched an energy infrastructure index in 2013 that includes both
Canadian and US names from a benchmarking standpoint, he says. The reason we did that is really because we think
more and more people are realizing how
integrated are the US and Canadian stories. The industry talks a lot about the
US energy renaissance, but what we really mean to say is the North American
renaissance.
Feng sees an interconnectivity of energy synergies across the border, and says
the issues that affect the energy industry
in one country will noticeably affect the
interests of the other.
We are really starting to see that now.
MLPs are taking an interest in assets
across the border because they realize
that there is a knowledge base from owning US assets that helps them in Canada,
as opposed to buying assets on a completely different continent. For the US
and Canada, there is a lot of overlap in
terms of how the dynamics of one affect
the other. So, whether it is Keyera Corp.
or the Canadian companies in general, I
think we will continue to see that.
KeyeraWhitecap. On March 17 of this

year, Keyera Corp. entered into an agreement with Whitecap Resources Inc. to
68JULY/AUGUST 2014|GasProcessingNews.com

acquire ownership interests in processing

assets in west-central Alberta, Canada,
and in the associated oil and gas reserves
for $113 MM. Whitecap initially acquired
the assets as part of a larger transaction.
As part of the agreement, Keyera will
acquire an 85% ownership interest in the
West Pembina 6-28 gas plant (known
as the Cynthia gas plant); varying ownership interests in certain oil batteries,
compressors and gathering pipelines associated with the Cynthia gas plant; and
a 4.6% ownership interest in the Bigoray
gas plant. These acquisitions will bring
Keyeras ownership in the facility to
100%. Keyera will also gain some Nisku
reserves that are presently tied into the
Cynthia and Bigoray gas plants.
The Cynthia gas plant has a licensed
capacity of 78 MMcfd and is located
in west-central Alberta, near Keyeras
Pembina North, Brazeau North and
Bigoray gas plants. The plant has a turboexpander capable of extracting a deep
cut of ethane-rich NGL (C2+ mix) from
the raw gas stream. The plant also has an
acid gas injection facility that enables it
to handle sour gas. Current throughput
is 46 MMcfd and is largely made up of
associated gas and NGL from Nisku oil
production in the area.
Keyeras business is principally in
Canada, but they have dabbled a bit on
the US side as well, says Feng. They are
going to be very choosey if they make a
bigger splash in the US market. If a US
company is going across the border the
other way, its the same idea. US companies are not going to want to put a lot of
resources at that level of geographic distance unless they find something that really makes strategic sense.
CentricaQPI. Elsewhere in Canada, a
Canadian-to-Canadian swap occurred as
CQ Energy Canada Partnership (CQE),
the joint venture between Centrica and
Qatar Petroleum International (QPI),
agreed to acquire a package of natural gas

assets in the Foothills region of Alberta

from Shell Canada Energy for $45 MM.
As part of the transaction, Shell will receive CQEs interest in the Burnt Timber
gas processing plant and its interest in the
Waterton undeveloped lands in southwest Alberta. CQE estimates that the
assets to be acquired have proven plus
probable reserves of 90 Bcfe and will increase the partnerships production in the
region by approximately 24 MMcfed.
Future of M&A. With selective M&A

activity taking place between the US and

Canada, can Mexicos companies and assets be far behind the deal flow? Maybe,
says Feng.
Mexico is a more recent part of the
conversation, because its energy reforms
have only taken place over the course of
the past year. We could see US companies engage in strategic transactions with
Pemex, the Mexican state-owned petroleum company, or they could go in and
bid for projects on their own. You may
see bigger names like Kinder Morgan, for
example, choose the latter route. From
a macro standpoint, we will continue to
see a lot more integration across the continent in a way that hasnt been as much
the case until recent years, Feng says.
To what does all this deal activity speak?
Its obviously just an interest in midstream
in general, says Feng. Whether its gas
processing or other parts of the midstream
value chain, I think it speaks to the fact
that investors can participate in the energy
renaissance beyond just the producers.
The shale plays are driving interest in
midstream. There are some who prefer investing in the higher-risk, higher-reward
upstream companies. However, there are
other energy investors that are looking
for a balance of income and growth. An
investment in the midstream sub-sector,
generally speaking, is exactly that, and
its a way to participate in the long-term
buildout of North American energy infrastructure. The companies also see that
the production boom is expected to last
for many years, and thats contributing to
M&A interest, Feng explains.
Interest in energy infrastructure grew
at a slow and steady rate for the first 20
years after the Tax Reform Act of 1986,
says Feng. But, given historical returns,
the energy renaissance and interest in
yield and real assets, midstream is no longer an emerging asset class. GP

WHATS NEW IN GAS PROCESSING TECHNOLOGY

H. MECHE, Associate Editor

Metal loss measurement in remote locations

Permasenses integritymonitoring systems use sensor
technology to continuously monitor
metal wall thickness and deliver
high-integrity data from remote
and inhospitable environments.
The quality and frequency of the
measurements enable detection
of corrosion and erosion activity
before failure occurs.
The systems are suited for
offshore applications, negating the
need to send inspection personnel
into hazardous situations offshore,
and providing data to the desks
of integrity/operations engineers,
either on the platform or on land.
The marine version of the nonintrusive wall-thickness monitoring sensor features standard or compact form
factors (the compact form factor sensor offers a height from the pipe wall of only 200 mm), metal components
made of duplex steel for increased resistance, a tip seal to protect pipe from external corrosion at the pipesensor contact area, an IP67 rating and flexible sensor mounting solutions.
Permasense systems monitor sand erosion in offshore gas production facilitiesa particularly valuable
application, as unpredictable sand content can erode platform pipework. High erosion rates can occur in areas
of high velocity or with sudden changes in flow direction. In gas production platforms, this is usually directly
after the choke, where the flowrate is increased; on the outside radius of bends; or just downstream of bends,
especially straight after the choke or downstream of blind tees.
www.permasense.com

Complete portable
emissions analyzer

Blowers safely handle corrosive/

explosive gases

The E5500 combustion

analyzer provides emissions
monitoring for regulatory and
maintenance use in boiler, burner,
engine, turbine, furnace and
other combustion applications.
The complete portable tool also
includes electrochemical gas
sensors (O2, CO, NO, NO2, SO2 )
and is low-nitrogen-oxides (NOx )
and total-NOx capable.
It has a real-time PC
software package with wireless
communications, along with other
features, including a wireless
remote printer; external water-trap
assembly; stack gas and ambient
air temperature measurements;
draft and differential pressure
measurements; and calculated
values for efficiency, excess air
and CO2%.

AMETEK Precision Motion

Controls ROTRON Chem-Tough
regenerative (side-channel)
blowers safely handle corrosive
and/or potentially explosive
gases. The blowers operate in
environmentally challenging,
chemically corrosive and
potentially hazardous conditions,
including methane extraction and flaring.
The blowers use regenerative air technology to develop proper air
pressures and vacuums. This is accomplished without the higher energy
and maintenance costs associated with larger multistage or positivedisplacement blowers and compressors. An extensive product range
allows users to achieve ideal flows, pressures and vacuums.
Rugged construction features include nickel-plated components
and 303 stainless steel motor shafts and hardware. Custom seals ensure
leak containment. Use of low-friction polymers provides permanent
dry lubricity. The blowers low-noise, high-efficiency aerodynamics are
achieved through its lower-speed alternating-current induction motors.
These ATEX-certified, explosion-proof motors are designed for harsh
environments, and they are available in all international voltages.

www.E-Inst.com

www.ametektip.com

Analyzer
continuously
measures
hydrocarbons
GOW-MAC Instrument
Co.s Series 2300 total
hydrocarbon analyzer is a
2,300-microprocessor-controlled
instrument for continuously
measuring concentrations of
hydrocarbons. Using an optional
catalytic methanizer, it can
measure carbon monoxide and
carbon dioxide in gas streams.
The analyzer uses a flame
ionization detector (FID) where
ionized carbon atoms are
produced when burned in a
hydrogen flame. Ionized atoms
are detected and displayed as
parts-per-million (ppm) or partsper-billion (ppb) concentrations
on a high-resolution LCD
touchscreen. An accompanying
membrane keypad enables
straightforward navigation
through settings and functions.
The instrument operates on
either zero-grade hydrogen (H2 ),
a 40% or 60% H2 /nitrogen mix, or
a 40% or 60% H2 /helium mix. It
features auto ranging from 0 ppm
to 20,000 ppm; auto zero and
auto calibration; programmable
relays for concentration alarms,
events and diagnostics; electronic
flow control of air, fuel and
sample gas; real-time data
logging; a flame-out indicator
with auto shutoff of gases for
safety; an array of optional output
capabilities; USB and Ethernet;
and MODBUS and PROFINET
(read-only) communication
protocols. Samples can be
introduced by an optional internal
pump or by pressurized tanks.
www.gow-mac.com

Gas lter lines

handle high
pressure

Newgate Instruments multivariable pressure transmitter (MVT), the JT400, uses

five times less energy than traditional MVTs. The JT400 transmitter is reportedly the only
MVT with an integrated autonomous power system contained within an explosion-proof
housing. It can operate for up to 12 years without requiring a battery change, and the
solar-powered JT400 version can operate up to 200 days without sunlight.
The JT400 transmitter logs data of 15-minute averages up to 30 days for
periodic transmission or local download. Additionally, it maintains industry-leading
performance accuracy, is the only MVT to offer a local USB port for convenient data
download, is compatible with all pipeline equipment, and can be installed to replace
any existing transmitter or on new natural gas wells.

Xebec Adsorption Inc.s

three new X-Series filter lines
accommodate pressure ranges up
to 290 pounds per square inch
(psig), 725 psig and 6,000 psig
(20 barg, 50 barg and 420 barg).
The X-Series has been
performance-validated according
to International Organization
of Standardization (ISO) 8573
quality standards and ISO 12500
test methods by Institut fr
Energie-und Umwelttechnik eV, an
independent verification body.

www.newgateinstruments.com

www.xebecinc.com

Pressure transmitter reduces energy use

Gas Processing|JULY/AUGUST 201469

WHATS NEW IN GAS PROCESSING TECHNOLOGY

H. MECHE, Associate Editor

Protect LNG transport assets against spills, res

Gas transported as LNG is typically stored at temperatures of 260F.
Steel becomes brittle at roughly 22F, exposing the transport asset
to cracks, corrosion and potential cryogenic spills. Any type of spillage
caused by this process, if the LNG is vaporized, can create a potential fire
risk. Syntactic epoxy insulation offers protection against cryogenic liquid
contact. This epoxy binder system is filled with insulating microspheres,
which are typically wet-applied by hand or spray.
Sherwin-Williams FIRETEX M89/02 is a seamless, high-solids epoxyresin-based insulative epoxy. It was developed to provide protection against both cryogenic/LNG spillage and
hydrocarbon fires, and it can be used at operating temperatures from cryogenic to 300F. The insulative epoxy
has been tested for freeze-thaw cycling, impact resistance, flexibility, compressive strength and adhesion, as
well as for resistance to saltwater and freshwater immersion.
Ongoing testing by Sherwin-Williams revealed no breakdown of coating in large-scale testing. FIRETEX
M89/02 epoxy was proven to withstand a cryogenic spill simulation in which systems were immersed in liquid
nitrogen and then hydrocarbon fire-tested per UL 1709 for 60 minutes.
FIRETEX M89/02 epoxy can be used in conjunction with the FIRETEX M90 Series epoxy to provide
protection against hydrocarbon and jet fire following a cryogenic spill.

System inspects
tank welds swiftly

As a result of interviews with its major shale play clients, AEREON developed its Quad-O Design Enclosed
Combustor (QDEC) as a solution to meet demands for an environmentally compliant line of combustors. The
QDEC is a completely smokeless system, offering quiet operation with no visible flame, reducing emissions to
comply with New Source Performance Standard (NSPS) Subpart OOOO.
The system does not require electrical, steam or assist gas utilities to achieve smokeless performance.
Also, with low power consumption and an optional solar-powered ignition panel with nine-day battery backup
support, the QDEC offers reliability in remote installations.

The Applus RTD Rayscan

Tankscan, a real-time digital
radiographic inspection system,
enables a full inspection of LNG
storage tank welds in a singlescan movement, producing an
image of each weld. No film
chemical processing is required,
and a steady scanning system is
used for dynamic examination.
The system is suitable for
both horizontal and vertical
welds, and its rigid frame helps
maintain alignment between
the X-ray source and the digital
line detector. This process offers
savings by reducing both time
spent on the examination of
each weld and the number of
operators required.
The product has been
designed to avoid vibrations,
with a rigid frame and support
wheels. A safe working distance
of only 3 m from the frame is also
achieved with a protective shield
that surrounds the X-ray source,
beam and detector.

www.AEREON.com

www.applusrtd.com

www.protective.sherwin-williams.com

Enclosed combustors are environmentally compliant

Bret Ronk, Publisher

Phone: +1 (713) 520-4421
Fax: +1 (713) 520-4421
E-mail: Bret.Ronk@HydrocarbonProcessing.com
www.GasProcessingNews.com

SALES OFFICESNORTH AMERICA

IL, LA, MO, OK, TX
Josh Mayer
Phone: +1 (972) 816-6745
Fax: +1 (972) 767-4442
E-mail: Josh.Mayer@GulfPub.com

AL, AK, AZ, AR, CA, CO, FL, GA, HI, ID,
IN, IA, KS, KY, MI, MN, MS, MT, NE, NV, NM,
ND, OR, SD, TN, TX, UT, WA, WI, WY,
WESTERN CANADA
Ryan Akbar
Phone: +1 (713) 520-4449
Fax: +1 (713) 520-4449
E-mail: Ryan.Akbar@HydrocarbonProcessing.com

CT, DC, DE, MA, MD, ME, NC, NH, NJ,

NY, OH, PA, RI, SC, VA, VT, WV,
EASTERN CANADA
Merrie Lynch
Phone: +1 (617) 357-8190
Fax: +1 (617) 357-8194
Mobile: +1 (617) 594-4943
E-mail: Merrie.Lynch@GulfPub.com

DATA PRODUCTS
Lee Nichols
Phone/Fax: +1 (713) 525-4626
E-mail: Lee.Nichols@GulfPub.com

70JULY/AUGUST 2014|GasProcessingNews.com

SALES OFFICESEUROPE

ADVERTISER INDEX

FRANCE, GREECE, NORTH AFRICA, MIDDLE EAST,

SPAIN, PORTUGAL, SOUTHERN
BELGIUM, LUXEMBOURG, SWITZERLAND,
GERMANY, AUSTRIA, TURKEY

Ametek Process Instruments ..........................5

Catherine Watkins
Tl.: +33 (0)1 30 47 92 51
Fax: +33 (0)1 30 47 92 40
E-mail: Watkins@GulfPub.com

ITALY, EASTERN EUROPE

Fabio Potest
Mediapoint & Communications SRL
Phone: +39 (010) 570-4948
Fax: +39 (010) 553-0088
E-mail: Fabio.Potesta@GulfPub.com

UNITED KINGDOM/SCANDINAVIA,
NORTHERN BELGIUM, THE NETHERLANDS
Michael Brown
Phone: +44 161 440 0854
Mobile: +44 79866 34646
E-mail: Michael.Brown@GulfPub.com

SALES OFFICESOTHER AREAS

CHINAHong Kong
Iris Yuen
Phone: +86 13802701367, (China)
Phone: +852 69185500, (Hong Kong)
E-mail: Iris.Yuen@GulfPub.com

INDIA
Manav Kanwar
Phone: +91-22-2837 7070/71/72
Fax: +91-22-2822 2803
Mobile: +91-98673 67374
E-mail: India@GulfPub.com

JAPANTokyo
Yoshinori Ikeda
Pacific Business Inc.
Phone: +81 (3) 3661-6138
Fax: +81 (3) 3661-6139
E-mail: Japan@GulfPub.com

Ariel Corporation .............................................. 14

BASF Corporation........................................C38
Bryan Research & Engineering .......................11
Chart ....................................................................... 2
Cobey .................................................................. 30
DMG EventsGas Asia Summit................... 20
Dresser-Rand ..................................................... 18
Exterran ................................................................17
Gulf Publishing Company
EventsECF ....................................................32
EventsGasPro ...............................................31
US Gas Processing Plant Directory ......... 43
Jonell, Inc .............................................................13
KP Engineering ...................................................71
Linde AG ................................................................9
Paqell ...................................................................... 7
Pentair ..................................................................72
Select Engineering ........................................... 19
Siirtec Nigi SpA ..................................................12
SKF Group...........................................................47
World Gas Conference ....................................27
This index and procedure for securing additional information are
provided as a service to advertisers and a convenience to our readers.
Gulf Publishing Company is not responsible for omissions or errors.

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