Ogjournal20150803 DL

AUG.
3, 2015 | USD 10
International Petroleum News and Technology | www.ogj.com
OFFSHORE
EUROPE
SINGLE-WELL DESIGNS ADD RESERVES

US LTO MARKET
AFPM: SAFETY, GASOLINE BLENDING
NORTH AMERICAN LNG IMPERILED
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FORUM
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New Orleans, Louisiana
October 4 7, 2015
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From CITGO, CVR, Delek, Flint Hills,
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Matthey, KBC, NALCO, Shell Global
Solutions, Technip and UOP
To answer your questions
And lead discussions on challenges
you are facing at your facility today!
Been in the Industry <15 years?

The Principles & Practices
sessions are for you!
Attendees are encouraged to share
their challenges and experiences in
these interactive discussion sessions
to benet one another.
TECHNOLOGY = A MUST ATTEND

EVENT
New This Year
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From Tesoro, Emerson, ExxonMobil,
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Panels and Presentations
On Cybersecurity Defenses in Rening/
Petrochemicals in 2015, Industrial Control
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Led by young leaders for other young
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CONTENTS
Aug. 3, 2015 Volume 113.8
NORTHWEST EUROPE EXPLORATION, APPRAISAL WELLS

UK Continental Shelf
GENERAL INTEREST
120
Cornyn calls for more

US energy exports in
wake of Iran deal
Nick Snow
35
30
Separate Murkowski
bill addresses crude
exports, OCS
revenue sharing
Nick Snow
32
100
lls, no.
Senate Banking
Committees crude oil
export debate breaks
along party lines
FIG. 1a
140
Appraisal sidetracks
Appraisal spuds
Exploration sidetracks
Exploration spuds
Price
120
100
26
80
80
Nick Snow
API: US petroleum
demand rose in June,
second quarter
SPECIAL REPORT
36
Drilling activity declines slightly

in Northwest Europe for 2015
Gazprom Neft advances

Moscow refinery revamp
Matthias Sasso
Robert Brelsford
EPA proposes
voluntary methane
reduction program
for gas industry
37
Nick Snow
Robert Brelsford
34
37
Post-sanctions Iran
initially wont
shake markets up,
executive says
Joint venture plans

grassroots refinery
for North Dakota
Nick Snow
38
OFFSHORE EUROPE
26
Egypt advances refinery

modernization projects
Robert Brelsford
35
REGULAR FEATURES
COVER
Oseberg B is one of three platforms in Statoil

ASAs Oseberg Field Center. The area lies
north of several recent discoveries in the
Norwegian North Sea. According to Oil & Gas
Journals Offshore Europe Special Report,
starting on p. 26, exploration drilling remains
buoyant in Norway, with 40 wells likely to be
spudded in 2015. Photo by Harald Pettersen
for Statoil.
OG&PE
P1
NEWSLETTER 8
LETTERS/CALENDAR 18
JOURNALLY SPEAKING 22
EDITORIAL 24
SERVICES/SUPPLIERS 73
STATISTICS 76
MARKET CONNECTION 82
ADVERTISERS INDEX 26
EDITORS PERSPECTIVE/
WATCHING GOVERNMENT 88
il, $/bbl
140
FIG. 1
REFINERS REALIGNMENT, 1995 2015
FLOW CURVE, LOW-PERMEABILITY CORES
FIG. 1
V
Darcy
Nonlinear
Vc
39
Texaco
Saudi Aramco
Star
Shell
British Petroleum
Amoco
Arco
Marathon
Marathon
Ashland
Citgo
Unoven
Unocal
Tosco
Divested refneries
Phillips
Conoco
Exxon
Mobil
Valero
Ultramar
UDS
Diamond-Shamrock
Clark
Phibro
Divested refneries
Coastal
Sun
Total
Fina
FIG. 1
Saudi Aramco
Motiva
Shell
BP
2005 2015
Marathon Petroleum
Citgo
2005 2015
ConocoPhillips
Phillips 66
ExxonMobil
Valero
2005 2015
Phil. Energy, PBF

Total
58
TECHNOLOGY...
EXPLORATION & DEVELOPMENT
DRILLING & PRODUCTION
PROCESSING
TRANSPORTATION
Single-well design
benefits low-permeability
reservoirs
US LTO market responds

to global price decline
AFPM Q&A1:
Safety, gasoline
processing questions
addressed at annual
conference
Delays, supply overhang

menace North American
LNG exports
Peter Wells
44
Jianchun Guo
Songgen He
Yan Deng
62
52
Performance-based
contracting improves
project execution
39
James F. Bowe, Jr.
Financial sanctions
impact Russian oil,
equipment export bans
effects limited
Nelson-Farrar
monthly cost indexes
Mohit Dubey
48
Gary Farrar
56
Daniel Fjaertoft
Indra Overland
66
US refiners continue
consolidation,
restructuring efforts
William L. Leffer
58
GORGON LNG
Jansz-lo feld
AUSTRALIA
Area
shown
Owner or IPM management
Project
Assets
Materials
Gorgon
feld
Personnel
Barrow
Island
Owner-operator,
IPM have greater
visibility to contractormanaged tasks
Workfow integration
Schedules
Responses
Status
Changes Exceptions
Onslow
Metrics
Exmouth
Service
contractors,
subcontractors
Material
suppliers
Logistics
services
Dampier
FIG. 4
Major
engineering
services
44
Gorgon
LNG plant
Karratha
D
na amp
tu ie
ra r-t
l g oas Bu
pi nb
pe ur
lin y
e
NEW FRAMEWORK, GREATER PROJECT VISIBILITY
AUSTRALIA
62
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OGJ
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Editorial Advisory Board

Pat Dennler Motiva Enterprises LLC, Port Arthur, Tex.
Doug Elliot Bechtel Hydrocarbon Technology
Solutions/IPSI (Advisor), Houston
Fernando Feitosa de Oliveira Pasadena Refning
System Inc., Pasadena, Tex.
Andy Flower Independent Consultant,
Caterham, UK
Michelle Michot Foss Bureau of Economic Geologys
Center for Energy Economics,
The University of Texas (Houston)
Michael Lynch Strategic Energy & Economic
Research Inc., Amherst, Mass.
Tom Miesner Pipeline Knowledge & Development,
Houston
Ralph Neumann Badger Midstream Energy LP
Kent F. Perry RPSEA, Houston
Ignacio Quintero Chevron Pipe Line Co., Houston
John A. Sheffeld John M. Campbell & Co.,
Lechlade, UK
Andrew J. Slaughter Deloitte Services LP, Houston
John Thorogood Drilling Global Consultant LLP,
Insch, Scotland
Steven Tobias Hess Corp., Houston
Shree Vikas ConocoPhillips Co., Houston
Clark White Targa Resources Inc., Houston
Colin Woodward Woodward International Ltd.,
Durham, UK
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OGJ
Newsletter
Aug. 3, 2015
International News
for oil and gas professionals
GENERAL INTEREST Q U IC K TA K E S
Removing oil export ban would raise product prices
Ending the decades-old ban on exporting US-produced crude
oil would raise prices by $3/bbl and increase product prices,
a study commissioned by Consumers and Refiners United for
Domestic Energy (CRUDE) concluded (see related story, p. 30).
The study by Alan Stevens of Stancil & Co. in Irving, Tex.,
also found that ending the crude export prohibition would
make crude and product imports climb and product exports
drop; and reduce domestic refinery utilization and possibly
shutter some refineries.
This report is a holistic and thorough analysis of energy
markets, which shows that American consumers and businesses will take a major hit if Congress lifts export restrictions,
CRUDE Coalition Executive Director Jay Hauck said on July 27.
CRUDE Coalition members include Alon USA, Monroe Energy,
PBF Energy, and Philadelphia Energy Solutions.
This is more evidence that Congress should think long and
hard before rushing to change our 40-year-old energy independence law, Hauck said.
The study also noted that US refining capacity and utilization are at all-time peaks, the Organization of Petroleum Exporting Countries continues to control crude prices indirectly
through its members production volume limits, and allowing
exports would make the USwhich still imports 47% of its
crude supplymore reliant on less secure foreign sources.
It was released a day before the US Senate Banking Committees scheduled hearing on possible impacts of removing the
crude export ban. Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-Alas.), who introduced legislation last week which included a provision to end the crude exports ban, was scheduled to testify (OGJ Online, July 24, 2015).
SSE E&P UK buys interest in West of Shetland fields

SSE E&P UK Ltd. has agreed to acquire 20% interest in Laggan,
Tormore, Edradour, and Glenlivet fields in the West of Shetland
area from Total SA for $876 million.
Laggan and Tormore fields lie in 600 m of water 140 km
west of the Shetland Islands on Blocks 206/1a, 205/4b, and
205/5a. Development of the fields was launched in 2010 and
launch of gas production is expected in the coming months
For up-to-the-minute news,

visit www.ogjonline.com
(OGJ Online, Feb. 16, 2010). The development concept consists

of the 140-km tie-back of five subsea wells to the new onshore
Shetland gas plant, with peak production of 500 MMscfd.
Development of Edradour and Glenlivet fields launched in
2014. The Edradour discovery lies in 300 m of water 75 km
northwest of Shetland on Block 206/4a, while the Glenlivet
discovery lies in 400 m of water north of Edradour on Block
214/30a.
Edradour will be developed by converting the discovery
well into a production well, connected to the main LagganTormore flowline by a 16-km subsea tie-back (OGJ Online, July
3, 2014). Glenlivet will be developed via two wells and a 17-km
production pipeline tied back to Edradour (OGJ Online, Oct.
30, 2014). Edradour is expected to start up in 2017, followed by
Glenlivet in 2018.
The sale of these minority interests is aligned with Totals
portfolio management strategy and target of divesting $5 billion
of assets in 2015, explained Arnaud Breuillac, Totals exploration and production president. It allows us to capitalize fully
on this new deep offshore development, while retaining a majority interest and operatorship.
Following completion of the deal, Total will have 60% operated interest in Laggan, Tormore, Edradour, and Glenlivet
fields alongside partners Dong E&P (UK) Ltd. 20% and SSE
E&P UK 20%. The sale also includes 20% of Totals interest in
the Shetland gas plant and interests in several exploration licenses in the West of Shetland area, including the Tobermory
discovery.
CBM producer Walter Energy files for Chapter 11

Walter Energy Inc., Birmingham, Ala., and its US subsidiaries
filed for restructuring under Chapter 11 bankruptcy in the US
Northern District Court of Alabama.
Walter Energy produces coalbed methane although its primarily business is providing coal for steel producers in Europe,
Asia, and South America. The bankruptcy did not involve Walter Energys holdings in Canada and abroad.
Walter Energy Chief Executive Officer Walt Scheller said,
We must do what is necessary to adapt to the new reality in
our industry.
Walter Energy has sufficient cash to assure that vendors,
suppliers, and other business partners will be paid in full for
Oil & Gas Journal
14
PROBLEM:
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deck space for a large ROV?
SOLUTION:
Fugro Subsea provides ROV systems

of various sizes and capabilities, including
smaller vehicles ideal for FPSO inspection.
www.fugro.com/problem-solved
ICE BRENT / NYMEX LIGHT SWEET CRUDE

$/bbl
57.00
55.00
53.00
51.00
49.00
47.00
45.00
43.00
US INDUSTRY SCOREBOARD 8/3

4 wk.
average
Latest week 7/17
July 22
July 23
July 24
July 27
Motor gasoline
Distillate
Jet fuel
Residual
Other products
July 28
TOTAL PRODUCT SUPPLIED
Crude production
NGL production2
Crude imports
Product imports
Other supply2 3
TOTAL SUPPLY
Net product imports
YTD avg.
year ago1
Change,
%
9,604
3,792
1,580
193
4,796
19,965
8,988
3,849
1,622
274
4,584
19,317
6.9
(1.5)
(2.6)
(29.6)
4.6
3.4
9,073
3,988
1,548
206
4,805
19,620
8,727
3,879
1,459
245
4,482
18,792
4.0
2.8
6.1
(15.9)
7.2
4.4
9,580
3,247
7,531
2,305
2,424
25,087
(1,437)
8,528
2,888
7,346
1,700
2,412
22,874
(1,419)
12.3
12.4
2.5
35.6
0.5
9.7
9,402
3,115
7,263
2,097
2,323
24,200
(1,540)
8,295
2,715
7,339
1,832
2,235
22,416
(1,550)
13.3
14.7
(1.0)
14.5
3.9
8.0
16,706
17,044
95.1
16,386
16,549
92.9
2.0
3.0
15,972
16,288
91.2
15,679
15,985
89.3
1.9
1.9
Refining, 1,000 b/d

July 22
July 23
July 24
July 27
July 28
Crude runs to stills

Input to crude stills
% utilization
Latest week 7/17
Latest
week
Previous
week1
463,885
216,285
141,515
44,108
39,265
461,417
218,010
141,280
43,509
40,194
Change
Same week
year ago1 Change
Change,
%
Stocks, 1,000 bbl

Crude oil
Motor gasoline
Distillate
Jet fuelkerosine
Residual
Stock cover (days)4
July 22
July 23
July 24
July 27
2,468
(1,725)
235
599
(929)
371,071
217,871
125,932
37,303
36,165
Change, %
92,814
(1,586)
15,583
6,805
3,100
25.0
(0.7)
12.4
18.2
8.6
Change, %
July 28
Crude
Motor gasoline
Distillate
Propane
Futures prices5 7/24
ICE GAS OIL / NYMEX HEATING OIL

/gal
169.00
167.00
165.00
163.00
161.00
159.00
157.00
155.00
YTD
average1
Supply, 1,000 b/d
NYMEX NATURAL GAS / SPOT GAS - HENRY HUB

$/MMbtu
2.915
2.895
2.875
2.855
2.835
2.815
2.795
2.775
Change,
%
Product supplied, 1,000 b/d
WTI CUSHING / BRENT SPOT

$/bbl
57.00
55.00
53.00
51.00
49.00
47.00
45.00
43.00
4 wk. avg.
year ago1
27.8
22.5
37.3
95.4
27.8
22.8
38.3
99.8
(1.3)
(2.6)
(4.4)
22.6
24.2
32.7
74.5
23.0
(7.0)
14.1
28.1
Change
Light sweet crude ($/bbl)

Natural gas, $/MMbtu
49.26
2.84
51.69
2.87
(2.4)
101.68
4.05
Change
(52.42)
(1.22)
(51.6)
(30.0)
Based on revised figures. 2OGJ estimates. 3Includes other liquids, refinery processing gain, and unaccounted for crude oil. 4Stocks
divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices.
Source: Energy Information Administration, Wall Street Journal
July 22
July 23
July 24
July 27
July 28
BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE
PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU

/gal
56.00
55.00
54.00
53.00
42.00
41.00
40.00
39.00
July 22
July 23
July 24
July 27
3,900
3,600
3,300
3,000
2,700
2,400
2,100
1,800
600
300
0
2,136
1,827
309
Jun. 14
July 28
Jul. 14
Aug. 14 Sept. 14
Oct. 14
Nov. 14
Dec. 14
Jan. 15
Feb. 15
Mar. 15
Apr. 15
May 15
Jun. 15
Note: Monthly average count
NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3

/gal
188.00
186.00
184.00
182.00
180.00
178.00
176.00
174.00
1Not
2,000
1,883
1,700
1,400
1,100
876
800
650
395
450
200
250
July 22
July 23
July 24
July 27
July 28 1
available 2Reformulated gasoline blendstock for oxygen blending

regular unleaded
3Nonoxygenated
10
BAKER HUGHES RIG COUNT: US / CANADA
50
5/9/14
5/23/14
5/16/14
6/6/14
5/30/14
6/20/14
6/13/14
7/4/14
6/27/14
7/18/14
7/11/14
5/8/15
7/25/14
5/22/15
5/15/15
6/5/15
5/29/15
6/19/15
6/12/15
7/3/15
6/26/15
7/17/15
7/10/15
7/24/15
Oil & Gas Journal | Aug. 3, 2015
INVENTING. COLLABORATING. LEADING.
Creating Value Along the Hydrocarbon Journey

In an industry where extreme conditions and technical requirements grow more challenging every
day, Cameron takes the lead as we collaborate with our customers to develop solutions that add
Scan to see whats

new at Offshore
Europe 2015
value to each step in the hydrocarbon journey, from reservoir to point of sale. Visit us at Offshore
Europe to hear Cameron technical experts talk about the issues that are facing the industry. Spend
time with us to explore the many ways in which Cameron addresses these challenges through
innovation, enabling technologies and life-of-eld solutions. Let us show you how Cameron creates
the ow control technology that energizes the world. www.c-a-m.com/offshore-europe2015
AD01897CAM
STANDS 5D70 & 5D80
goods and services that they provide during the reorganization

process, the company said.
Black Warrior Methane Corp. is owned by Jim Walter Resources Inc., now a Walter Energy subsidiary that produces
CBM.
Some 1,440 CBM wells in the Walter Black Warrior basin
are owned by Walter Energy, which acquired the assets from
Highmount Exploration & Production LLC in May 2010. The
wells are spread over 230,000 acres in Tuscaloosa and Walker
counties in central Alabama.
Blackstone Advisory Partners LP was retained by Walter
Energy as its financial advisor and Alix Partners LLP as its restructuring advisor.
using a 18-stage fracturing job and a 3,221-ft lateral.

To the best of our knowledge, this is the highest reported
[initial production rate] of any Utica well to date, said Steven
Schlotterbeck, EQT executive vice-president. I want to make
note of the fact that we were able to flow this well directly into
the sales pipeline without shutting in production from our other wells.
EQT tied the well to a sales pipeline without impacting field
pressure by diverting a Marcellus gathering system to another
sales pipeline. The company plans to drill additional appraisal
wells with the first slated for the third quarter in Wetzel County, W.Va.
Julius well discovers gas in King Lear area

MOL completes Ithaca Norge acquisition
MOL Group, Budapest, has completed its acquisition of Ithaca
Petroleum Norge from Ithaca Energy Inc. for $60 million plus
possible bonuses of up to $30 million if exploration is successful. The acquired company holds 14 exploratory licenses offshore Norway. The initial payment earlier was reported incorrectly as $600 million (OGJ Online, Apr. 24, 2014).
EXPLORATION & DEVELOPMENT Q U IC K TA K E S

UK awards 41 more licenses in offshore round
The UK government has awarded 41 licenses for exploration
and production in the second tranche of the 28th Offshore Licensing Round.
In the first tranche late last year, it awarded 134 licenses
(OGJ Online, Nov. 6, 2014).
The combined results make the 28th round one of the largest rounds in the 5 decades since the first licensing round took
place, according to the new Oil & Gas Authority, which recently took over licensing from the Department of Energy and
Climate Change.
The round, opened in January 2014, drew 173 total applications. The 175 licenses awarded in both tranches cover 353
blocks on the UK Continental Shelf.
The new awards were confirmed after supplemental environmental assessment and consultation.
Work obligations in the new tranche include one firm well,
by E.On E&P with partner Bayerngas on Block 48/3, and two
contingent wells. Other firm work commitments are acquisition or reprocessing of seismic data.
Awardees in the latest tranche are a mix of large and small
independent producers and integrated operators.
Among the latter group are BP PLC, Eni SPA, Idemitsu Kosan Co. Ltd., OMV AG, Royal Dutch Shell PLC, Statoil ASA,
Suncor Energy Inc., and Total SA.
EQT reports high IP from Utica dry gas well

EQT Corp., Pittsburgh, said a deep, dry gas Utica well averaged
72.9 MMcfd with an average flowing casing pressure of 8,641
psi during a 24-hr deliverability test. The well was completed
12
Statoil ASA said its Julius exploratory well, drilled in the King
Lear area of the Norwegian North Sea, has discovered gas and
condensate (OGJ Online, Nov. 7, 2013).
The 2/4-23S was drilled 5,548 m subsea in 68 m of water
by Maersk Drillings Maersk Gallant jack up rig. The well was
drilled in production license 146, about 17 km northeast of
Ekofisk field.
Statoil estimates 15-75 million boe recoverable from Julius,
which also was drilled to appraise the King Lear gas and condensate discovery in 2012 by the PL 146/PL333 partnership of
Statoil and Total E&P Norge.
The Norwegian Petroleum Directorate said Julius encountered 41 m of gas and condensate-filled sandstone with moderate reservoir quality in the Ula formation.
The well also encountered 30 m of water-filled sandstone
with poor reservoir quality in the Byrne formation, NPD said.
A 20-m gas-condensate column in the Farsund formation confirmed pressure communication with the 2/4-21 King Lear discovery but will not lead to any change in resource estimates.
The King Lear and Julius discoveries confirm Statoils view
that even such mature areas of the NCS still have an interesting
exploration potential, said May-Liss Hauknes, North Sea vicepresident, exploration.
Statoil said the Julius discovery will be included in the resource
base for a future development decision on PL146/PL333.
DRILLING & PRODUCTION Q U IC K TA K E S

Petrobras workers stage 24-hr strike
Workers at beleaguered Petroleo Brasileiro SA (Petrobras)
staged a 24-hr strike across Brazil to protest plans by the stateowned company to liquidate assets for debt service, according
to news reports.
An official of the National Oil Workers Federation was quoted as saying 90% of the companys 86,000 employees participated.
Brazil produces 2.3 million b/d of crude oil and has 13 refineries with total crude capacity of 1.9 million b/d.
Late in June, Petrobras, which dominates Brazilian production and refining, reported plans to divest assets totaling $15.1
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billion in 2015-1630% in exploration and production, 30%

in downstream, and 40% in natural gas and power.
The company said it expected additional restructuring,
demobilization of assets, and additional divestments totaling
$42.6 billion during 2017-18.
Petrobras is at the center of a massive corruption scandal
that has rocked the government.
Its new plan slashes investment during 2015-19 by 37%
from a predecessor to $103.3 billion83% for E&P, 10% for
downstream, 5% for gas and power, and 2% for other areas.
Petrobras lowered its forecast for Brazilian production of
crude oil and natural gas liquids in 2020 to 2.8 million b/d
from the earlier-projected 4.2 million b/d.
BHI: US rig count jumps 19 units to 876

The US drilling rig count jumped 19 units to reach 876 during
the week ended July 24, according to data from Baker Hughes
Inc.
The gains came primarily from rigs drilling on land. Land
rigs were up 17 units to 841. Those drilling in inland waters
also increased, up 2 units to reach 4 rigs working.
During the week, rigs targeting oil jumped 21 units to 659.
Gas-directed rigs, meanwhile, were down 2 units to 216. Rigs
considered unclassified were unchanged at 1 rig working.
Rigs engaged in horizontal drilling increased 12 units to
662. Directional drilling rigs lost 1 unit to 83.
Rigs drilling offshore and in the Gulf of Mexico were both
unchanged this week, both maintaining counts of 31.
Canadas rig count continued its upward climb, increasing
8 units to an even 200. Its count has now risen in 9 of the last
11 weeks. This weeks gain was spurred by a rebound in gasdirected rigs, which were up 8 units to 102. Oil-directed rigs,
meanwhile, were unchanged at 98 rigs working. Canadas overall count is still down 195 year-over-year.
Among the major oil- and gas-producing states, Texas was
up 8 units to 374. Louisiana jumped 7 rigs to 76. Oklahoma,
at 107 rigs working, was up 2. Four states were up 1 unit each:
North Dakota, 69; New Mexico, 51; Pennsylvania, 44; and
Ohio, 20. Eight states remain unchanged from last week: Colorado, 39; Wyoming, 21; West Virginia, 18; Alaska, 11; California, 11; Kansas, 11; Utah, 7; and Arkansas, 4.
Statoil drilling first production well at Gina Krog

Statoil ASA has started drilling the first production well at Gina
Krog field, 30 km northwest of Sleipner in the North Sea (OGJ
Online, Oct. 28, 2014).
Gina Krog has 20 well slots, and Statoil said Maersk Drillings Maersk Integrator jack up rig will drill wells until 2019.
The current plan is to drill 14 wells. Ten will be production
wells and four will be combined gas injection and production
wells. During the first years of production, gas will be injected
as pressure support to extract more oil.
Statoil will drill the top sections of six wells after ten 30-in.
conductors are installed. Two or three wells will be drilled into
14
the reservoir before the topsides arrive from South Korea.

Statoil said installation of the steel jacket and predrilling
module was completed in June.
Gina Krog, previously known as Dagny, was originally a minor gas discovery that had been considered for development on
a number of occasions since its discovery in 1974. A plan for
development and operation of the field was submitted in 2012.
Most recently, Statoil let a contract for design and installation
of topsides for the fields platform (OGJ Online, Feb. 20, 2013).
Centrica to boost production from Morecambe Bay

Centrica PLC reported a project to boost gas production from
Morecambe Bay in northwest England (OGJ Online, Jan. 31,
2012). The 16-million project involves installing new equipment on the North Morecambe platform, which will use the
high pressure of the nearby Rhyl field to boost pressure and
production from North Morecambe wells.
We have been producing gas from Morecambe Bay for 3
decades, and we want to continue our operations in the region
into the 2020s and beyond, said Andy Bevington, Centricas
director of UK operated assets.
The North Morecambe platform is normally unmanned.
Project teams will be working from the Seajacks Kraken jack
up barge. The company said teams can walk to work across a
gangway connecting the barge to the platform, rather than relying on daily helicopter flights offshore.
Gazprom Neft brings fifth Badra field well onstream

JSC Gazprom Neft said a fifth well has been brought into production in Badra field in eastern Iraq (OGJ Online, June 26,
2015). The P-04 is in testing mode but potential output is estimated at 10,000 b/d. The five wells are producing 35,000 b/d.
In addition, drilling of P-13 is nearing completion with anticipated production of 10,000 b/d. P-09 and P-15 are also drilling. Gazprom Neft, the operator, expects to receive in August
its second consignment of oil as payment for investment.
PROCESSING Q U IC K TA K E S
Chevron Phillips Chemical makes appointments
Chevron Phillips Chemical Co. LLC has made several executive
appointments, all effective Aug. 1.
Mark Lashier, currently executive vice-president, olefins and
polyolefins, will become executive vice-president, commercial.
In his new role, he will serve as the lead commercial executive
for all product lines in Chevron Phillips Chemicals portfolio.
Ron Corn, currently senior vice-president, specialties, aromatics, and styrenics, will become senior vice-president, projects and supply chain. He will be responsible for the projects
organization, including the execution of the companys USGC
petrochemicals project, and the formation of an integrated supply chain organization serving all customers and product lines
in the Chevron Phillips Chemical portfolio.
Scott Sharp, currently senior vice-president, projects, will
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become senior vice-president, manufacturing, with functional

responsibility for all of the companys global manufacturing operations.
Lashier, Corn, and Sharp will report to Peter L. Cella, president and chief executive officer.
Dave Smith, currently vice-president, olefins and NGL, will
become senior vice-president, petrochemicals, responsible for
the olefins, NGL, and aromatics product lines.
Dave Morgan, currently vice-president, polyethylene, will
become senior vice-president, polymers, responsible for all resins as well as the performance pipe division.
Mitch Eichelberger, currently general manager, normal alpha olefins and polyalphaolefins, will become vice-president,
specialties, responsible for normal alpha olefins, polyalphaolefins, specialty chemicals, and drilling specialties product lines.
Smith, Morgan, and Eichelberger will report to Lashier.
authorization by the US Federal Energy Regulatory Commission, in cooperation with the Puerto Rico Electric Power Authority (PREPA), to site, construct, and operate the proposed
Aguirre Offshore GasPort Project offshore Puerto Rico (OGJ
Online, Apr. 9, 2014).
The order confirms the final environmental impact statement (EIS) that resulted in a finding of no significant environmental impact. As part of the order, the project will comply
with all the environmental conditions outlined by FERC.
The proposed project will be a floating LNG terminal that
will consist of a floating storage and regasification unit, minimal infrastructure to moor the vessel, and a subsea pipeline to
deliver the gas onshore.
The terminal, off Puerto Ricos southern coast near the town
of Salinas, would provide fuel to the Aguirre central complex
and underpin the conversion of power generation from imported oil to natural gas.
South Africas Enref refinery due maintenance

Engen Petroleum Ltd. will shut down its 125,000-b/d Enref refinery in Durban, South Africa, for planned maintenance beginning on July 9, the company said.
The scheduled outage comes as part of the refinerys ongoing
maintenance program designed to ensure safe, reliable operations at the plant, as well as to secure a steady and stable supply
of petroleum products for the country, Engen Petroleum said.
The company, which warned of potential supply disruptions
during the shutdown period, did not disclose a timeframe for
when planned maintenance activities would conclude.
Details regarding the specific nature of the scheduled maintenance work remained unavailable.
The Enref refinery, South Africas second largest, produces
automotive, industrial, aviation, and marine fuels, as well as bitumen, lubricants, and a range of chemicals and solvents.
TRANSPORTATION Q U IC K TA K E S
Excelerate gets FERC okay for GasPort project
Excelerate Energy LP, The Woodlands, Tex., has been granted
Excelerate Energy LP has been granted authorization by FERC
to site, construct, and operate the proposed Aguirre Offshore
GasPort Project. Photo from Excelerate Energy.
Report: Old crack caused Canadian pipe break

The early-2014 rupture of a natural gas pipeline south of Winnipeg, Man., resulted from a fracture at a crack that formed
in the pipe wall during construction but remained stable more
than 50 years, according to the Transportation Safety Board of
Canada (OGJ, Feb. 3, 2014, Newsletter).
A TSB statement said the crack probably resulted from
inadequate welding procedure and poor welding quality. It
noted there was no requirement for radiographic inspections
of every weld when TransCanada PipeLines Ltd. Line 400-1
was laid.
Incremental stresses caused the fracture at a mainline valve
near Otterburne, TSB said in its investigation report. They resulted from factors such as weakened soil support due to years
of pipeline maintenance, record-low temperatures, recent work
at and around the valve site that might have driven frost deeper
into the ground, and thermal contraction that might have occurred when the pipeline cooled due to the absence of gas flow
for 20 days before the rupture and brief fire.
The incident caused no injuries or environmental damage.
TransCanada returned the pipeline to service after performing
investigations and tests.
Financing set for gas line in northern Mexico

Financing is set for construction of a 289-mile pipeline that will
carry natural gas produced in Texas to power plants in Mexico,
reports Milbank, Tweed, Hadley & McCloy, which represented
the funding group. The La Laguna pipeline will connect power
plants owned by state-owned Comision Federal del Electricidad in El Encino, Chihuahua, and La Laguna, Durango.
Fermaca Global LP will build the $820-million pipeline,
which is expected to be operational in first-half 2017. Capacity
will be 1.5 bcfd. Members of the financing group include Citigroup, ING, NordLB, Banco Santander, Sabadell, and Goldman
Sacha.
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LETTERS
Lets stay home
Flow Assurance.
Its what we do.
As President Obama readies a new surge in Iraq, we can sense

the eerie similarity with Vietnam. In each case we intruded on a
civil war; Iraq has two or three. Each action had a doubtful motive: the Gulf of Tonkin attack and the mushroom cloud mythical
weapons of mass destruction in Iraq.
Each intervention follows a similar course: Start with air power,
then introduce advise and assist trainers for whichever faction we
pick, and finally our boots on the ground enter the fray. When Vietnam failed, we picked up what remained of our material and went
home. But in Iraq we follow each failure with a new surge.
Iraq is one of the artificial countries created by the British and
by League of Nations mandates after World War I. Its disparate
Sunni, Shia, and Kurdish elements dont want to be together, and
Iraq is destined to come apart. Our attempt at fusion in Iraq is
about as difficult as nuclear fusion for commercial electric power.
Positively charged hydrogen atoms dont want to be together, and
only the sun has the conditions for that process.
In Vietnam and Iraq, US-backed local governments did their own
thing, alienating much of the country. Poorly motivated local armies
waste our training and supplies.
We persist, thinking that we need Middle East oil, or that we
have to occupy various countries to prevent a domestic terror attack. Declining oil consumption and rising Western Hemisphere
production mean that we no longer need Middle East oil. Occupying
Muslim countries is not possible.
Lets take one lesson from Vietnam and stay home.
Rolf E. Westgard
Osher Lifelong Learning Institute
University of Minnesota
St. Paul
State royalty jurisdictions
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The article Ohio Weighs post-production costs, royalty calculations is

a welcome piece on an important issue, a good example of Oil & Gas
Journal keeping its readers informed of timely legal and political issues
(OGJ, June 1, 2015, p. 49). In general it will be useful to many readers
because it explains some of the reasons courts in at-the-well and
marketable-product jurisdictions have taken their differing positions.
But the article is not fully accurate in two areas. Its bibliography
cites four articles, but all are from the at-the-well side of the debate,
none from the other side. And, more significantly, the authors repeat
a commonly stated error when they assert that at-the-well jurisdictions
are in the majority. They are not.
In New Mexico, one of the states listed as an at-the-well jurisdiction,
the New Mexico Supreme Court three times has allowed class actions
certified on marketable-product grounds to proceed. The article omits
Arkansas, widely acknowledged to be a marketable-product state.
It treats Michigan as an at-the-well state, but in 1999 the Michigan
legislature passed a statute adopting marketable-product treatment in
order to correct what it clearly saw as an unacceptable judicial at-thewell rule. The article omits Nevada and Wyoming, two other states with
marketable-product statutes. While statutes are not judicial decisions,
for all recent leases the marketable-product rule controls in these three
states.
Alaska is not mentioned. Yet in that state, where most production
is on state land, the older state DL-1 lease has been interpreted to
include a marketable-product standard, although settlements later
allowed some deductions, and the new form lease requires marketable-product treatment. Production from the largest owner of oil and
gas by far in the country, the federal government, applies a version of
the marketable-product rule. Finally, in California the primary cases on
2015 EVENT CALENDAR
deductions are oil cases that long predate

the marketable-product era in natural gas,
and its courts have never been presented
with arguments for the rule.
Accounting for these changes would
show marketable-product jurisdictions in
the majority whether measured by number
of jurisdictions or by production and would
require recoloring a large part of the map on
p. 53.
John Burritt McArthur
The Law Office of John Burritt McArthur
Berkeley, Calif.
The authors respond:

We appreciate the comments provided by
Mr. McArthur to our article and the information he added to the discussion.
Regarding the concern he expressed that
the bibliography cites only a limited number
of articles that each favor the at-the-well
rule, two leading proponents and advocates
for the marketable-product rule, including
one of the originators of the theory, are in
fact referenced in the bibliography. Further,
the editors omitted the bulk of the source
material for the articleover 35 cases from
13 different jurisdictions and several circuit
courtsfrom the final, published version
because the formatting was not consistent
with the style and format guidelines of the

Oil & Gas Journal. We, of course, would be
happy to supply those citations to readers
upon request. The articles that were cited
in the bibliography were included there only
because the related arguments and discussion threads could not be referenced in the
footnotes due to OGJs formatting requirements.
As for the status of the at-the-well rule in
US jurisdictions:
We listed New Mexico as an at-the-well
jurisdiction because its courts are among
those that have given effect to at-the-well
language and because the New Mexico Supreme Court has expressly refrained several
times from adopting the marketable-product
rule in place of this language. Most recently,
in ConocoPhillips Co. v. Lyons (2012), it confirmed the appellate courts decision in Creson v. Amoco Prod. Co., noting, for example,
that at-the-well language typically entitles
the lessee to deduct all post-production
expenses. And while we are aware of one
federal decision making an Erie guess that
New Mexico would follow the marketableproduct rule, we respectfully disagree given
the Courts discussion in ConocoPhillips.
We did not list Arkansas as a marketable-product jurisdiction because Arkansas
courts have never explicitly adopted it and
the decision in Hanna Oil v. Gas Co. v.

Taylorthe case often cited by others for a
contrary viewdid not rely on the implied
duty to market in reaching its decision.
Rather, the court relied on a pure contract
interpretation analysis. This is in line with at
least two recent federal decisions interpreting
Hanna Oil, which also concluded that the law
is unclear as to whether Arkansas follows the
marketable product rule and declined to
make an Erie guess.
The substance and focus of our article
was on how courts in the United States
have addressed the issue of post-production
costs, and not state legislatures. Thus,
we discussed the judicial creation of the
marketable-product rule and how that rule
is inconsistent with Ohio law. We did not address how some states may have altered, by
statute, the method of royalty calculation to
be used by the parties, as it does not inform
that analysis.
Tabulating those jurisdictions who
have addressed it through the courtsas
others before us have doneleaves us with
the firm conviction that the at-the-well rule
remains the majority rule.
Gregory D. Russell
Peter A. Lusenhop
Steven A. Chang
Vorys Legal Counsel
Columbus, Ohio
19
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Denotes new listing or EnerComs Oil & Gas
Conference, Dena change in previously
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enercominc.com/theoil-and-gas-conference
16-20.
AUGUST 2015
POWER-GEN Natural
Gas, Columbus,
SPE Nigeria Annual In- Ohio, web site: www.
ternational Conference pennwell.com/
events/2015/08/power& Exhibition, Lagos,
web site: www.spe.org/ gen-natural-gas.html
18-20.
events/calendar/ 4-6.
CCPS Latin American
Conference on Process
Safety, Rio de Janeiro,
web site: www.aiche.
org/ccps/conferences/
ccps latin-americanconference-on-process-safety/2015
10-12.
SPE Asia Pacific
Enhanced Oil Recovery
Conference, Kuala
Lumpur, www.spe.org/
events/eorc/2015/ 11-13.
NAPE, Houston, web

site: napeexpo.com/
19-20.
IADC Well Control

Conference of the
Americas & Exhibition,
Galveston, Tex., web
site: www.iadc.org/
event/2015-iadc-wellcontrol-conferenceamericas-exhibition
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en/ 26-28.
Tanzania Oil & Gas

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22-24.
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Rocky Mountain Energy Summit, Denver,
web site: rmesummit.
org/wp 24-27.
Mexico Upstream Summit, Mexico City, web

site: www.cwcmexicooilgas.com 1-3.
SPE Liquids-Rich
Basins ConferenceNorth America,
Midland, Tex., web site:
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lrbc/2015/ 2-3.
pore, web site: www.

asiapacific.cwclng.
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SPE Offshore Europe

Conference & Exhibition, Aberdeen, web
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ence, Perth, web site:
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Summit & International
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Oil Sands Trade Show
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Exhibition, Amsterdam,
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Pipeline Week, The
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Rice Global Engineering & Construction
Global Oil & Gas Black
Annual Forum XVIII,
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Exhibition & Conferchemical Manufacturwww.forum.rice.edu/
ence, Athens, web site: ers Q&A & Technology
21-22.
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Forum, New Orleans,
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Black-Sea-Mediterra- org/forms/meeting/MiMozambique Gas
nean 23-24.
crosite/QA15 4-7.
Summit, Maputo,
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San Francisco, www.
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Expo, Jakarta, web site: 13-14.
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Offshore Energy Exhibition & Conference,
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biz 13-14.
Exhibition, Almaty,
pira.com 8-9.
Kazakhstan, web site:
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Show & Conference,
Woodlands, Tex., web site:
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kogs2015.com 11-14. nology.com/index 13-15.
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Hydrocarbons (ICTESH), Gas-to-Liquids, London, SPE Eastern Regional
Athens, web site: www. web site: www.gas-to- Meeting, Morganictesh.org 6-9.
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JOURNALLY SPEAKING
A better definition
TAYVIS DUNNAHOE
Exploration Editor
22
The growth of unconventional resources in the last

20 years is largely attributed to advanced tools and
drilling techniques. Another important factor that
has increased the amount of recoverable reserves in
most unconventional reservoirs is a better understanding of the subsurface in many of these plays.
As a life cycle, seismic, exploration drilling,
and development share a symbiotic relationship.
The value of each facet of this process varies with
which perspective is driving the conversation.
Business decisions are made based on what an
operator may know about a particular drilling target. Considerations are given to not only the geologic understanding, but also on the availability
of equipment, tools, experienced manpower, and
access to infrastructure.
The question remains, Which of these elements take priority in the decision to drill?
According to a recent survey conducted jointly
by Oil & Gas Journal and PennEnergy, operators
selected geologic data as the most important factor
in planning a well.
The survey, Unconventional Well Business Processes: Operator & Non-Operator Perspectives,
polled both operators and non-operators to define
primary business considerations in developing
unconventional resources.
With the primary objective to increase ultimate
recovery, participants were asked to rank the various processes involved in developing a well. The
highest ranked factor among all respondents was
data. Operators, which accounted for 39.6% of respondents, ranked geologic data higher than data
on chemicals and proppants. The consensus was
somewhat polarized with -0.39 index among operators and non-operators.
While subsurface tools were ranked as the
second-highest priority, the survey revealed that
better understanding of the subsurface would lend
more credence to investing in a well.
Gaining a better understanding of geologic,
petrophysical, and fracture propagation data also
ranked high as one of the biggest challenges faced
in acquiring the skills to design a well. Subsurface visualization technology was selected as the
area where more technological enhancements
were needed. In an open-ended question inviting respondents to offer ideas that would improve
well design, 31% said data analysis should become
more advanced. Reservoir visualization and modeling came in behind this with 16% of respondents providing ideas.
New ideas, not new rocks

Unconventional development, namely horizontal
drilling, has come full circle in the US in nearly 30
years. In 1990, OGJ described drilling activity in
Pearsall (Austin chalk) field in South Texas as hysterical after the area saw 40 rigs operating from almost no rigs the previous year (OGJ, Feb. 26, 1990,
p. 53).
Pearsall field was considered a good case
study for horizontal drilling in historic fields. The
area had seen almost 2,000 wells since 1936. More
than half of the new drilling in 1990 spawned
from advances in hydraulic fracturing in the mid1970s.
In 1995, a different survey cited the pace of
horizontal drilling in the US at about 1,000 well/
year. Of these, 79% were drilled in the Austin
chalk (OGJ, June 19, 1995, p. 39). At that time,
about 90% of all US horizontals were drilled in
carbonate formations. The most common application for horizontal technology in the US was intersecting vertical fractures (53% of all formations).
Horizontal drilling was not a new process, but
the Austin chalk provided a proving ground that
serves as the basis for todays shale development.
Defining the subsurface

Unlike most carbonate formations, the later shale
boom would often require operators to manufacture
porosity in low-permeability environments using
advanced fracing techniques. In its earliest phase,
shale development was primarily a trial-and-error
process though with errors coming at great cost.
Improvements in data acquisition, microseismic, and 3D visualization have paved the way for
tailor-made drilling and completion applications
in many shale plays within the US as well as improved reservoir modeling and sweet spot identification. With ultimate recovery as a goal, it stands
to reason that geologic data remain an important
factor in deciding to invest in an exploration well.
While the subsurface is static, the industrys interpretation of unconventional reservoirs provides
better definition.
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EDITORIAL
Targeting subsidies
Presidential hopeful Jeb Bush has plunged boldly
or accidentallyinto the treacherous mists of energy taxation in a manner potentially useful to the
oil and gas industry. Responding to questions at an
Americans for Prosperity event in Manchester, NH,
he said, I think we should phase out, through tax
reform, the tax credits for wind, for solar, for the oil
and gas sector, for all that stuff.
If Bush had stopped there, a literal interpretation of his words would bode well for the oil
and gas industry but ominously for renewable
energy. Without tax credits, power from wind
and sunshine cant compete at meaningful scale
in the market for electricity. And the only tax
credits available exclusively to oil and gasfor
enhanced recovery and for production from marginal wellsexpire when prices of crude oil and
natural gas exceed thresholds below their current
levels.
All subsidies
What Bush apparently meant, however, was not
just tax credits but all subsidies.
So youd like to get rid of all fossil fuel subsidies? asked a young man identified in news reports as an environmental activist. Thats so good
to hear. Im really excited for that.
Bush responded: All of themwind, solar, all
renewables, and oil and gas. Insisting markets
should make energy decisions, he said, I dont
think we should pick winners and losers.
Probably without knowing it, the Republican
former governor of Florida created the occasion
for an overdue look at what constitutes an energy
subsidy. The default assumption of politics, enthusiastically asserted by promoters of renewable
energy and amplified by slavish media, is that oil
and gas receive tax subsidies worth tens of billions
of dollars each year and that alternatives deserve
compensatory treatment.
Yet what, exactly, are those energy subsidies
said to flow so lavishly to Big Oil?
One big-dollar tax category included in Energy
Information Administration analyses of energy
subsidiesand targeted by the Obama administration for repealis expensing of exploration
24
and development costs, especially intangible

drilling costs (IDCs). These provisions allow a
taxpayer to deduct costs immediately rather than
through serial charges. For any specific property, the taxpayer benefits from the time value
of moneybut not from diminished tax liability
over the life of the revenue stream. IDC expensing is unique because drilling incurs a uniquely
high proportion of costs unassociated with physical assets with depreciable value. But being unique
doesnt make IDC expensing a subsidy. Furthermore, timing preferences arent nearly as valuable
to the taxpayer as outright tax credits, such as
those available to solar and wind.
Another tax mechanism reported by EIA with
high annual value is percentage depletion, available only to individuals and small producers. The
alternative is cost depletion, the annual calculation
of which can strain small taxpayers. Technically,
percentage depletion becomes a subsidy when, for
a specific property, total charges exceed tax basis.
This happens, especially for old producing assets.
But it doesnt represent a fat subsidy for Big Oil, as
often is alleged. Major oil companies havent been
able to use percentage depletion since the 1970s.
Not included in EIAs report of subsidies but
routinely attacked as special favors to oil and gas
companies are several mechanisms that happen to
be available to other industries. These include lastin, first-out inventory accounting; tax treatment of
foreign income by dual-capacity taxpayers; and
the domestic manufacturers deduction.
Intended conversation?
Only Bush knows if he hoped to inspire discussion
about these complexities when he opined first on
tax credits, then on subsidies for all energy forms.
Whatever his intent, that conversation would be
enlightening if activists stayed quiet long enough
to let it proceed and if enough impartial observers
remained engaged through all the tax arcana.
Honest study would reveal that tax provisions
available to oil and gas companies dont represent
the rich and expendable handout industry detractors make them out to be. Then another tall tale
could fade from American political mythology.
GENERAL INTEREST
Drilling activity declines slightly

in Northwest Europe for 2015
Matthias Sasso
Hannon Westwood
Aberdeen
Annual drilling campaigns are usually well under

drilled the well from the Forties Alpha Platform,
way by midyear and can suggest what to expect for
targeting a near-field Upper Jurassic trap. Although
the remainder of the year. The fall in oil price at
estimated reserves are modest, about 9 MMboe, dithe end of 2014 resulted in somber predictions for
rect access to the production platform should endrilling activity, especially in relatively high-cost
sure a positive economic outcome even at the curregions such as offshore Northwest Europe. This
rent oil price.
SPECIAL
review looks at emerging trends from exploration
In line with its strategy of maximizing near-field
REPORT
and appraisal drilling to date in 2015 for the UK,
potential, Apache is currently drilling the K-ProsNorway, Denmark, and the Netherlands.
pect (Well 9/19b-18) in the Greater Beryl area of
Figs. 1a-1c show an overview of drilling activthe northern North Sea. The central North Sea has
ity from 2000-14 for the UK, Norway, and the Netherlands.
the most activity with wells on Manhattan (Nexen Inc.) and
UK drilling activity peaked in 2007 when operators spudCorfe (Total SA), each with potential reserves of 85 MMded 122 wellbores (including sidetracks). Activity steadily
boe. Success on either well would encourage drilling on
declined to 2014, with only 37 wellbores drilled.
surrounding targets. In the southern North Sea (gas basin),
Drilling activity in Norway during the same period was
Wintershall Norge is drilling the Sillimanite prospect, a Carsteady until 2005, though has since increased. Exploration
boniferous target with potential of more than 80 MMboe.
drilling peaked in 2013, accounting for 45 of 59 wellbores.
Appraisal drilling has only one confirmed success to date
The high rate of exploration drilling continued in 2014 with
at Humphrey in the southern North Sea, a small accumu43 exploration wells recorded from a total of 56 wells.
lation, which prior to appraisal had estimated resources of
The Netherlands sector only covers the eastern part of
only 3.3 MMboe (20 bcf), with tieback potential to Cygnus
the offshore Permian gas basin, and this is reflected in much
field. An extensive program is ongoing in the Captain field
lower activity levels than the UK and Norway. Drilling rates
area (Chevron Corp.), while the industry awaits confirmaover the period have remained steady at as many as 10 welltion of results on Jasmine (ConocoPhillips) and Sparrowbores/year, on par with the equivalent part of the Permian
hawk (Nexen) in the central North Sea (Fig. 2a).
gas basin in the UK.
Our 12-month UK outlook includes eight wells, all exploratory, for which operators have submitted petroleum opUK activity
erations notices to UK Department of Energy and Climate
There have been 10 new well spuds (five exploration, five apChange. Drilling has not started at any of them. We estimate
praisal) in the sector during 2015. There also have been well
operators will drill another five discretionary wells, includprograms carried over from 2014: Dalziel and Drumtochty
ing appraisal wells. On this basis, we predict between 20
(exploration) and Franklin and Kraken West (appraisal). The
and 25 exploration and appraisal wells will have spudded by
programs on Dalziel, Drumtochty, and Kraken West were
the end of 2015.
technical successes and Franklin is an assumed success as
the final sidetrack was suspended.
Off Norway
The rate of activity in 2015 is lagging behind 2014 levels
There have been 23 new wells spudded (19 exploration, four
when 25 well spuds were recorded for the whole year (13
appraisal) in the Norwegian sector during 2015. These have
exploration, 12 appraisal). Our current projections suggest a
yielded seven discoveries: Skirne East, Morkel, and Zulu
yearly total in the low 20s.
(North Sea); Imsa, Snefrid Nord, Roald Rygg, and Gymir
Les Arcs, drilled by Apache Corp. in the central North
(Norwegian Sea). These discoveries account for 114 MMboe
Sea, is the only recent discovery in the region. The operator
of reserves (ranging in size from 4 to 42 MMboe), averaging
26
NORTHWEST EUROPE EXPLORATION, APPRAISAL WELLS
FIG. 1
Appraisal spuds
Exploration spuds
Price
120
100
Wells, no.
FIG. 1a
140
120
100
80
80
60
60
Oil, $/bbl
140
40
40
20
20
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
FIG. 1b
Norway
Appraisal spuds
Exploration spuds
Price
140
120
140
120
80
80
60
60
40
40
20
20
Oil, $/bbl
100
100
Wells, no.
16.3 MMboe/discovery. Accounting for

dry holes, the average finding rate is 8.2
MMboe/exploration well.
The majority of exploration drilling has occurred in the North and
Norwegian Seas, with only the unsuccessful Bjaaland well drilled in
the Barents Sea. Exploration drilling
activity remains buoyant in Norway,
aided by the 78% subsidy on exploration and appraisal drilling costs from
the Norwegian government. More
than 40 exploration wells are likely
to spud in 2015, which is in line with
the previous 2 years. Currently there
are six active wells in the North Sea:
Julius, Gina Krog East 3, Ivar Aasen
(all Statoil), Havfrue (Suncor Energy
Inc.), Crossbill (Wintershall), and Fosen (Lundin Norway AS) (Fig. 2b). In
the Norwegian Sea, drilling is ongoing
at the Zumba Prospect for Tullow Oil
PLC.
Appraisal drilling has led to two
confirmed successes this year. Det
Norske Oljeselskap ASA drilled the
first on Ivar Aasen in the North Sea
where operations are ongoing. The
second was on Alta (Lundin) in the
Barents Sea, which is in the process of
being sidetracked (OGJ Online, June
24, 2015) (Fig. 2d). Potential reserves
are 267 MMboe. A third appraisal on
the Beta discovery (Suncor) came up
dry.
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
FIG. 1c
Netherlands
140
120
Appraisal spuds
Exploration spuds
Price
100
140
120
100
80
80
60
60
40
40
20
20
Oil, $/bbl
There have been five new well spuds

(four exploration, one appraisal) in the
Dutch sector to date in 2015. Exploration wells K06-12 and P18-07 were
successful. Well L10-38 was a technical failure and the operator is drilling
a sidetrack, while the results of Well
F12-05 are not yet available. Well F1713, the sole appraisal well, was also a
technical failure.
There have been two well spuds
(one exploration, one appraisal) in
Denmark during 2015. The Vendsyssel-1 exploration well began drilling
in early May. Subsequent to the successful Xana-1X exploration well, spud
in 2014, the Noble Sam Turner drill-
Wells, no.
Netherlands, Denmark
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
27
GENERAL INTEREST
NORTHWEST EUROPE, ACTIVE WELLS
FIG. 2
North, Barents Seas
FIG. 2a
FIG. 2b
Zumba
K-Prospect
Niobe
Captain
Manhattan
Corfe
Sillimanite
Havfrue
Ivar Aasen
Gina Krog
East 3
Fosen
Julius
Denmark
North Barents Sea

FIG. 2d
FIG. 2c
Alta
oil price, however,

there are several
additional factors
contributing to the
slowdown.
Fig. 1a shows the
SPECIAL
record-high number
REPORT
of UK continental
shelf
exploration
and appraisal wells
in 2007 (122) steadily diminishing
toward 2014 (37), a 55% reduction.
This is in sharp contrast to the situation in Norway where exploration and
appraisal drilling has increased markedly since 2005 to 56 wells in 2014.
Norways 78% tax break is a primary factor for these high exploration
rates.
In addition, the measured approach
by which the Norwegian government
releases acreage is instrumental in encouraging companies to properly evaluate and explore available regions.
Despite the relative maturity of the
Rotliegendes play in the Dutch sector,
exploration and appraisal activity has
remained consistent, albeit low, since
2004.
Another factor limiting exploration
and appraisal drilling in the UK North
Sea is the relatively high $50-60 million/well cost.
Lower rig rates, however, are providing some relief for northwestern
Europe explorers. Coupled with tax
and potential exploration incentives in
the UK sector, the lower rates may see
an uptick in activity over time.
Jude-1
ship has begun operations on the Jude-1 appraisal well for

Maersk Oil (Fig. 2c).
Northwest Europe trend

Activity so far in 2015 points to sustained drilling in Norway and the Netherlands relative to recent years, but shows
a continuing decline for the UK and Danish sectors.
The trend of declining exploration and appraisal activity in the UK has been compounded by the recent drop in
28
The author
Matthias Sasso (matthiassasso@hannonwestwood.com) is technical analyst at Hannon
Westwood, Aberdeen. He holds a BSc Honors in
geology and petroleum geology from University
of Aberdeen. He is a member of the Petroleum
Exploration Society of Great Britain.
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GENERAL INTEREST
Senate Banking Committees crude oil

export debate breaks along party lines
Nick Snow
Washington Editor
Congressional committee debate over the 40-year ban on

exporting US-produced crude oil continued to break largely
along party lines as the US Senate Committee on Banking,
Housing, and Urban Affairs held its first hearing in years
on the subject. Republicans on the committee called for the
bans removal. Democrats generally opposed that idea, their
positions ranging from quiet concern to loud skepticism.
Consumers, US jobs, and economic growth could all
benefit from a rise in US-produced oil, said Chairman Richard D. Shelby (R-Ark.) at the July 28 hearing. The export
ban in place today is economically inefficient by artificially
discouraging production.
Lifting the ban also could benefit the USs geopolitical position globally and reduce worldwide reliance on members of
the Organization of Petroleum Exporting Countries as well
as Russia, not to mention Iran, which could be soon ramping up oil production under the terms of the administrations
nuclear deal, Shelby said.
Ranking Minority Member Sherrod Brown (D-Ohio) said,
I want to hear from our witnesses about the effect ending
the export ban would have on prices, domestic drilling,
greenhouse gas emissions, and whether it would increase
pressure to drill on federal lands or other environmentally
sensitive areas of the country.
Brown also called for consideration of alternatives to what
he felt were all-or-nothing positions the export ban removals supporters and opponents have taken. For example,
should the administration use its existing legal authorities
to expand licensing? he suggested. Doing so might give us
more control over the process in the medium-to-long term,
when some of the major shale plays currently in production
tap out.
The hearings first two witnessesSenate Energy and
Natural Resources Committee Chair Lisa Murkowski (RAlas.) and member John Hoeven (R-ND)called for the
crude export bans removal. I brought this issue to this
committees attention a year ago, Murkowski said. Instead
of calling for an end to the ban, I called for 2014 to be the
Year of the Report. Boy, did they do reportsover 20 of
them that looked, primarily, at what the impact would be
on the price at the pump. Every one of those reports said it
wouldnt be significant.
Artificial discount
Hoeven said, It might seem counterintuitive for more crude
oil exports to be good for consumers at the pump, but the
30
reality is that gasoline prices are set by Brent crude prices,

which are driven by global supply and demand. We cant
compete in that market because of the export ban, which
creates a $5 discount for what our domestic producers receive.
Murkowski said, This is our opportunity to become an
energy superpowerto signal the world that were ready to
empower our allies with energy and environmental technologies instead of arriving with boots on the ground. Whether
its 6 months or 18 months, Iranian oil is returning to the
global market while were going to keep telling US producers
they cant sell their crude to customers overseas. Continuing
the ban means we wont be able to sell crude oil to some of
our closest allies, such as South Korea, which now has to buy
its oil from Iran.
Three of the four witnesses on a second panel also said
that its time for the US to end its export ban. Michele
Flournoy, chief executive and cofounder of the Center for a
New American Security, said that in doing so, the US would
improve its economic position and strengthen its ability to
play a major role in global affairs.
Stimulating US oil production growth also expends energy security by increasing supplies to the global market
from a reliable, stable producer, Flournoy said. Lifting the
ban also would enable US producers to be more responsive
to market signals, and would give US policymakers more
options to use the Strategic Petroleum Reserve in ways that
could counteract hostile attempts by foreign producers to
manipulate prices. All in all, this would reduce risk to American consumers.
Richard E. Muncrief, president and chief executive officer
of Tulsa independent WPX Energy Inc., told the committee
that his companys growth and that of many of his competitors are restricted by not being able to compete globally.
Lifting the oil export ban would create new markets for us
and unleash a new engine of growth so that our company
and others can continue to ramp up investment and create
new jobs, he said.
Muncrief also noted that allowing US producers to export
crude would give allies that now have to rely on supplies
from less politically stable sources a more reliable alternative. This diversification benefits our security too, because
it limits the ability of other, less-friendly nations to disrupt
the energy supplies of our allies, and provides more economic stability in the nations that are partners of the US,
he noted.
Benjamin Zycher, John G. Searle Scholar at the American
Enterprise Institute, said discontinuing the ban would increase prices in the US by $2-3/bbl, which would largely be
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GENERAL INTEREST
offset by eliminating the artificial differential between West
Texas Intermediate and Brent crude that the ban created.
Ending the ban also would put downward pressure on petroleum product prices worldwide, he added.
Every bit helps

Zycher noted, however, that a broader US contribution to
global crude markets ultimately could reduce prices. This
would have salutary effects in terms of reducing foreign exchange earnings by several unsavory regimes, the Iranians
and Russians in particular, he told the committee. That impact might be modest, but as far as Im concerned, every bit
helps, particularly in terms of increasing energy security in
Europe.
The panels fourth witness, United Steelworkers Pres. Leo
Gerard, said discontinuing the ban would hurt not just US
refineries, which are exporting record volumes of products,
but also other US manufacturers.
Just in one year, American refiners, just by streamlining
processes, have increased their production 100,000 b/d. Were
not opposed to exporting our energy, just the crude oil that
would allow overseas refiners to realize the same benefits,
Gerard said. We can keep the crude oil at home, realign our
refineries, and process it here so our industries can gain more
competitive advantagesor we can export it to the Chinese.
One committee Democrat strongly supported ending the

ban. I could give you 50 reasons why this policy is wrong,
but Id like to talk about a couple of other issues, said Heidi Heitkamp (ND). This technological revolution has been
driven by risk-takers like [Continental Resources Inc. Chief
Executive] Harold Hamm, who is sitting in this room. But if
it becomes uneconomic to take risks domestically, where do
you spend your money?
Some said they need better information on potential consequences of removing the ban before they can support it.
I think what could happen is that cheaper gasoline would
be produced worldwide, but our own refineries would be at
a competitive disadvantage against a monopoly like OPEC,
said Jack Reed (RI). OPEC really isnt a monopoly, Zycher
responded. Its just one big guy, and a lot of little fish.
Others expressed outright skepticism. It would be nice
to hear from the many, many experts who believe that climate change is real, that its caused by humans, and that
people should do something about it at a hearing about the
crude oil export ban, said Elizabeth Warren (Mass.). Lifting this ban sounds pretty generous. It also would generate
profits for the biggest oil companies, which is a good reason to be skeptical about study after study they have funded
which conclude its not going to have a serious effect on gasoline prices for consumers.
Separate Murkowski bill addresses

crude exports, OCS revenue sharing
Nick Snow
Washington Editor
US Senate Energy and Natural Resources Committee Chair

Lisa Murkowski (R-Alas.) introduced legislation that would
end the ban on US crude oil exports, and establish federal
Outer Continental Shelf revenue sharing for southern MidAtlantic and additional Gulf Coast states as well as Alaska.
The July 23 measure, which she called the Offshore Production and Energizing National Security (OPENS) Act, is
separate from the more comprehensive energy policy bill
jointly introduced the same day by Murkowski and Ranking
Minority Member Maria E. Cantwell (D-Wash.).
That bills primary oil and gas provisions deal with the
Strategic Petroleum Reserve, LNG exports, and working
more closely with states on oil and gas exploration and production oversight. It is one of 20 bills scheduled for markup
on July 28 before the full committee.
Murkowski said her own bill is a combination of four
measures the committee has reviewed already, including S.
1312, the Energy Supply and Distribution Act, and S. 1278,
the Alaska Offshore Lease Sale Act.
32
The senator emphasized Alaska when she explained why

she felt the OPENS Act was necessary. With exploration
proceeding in the Chukchi Sea, and the Alaska offshore
emerging as a key part of our national energy security, it
is critical that we ensure revenue sharing for the state and
coastal communities, she said.
She said Alaskas OCS in the Beaufort and Chukchi seas
contain an estimated 23.6 billion bbl of oil and 104.4 tcf of gas.
Cook Inlet near Anchorage, which supplies gas to south-central
and interior Alaska, contains another estimated 19 tcf, she said.
Murkowski said her bill specifically would:
Establish federal oil and gas revenue sharing on the
Alaska OCS for the state and for coastal communities.
Increase access to additional resources by requiring a
minimum of three lease sales in each of the Beaufort, Chukchi, and Cook Inlet planning areas during any 5-year period, and annual lease sales in the 8(g) zone of the Beaufort
and Cook Inlet planning areas in future 5-year OCS plans.
Establish the Tribal Resilience Program, creating a
fund for tribal entities for investments in energy systems and
critical infrastructure to combat erosion, improve health and
safety, and foster resilient communities.
GENERAL INTEREST
Direct funds in the near term for workforce development,
investments in science, and permitting to ensure Alaska OCS
crude oil has a pathway to the Trans-Alaska Pipeline System.
Murkowski said the OPENS Act also provides revenue
sharing and key protections for OCS development in the
Gulf of Mexico and the off the southern Mid-Atlantic coast,
improves permitting for OCS development, and lifts the ban
on crude oil exports.
Allowing more exports from the Lower 48 will increase
demand for North Slope crude oil at West Coast refineries
by creating an outlet for crude produced in the US Midcontinent, she said.
EPA proposes voluntary methane

reduction program for gas industry
Nick Snow
Independent Petroleum Association of America General

Counsel Matthew Kellogg also noted that a flexible voluntary program with appropriate incentives for participation
will be the fastest and most effective way to further reduce
methane emissions from the oil and gas sector.
It remains to be seen whether the options proposed by
EPA will be workable and whether EPA will provide appropriate incentives for participation, he said. Additionally,
there are concerns about the complexity and utility of the
record keeping and reporting requirements associated with
the voluntary program.
Interstate Natural Gas Association of America Pres. Donald F. Santa said INGAA welcomes the opportunity for individual members to enter into agreements with EPA to reduce
methane emissions further.
It is extremely important that this program have flexibility because not all pipelines are alike in their configuration,
their equipment, and, consequently, their opportunities to
reduce methane emissions, he said.
Washington Editor
Collaborative measures
The US Environmental Protection Agency proposed a voluntary
methane reduction program for the natural gas industry that
would allow companies to make commitments and track their
progress. Comments on the proposed program, which would
build on progress EPA has achieved in its Natural Gas STAR
Program in the last 20 years, will be accepted through Sept. 1.
EPA also scheduled webinars for specific gas industry
segments about the Natural Gas STAR Methane Challenge.
Oil and gas trade associations generally expressed cautious
support for the idea.
This flexible program has the potential to foster significant cost-effective emission reductions across the oil and gas
sector and to provide transparency on the progress partner
companies are making to reduce emissions, EPA said in its
July 23 announcement.
The proposed program would include companies with operations throughout the natural gas value chainonshore production, gathering and boosting, processing, transmission, storage,
and distributionand in onshore oil production, it said.
EPA said it hopes to revise and finalize the proposed program in October, and have it ready to launch by yearend.
Already incentivized
The American Petroleum Institute said it would work with
EPA on its proposed methane reduction program, but cautioned against duplicative regulation of oil and gas operations. Voluntary programs are the best way to reduce methane emissions from existing sources, API Regulatory and
Scientific Affairs Senior Director Howard Feldman said.
Industry is already incentivized to best determine how
to cost-effectively reduce emissions, and will consider participation in a voluntary program provided it has the necessary flexibility and incentives, he said.
34
Americas Natural Gas Alliance will review EPAs proposal in

the next few days to see how it would work in tandem with
existing and upcoming regulations, ANGA Pres. Martin J.
Durbin said on July 23.
We have always said that the best way to achieve reductions in methane is through collaborative measures, Durbin
noted. The fact that we have cut methane emissions from
production activities by 38% since 2005 while increasing
production by 35% bears that out. By contrast, it is clear
that direct regulation will lead to regulatory uncertainty and
fewer reductions over a longer period.
Meanwhile, Pamela A. Lacy, American Gas Association
senior managing council for the environment, said, We appreciate that EPA is developing a voluntary program that
gives companies the flexibility to choose either a best practices or a percentage reduction approach.
She said, AGA will need to review the details, but we
believe this approach will help tailor the emission reduction
goals to fit different situations on the ground, while taking
the Gas STAR program to the next level.
Matthew Hite, vice-president of government affairs at the
Gas Processors Association, said GPA was an original advocate for EPAs Natural Gas STAR Program, which has been
successful in achieving voluntary emissions reductions.
GPA looks forward to evaluating EPAs new proposal, he
told OGJ. We will be looking at how EPA addresses incentives in the proposal and how or if they credit previous efforts to voluntarily reduce methane emissions.
A spokeswoman for the Natural Gas Supply Association
said NGSA also is reviewing the agencys proposal. EPAs
voluntary program offers companies that wish to participate
a welcome opportunity to showcase the reductions in methane our industry has been achieving, she said.
GENERAL INTEREST
Post-sanctions Iran initially wont

shake markets up, executive says
Nick Snow
Washington Editor
Irans resumption of oil and gas exports, once sanctions are

lifted under the recently negotiated nuclear limits agreement, probably wont flood global markets initially, the chief
executive officer of Crescent Petroleum forecasts.
Majid Jafar said Iran Petroleum Minister Bijan Zangeneh
has said he wants to increase the countrys crude oil production to more than 4 million b/d in the near future, and plans
to unveil National Iranian Oil Co.s new petroleum contract
in late August.
I think Iran can achieve this, but it wont be easyand it
wont have as big an impact as it might have had in the 1990s
when there werent so many other options, Jafar said during
a July 22 address at the Atlantic Council.

NIOC reportedly is trying to reform its contract terms
to attract new outside investment, but faces considerable
challenges similar to other countries in the region that have
state-owned oil companies, Jafar explained. Success wont
be about having a better financial return, but about realigning national interests with investors needs, he said.
The country also does not appear likely to have a major immediate impact on global natural gas markets despite
its having 1,201 tcf of proved reserves, the second largest
amount globally, Jafar said. Its not the same as oil, he said.
The problem is making a price decision. Irans biggest problem is that it spends time negotiating with itself. Nobody is
willing to take responsibility, so it tends to negotiate unrealistic contracts.
Cornyn calls for more US energy exports in wake of Iran deal

Nick Snow
Washington Editor
US Senate Majority Whip John Cornyn
(R-Tex.) said it would be geopolitically,
economically, and strategically absurd
for the US to maintain outmoded
oil and gas export restrictions while
permitting Iran to increase its sales to
foreign customers under the recently
concluded nuclear arms limitation
agreement.
Our allies regularly call on the US
to end these bans, Cornyn said in July
23 remarks at the Center for Strategic
and International Studies.
Earlier this month, the Czech ambassador said it would send a strong
signal to both our allies and their
adversaries. It also would mean that
Russian and Iranian aggression would
not be bankrolled by our allies and
friends, he said.
Unfortunately, the US is stifled
by decades-old policies based on
energy scarcity instead of abundance
that stifle its domestic production
growth while undermining its allies
security, the senator said. Promoting
American energy would strengthen our

hand around the world, enhance our
security, and improve our economy,
he said.
Last weeks multilateral nuclear
arms agreement with Iran includes
removal of sanctions preventing the
country from exporting more of its oil
and gas, Cornyn said. It already is
one of the biggest suppliers to South
Korea and other US allies in Asia,
he said. Iran can be expected to
use the windfall of more supplies to
more customers to rebuild its military
and continue to covertly fund terrorist
groups in other countries.
Were the 800-lb gorilla, Cornyn
added. Its interesting to see, however, how many of our allies and other
P-5 countries already have delegations
in Tehran trying to make deals.
Asked why debate on removing the
US crude export ban has not moved
forward in Congress, he said the issue
probably isnt as politically mature as
that of allowing more LNG exports.
Cornyn noted that Senate Energy and
Natural Resources Committee Chair
Lisa Murkowski (R-Alas.) and Ranking
Minority Member Maria E. Cantwell

(D-Wash.) jointly introduced their comprehensive energy bill a day earlier,
which he hoped will frame the oil and
gas exports debate.
I cant give you a timetable,
Cornyn said. This fall is going to be
kind of bumpy because were going to
be tied up in so many other issues that
are going to eat up a lot of oxygen. The
fact Sens. Murkowski and Cantwell
are working together makes me hope
theyll be able to have a bill ready for
Majority Leader [Mitch McConnell (RKy.)] to bring to the floor.
More policymakers also need to
understand that US energy abundance
is an important geopolitical asset that
needs to be used more to improve
domestic security, Cornyn said.
I hope we can make this a part of
the presidential campaigns, he said.
If the winner stakes a claim on it, he
or she can claim it as a mandate and
move us forward. I hope we can get
the candidates to think about this in a
different way than before.
35
GENERAL INTEREST
Both gas export agreements that it negotiated since
2000one of which was with Crescentwound up in arbitration, he noted. The fact that domestic gas prices are
subsidized also doesnt help, he said. It also makes it very
unlikely that Iran will start to compete with Russia in supplying gas to Europe. It will need to improve its policies and
institutions first.
State monopolies
Other Middle East producers will need to adjust to new
global market realities resulting not just from North Americas unconventional production renaissance, but also from
consumer countries declining demand growth, Jafar said.
National oil companies are dominant, he said. This has
led to large, and in some cases politicized, state monopolies.
Sanctions caused only about 1 million b/d of Irans production plunge from 6 million b/d to 3 million b/d, he suggested.
Outmoded policies and priorities caused the rest, he said.
The Middle Easts market share does not reflect its resource holdings, Jafar said. Its politically unstable, but
government policies need to be reformed, particularly subsidies which benefit the very wealthy the most and divert
revenue from more important areas. Not reforming subsidies
amid very low prices means were consuming too much of
our own energy. It also undermines efficiency.

He said the regions oil-producing countries fall into one
of two broad countries: those with savings, mainly along the
Persian Gulf, and those without, primarily failed states like
Iraq, Libya, and Yemen. Their economic growth is worse
than their importing neighbors like Egypt and Lebanon because oil prices fell so far in the last year, Jafar said.
Encouraging Middle East producing countries to achieve
their energy potential is still very much in the interest of the
US, he said. The focus should be on governance, not just
politically but economically, he said.
What happened in the last year was about more than
North American shale oil, Jafar said. There were other factors, principally a reassessment of Chinas future demand.
The Saudi Arabians have bad memories of the 1980s when
they chased production, and prices collapsed anyway. Now,
they seem to be asking why they, as the lowest-cost producer, have to be the first to cut production.
Jafar said that after 45 years, Crescent, which is based
in Sharjah, has moved from a worldwide focus to one on
the Middle East. Part of the company has moved into infrastructure, including ports and power. Were very committed to the region, Jafar said. Im very optimistic about its
prospects going forward, but there are huge risks, along with
opportunities.
API: US petroleum demand rose in June, second quarter

Total US petroleum deliveries, a measure of demand, increased 4.2% from June 2014 to average 19.6 million b/d last
month. In the second quarter, demand gained 3.7% compared with the same period last year.
Demand for and production of oil and refined products
grew almost across the board over the last year, said API
Chief Economist John Felmy. Notably, gasoline demand last
month reached the highest level since the summer of 2007.
Gasoline demand in June averaged more than 9.3 million
b/d, up 3.5% from June 2014 and the highest for any month
since August 2007. Deliveries of gasoline in the second quarter increased 2.6% compared with last year.
Distillate deliveries were up 1.3% from the prior year to
average 3.9 million b/d. Over the same period, demand rose
for jet fuel (0.6%), residual fuel (3.1%), and other oils (8.9%).
At nearly 9.8 million b/d, US crude oil production in June
increased 12.5% from the prior year, a new record level for
the month of June and the highest for any other month since
April 1971. In the second quarter, crude oil production increased 12.9% year-over-year.
Natural gas liquids production averaged nearly 3.4 million b/d, a new all-time record and 10.3% higher than the
prior year. Production in the second quarter increased 11.4%
over the same period in 2014.
36
According to the latest reports from Baker Hughes Inc.,

the number of oil and gas rigs in the US in June was 861, a
drop of 3.1% from the previous month and 53.7% below the
year-ago level.
US total petroleum imports in June averaged 9.1 million
b/d, 3.3% higher than a year ago but the second lowest level
for the month since 1993. Meanwhile, crude oil imports fell
1.1% to just below 7 million b/d.
Refinery gross inputs in June rose 5% from last year to a
record high for the month at nearly 16.9 million b/d. Exports
of refined petroleum products were up 12.6% over the same
period to average nearly 4.7 million b/d, the highest June
level ever.
The refinery capacity utilization rate last month averaged
above 90% for the third time this year at 94.4%. This was
up 2.4 percentage points from May, and up 4.1 percentage
points from June 2014. APIs latest refinery operable capacity
was 17.873 million b/d.
Crude oil stocks in June gained 22% from the prior year,
averaging 468.2 million bblthe highest level for the month
since 1930.
Stocks of motor gasoline ended down 0.9% from last year
to 216.9 million bbl. Distillate and jet fuel stocks were up
from year ago levels while stocks of other oils fell.
GENERAL INTEREST
Gazprom Neft advances

Moscow refinery revamp
Robert Brelsford
Downstream Technology Editor
JSC Gazprom Neft has gained final approval from Russian

government regulators to begin construction on its longplanned combined oil refinery unit (CORU) upgrade and
modernization project at the 12.15 million-tonne/year Moscow refinery (OGJ Online, May 7, 2013).
Russias federal building standards and quality-control
agency Glavgosekspertiza has approved final project documentation for the CORU, which is designed for primary distillation of crude oil to produce high-octane Euro-5 standard
gasoline, diesel fuels, and vacuum gas oil, Gazprom Neft said.
The CORU plant, which will replace outdated equipment
and be fully compliant with Russias current ecological standards and environmental regulations, will involve installation of a 6 million-tonne/year (tpy) primary atmospheric-vacuum distillation unit (CDU-VDU 6); a 1 million-tpy
gasoline reforming unit; a 2 million-tpy diesel (distillate) hydrotreating unit, which will include an iso-dewaxing unit; a
gas fractionation unit; and an amine regeneration unit.
In addition to boosting crude processing at Moscow to
the refinerys full nameplate capacity, the CORU plant, once
commissioned, will improve the complexs operational energy efficiency as well as increase its inter-maintenance period
to 4 years from a current 2 years, the company said.
The project also will reduce the refinerys total environmental impact from processing activities by 11%, according
to Gazprom Neft.
Construction on the new plant is scheduled to begin by
yearend, with start-up due third-quarter 2018.
In June, Gazprom Neft let a contract to Tecnimont SPA,
a subsidiary of Maire Tecnimont SPA, Milan, for engineering, procurement, and construction management services
for the CORU project, which comes as part of the second
phase in the companys program to modernize and upgrade
its Russian refineries to improve processing capacities, oil
conversion rates, energy efficiency, production quality, and
environmental impacts over 2013-20 (OGJ Online, Jun. 19,
2015; Jan. 14, 2015; Dec. 3, 2014).
Other second-stage modernization work at the Moscow
refinery includes the following:
Start-up of a newly reconstructed and refurbished sulfur-recovery unit, which the company commissioned in October (OGJ Online, Oct. 3, 2014).
Installation and commissioning of an automated air-monitoring system at Moscows key units as part of the refinerys
modernization program, which was completed in April 2015.
A furnace-improvement efficiency project, which the
company began in 2014, that involves installation of furnac-
es and renovation of existing ones to enable the refinery to

increase furnace efficiency to 90% and reduce sulfur dioxide
emissions from the site by more than 95%.
A project to reconstruct and revamp the Moscow refinerys existing catalytic cracking unit to increase processing
capacity also is planned, as are projects to construct hydrocracking and flexicoking units at site.
Once fully completed, the modernization program at
Moscow will increase overall design capacity of the refinery
to 18.15 million tpy.
Egypt advances refinery

modernization projects
Robert Brelsford
Egypt has finalized a series of joint agreements with a subsidiary of Technip SA, Paris, to provide work on projects
designed to upgrade and modernize operations at two of the
countrys aging refineries.
Under the separate agreements, which were signed during a late-July visit to Italy by Egyptian government officials,
Technip Italy SPA will provide an array of services for modernization projects at Egyptian General Petroleum Corp.s
(EGPC) 4.5 million-tonne/year (tpy) Assiut refinery in Upper
Egypt, and Middle East Oil Refining Co.s (Midor) 100,000b/d refinery in Alexandria, Technip said.
The agreements under the framework of a long-standing
relationship between Italian and Egyptian governments and
companies to boost cooperation in developing Egypts upstream and downstream petroleum sectors, according to
Technip and Egypts Ministry of Petroleum (MOP).
Assiut refinery
As part of its agreement with EGPC, Technip said it immediately will begin activities related to a $1.5-billion modernization project that would maximize diesel production from
bottom-of-the-barrel components at EGPC subsidiary Assiut
Petroleum Refining Co.s (ASORC) refinery in Asyut, 400
km south of Cairo.
While it plans to take responsibility for engineering, procurement, and construction (EPC) on Assuit modernization
at a future point, Technip also is working to ensure financing for the project with Italian export credit agency SACE,
which may consider an intervention to support the revamp
plan, the service provider said.
Last year, ASORC secured $198 million in financing from
Saudi-based Islamic Development Bank (IDB) for the proposed project, which is to include a 1.4 million-tpy diesel
hydrocracking complex to convert lower-quality heavy fuels
into high-quality petroleum products such as LPG, naphtha,
37
GENERAL INTEREST
kerosine, and gasoline (OGJ Online, Sept. 3, 2014).
The project, which will require a total investment of $2.82.9 billion, is designed to help meet Egypts rising demand
for petroleum products, EGPC and MOP said in 2013.
The diesel hydrotreating complex would increase the refinerys diesel production capacity to 1 million tpy, LPG production to 76,000 tpy, gasoline production to 442,000 tpy,
and jet fuel production to 628,000 tpy, according to a July 25
statement from MOP.
A revised timeline for the project was not disclosed, but
the diesel hydrotreating complex previously was scheduled
to be operational between 2016 and 2017, according to MOP.
Midor refinery
At the Midor refinery, in Alexandrias El Amreya Free Zone,
Technip Italy will work on a $1.4-billion modernization project
that, in addition to improving the quality of production yields
at the plant, would expand the refinerys nameplate crude processing capacity to 160,000 b/d from its current 100,000 b/d.
As part of its agreement with Midor, Technip said, in due
course, that it will provide EPC services for the expansion
project, as well as immediately begin unidentified activities
related to the revamp.
Included in Technips agreement with the Egyptian stateowned refiner is a commitment by SACE to launch an evaluation process that would ensure an export credit facility to support the expansion project, according to the service provider.
Once completed, the project would enable the refinery to
produce 1.6 million tpy of diesel, 488,000 tpy of gasoline,
71,000 tpy of LPG, and 672,000 tpy of jet fuel, MOP said.
Earlier in the year, Midor let two contracts worth a total of
$1.4 billion to UOP LLC, a unit of a Honeywell International, to
provide engineering designs and licensing for new units to be
included as part of the expansion (OGJ Online, Apr. 9, 2015).
At the time, MOP said the expansion would equip the Midor refinery to produce 245,000 tpy of LPG, 1.3 million tpy
of high-octane gasoline, and 2.3 million tpy of diesel meeting European quality specifications.
The Egyptian government has disclosed neither a construction timeline nor possible commissioning date for the
proposed capacity expansion at Midor.
Joint venture plans grassroots

refinery for North Dakota
Robert Brelsford
Quantum Energy Inc., Tempe, Ariz., said it will form a joint

venture with Native Son Holdings LLC (NSH), The Woodlands, Tex., to build North Dakotas third refinery (OGJ Online, May 4, 2015).
38
To be owned by Quantum Energy and NSH subsidiary

Native Son Refining LLC, Quantum Native Processing Partners LLC (QNPP) would be responsible for construction and
operation of a proposed 40,000-b/d grassroots refinery in
Berthold, ND, Quantum Energy said.
The companies agreement to team on the Berthold refinery project follows the recent addition of Robert L. Monday,
founder of NSH and its subsidiaries, to Quantum Energys
advisory board, as well as expedites and consolidates preexisting plans by Quantum Energy and NSR to build separate
refineries in the region.
NSRs design for a 40,000-b/d refinery, for which a team
of NSR engineers previously prepared a construction permit
application, also would double the capacity of Quantum Energys original plan for a 20,000-b/d plant (OGJ Online, Mar.
21, 2014), according to Stan Wilson, chairman of Quantum
Energy.
The companies intend to file the construction permit application for the JVs Berthold refinery by the end of July,
said Andrew Kacic, Quantum Energys chief executive officer.
Quantum Energy and NSR also are in discussions with a
Canadian firm regarding the possible formation of another
JV to construct another 40,000-b/d refinery in either Manitoba or Saskatchewan, the company said.
The companies did not disclose either a timeframe or estimated cost for the proposed Berthold refinery.
Bigger plans
Quantum Energys proposed $250-million, 20,000-b/d hydroskimming refinery in East Fairview, ND, stalled in July
2014, following termination of an agreement with Northstar
Transloading LLC to purchase 80 acres of land adjacent to a
Northstar terminal for the plants construction, according to
Quantum Energys most recent annual report.
Late during third-quarter 2014, however, the company
entered into an agreement with Bilfinger Westcon Inc., Bismarck, ND, to jointly develop up to five clean-energy centers throughout the Bakken formation, each of which would
include a 20,000-b/d diesel-topping refinery, an NGL stripping plant, and equipment for carbon dioxide recovery,
Quantum Energy said.
Refineries would produce ultralow-sulfur diesel for local
distribution, with any secondary products available for shipping via rail to other refineries or end users.
The newly announced QNPP refinery likely will be situated on part of a combined 340-acre site in the Berthold area
of Ward County, ND, that Quantum Energy secured in a series of separate transactions during fourth-quarter 2014 for
construction of its Berthold energy center.
Quantum Energy also has signed 2-year option agreements with landowners to build proposed energy centers in
Baker, Mont.; Fairview, Mont.; and Stanley, ND, according to
the companys web site.
TECHNOLOGY
Single-well design benefits

low-permeability reservoirs
Jianchun Guo
Songgen He
Yan Deng
Southwest Petroleum University
Chengdu, China
Low and ultra-low permeability sandstones account for

much of the increase in gas reserves in China. Effectively
developing these reservoirs has been a research focus in the
region.
A novel optimization design for staged
hydraulic fracturing in heterogeneous,
low-permeability tight-gas reservoirs may
solve key difficulties associated with nonDarcy effects and heterogeneity in these
reservoirs. Improved stimulation performance outlined in this article may proEXPLORATION &
mote effective economic development in
DEVELOPMENT
many of Chinas gas fields.
FLOW CURVE, LOW-PERMEABILITY CORES
FIG. 1
V
Darcy
Nonlinear
Vc
Gmin
Barrier
Percolation unit
Hydraulic fractures
P/L
Pc
Percolation
unit
Barrier
Percolation
unit
Stimulation
Staged fracturing is an effective approach for many horizontal
wells drilled in low and ultra-low permeability gas reservoirs.
For the Western-Sichuan gas field in China, stimulation results have shown this process insufficient in terms of enhancing production because of poor pertinence in staged fracturing design. The design method of one policy for one well has
proven more effective for the low-permeability Xinma-Shifang
section, considering the reservoirs pseudo threshold pressure
gradient (TPG), i.e., the intersection between the epitaxial line
and the pressure gradient axis, and its heterogeneity.
Low production and rapid decline of vertically fractured
wells have caused horizontal wells to take precedence. Design optimization of staged fracturing encounters several
problems in the development of low and ultra-low permeability formations.
A complicated pore throat network featuring small pore
throat radii and high pore throat ratios causes the non-Darcy percolation effect. During displacement experiments, a
concave flow curve under lower pressure gradients represents the non-Darcy effect. Optimized fracturing parameters
based on linear Darcy flow do not apply.
Optimized fracture designs lack pertinence in this severe
heterogeneous reservoir, characterized by narrow channel
sand bodies, variable reservoir types with irregular distribution, and sandstone and mudstone interbedding. The variety
of strata encountered in horizontal wellbores has caused the
fracture design for this reservoir to evolve from one-per-section to one-per-well. Wells must provide accurate and practical optimization that considers the non-Darcy percolation
effect and the heterogeneity of the reservoir.
Wellbore
This reservoir model is composed of different percolation units

(Fig. 2).
The Western-Sichuan gas field is a typical example of the

Jurassic Penglaizhen (JP2) stratum, with the Xinma-Shifang
section identified as a primary target. This formation has a
burial depth of 800-1,900 m and a reservoir thickness of
3-40 m, contributing to a 1.23-1.4 pressure coefficient.
The Xinma-Shifang reservoir is characterized by low porosity (2.87-14.57%) and low permeability (0.015-2.81 md).
Distributary channel deposits characterize the stratum. Sand
bodies are stripped and lenticular, sandstone with mudstone
interbedding in the vertical direction and variable reservoir
types with strong heterogeneity in the plane direction.
Design method
Nonlinear ow can be investigated by displacement experiments with cores of a specific section.
39
TECHNOLOGY
3a
3b
3c
3d
The basic workflow for designing fractures for heterogeneous, low-permeability reservoirs begins with analyzing log interpretation results to develop the geological model
(Figs. 3a and 3b). Once fracture placements have been optimized , production simulation can provide an outlook of overall contribution from the variety of percolation units
in the horizontal wellbore (Figs. 3c and 3d).
The SF104-2H well was optimized with 10 hydraulic fracture jobs in eight stages (Fig. 4).
RESERVOIR TYPES, RECOMMENDED HYDRAULIC FRACTURES

Permeability, Percolation
Fracture
Reservoir types Porosity, %
md
unit width, m spacing, m
I
A
>12
>1.1
7.8
136
B
12-14
0.7-1.1
10.5
112
II
A
11-12
0.5-0.7
14.5
88
B
9-11
0.35-0.5
15.7
72
III
A
8-9
0.20-0.35
19.5
56
B
7-8
0.1-0.2
22.8
48
IV
<7
<0.1
40
Pressure
drop
gradient,
MPa/m
0.15
0.18
0.23
0.28
0.36
0.42
Table 1
Fracture
Fracture
half-length, conductivity,
m
density/cm
140
25
160
20
180
15
A concave flow curve shows the

non-Darcy effect. V is the velocity of
fluid where P/L represents the pressure gradient (ratio of displacement
pressure drop and length of core). Gmin
is defined as TPG, and G is defined as
pseudo TPG. Vc and Pc are the velocity
and pressure gradient corresponding
to epitaxial point a (Fig. 1).
Results show lower permeability
leads to a ow curve with stronger
nonlinearity and the relationship between pseudo TPG and permeability is
fitted by TPGpseudo=0.114K-0.46, where
K represents the permeability derived
from core tests or logging. The ability
to consider pseudo TPG in the production stimulation of a fractured horizontal well depends on permeability.
The location design of multistage
hydraulic fractures depends on each
independent percolation unit. Development of a long horizontal well
divides the reservoir into multiple
independent percolation units for longitudinal heterogeneity (Fig. 2).
The barrier between two percolation units is mudstone or tight sandstone with sufficient width. The critical
barrier width, determined by whether
the pressure wave can penetrate the
barrier by production stimulation, determines percolation units.
The relationship between critical barrier width and permeability is fitted by
Wcb=9 .508 ln(K) + 41.16, where Wcb
represents the critical barrier width determined by production stimulations ability to penetrate via pressure waves. The
economic cost of one hydraulic fracture
provides the basis for deriving the economic-limit percolation unit width (Table
1). Once the barriers are identified, fracture stages can be optimized per spacing,
length, and conductivity within a single
percolation unit.
Conventional production stimulation allows identification of optimal
parameters. In this article, permeability, porosity, and pseudo TPG define
parameters for the variety of different
reservoir types of the JP2 stratum in
the Xinma-Shifang section.
Fracture spacing and production
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TECHNOLOGY
interpreting the log results is a first
step. The data provide the basis for a
heterogeneous reservoir model to obtain the distribution of the percolation
units and determine the relationship
between critical barrier width and permeability. The next step is to design
fracture stageslocation, length, and
conductivityfor each percolation
unit (Table 1). These hydraulic fracture
designs are inserted into the geological
model, allowing reliable prediction for
production and optimization and completing fracture design. Further adjustments, however, may still be required.
Field application
The SF104-2H well served as a test
application for the strategy outlined
in this article. The measured depth is
2,901 m (total vertical depth 1,653 m),
and the horizontal interval is 851 m.
The continuity of sand bodies is generally good, and the drilling-encounter
Optimized fracture length is 110-180 m with the end position longer than that in the
ratio is as much as 90.5%. But properroot position in an effort to control the entire sand body (Fig. 5).
ties along the horizontal wellbore vary.
The logging interpretation results
SF104-2H, FRACTURING OPERATION CURVE
FIG. 6
show that the reservoir has low perme25
3,000
Proppant concentration, kg/cu m
ability with a scope of 0.2-0.8 md and
95
95
Tubinghead pressure, MPa
porosity ranging 7-12% with 34-56%
Displacement, cu m/min
20
2,400
gas saturation.
Casinghead pressure, MPa
76
76
The lithology and property interpretation divides the horizontal reservoir
15
1,800
section into four percolation units. Based
57
57
on research results of the fracture pa10
1,200
rameters, the plan optimized 10 hydrau38
38
lic fracture jobs in eight stages (Fig. 4).
The well plan combined conven600
5
tional
staged fracturing and limited
19
19
entry fracturing technology. The width
0
0
of sand body plane distribution is 22000
80
160
240
320
400 0
370 m. With the target of controlling
Time, min
the entire sand body, the well plan
optimized fracture length in the end
position to 110-180 m. This stage was
pressure identify the pressure drop gradient. Pseudo TPG
longer than that of the root position (Fig. 5). The outlined
can optimize fracture spacing based on reservoir properfracture stages yield the following operating parameters:
ties or a combination of reservoir types. Optimized fracture
Proppant volume/stage = 22-52 cu m.
lengths are estimated to determine each stages contribution
Fracturing fluid volume/stage = 140-364 cu m.
to production. The width of channel sand bodies also needs
Sand fluid ratio = 22.3-25%.
to be treated as a restrictive condition in each specific well.
Rate = 3.5-5 cu m/min.
These steps conclude the research process. The results
The single-well design successfully distributed hydraulic
allow quick and effective design of a single-well method
fracturing throughout the wellbore, and microseismic map(Fig. 3a-d). When considering a candidate horizontal well
ping shows the staged optimization (Figs. 6 and 7).
42
TECHNOLOGY
OPTIMIZED METHOD APPLICATIONS

Horizontal
interval, m
851
1074
661.5
991
860
787
940
934
1,189
874
554
997
1,002
958
999
961
757
918
1000
970
777
Average
Completion
method
Casing
Casing
Openhole
Casing
Openhole
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Casing
Fracturing
stages
8
7
6
8
7
8
9
8
9
5 (9 fractures)
5 (6 fractures)
8
8 (9 fractures)
8
8 (11 fractures)
9
7 (10 fractures)
8 (12 fractures)
8
5
8
With the successful application of

optimized fracturing in well SH1042H, the operator expanded this one
policy for one well method throughout the Xinma-Shifang section in 20
additional wells (Table 2).
Compared with the fractured horizontal wells before the application of a
single-well design, the average production rate/well increased to 23,080 cu
m/d from 16,390 cu m/d of gas. Optimized fracture design on a single-well
basis provided increased production as
compared with a single fracture design.
Acknowledgment
Proppant volume, cu m
296
185
190
256
205
184
245
236
251.1
175
116
216.5
280
209
158.6
242.7
167.5
247
167
133.3
179
Fracturing fuid
volume, cu m
2,064.8
1,543.5
1,394
1,804.6
1,417.7
1,331.3
1,721.1
1,825.9
1,647.4
1,191.8
116
1,501.4
1,757.9
1,775.2
1,068.1
1,513.2
1,185.4
1,684
1,341.9
1,114
1,348.6
Rate, cu m/min
3.5-5.8
4.5-5
4.9-5.5
4.3-5.5
4-5.1
4.5-5.2
4.2-5.7
4.1-5.6
4-5.2
4.7-6.5
4.5-5.7
4.4-5.1
5-5.6
3.6-4.5
1.5-5.3
4.5-5.5
3.4-5.1
2.4-5.8
3.4-4.9
1-5.0
4.2-5.3
Tubing head
pressure, MPa
22.3
8.4
16.8
14.4
12.4
5.6
20
21.8
0
9.1
2
12.6
6.56
15.6
0
13
1.7
17.6
7.2
11
16
2.308
MICROSEISMIC MAPPING RESULTS
-400
Stage 3-2
Stage 4
-500
Stage 5-1
-600
Stage 5-2
Stage 6
-700
-800
-900
FIG. 7
Stage 1
Stage 2
Stage 3-1
N
-300
Northward, m
Well name
SF104-2HF
SF114-1HF
SF16-1HF
MP23-3H
SF20-2H
XP104-2H
SF104-3H
SF23-1H
SF8-1H
SF10-1H
SF39-1HF
MP23-15HF
SF31-2HF
SF38-1HF
SF16-4HF
SF16-3HF
SF302HF
SF38-5HF
SF107H
SF16-2HF
SF303HF
Table 2
Gas production
rate, 1,000
cu m/d
4.55
1.572
1.001
4.007
5.57
1.524
3.628
2.531
0.12
1.235
0.325
1.184
0.998
3.095
0.139
0.858
0.793
4.427
0.557
3.854
6.5
Stage 7
Stage 8
-1,400
This article was prepared under auspices of the Southwest Oil and Gas Co.
of Sinopec and the State Key Laboratory of Oil and Gas Reservoir Geology and Exploitation at
Southwest Petroleum University, Chengdu, China.
-1,200
-1,000
-800
Eastward, m
-600
-400
-200
Songgen He (hesonggen917@163.com) is a
doctoral student of the State Key Laboratory of
Oil and Gas Reservoir Geology and Exploitation
at Southwest Petroleum University.
The authors
Jianchun Guo (guojianchun@vip.163.com)
is a professor and the dean of the School of
Petroleum and Gas Engineering, Southwest
Petroleum University. He obtained his PhD in
engineering from Southwest Petroleum University in 1998. He is a member of the Society of
Petroleum Engineers.
Yan Deng (dengyan@swpu.edu.cn) is associate

professor of the School of Petroleum and Gas
Engineering, Southwest Petroleum University.
She obtained her PhD in engineering from
Southwest Petroleum University in 2005.
43
TECHNOLOGY
DRILLING &
PRODUCTION
US LTO market responds

to global price decline
Peter Wells
Boston Petroleum Research

Winchester, UK
44
800
120
700
110
Major rig decline
100
at $92/bbl
600
Permian basin, Texas District 8
90
400
80
300
Oil price
Eagle Ford, Texas Districts 1-3
70
200
$/bbl
Rigs
500
60
100
50
Apr. 2015, Week 4
May 2015, Week 4
Mar. 2015, Week 4
Feb. 2015, Week 4
Jan. 2015, Week 5
Jan. 2015, Week 1
Dec. 2014, Week 1
Oct. 2014, Week 2
Nov. 2014, Week 1
Aug. 2014, Week 3
Sept. 2014, Week 2
July 2014, Week 3
May 2014, Week 4
Apr. 2014, Week 4
Mar. 2014, Week 4
Jan. 2014, Week 5
Feb. 2014, Week 4
Jan. 2014, Week 1
June 2014, Week 3
Bakken
40
Source: Rig count, Baker Hughes; oil price, US Energy Information Administration
BAKKEN RIG COUNT, PRODUCTION
FIG. 2
Production,
unchanged rig count
1.8
400
1.6
350
Actual
production
1.4
300
Production,
lower rig count
Drilling rigs
250
1.0
200
Rigs
1.2
0.8
150
0.6
100
0.4
50
0.2
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
0
2008
Saudi Arabias new market share policy is supported by its deep reserves. It
has the near-term effect of enabling the
Saudis to accommodate competition
from rising Iraqiand potentially Iranianproduction without losing market share within OPEC. Saudi policy
also suppresses high-cost marginal oil
FIG. 1
Oil price shifted 3 months forward
2007
Economically marginal
production
RIG COUNT, BRENT PRICING, US LTO-PRODUCING AREAS
Million b/d
The steep decline in oil prices has led

to deep capital spending cuts in the oil
and gas industry. Integrated oil companies and the larger independents
have announced cuts of about 25%.
Smaller independents, especially those
most exposed to light tight oil (LTO)
plays in the US, generally have announced cuts of more than 40%.
Saudi Arabia is and will remain the
most influential oil producer for the
next decade, at least. Its policies will
determine oil prices over that period
and will have a significant effect on US
LTO production
This article looks at how US LTO
producers can respond to the new
price environment in which OPEC,
specifically Saudi Arabia, has abandoned a 30-year policy of trying to set
a price floor by cutting production in
times of oversupply. It also determines
if US producers response can affect
global pricing.
Source: Rig count, Baker Hughes; production, North Dakota State Government
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
Million b/d
2014 Brent pricing, $/bbl
production, especially LTO.

US LTO COST-OF-SUPPLY CURVES
FIG. 3
LTO, however, is not the only eco100
nomically marginal production at risk
Cost-of-supply curve,
way points
in the new price environment. Low
90
prices compromise new projects and
expansion phases in the Canadian oil
80
sands, as well as frontier developments
70
in the Arctic, ultradeepwater, and
Cost-of-supply curve,
more remote deepwater regions.
15% cost reduction
60
The new price environment will
slow or halt oil sands production
50
growth. Production will continue from
40
existing projects with costs <$50/bbl
and other projects already underway
30
to recover sunk costs.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
We expect the Canadian oil sands
Production, million b/d
to have significantly slower (or even
zero) production growth over the
next 5-10 years. Sanctioned projects
FIG. 4
US LTO PRODUCTION
will continue and add an incremental
Unchanged rig count
5.0
Lower rig count,
300,000-450,000 b/d by 2018.
6
years
4.5
Our project monitoring database
shows delay or cancellation of unsanc4.0
tioned projects or those without much
3.5
Eagle Ford
sunk cost. Canadian oil sands proj3.0
ects involving $60 billion of capital
2.5
investment and 800,000-900,000 b/d
Bakken
2.0
of production will be affected over the
Others
next few years. Shell, for example, re1.5
cently cancelled a 200,000 b/d project
1.0
at Pierre River.
Permian basin
0.5
It will take almost a decade for re0
duced deepwater activity to lower production due to long development lead
times.
Our earlier modelling for deepwater
projects showed a sharp 2022-27 rise
in production from new projects in the Gulf of Mexico, AnThe cumulative effect of these reductions could be subgola, and Brazil. This rise is now likely to be delayed and
stantial. OAO Lukoils Leonid Fedun expects Russian oil
more dispersed over the period 2024-30. Deepwater producproduction to decline by 800,000 b/d by the end of 2016.
tion in 2022-25 will be 1.0-1.5 million b/d less than previously forecast due to the impact of lower oil prices on capital
LTO model
budgets.
US LTO production grew to more than 3 million b/d at the
Our modelling of Russian oilfields shows that producend of 2014 from zero in 2007. LTO does not respond to caption in existing West Siberian fields will be affected by the
ital expenditure cuts in the same way as other economically
absence of western technology and investment. This will remarginal production. This is because of their cost of producsult in declining production beginning in 2021, falling from
tion (>$50/bbl) is below current oil prices. For LTO, howabout 10 million b/d to less than 8 million b/d by 2030.
ever, continuous drilling is needed to sustain production beThe exploration and development of potential Arctic oil
cause of high-decline rates. Consequently, a major reduction
fields in collaboration with western oil companies are also
in drilling due to capex cuts will lead to lower production
likely to be delayed. Any new Arctic oil production will not
despite improvements in well performance and efficiency.
be significant until the 2030s.1 Likewise, the development of
Oil prices below the cost of new supply but above the cost of
Russias LTO potential in the Bazhenov shale will probably
production lead to lower oil production. This is demonstrated
be delayed until after 2025.2
by our LTO model, which uses data from thousands of wells.
45
TECHNOLOGY
US LTO SUPPLY COST CURVES
FIG. 5
130
2014 Brent pricing, $/bbl
120
110
100
90
15% cost
savings
Base case
(gradual return of
Iranian supply, 2016)
80
70
60
25% cost
savings
50
US LTO PRODUCTION FORECASTS, SUPPLY CURVES
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
40
FIG. 6
5.0
25% cost
savings
4.5
4.0
15% cost
savings
Million b/d
3.5
3.0
2.5
Base case
(gradual return of
Iranian supply, 2016)
2.0
1.5
1.0
Fig. 1 shows the estimated drilling rig activity in the

three main US LTO basins using data from Baker Hughes
and Brent oil prices. All three producing areas show that if
drilling activity declines by 25%, production stabilizes.
Production falls, however, at higher rates of decline. The
latest data from Baker Hughes shows rig counts stabilizing
in June 2015 ($60/bbl Brent) at levels about 55-60% lower
than the peak counts in 2014 (Fig. 1).
Fig. 2 shows Bakken LTO crude oil production with
unchanged drilling rates and with less drilling. There is a
match between actual production and the model through
March 2015, the latest data available at the time this article
was written. We estimate a 6-year period of low drilling activity through 2020 before drilling activity rebounds to 2014
levels.
46
Q1 2025
Q1 2024
Q1 2023
Q1 2022
Q1 2021
Q1 2020
Q1 2019
Q1 2018
Q1 2017
Q1 2016
Q1 2015
Q1 2014
Q1 2013
Q1 2012
Q1 2011
Q1 2010
0.5
Drilling-pricing relationship
The principal uncertainty in analyzing the relationship between drilling
activity and oil price lies in the assumed time lag between falling prices,
the decision to curtail activity, and the
process of demobilizing rigs and unwinding commitments to contractors.
We estimate this time lag to be about 3
months for the purposes of our model.
This reveals a point at which declining oil prices began to have an effect on drilling: 3 million b/d and $92/
bbl (Brent) (Fig. 3).
The model forecasts that sustaining
drilling activity at peak levels reached
in 2014 would yield maximum US
LTO production of about 4.5 million
b/d. This defines the terminal point on
the cost of supply curve (Fig. 3). It also
forecasts a 1-1.2 million b/d drop in
overall US LTO production due to the
55-60% drop in drilling activity (Fig.
4). This yields a further waypoint on
the cost-of-supply curve of 2 million
b/d at $60/bbl. New US LTO production is assumed not to be significant at
oil prices below $40/b (Brent), a waypoint that rounds out the estimated US
LTO cost-of-supply curve(Fig. 3).
The derived cost-of-supply curve
shows that even quite significant cost
savings would not add a great deal
to US LTO production. A 15% effective cost reduction would add only
250,000 b/d to US LTO production.
Model inferences
The total time lag between declining prices and reduced
production is about 6 months. This includes 2-3 months
for wrapping up drilling operations and contractual commitments, and 3 months for the reduced drilling to affect
production.
The response of US LTO to oil price signals is slow. In
addition to the 6-month lag, our models show it takes 12
months for half the decline to occur and 36 months before
prices fully affect production (Figs. 2 and 4).
The slow response is due to low initial-production rates
and high decline rates of LTO wells. Sustaining meaningful production requires a large number of wells. It takes 12
months to realize a fall or rise of 500,000 b/d in US LTO production. Saudi Arabia has 5 times this production in spare
capacity and can make it available in less than 3 months.
We have also modeled the impact of higher and lower US
TECHNOLOGY
LTO production on the future trajectory of oil prices.
Fig. 5 shows the price forecast to 2025 if there is no reduction in US LTO cost of production, and two variations
with 15% and 25% cost reductions. While there is not much
difference with a 15% cost reduction, the forecast widens to
$10/bbl by 2025 if a 25% cost savings can be realized.
Fig. 6 shows total US LTO production. Even with the
estimated cost savings, US LTO production is only about
500,000 b/d higher after 2019 than if there is no reduction
in the cost of production.
References
Global supply
The author
The rise in US LTO production, together with sluggish global demand, has contributed to high global spare capacity and
falling oil prices. Slow response time (>12 months) and relatively small increments of production involved (<500,000
b/d), mean US LTO production cant affect oil prices in the
short term.
The market is more sensitive to whether or not sanctions
on imports of Iranian oil are lifted and whether or not Libya
stabilizes than it is to US LTO production. OPEC and Saudi
Arabia can also affect the market more quickly and in greater
volume; millions of b/d over a few months.
Peter Wells (peter.ra.wells@btconnect.com)

is the managing partner of Boston Petroleum
Research, which specializes in building models
to simulate regional oil exploration and production and global oil supply, demand and price. He
is an adviser to Toyota Motor Corporation on oil
supply, demand and price matters. Wells holds
a BS and PhD in geology and held a fellowship at the University
of Oxford. Wells is a member of the Energy Institute, the AAPG,
EAGE and the Royal Institute of International Affairs (Chatham
House).
1. Milne, R., Adams, C., Crooks, F., Oil Companies Put

Arctic Projects into Deep Freeze, Financial Times Online,
Feb. 5, 2015.
2. Chazon, G., Farchy, J., Russia Arctic Energy Ambitions
Jeopardized by Western Sanctions, Financial Times Online,
Sept. 1, 2014.
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TECHNOLOGY
Performance-based contracting
improves project execution
Service, supply PBC
Mohit Dubey
E2open
Dallas
Performance-based contracts (PBC) shift risk and corresponding reward to the party best placed to improve performance in a particular activity over time. The supplier or
Greater information-sharing and a new operational framecontractor has the leeway to benefit through integration, opwork will help the oil industry mitigate project delays and
timization, and performance improvements, while defining
overall risk. This article looks at how such a framework has
the outcome in a way that directly aligns with the overall
worked in other industries and is being adopted by some
project.
oilfield service providers, and how it could accelerate a new
The size of the contract and inherent risks of the project
approach to contracting for material supply and services at
define the payouts and penalties for hitting or missing perthe wellsite.
formance targets. Overall compensation to the service proInefficiencies working with external partners often lead
vider, consisting of the base price and the incentive, may
to project delays. Incentives or penalties for contracted work
be higher under a performance-based contract, because the
cannot mitigate delays or the entire project risk because they
risk premium is explicit rather than absorbed in the owners
are proportional toand limited bythe scope of the outoperating expenditures.
sourced work.
This approach has been used effectively in other indusOil and gas producers use contractual frameworks to
tries. The US Department of Defense (DOD) let contracts for
manage intercompany relationships, improve efficiencies,
major weapon systems that would be equivalent to mainteand mitigate project delays. Companies procure material
nance and repair contracts for oil and gas field equipment.
supply and oilfield services other than drilling on
According to DOD, performance-based lifea primarily transactional basis, with a service percycle product support offers the best strategic apformed or material procured at a predetermined
proach for delivering required readiness, reliabilprice, rather than a performance basis under which
ity, and ownership costs. The DODs contractor
the service provider takes a greater share of both
improved aircraft availability by minimizing asrisk and reward.
set downtime caused by unavailable spare parts
But the number of performance-based service
or technicians and reaped the corresponding reDRILLING &
and supply contracts in the oil and gas industry
wards.4
PRODUCTION
has increased.1-3
Other studies have shown that product reliabil-
TYPICAL E&P PROJECT STRUCTURE
FIG. 1
Operator
Integrated project management company
Coring
Fluids
Testing
48
Mud logging
Directional drilling, MWD
Wireline logging
Drill bits
Construction
Rigs
TECHNOLOGY
PROJECT LAYOUT, MULTIPLE CONTRACTORS

Engineering directly
engaged by operator
FIG. 2
Primary interface:
Operator, integrated project manager (IPM)
Service execution
Installation
Material delivery
Responsibility
Operator
IPM
Other engineering service provider
Subcontractor
Project interface
Subcontractor engaged by IPM
ity is 25-40% higher under PBC than under time-and-material-contracts for service and support, such as those used
predominantly in the oil and gas industry.5
A study of PBC in support services for capital-intensive
industries found that when a company is less risk-averse
than its suppliers, performance incentive increases while
the cost-sharing incentive decreases over time. Conversely,
when a company is more risk-averse than its suppliers, the
performance incentive decreases while the cost-sharing incentive increases over time.6
Service providers also benefit under PBC because the
contracts no longer specify how the service levels may be
achieved. The service provider has the flexibility to pool assets across multiple projects in the same geographic region
while providing the required service levels to each.
Closely monitoring contract definitions and risk assumption, as well as material supply and service performance, is
essential in high-risk environments, as service companies
will not want to take on an unlimited share of potential
problems.
PBC execution
Performance-based service and supply contracts are part of
the overall incentive-based project management offerings of
leading integrated-service providers that not only have wellrecognized project management expertise but also the ability to provide most of the products and services using inhouse resources.7
Schlumberger Ltd. defines integrated operations as
streamlined and coordinated performance of products, services, and personnel as if they were a cohesive system with
a single objective. Such operations are achieved by first integrating services in field operations, technologies, and engineering workflows in the office.7 Halliburton Co. also offers various levels of integrated services to suit the operating
models of its customers.8
PBC contracts give service providers the flexibility to
manage execution details. This is contrary to the prevailing practice in the oil industry in which control is retained
by specifying service-execution requirements and material-
supply metrics in fine detail. Integrating the expertise of

multiple service providers, each operating under a separate
PBC, is difficult for the contractor, as well.
Developing an operational framework that addresses
these challenges and enables relatively smaller contractors
and suppliers to bid for PBCs requires an understanding of
project organization and its implications for coordination
and control.
Project participants, interfaces

Fig. 1 shows typical project structure, regardless of the nature of contracting relationships.9 In practice, multiple organizations with relevant expertise, as well as available capacity, come together to execute projects.
Fig. 2 is more generic and establishes a project layout in
which each node represents a product or service acquired
and integrated into the project. In this example, the integrated project management company (IPM), is responsible
for successful project delivery. Baker Hughes played this role
in redeveloping Iraqs Zubair oilfield for a consortium of operators.10
In an arrangement in which all products and services are
delivered through internal resources, there would be no interfaces and the operator or IPM would be able to monitor all
tasks and control all activities.
The IPM manages any change to the scope of work, engineering, design, or delivery schedules. It has less control
when external partners are brought into the mix.
Fig. 3 illustrates this limited access to the schedule and
project status. A subcontractors impact on overall project
performance is difficult to infer in this configuration. It is
also difficult to ensure that the two major contractors engaged by the operator are working toward a common goal.
Limited visibility implications

If a project is experiencing delays in some of its tasks and
the work is internal, task statuses would be continuously
evaluated against project schedule. If the task was critical
resources would immediately be brought to bear to alleviate
the problem.
49
TECHNOLOGY
PROJECT VISIBILITY SUBSETS
FIG. 3
Tasks visible to operator
Tasks visible to IPM

Tasks visible to engineering
Responsibility
Operator
IPM
Other engineering service provider
Subcontractor
Project interface
Tasks visible to subcontractor
If a contractor is doing the work, however, it would try to

resolve the problem and manage the schedule itself, informing the operator only after the full impact of the situation
was known and a mitigation plan developed.
This is a rational response under the prevailing contracting paradigm. A contractor, aiming to deliver on time, is not
incentivized to reveal potential delays early or expected to
share news of internal delays before gaining a full understanding of the situation.
The operator expects the contractor to deliver to the
agreed-upon schedule or face penalties based on the incentive structure. Project-level incentives may influence behavior on quarterly (or longer) timeframes, but are not effective
in managing daily (or even more frequent) interactions of an
extended project team.
Losing early warning of potential delays in contracted activities results in project-wide inefficiencies, including lastminute schedule changes, idle service personnel, or an inability to redeploy resources quickly. As projects have grown
in size, delays have grown longer, reaching an average of 2.5
years for projects greater than $1 billion as of 2012.11
Given that incentives or penalties for the contractor have
to be proportional to the value of the outsourced work, only
a limited amount of project risk can be transferred to the
contractor. The contractor cannot suitably compensate the
operator for delays in a megaproject coming online, or compensate the IPM for the cascading impact of delays on the
IPMs own incentive payment.
Contract litigation is time and resource-intensive and
adversarial. It will also not change project interactions in
shorter timeframes. An improved standard operating procedure for operator-contractor interaction is needed.
New operational framework

Bidirectional information sharing on activities up to one or
two levels beyond the main project interfaces is critical to
50
coordinated project execution. Operators and lead integrators regain early warning to potential delays and participate
in reviewing mitigation plans when a delay exceeds agreedupon thresholds (Fig. 4).
There are several PBC-based rationales for such information sharing.
Coordinated execution of tasks and activities among all
parties working toward a common project milestone aligns
outcomes. This coordination is performed by a lead contractor, the integrated service provider, or even the operator.
Overall timeline achievement, sharing data across the PBC
interface, and timely performance of individual tasks that
influence the performance of other parties form the basis of
incentive profiles.
New operating procedures based on these ideas seek both
to address existing problems and support new contractual
arrangements. New procedures must:
Support management of both material supply and service execution.
Support current transactional contractual relationships in addition to new performance-based arrangements.
Support management of service-supply by contractors/
suppliers through increased visibility of all tasks on the project.
Allow the operator-integrator sufficient access to status of service and supply to coordinate dependent project
activities.
Track task-supply status continuously against the latest
schedule to enable exception-based intervention by all parties for developing a risk-mitigation plan.
This could mean a turnkey supplier of control systems
shares status updates with the operator or IPM for the delivery of equipment to the wellsite, and informs them of progress of the installation in greater detail than has so far been
the case. When there is a delay in the delivery of a small but
critical subassembly to the wellsite, the operator or IPM is
TECHNOLOGY
NEW FRAMEWORK, GREATER PROJECT VISIBILITY
FIG. 4
Owner or IPM management

Project
Assets
Materials
Personnel
Owner-operator,
IPM have greater
visibility to contractormanaged tasks
Workfow integration
Schedules
Service
contractors,
subcontractors
Responses
Status
Material
suppliers
Changes Exceptions
Logistics
services
able to immediately evaluate its impact on related activities

and the project milestone. The early warning and a systematic plan for intervention replace the reactive, ad-hoc, and
urgent back-and-forth that characterizes the common response to late-breaking news of high-impact delays.
An operator, currently, is deploying a global, cloud-based
platform that provides a comprehensive view of material
movements over multiple hand-offs to the wellsite, not just
the last leg, as is common today.12
Information is linked along the path the material follows
and is visible regardless of the party handling the materials
or the system in which the data resides, even as ownership
changes. With these capabilities, collaborative planning and
execution can occur in real-time between all stakeholders:
procurement, logistics, worksite and central materials management, as well as suppliers and contractors.
The linkage to and dependency of each party on the next
becomes visible to all, and each hand-off in a project schedule is measured separately, not just in the aggregate. This
framework is expected to make project execution more effective for traditional contracting relationships as well as
PBC.
Metrics
Major
engineering
services
reliability: an empirical analysis, Management Science, Vol.

58, No. 5, pp. 961-979, March 2012
6. Kim, S. H., Cohen, M. A., Netessine, S., Performance
contracting in after-sales service supply chains, Management
Science, Vol. 53, No. 12, pp. 1843-1858, December 2007.
7. Schorn, P., Industry Challenges Drive the Need for
New Business Models, Journal of Petroleum Technology, Vol.
66, Iss. 10, pp. 132-135, October 2014.
8. Project Management Commercial Models, Halliburton.com, 2015.
9. Chafcouloff, S., Michel, G., Trice, M., Clark, G., Cosad,
C., Forbes, K., Integrated services, Oilfield Review, Vol. 7,
No. 2, pp.11-25, February 1995.
10. Turnkey Workover and Completion Project Restored
Production in Southern Iraq Field, Baker Hughes Inc. case
study, 2013.
11. From Discovery to Production - The Challenges of
Execution, presented by Schlumberger Business Consulting
to the Oil & Money Conference, London, UK, 2013.
12. E2open customer engagement, 2015.
References
1. Jacobs Receives 2-Year Contract from Canaport LNG,
Jacobs Engineering Group Inc. press release, Mar. 9, 2010.
2. Nexen Contracts Jacobs for Maitenance at Long Lake
Bitumen Complex in Canada, Jacobs Engineering Group Inc.
press release, Oct. 19, 2010.
3. Schlumberger Announces First-Quarter 2014 Results,
Schlumberger Ltd. press release, April 17 2014.
4. Operation of the Defense Acquisition System. Instruction No. 5000.02,US Department of Defense, 2008.
5. Guajardo, J. A., Cohen, M. A., Kim, S. H., Netessine,
S., Impact of performance-based contracting on product
The author
Mohit Dubey (mohit.dubey@e2open.com) is
senior director, strategy, at E2open, a provider of
cloud-based collaborative planning and execution software. He is based in Dallas and has
more than 18-years experience working with oil
and gas, aerospace and defense, and hi-tech industries. He holds a BS in electrical engineering
from the Indian Institute of Technology, Kanpur, and an MBA
from the Indian Institute of Management, Ahmedabad.
51
TECHNOLOGY
A FPM Q & A 1
Safety, gasoline processing questions

addressed at annual conference
Gasoline processing operations, with a focus on safety,
blending, and reforming issues, garnered considerable attention during the 2014 American Fuel and Petrochemical
Manufacturers Q&A and Technology Forum (Oct. 6-8; Denver).
This annual meeting addresses real problems and issues
refiners face in their plants and provides an opportunity for
members to sort through potential solutions in a discussion
with panelists and other attendees.
This is the first of three installments based on edited transcripts from the 2014 event. Part 2 in the series (OGJ, Sept.
7, 2015) will focus on hydroprocessing, while the final installment (OGJ, Oct. 5, 2015) will highlight discussion surrounding processes associated with fluid catalytic cracking.
The session included five panelists comprised of industry
experts from refining companies and other technology specialists responding to selected questions and then engaging
attendees in discussion of the relevant issues (see accompanying box).
The only disclaimer for panelists and attendees was that
they discuss their own experiences, their own views, and
the views of their companies. What has worked for them in
their plants or refineries might not be applicable to every situation, but it can provide sound guidelines for what would
work to address specific issues.
Safety
What are the recent safety improvements in the procedures
or equipment for sampling sulfuric acid?
PRESLEY For this response, I am going to focus on three
things. The first is the location in the process from which the
sulfuric acid is sampled. Second, I will provide some information on the apparatus used for sampling; and then lastly,
I will touch a little on personal protective equipment (PPE).
I will start with the location of the sample. This is a somewhat recent change for many refiners. Traditionally, you
would take the sample on the transfer or spent-acid line. The
problem is that there is a significant lag time when sampling
from that location: more than 2 hours lag from where you
really care about understanding the acid strength. What re-
52
The panelists
John Ahern, gasoline and catalyst specialist, Phillips 66
Jeff Hude, process engineering manager, Valero Energy
Corp.
Michael Mitzner, senior regional sales manager, Axens North
America
Shane Presley, technical service leader, DuPont Clean
Technologies
Rick Vice, alkylation and Merox technologist, Marathon
Petroleum Corp.
The respondents
Christopher Gilmore, Irving Oil Ltd.
Geoff Dubin, Axens North America
Mark Kaminsky, Aramco Services Co.
Troy Small, UOP LLC
Ka Lok, UOP LLC
Soni Oyekan, Prafis Energy Solutions
ally matters is the acid strength inside the

reactor.
So you may ask what this has to do
with safety. It matters because it helps
prevent acid runaway. From the standpoint of an acid runaway, 2 hrs may be
too late, particularly if you are in a situation where you are spiraling downward
PROCESSING
on acid strength. So for that reason, we
now generally recommend that for most
of the new units, you sample directly
from the Contactor reactor. One of the challenges associated
with sampling here, though, is that the mixture is roughly
50% hydrocarbon and 50% acid; so you have to figure out a
way to safely sample.
At DuPont, we have developed what we call the Reaction
Zone Monitoring System (RZMS). This is a sampling and
instrumentation package that allows the operator to better
understand what is going on inside the reactor. What this
system does is pull a stream from the high pressure side of
the impeller and return it back to the suction side in order to
create a constant circulating flow.
We have a Coriolis meter that measures the density continuously, which will give you an indication of the acid-tohydrocarbon ratio. We also have a refractometer that measures the refractive index, which can be correlated to the acid
strength inside the reactor. Clearly, continuous monitoring
of acid strength is ideal for optimization and acid runaway
prevention. We also have the ratio glass as part of the RZMS.
The ratio glass is used for acid-to-hydrocarbon monitoring,
but it also provides a way to look at the emulsion inside the
reactor. In other words, is it frothy? Is it bubbly? It is like a
window into the reactor.
The way the system operates is that the emulsion is normally flowing through the ratio glass; and then when you
want to take a reading, you basically block the outlet valve
and let it settle out for 15-25 min. We use the fact that you
are already settling out the acid, so we have installed a sampling system under the bottom of the glass.
The sampling system allows you to first settle the acid
and hydrocarbon and then vent off any hydrocarbon before
collecting the acid sample. We catch the sample in a capped
bottle with a needle that is used to pierce the septum on
the top of the bottle. We usually catch a very small sample,
which is typically all that is needed, especially if you are
using an autotitrator. We have found these systems to work
very well.
Now I will add a little about PPE. Other than the basic
refinery PPE used when you are sampling acid, we generally
recommend chemical goggles and face shields. The reason
we recommend both is because we see a lot of refiners who
just have face shields and safety glasses but not goggles. If
you are getting splashed with acid, your instinctif something is coming toward your facewill be to turn away. The
problem is that if you do not have goggles behind the face
shield, then the acid may get into your eyes; so we generally
recommend both. We also recommend acid-resistant gloves
and an acid-resistant apron or a splash suit.
HUDE The goals of sulfuric acid sampling: You are trying to
obtain a representative sample for process monitoring so you
can know the current condition of your unit. As an operator,
you want to minimize the chance of any employees or contract workers coming in physical contact with the acid. Also,
the acid you are draining, if you have a long deadleg type of
system, all has to go down to a sewer where it will be treated;
so you want to minimize acid to the sewer where possible.
We had an opportunity to redesign our sample system
in 2010. Our primary consideration was trying to minimize
equipment operator exposure. We installed a closed-loop
sample system that uses needle valves with a sample enclosure. With this type of enclosure, the goal is to keep any unexpected splattering from that sample contained within the
enclosure, which reduces the potential for the test operator
being exposed. This also allows him to downgrade the PPE
required to do the task. The closed loop is tubed down the
enclosure box with small legs, which runs down under the
installed plexiglas shield; essentially a custom design. There
was nothing particularly fancy about it, but the whole point
was to reduce the operators exposure to acid when performing his job duties.
The second type of sample station of which we are now
aware is an in-line sample valve. With this device, the sample collection system is completely enclosed. Obtaining the
sample requires no draining or flushing, but it is specialty
manufactured and requires manufacturer-specific sample
bottles.
Here are a couple of pictures (see accompanying photos).
On the left is a sample system we built at Houston. Basically,
the operator puts the bottles inside, opens this lid, puts the
bottles on a tray, and then obtains a sample. He controls the
flow rate using the needle valves. The other kind we have
seen is the in-line sampling shown on the right. We do not
have one at our plant, but one of our neighboring acid plants
has it.
We went through our procedures using digital cameras to
help provide clarifications and did, basically, a step-by-step
photo-op through the procedure. Afterwards, we retrained
all the operators to make sure they were all aware of the upgrades and requirements. The goal is to keep them protected
and safe.
As a final comment, at Houston we went through and labeled the unit with simple GOT PPE memory joggers like
advertising. The whole point was to make the operators and
maintenance personnel aware and thinking about PPE requirements for the job tasks in the area.
Blending
In recent years, the gasoline blend pool has shifted due to
increased ethanol blending, larger volumes of high-RVP
material from processing lighter crudes, and other specifications changes. How are you taking advantage of these
changes to optimize gasoline processing units?
MITZNER The impact from ethanol and shale crudes has
created unique challenges in the overall gasoline pool. The
first big change came with the Renewable Fuel Standards
(RFS) that required up to 10% ethanol in the gasoline pool,
depending on local regulations. Other blends of ethanol exist at 15% and 85% ethanol, but the bulk of the gasoline is
sold at the 10% blend.
Ethanol, due to its high RVP and high octane rating,
changed the gasoline pool quickly. Using a basis of 10% ethanol in the gasoline pool, ethanol allowed refiners to decrease
the octane of the traditional gasoline components by around
three road-octane points. The primary means of adjusting the
octane of the traditional gasoline pool was adjusting naphtha
reformer severity. For refiners who run their reformer for the
majority, if not all of the refinery hydrogen, this ethanol blend
requirement could lead to significant octane giveaway as high
53
TECHNOLOGY
thas, tend to be sweeter than their conventional crude counterparts. These

sweeter shale-cracked naphthas are
helping to minimize the impactsboth
capital and operational costsof moving existing post-treaters into ultralowsulfur gasoline for Tier 3.
AHERN When it came to ethanol being

added to the blend pool, one of the first
challenges was its unpredictability, in
terms of how it affects octane and volatility when added to the base oil blend. So
before you can start to go out and look at
Valero Energy Corp.s sample station for sulfuric acid at the Houston refinery (a) feaalternative blending opportunities to retures closed-loop tubing with an enclosed bottle-filling station, where all valves are
operated outside the enclosure to protect employees, while a nearby acid plant uses
duce giveaway, the blending models will
an in-line sample valve (b). Both systems reduce operator exposure to sulfuric acid.
have to improve. We found that we had
to move away from the traditional volume-based blend models to the more deseverity is maintained simply to produce hydrogen. Those
tailed molecular-based blend models, and we have had some
refiners not solely dependent on their naphtha reformer had
success with that. Once you have better blending modeling,
more flexibility to adjust, but reduced reforming severity has
you can then start looking at alternative blending strategies.
led to very long cycles on the fixed-bed reformers or low-coke
One of the problems with ethanol is that it increases the
operation in the moving-bed reformers.
RVP of the blend to which it is added but it has the advanThe RVP implications from ethanol are also pertinent. Butage of increasing octane and diluting benzene and aromatics,
tanes and other light paraffins were forced out of the pool, to
which allows for alternative processing and blending options.
varying degrees, at each site by ethanol. The RFS did allow
With regard to C4s and C5s, we have normally used the
an RVP waiver that helped mitigate the impact of ethanol,
strategy of sending them to the isomerization unit to imbut the impact of ethanol is becoming more critical now as
prove octane. This octane increase is accompanied by an
the naphtha-rich shale crudes are being processed by more
RVP increase due to the higher RVPs associated with the
refiners at increasing quantities.
isoform of a molecule. So now, we bypass the unit and send
There is an increasing glut of light naphtha that must be
the C4s-C5s directly to the blending pool. This also has the
handled within the refinery. Often refiners would sell off
benefit of cheaper processing costs.
their excess butanes and pentanes, even with moderate sulfur content still in the stream. As refiners move to ultralowGILMORE You have described our current issue to a tee. We
sulfur gasoline, and with naphtha hydrotreaters that do not
are long on C5 molecules. Currently, we will sell these into
frequently have excess capacity, purchasing outside naphthe market for other refiners as a gasoline blendstock or petthas that cannot be directly sent to the gasoline pool has berochemical feedstock. Are there technologies out there that
come less palatable. As refiners move towards retaining this
could convert these C5 molecules into a larger molecule that
excess capacity of light naphthas in-house, reformer severity
could be used for gasoline or distillate blending?
may go back up to account for the lower octane rating of the
extra straight-run naphtha that must be processed.
MITZNER I am not an expert in this area of technology.
Yet, shale naphthas, more paraffinic than traditional
Geoff Dubin is our naphtha block technology manager and
crude-derived naphthas, require higher-severity operations
may know what would convert a C5 into a larger molecule.
in the naphtha reformer to meet current target octanes. At
several refineries, the economics of processing shale crude
DUBIN The big question with C5s is the type with which
have led to older reformers being restarted. The reduced seyou are starting: saturates or olefins. If you are working with
verity of naphtha reforming that was seen during the start of
a straight paraffin, you will find a problem that has been gothe RFS is being reversed, to a degree, by the paraffinic shale
ing on for 10-20 years; that is, how do we find a way to get
crudes now being produced.
pentanes out of the pool? For olefinic streams, you can look
The cracked naphthas derived from shale crudes also
at oligomerization which will take those paraffinic C5s and
bring with them some benefits. As shale crudes tend to be
turn them into gasoline or diesel. Those technologies exist.
sweeter than traditional crudes, the shale-derived cracked
Axens has licensed units that have been in operation for 20
naphthas, similar to the shale-derived straight-run naphyears now for oligomerizing olefins.
54
TECHNOLOGY
Reforming
What are the sources of platinum loss in precious-metals

catalysts? What role can your refinery engineers play in
minimizing this loss?
MITZNER Platinum loss results primarily from catalyst losses and poor bookkeeping practices. Actual loss of platinum
from the catalyst is less likely and limited to extreme regeneration conditions.
Many years will pass and several unit engineers will rotate through during the lifetime of a reforming catalyst. Having a well-thought-out and executed protocol for handling
the catalyst, accounting for its whereabouts, and accurately
knowing its mass and platinum content at all times during
its lifecycle will enable more accurate closure on the platinum balance post-reclamation.
Catalyst losses primarily occur during handling. Unrecovered spillage often occurs during transportation, reactor
loading and unloading, screening operations, etc. Occasionally, spent or fresh catalyst is inadvertently disposed of from
the warehouse or at the unit, particularly if drums are not
clearly labeled. Catalyst that is never loaded and left in storage can be overlooked even though it remains onsite. Catalyst bookkeeping is complicated by intermittent skimming
of catalyst, dump and screens, reloading, and transferring
catalyst from one reactor or unit to another.
On oil, catalyst losses result from lost containment either
as whole pieces, fragments, or dust. Sometimes this material is lost to the liquid product and winds up distributed
throughout the unit and downstream equipment all the way
to product storage. This contamination only occurs when
there is a mechanical failure that allows catalyst loss from
the reactor or circulation system.
Inaccurate bookkeeping will often account for a fair portion of the platinum loss. The alumina used to make reforming catalyst is very hygroscopic. In little time, its weight can
change by several percent if it is left exposed to humid air.
Contaminants accumulated during the catalysts lifetime, as
well as coke and adsorbed hydrocarbons remaining on the
catalyst being sent for reclamation, can also affect its weight.
Accurate determination of the loss on ignition (LOI) is critical to accurate bookkeeping. The accurate determination of
the platinum content of both the fresh and spent catalyst is
also extremely critical.
Samples collected for assay must accurately represent the
material from which they are taken. Disproportionate inclusion of inerts, scale, etc. in these samples will impact the accuracy of the platinum assay. Comingling catalysts that are
different in size, shape, or platinum content increases the
probability of non-representative assay results. Formation of
alpha alumina, as a result of severe temperature excursion
during regeneration, will encapsulate some of the platinum
and render it unrecoverable.
VICE Catalyst losses occur through the sampling process,

fine generation, and continuous catalyst regeneration (CCR)
while circulating the catalyst, or as a result of mechanical
issues with fixed-bed support systems and during the catalyst change-out process. Relative to the sampling process, it
is critical for the lab to have procedures in place to capture
all of the catalysts for reclamation. Relative to the CCR engineers, they should be watching catalyst-fines generation on a
routine basis, as well as the catalyst makeup. It is really critical to determine if you have a problem earlier to minimize
your losses.
During the change-out process, the management of the
platinum catalyst is everyones responsibility, so that goes
from the catalyst-handling company to operations and your
tech-service personnel. In our system, the engineer would
be tracking the catalyst from the moment it arrives in the
warehouse until it goes in the unit and is then loaded in the
reactor. The same is true about the spent catalyst when it is
removed from the reactor to the storage area and then eventually sent out for reclamation.
As highlighted before, housekeeping is really critical during the loading and unloading processes. All spillage needs
to be picked up and captured for reclamation. Any catalyst
remaining in the reactor needs to be vacuumed up as well.
HUDE I want to add that you can see losses in catalyst manufacturing. Engineers need to be aware of that if they are
paying a first catalyst surcharge for platinum or a surcharge
on the reclaim. We have seen losses in this area up to 1%.
Also on the CCR, if you do not have a dust collector on Reactor 1, you will be losing platinum from that dust which is
going into your reformate tank. So an engineer should work
with maintenance to consider any recovery options when
you are cleaning a reformate tank.
KAMINSKY I just want to elucidate a bit about the chemistry going on with the platinum loss from my perspective
as a catalyst chemist. There is a volatile phase of platinum,
platinum oxide (PtO2), that forms under hot, oxidizing conditions such as in your regenerator. So it is not just fines but
actual volatilization of Pt as PtO2, which causes movement of
Pt from the catalyst in the regenerator.
This situation has been documented previously in automobile catalytic converters. Ford and GM have published
papers on Pt volatility. Such volatility causes Pt to move
out of the oxidation catalytic converter (that oxidizes CO
to CO2), but then the PtO2 adsorbs onto the downstream
selective catalytic reduction (SCR) catalyst and permanently
poisons it.
It is a big problem for car manufacturers. They are solving
it by alloying the platinum with palladium or other metals
to reduce the propensity for platinum to form the superoxide. Maybe such a solution would help reduce Pt loss in FCC
units also.
55
TECHNOLOGY
SMALL Typical operating conditions
in a reformer do not result in volatile
platinum. However, it is possible for
platinum to become volatile and come
off the catalyst at very high temperatures. One place this can occur is in
the chlorination zone of the CCR regeneration tower where slipping coked
catalyst into an oxygen-rich atmosphere can result in very high temperatures. To prevent this, the refiner
should make sure that the regeneration
tower is operated according to design.
In UOPs experience, these questions often arise as the result of an assay difference with the reclaimer rath-
er than with volatilizing platinum. The

assay differences can be due to unrepresentative sampling or poor or biased
analyses.
OYEKAN In order to fully answer the
questions, it is relevant to separate the
precious metal catalyst platinum management into five distinct stages to
cover a platinum catalyst manufacture
to spent-catalyst platinum reclamation
lifecycle. The stages that are pertinent
for our review are:
Reforming catalyst manufacture
by the catalyst supplier and platinum
settlement.
NELSON-FARRAR COST INDEXES1

Refnery construction (1946 basis)
Explained in OGJ, Dec. 30, 1985, p. 145.
1962
Pumps, compressors, etc.
222.5
Electrical machinery
189.5
Internal-comb. engines
183.4
Instruments
214.8
Heat exchangers
183.6
Misc. equip. average
198.8
Materials component
205.9
Labor component
258.8
Refnery (infation) index
237.6
1980
2012
2013
2014
Apr.
2014
Mar.
2015
Apr.
2015
777.3
2,170.6
2,221.1
2,271.9
2,267.0
2,309.5
2,313.3
394.7
514.8
516.7
515.8
515.5
516.8
516.8
512.6
1,047.0
1,046.8
1,052.9
1,050.8
1,058.4
1,064.1
587.3
1,477.0
1,509.9
1,533.6
1,532.2
1,536.4
1,553.2
618.7
1,220.9
1,293.3
1,305.0
1,305.0
1,305.0
1,305.0
578.1
1,286.1
1,317.5
1,335.8
1,334.1
1,345.2
1,350.5
629.2
1,579.7
1,538.7
1,571.8
1,583.4
1,469.9
1,456.5
951.9
3,055.6
3,123.4
3,210.7
3,196.9
3,260.1
3,269.2
822.8
2,465.2
2,489.5
2,555.2
2,551.5
2,544.1
2,544.1
Refnery operating (1956 basis)

Explained in OGJ, Dec. 30, 1985, p. 145.
Fuel cost
Labor cost
1962
1980
2012
2013
2014
Apr.
2014
Mar.
2015
Apr.
2015
100.9
810.5
968.1
1,123.7
1,264.8
1,285.2
954.2
893.0
93.9
200.5
287.9
308.3
312.8
312.0
297.0
317.1
123.9
439.9
1,407.5
1,506.4
1,541.3
1,538.9
1,609.6
1,582.8
131.8
Invest., maint., etc.
121.7
Chemical costs
96.7
Operating indexes2
226.3
489.4
489.1
493.1
493.2
542.0
499.1
324.8
896.5
905.3
939.4
938.0
945.7
945.8
229.2
517.2
502.6
472.3
477.7
442.1
430.3
Wages
Productivity
Refnery
103.7
Process units
103.6
312.7
637.5
661.8
688.5
690.0
654.7
655.8
457.5
739.0
802.6
865.3
871.7
754.1
738.7
These indexes are published in the frst of each month and are compiled by Gary Farrar, OGJ Contributing Editor.
Add separate index(es) for chemicals, if any are used. Indexes of selected individual items of equipment and materials are
also published on the Quarterly Costimating page in frst issues for January, April, July, and October.
3
For correct values to March 2013 refnery construction and refnery operating indexes, see OGJ, Dec. 1, 2014, p. 87.
2
56
Reforming catalyst storage and

catalyst loading.
Catalyst as used in the reforming
units.
Catalyst dumping and transfer to
platinum reclamation company.
Platinum settlement with the
platinum-reclamation company.
It must be clearly understood that
platinum losses can occur at any of
the stages of the catalyst cycle. Some
of the losses are due to contractual
agreements as agreed upon in the first
and fifth stages as a consequence of
platinum settlement. The platinum or
precious-metals manager for an oil refining company should have the necessary expertise to aid in minimization
of platinum losses for the oil refiner for
the first and fifth stages.
In the fresh-catalyst manufacture
stage, the agreement with the catalystmanufacturing company for platinum
settlement could stipulate 98-99.5%
platinum return for the settlements.
The platinum settlement requires that
the oil refiner and catalyst manufacturer or platinum reclamation companies for the platinum settlement have
appropriate analytical data (platinum
assay, LOI for solid content) to permit
effective conducting of the platinum
settlement.
Some oil refiners conduct platinum
settlement with the catalyst suppliers,
and some do not. I recommend conducting fresh-catalyst platinum settlements to establish a reference for initial
platinum in use in a specific process
unit that would be utilizing the freshcatalyst load, and that the nominal
platinum concentrations not be relied
on as indicative of the reference freshcatalyst platinum.
In the years I managed precious
metals for two oil refiners as a refinery technologist, several excess platinum troy ounces were returned to my
companies platinum-pool accounts after fresh-catalyst platinum settlements
with the catalyst manufacturers. In
addition, the fresh-catalyst platinum
settlement data provided a good reference basis for the subsequent platinum
TECHNOLOGY
inventory in the reactors after the catalyst loading.
In the spent-catalyst platinum reclamation, a similar legal agreement
could stipulate another 98-99% platinum settlement, with some additional
platinum-percent penalties for coke,
catalyst alumina state (alpha or delta),
and metals impurities. Thus, based on
the two platinum settlements for fresh
and spent catalyst for a catalyst lifecycle, platinum losses due to contractual
agreements and lack of the appropriate level of platinum management expertise by the oil refiner could lead
to platinum losses in the range of 3-5
wt% for the oil refiner.
Major additional losses could occur in Stages 2-4. These combined areas of catalyst loading, in-unit catalyst
usage, catalyst dumping, and precious
metals management are so intertwined
and extensive that I strongly recommend securing the services of experienced technical experts who understand clearly the three major catalytic
reforming technologiessemi-regeneration, cyclic, and continuous catalytic regeneration reformersand how
their operations could greatly contribute to significant platinum losses.
If you also own paraffin isomerization units and other process units
that use platinum catalysts, seek the
assistance of a technical expert who
fully understands platinum or precious metals management, as well as
the operations of the relevant oil refining process units that utilize platinum
catalysts.
An excellent oil refining expert
could also work with your engineers
and other relevant oil refinery personal on proactive steps for cost-efficient
catalyst management, process monitoring, and optimization and equipment management to minimize platinum losses.
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TECHNOLOGY
US refiners continue consolidation, restructuring efforts
Our previous installment on US refining industry concentration examined

how frenzied mergers, acquisitions,
other partnerships, and shutdowns
that occurred from 1995 to 2005 consolidated the industry (OGJ, June 4,
2007, p. 22). The consolidation, however, didnt result in any one company gaining appreciable market power,
whether viewed on a regional or nationwide basis.
In addition to examining further
consolidation and realignment actions by US refiners since 2005, this
next installment extends the original 2007 analysis,
which
measured
refining
capacity
based on distillation capability, to
include complexity,
which measures a
refinerys ability to
produce higher-valPROCESSING
ued products (e.g.,
more light oils, less
residual fuel). The
extended analysis is based on suggestions from industry observers that
complexity, perhaps, is a better gauge
of capacity. This article presents a corresponding two-tiered examination of
US refining capacity, further changes
over time, and different ways to measure them.
Consolidation, realignment
As previously reported, between 1995
and 2005, the top 25 US refining companies, each of which had capacities
exceeding 200,000 b/d, were transformed in one fashion or another to 14.
Venerable names in the refining industry, such as Arco, Texaco, Unocal,
and Diamond Shamrock disappeared,
58
REFINERS REALIGNMENT, 1995 2015

Texaco
Saudi Aramco
Star
Shell
British Petroleum
Amoco
Arco
Marathon
Marathon
Ashland
Citgo
Unoven
Unocal
Tosco
Divested refneries
Phillips
Conoco
Exxon
Mobil
Valero
Ultramar
UDS
Diamond-Shamrock
Clark
Phibro
Divested refneries
Coastal
Sun
Total
Fina
Chevron, Tesoro, Koch
FIG. 1
Saudi Aramco
Motiva
Shell
BP
2005 2015
Marathon Petroleum
Citgo
2005 2015
ConocoPhillips
Phillips 66
ExxonMobil
Valero
2005 2015
Phil. Energy, PBF

Total
Chevron, Tesoro, Flint Hills
DISTILLATION CAPACITIES* OF US REFINING COMPANIES, 2015

2,500
FIG. 2
20
18
Cumulative
2,000
16
14
1,500
12
10
1,000
Capacity, million b/d
Venus Consulting
Houston
Capacity, 1,000 b/d
William L. Leffler
Individual refners
500
4
2
0
Largest to smallest US refners
* The cumulative capacities for the individual companies are arrayed from the largest companies on the left to the smallest on the right.
TECHNOLOGY
joining others like Gulf Oil, Sohio, and Signal. While no new
grassroots refineries were built, additions to existing refineries and debottlenecking projects resulted in a 1.9 million b/d
rise in total refining capacity by 2007.
The US refining landscape continued to evolve through
2015 amid restructuring. While new names emerged, others disappeared altogether, such as Sunoco Inc., which sold
off its refining assets in pieces (OGJ Online, Sept. 6, 2011).
The larger 2007-15 refinery transactions include the following:
Philadelphia Energy Solutions took over Sunocos Philadelphia refinery.
PBF Holding Co. LLC (PBF), Parsippany, NJ, bought
Sunocos Toledo, Ohio, refinery (OGJ Online, March 1,
2011), as well as Valero Energy Corps Delaware City, Del.,
refinery and Paulsboro, NJ, refinery (OGJ Online, Jun. 2,
2010; Sept. 27, 2010).
ConocoPhillips separated its refining and marketing
businesses in a spinoff to create standalone, downstream
company Phillips 66 (OGJ Online, Nov. 10, 2011; July 14,
2011).
LyondellBasell bought Citgos interests in Houston Refining LPs 268,000-b/d refinery located at the city limits of
Houston and Pasadena, Tex., along the Houston Ship Channel (OGJ Online, July 17, 2007; Aug. 17, 2006).
Alon USA Energy Inc., Dallas, purchased Valeros refinery in Krotz Springs, La. (OGJ Online, July 8, 2008), as well
as Paramount Petroleum Corp., which included Paramounts
refinery in Paramount, Calif. (OGJ, Dec. 18, 2006, p. 56).
Husky Energy Inc. acquired a 50% interest in BP PLCs
Toledo, Ohio, refinery (OGJ Online, Dec. 5, 2007).
Calumet Specialty Produces Partners LP, Indianapolis,
bought Montana Refining Co. Inc., which operates a small
heavy-oil refinery in Great Falls, Mont. (OGJ Online, Aug.
15, 2012), as well as NuStar Energy LPs San Antonio refinery (OGJ, Dec. 2, 2013, p. 34).
Marathon Petroleum Corp. completed the purchase of
BPs refinery at Texas City, Tex., renaming it Galveston Bay
Refinery (OGJ Online, Feb. 1, 2013; Oct. 8, 2012).
Tesoro Corp. bought BPs Carson refinery near Los Angeles (OGJ Online, June 3, 2013) and sold its Kapolei, Ha.,
refinery to Par Petroleum Corp (OGJ Online, Sept. 27, 2013;
Jan. 9, 2013).
Monroe Energy LLC, a subsidiary of Delta Air Lines
Inc., purchased Phillips 66s refinery in Trainer, Pa. (OGJ
Online, May 1, 2012).
Fig. 1, updated from the previous article, shows the realignment of US refiners between 1995 and 2015. Several
companies have been combined or separated, depending on
the joint-venture arrangements of their owners.
Structural changes that occurred over the past 10 years
have been minor compared with those that took place during the previous decade. As Fig. 1 shows, the only major
structural change to take place since 2007 has been Sunocos
LARGEST US REFINING COMPANIES*

1995
Chevron
Shell
Amoco
Exxon
Mobil
BP
Sun
Star Enterprises
Citgo
Marathon
Koch
Tosco
Arco
Conoco
Texaco
Ashland
Phillips
Clark
Lyondell-Citgo
Phibro
Coastal
Fina
Unocal
Mapco
Diamond-Shamrock
2005
Valero
ConocoPhillips
ExxonMobil
BP
Shell
Marathon
Chevron
Sunoco
Citgo
Flint Hills
Tesoro
Saudi Aramco
Lyondell
Total
2015
Valero
Phillips 66
ExxonMobil
Marathon
Shell
Chevron
Tesoro
Citgo
BP
Flint Hills
PBF Energy
Saudi Aramco
HollyFrontier
Philadelphia Energy
LyondellBasel
Western Refning
Alon USA
*US refning companies with at least 200,000 b/d of distillation capacity.

Source: OGJ worldwide refning surveys for 1995, 2005, and 2015
COMPLEXITY
Analysts use complexity factors in several ways. Evaluating the market value of a refinery needs to take into account the value and cost of processing units downstream
of the distillation unit. Evaluating the operating cost-competitiveness of a refinery compared to other refineries in
benchmarking studies (as Solomon Associates does)
needs metrics to compare both size and capital costs of
technology.
Complexity factors have been explained by Daniel
Johnson in the Oil & Gas Journal (OGJ, March 18, 1996,
p. 74). Johnson points out that complexity factors take into
account the capital cost/bbl of capacity for every unit in a
refinery relative to its distillation capacity cost/bbl.
The capital cost/bbl of a vacuum distillation unit might
be 1.3 times that of an atmospheric distillation units cost/
bbl but only have one-third of the throughput. The capital
cost/bbl of a catalytic cracker or coker might be 5 or 8
times the capital cost/bbl of a distillation unit. These cost
factors are continually updated by OGJ and by others who
use their own factors.
The complexity of a refinery is a weighted average, or
the sum of each units throughput multiplied by the relative
complexity factor of each (with distillation complexity = 1).
Valero Corp.s Houston refinery, for example, has a
97,000-b/d distillation unit, as well as capacities for vacuum distillation, catalytic cracking, alkylation, hydrocracking, and hydrotreating, for a complexity factor of 1.268 million b/d (complexity factor of each unit times its throughput
capacity).
Suncor Energy Inc.s refinery in Commerce City, Colo.,
has a 98,000-b/d distillation unit, plus capacities for vacuum distillation, catalytic reforming, catalytic cracking, dimerization, and some hydrotreating for a complexity factor
of only 0.753 million b/d.
59
TECHNOLOGY
CUMULATIVE DISTILLATION CAPACITIES* OF US REFINERS, 1995 - 2015
FIG. 3
20
18
2015: 122 refneries, 52 companies

16
Capacity, million b/d
14
12
10
8
6
4
2
Concentration, control
0
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
No. of companies
* The cumulative capacities for the individual companies are arrayed from the largest companies on the left to the smallest on the right.
US REFINERS: DISTILLATION CAPACITY VS. COMPLEXITY*, 1995 - 2015
FIG. 4
2,500
Capacity, 1,000 b/d
2,000
1,500
1,000
500
0
0
* See accompanying box, p. 59.
5,000
10,000
15,000
Complexity
20,000
breakup, with the other transactions resulting in just a few

changes in ownership.
Despite the reduced frequency of downstream mergers
and acquisitions from 2007 to 2015, the list of companies
with more than 200,000 b/d in refining capacity has expanded to 23, collectively managing 86% of total US capacity.
60
Table 1, taken from OGJ refinery

surveys, provides a recap of the largest refiners (those with more than
200,000 b/d of capacity) in 1995,
2005, and 2015.
Fig. 2 shows the array of refining
companies, from the largest to smallest, for 2015, as measured by distillation capacity. It includes the so-called
creaming curve, which shows aggregated, or cumulative, capacities as a
function of the number of refiners,
again from largest to smallest. Beyond
those companies, the creaming curve
bends as a larger number of smaller refiners (another 30-35) add little to total
US capacity.
25,000
30,000
The 2007 analysis considered whether

concentration and market power that
had emerged by 2005 presented antitrust issues for the US refining industry. It concluded that, with so many refineries across the US at the time, the
industry was under little risk of broad
legal challenge based on its structure.
After 10 years of additional structural change, most of which has involved asset shuffling to further dilute
ownership concentration, even less
concern is warranted.
Fig. 3 shows the creaming curves
for 1995, 2005, and 2015, indicating
that aggregate US refining companies
capacities have increased substantially
in 20 years.
As expansions were commissioned,
total US refining capacity increased
by 2015 to 18.0 million b/d from 16.7
million in 2005, which had increased
from 15.4 million b/d in 1995.
A closer look at the plots in Fig. 3
reveals the following:
In 1995, 23 refiners held 80% of
refining capacity.
In 2005, 12 refiners held 80% of
refining capacity.
By 2015, the number of companies holding 80% of the
capacity has increased to 17.
Distillation, complexity
While distillation size tells a great deal about a refinerys
overall capacity, it doesnt include everything. Operators in-
TECHNOLOGY
vest sizeable resources and capital into technology downstream of distillation units.
The ability of a refinery to convert heavier, less-desirable
streams into high-value products can be measured using
complexity factors. (See accompanying box.)
When pricing for light-end products (e.g., gasoline, kerosene, jet fuel, distillates) is $15-20/bbl higher than pricing
for heavier-end products (e.g., residual fuel), or light crude
(e.g., West Texas Intermediate or Light Louisiana Sweet)
prices are $5-8/bbl over heavy crudes (e.g., Mexican Maya
or Western Canadian Select), refineries with more complex
configurations have an appreciable advantage over refineries
with more limited processing capabilities.
Since 1995, US refiners added some 240,000 b/d of coking capacity, increasing their ability to convert heavier crude
bottoms into lighter products. Catalytic cracking and hydrocracking capacities also collectively increased by 210,000 b/d.
Fig. 4 shows the evolution of US refineries distillation capacities vs. their complexity ratings between 1995 and 2015.
Close examination of Fig. 4 shows:
Distillation capacity has a 94% correlation with complexity, suggesting little justification exists for using one in
lieu of the other to determine concentration.

A small number of very large refiners have both large
distillation capacities and disproportianately high levels of
complexity.
Other large refiners have matched distillation capacity
and complexity but on a smaller scale.
A large number of smaller refiners contribute only a
small volume to the industrys total conversion capacity,
which has been the case for the last 20 years.
The author
William Leffler (http:// www.venusconsulting.
biz) is a consultant with Venus Consulting and
teaches refining, petrochemical, and upstream
courses. He worked at Royal Dutch Shell for
36 years in the upstream, downstream, and
petrochemicals areas. He has authored or
co-authored eight books on the oil and gas
industry, mostly in PennWells Nontechnical Language series,
including his most popular, Petroleum Refining in Nontechnical
Language. Leffler is a graduate of Massachusetts Institute of
Technology and New York University.
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TECHNOLOGY
Delays, supply overhang menace

North American LNG exports
James F. Bowe, Jr.
King & Spaulding
Washington
LNG, Sempra Energys Cameron LNG, and Petronas Rotan FLNG 2with Dominion Cove Point LNG beginning
construction. Chenieres Corpus Christi LNG will follow
suit this year, with a possibility of Pacific NorthWest LNG
(Petronas, Sinopec, Japex, Indian Oil Corp., and Petroleum
Brunei) also reaching FID.
With crude oil prices down roughly 50% from 1 year ago,
supply up slightly, and demand more or less flat, LNG prices
have collapsed. In February 2015 the Platts Japan-Korea Marker (JKM) dropped to $6.73/MMbtu, down 65% from
the record high of $20.20 set in February 2014.1 DurSupply, demand
ing February 2015 the JKM traded at a discount to the
LNG supply appears at least temporarily to have
UK National Balancing Point natural gas trading hub.
outstripped demand. Four new export liqueExcelerate Energy has halted development of
faction trains started operations last yearat
its proposed FLNG project in Lavaca Bay, Tex.,
ExxonMobil PNG Ltd.s PNG LNG, BG Groups
and seems unlikely to revive it. Other export projQueensland Curtis LNG, Santos Gladstone LNG,
ects, including most of those in Canada, are also
and Sonatrachs Arzew LNGadding more than
TRANSPORTATION
on uncertain footing. The prospects of a surge in
16 million tonnes/year (tpy) to supplies. Another
LNG supplies from Australia and Africasuch as
four land-based terminals and one or two floating
Anadarko Petroleums Mozambique LNG project
LNG (FLNG) plants are likely to come on line this
are likely to push most other export project development hoyear, putting an additional 21 million tpy into the market.
rizons out and has created a buyers market.
LNG production expected this year includes:
Chevron Australia Gorgon LNG (Fig. 1)
All US LNG export projects that have taken FID so far
ConocoPhillips Australia Pacific LNG
are brownfield projects with significant development cost
PT Donggi Senoro LNG
advantages. Sabine Pass and Freeport are both working on
Cheniere Energy Inc. Sabine Pass LNG
their third trains, with Cameron applying itself to Trains 4
Pacific Rubiales Energy FLNG
and 5. Both Cheniere Corpus Christi and Petronas Pacific
Petronas FLNG 1
NorthWest (Fig. 2) remain on track to make FID this year
But 2014 LNG deliveries were roughly flat to 2011, and it is
and several recently proposed small- to mid-scale projects
not clear demand will grow in 2015. Operators plan to comare also proceeding. Cheniere has signed binding sale-andmission 12 new regasification terminals this year, including
purchase agreements for Trains 1 and 2 at Corpus Christi,
some in new LNG importing markets such as Egypt, Jordan,
the first greenfield US export project to be approved.
Pakistan, Philippines, Poland, and Uruguay. At the same time,
Whether an export project moves forward depends on
however, global export capacity will hit roughly 400 million
availability of development funding to survive a long and
tpy by 2018, as compared with 290 million tpy in 2013.
costly permitting phase, long-term customer commitments
Three export projects reached FID last yearFreeport
to support this funding, and perseverance to complete the
increasingly complex (at least in the US) permitting process.
Permitting problems and delays affecting North American
LNG export projects could combine with an overhang of
LNG supply to make it difficult for North American LNG
projects that have not yet taken final investment decision
(FID) to get to FID over the next several years. LNG export
projects coming on line in Australia, plus promising projects
in Africa, could also soak up a good bit of whatever growth
in LNG demand occurs, perhaps further delaying market
commitment to new North American projects.
Based on Oil & Gas Journal webcast, Mar. 20, 2015.
62
GORGON LNG
FIG. 1
Jansz-lo feld
AUSTRALIA
Area
shown
Gorgon
feld
Dampier
Onslow
Exmouth
Lower oil prices

Assuming that a projects sponsors and potential counterparties remain interested in an LNG export project, the
drop in oil prices could benefit projects under development
by lowering construction costs. Reduced competition for
skilled labor and raw materials given the slowdown in oil
and gas drilling may already be helping LNG project developers. Woodside Petroleum, which in December postponed
its decision to proceed with its Browse LNG project, noted
that it had started seeing positive effects from lower oil prices on its supply costs and hoped to use the postponement as
an opportunity to lower construction costs.
Any reduction in construction costs would be of particular benefit to Canadian export projects facing high costs
stemming from the distance between the resource base and
liquefaction plant and the lack of already developed infrastructure bridging this gap. Such effects, however, would
vary based on prevailing local conditions.
LNG contracting
With the recent boom in US shale gas production and resulting rush to develop US LNG export projects, many would-be
buyers sought Henry Hub indexed pricing as an alternative
to traditional oil-linked prices. Some buyers have done this
to help them renegotiate price terms under existing contracts, others to combine with current crude-related pricing
in a hybrid pricing formula.
Whether LNG buyers will be able to take advantage of cur-
Gorgon
LNG plant
Karratha
D
na amp
tu ie
ra r-t
l g oas Bu
pi nb
pe ur
lin y
e
Barrow
Island
AUSTRALIA
rent market conditions to achieve lower prices in 2015 depends largely on the actual price review provisions in their
contracts; e.g., whether prices will be redetermined by an
arbitration panel based on pre-agreed criteria or whether no
pricing changes are allowed without agreement of the parties.
The substantial downturn in Brent prices earlier this year
allowed oil-linked LNG pricing to close much of the gap that
once existed relative to Henry Hub pricing. Buyers, however, have not been content to simply get lower prices and
diversified pricing mechanisms, theyve also pursued supply diversification and destination flexibility. The latter of
these trends is likely to continue, albeit at increased cost.
Contracts may also move toward smaller contract quantities
and shorter terms.
North American LNG export projects have some advantages. The tolling structure, under which buyers pay a fee
for the option to take LNG but assume no obligation to take
it, provides an attractive alternative for buyers seeking supply diversification. North American LNG contracts also do
not include destination restrictions beyond those required
by law. Infrastructure developed to support what were once
LNG import operations can be adapted at low incremental
cost to support LNG exports instead.
But North American projects also face some significant
disadvantages. The drop in Brent pricing has removed some
of Henry Hub prices luster. Projects being developed in the
northeast US, Atlantic Canada, the Pacific Northwest, and
British Columbiaand ultimately these projects custom-
63
TECHNOLOGY
PACIFIC NORTHWEST LNG
FIG. 2
Prince Rupert Gas

Transmission Project
Pacifc NorthWest LNG
Montney
formation
CANADA
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
US
ersalso have to bear the costs of developing substantial

new pipelines and navigating the US permitting maze for
both the export project and any pipeline.
Under Section 3 of the Natural Gas Act, the US Federal
Energy Regulatory Commission (FERC) authorizes the siting and construction of plants used for natural gas exports,
while the US Department of Energys (DOE) Office of Fossil
Energy authorizes exports of the commodity itself. FERCs
environmental, design, and safety reviews of LNG export
projects are far reaching and completing them costs several
million dollars. The process is also time consuming, taking
a minimum of roughly 450 days but sometimes stretching
to 3 years or more. DOE is obligated to approve exports to
nations with which the US has free-trade agreement (FTA).
Most LNG markets, however, are in non-FTA nations.
As to exports to non-FTA nations, DOE determines
whether the proposed export will not be consistent with
the public intereset; presuming that it is, and imposing on
opponents the burden to show that a particular proposal is
not. DOE last year revised its permitting procedure and now
only reviews an LNG export project after its environmental
review has been completed (OGJ Online, Aug. 15, 2014).
The Canadian process for approving LNG export plants
is much quicker and must less costly than the US processes.
Many proposed LNG plants have already received Canadian
National Energy Board and provincial approvals; more are
seeking them. But Canadian export projects that will look
to US gas sources will find themselves caught up in the US
regulatory process.
DOE appears to take the position that an export to Cana-
64
da (an FTA nation) must be reviewed and approved through

the process applicable to non-FTA exports if the Canadian
project proposes to export to non-FTA nations. And FERC
must separately review and approve US gas pipeline expansions that are required to move gas into Canada for export.
Pricing changes
Hybrid pricing and increasingly complex pricing structures
have resulted from the buyers push to increase supply diversity.
Some buyers are now seeking collaborations with other buyers
to strengthen negotiating power. The February announcement
of a joint venture between Tokyo Electric Power Co. (TEPCO)
and Chubu Electric Power Co. is an example of this and will
result in a single buyer for 16% of global LNG demand.
Price review provisions have also become more detailed
and have taken on a larger role in negotiations, addressing
greater interest on the part of both buyers and sellers to be
able to reset prices periodically given the volatility of the
past 10 years.
LNG demand
Demand forecasts for traditional Asian LNG markets (e.g., Japan and Korea) are less optimistic than they have been in the
recent past. China and India have been active LNG buyers in
the past few years, but their appetites now appear limited relative to what was expected just 1-2 years ago.
Europe has been the destination of last resort for spot
cargoes. Economic recovery there remains slow, at best. It
now appears unlikely that Europes appetite for LNG will approach the peak seen in 2011 until late in the decade.
TECHNOLOGY
New markets are emerging, however, as new countries
develop LNG import terminals for the first time. Uruguay,
Poland, Jordan, and the Philippines all have their first LNG
import terminals under construction. Development of floating storage and regasification units (FSRUs) may open up
additional markets. At least 16 floating import terminals are
now in use, with countries of operation including Argentina,
Brazil, China, Dubai, Indonesia, Israel, Italy, Lithuania, Kuwait, and Malaysia.
Hawaii is seeking to become a bulk LNG importer. Guam
may follow. And several Caribbean nations are trying to bring
in LNG. These are small markets, but given current conditions, may be attractive to developers anyway. Risks of developing these markets include the lack of a demonstrated track
record of reliably taking and paying for LNG, creditworthiness, and complicated scheduling if multiple customers will
be drawing natural gas from the same terminal.
References
1. Platts Gas Daily, Mar. 16, 2015.
The author
James F. Bowe, Jr. (jbowe@kslaw.com) is a partner with the international law firm King & Spalding LLP in Washington, DC. He has practiced
energy law, focusing on natural gas and electric
power, since 1982. Bowe holds a JD from the
Northwestern University School of Law and a BA
from Williams College. He is a member of the
Bar of the District of Columbia, the American Bar Association,
and the Energy Bar Association.
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TECHNOLOGY
TRANSPORTATION
Financial sanctions impact Russian oil,

equipment export bans effects limited
Daniel Fjaertoft
Sigra Group
Indra Overland
Norwegian Institute of International Affairs
Oslo
In reaction to Russias involvement in the conflict in Ukraine,

the European Union and the US have launched two-pronged
sanctions against the Russian oil sector. The equipment export ban will have limited effect during the next 10 years
because it targets shale, deep water, and the Arctic, and few
such projects are planned to come on stream before 2025.
RUSSIAN OIL PRODUCTION*

Rosneft 42%
FIG. 1
But the effect of financial sanctions is immediate and significant.

This conclusion stems from modeling Russias oil production outlook in three scenarios. These encompass a range of
possibilities, from a 2.5% fall by 2018 followed by recovery
on one end, to a more long-term decline leading to 7% lower
production by 2025 on the other. These estimates are conservative and do not fully account for the impact of sanctions
and lower oil prices on companies like Gazprom Neft and
Lukoil. They also do not take into account possible side effects of the equipment ban, the blurred boundaries of which
may cause it to affect projects outside the targeted environments.
SANCTIONS OVERVIEW
Lukoil 19%
Equipment export ban
Ban on credit lasting longer than

30 days to state banks and oil
companies
Tatneft 6%
Bashneft 3%
Russneft 2%
Gazprom 4%
SNG 13%
Slavneft 4%
*Chart shows 96% of total 2013 production.
Source: Russian Ministry of Energy
66
Gazprom Neft 7%
Table 1
Equipment designated for

Deep water
Offshore Arctic
Shale oil production
Financial instruments ban
Banks
Sberbank
VTB Bank
Gazprombank
Vnesheconombank
Rosselkhozbankg
Bank of Moscow (US only)
Oil companies
Rosneft
Transneft (EU only)
Gazprom Neft
Sources: EU Commission, US State Department
TECHNOLOGY
MONTHLY OIL PRODUCTION*

340
Million boe
330
320
310
300
290
280
Log trend = 5.5634ln(x) + 305.04
270
260
2010
2011
2012
2013
2014
2015
*Including associated gas.

Sources: Russian Federal State Statistics Service (GKS), Ministry of Energy
ANNUAL OIL PRODUCTION
FIG. 3
4,000
3,000
2,000
Status quo
Tax reform
ES-2035 target
1,000
0
2007
Production
2007
2011
2013
2015
2017
2019
2021
2023
2025
Source: A. Novak, GKS, Ministry of Energy, draft Energy Strategy 2035
FIELD DEVELOPMENT SCHEDULE*

4,500
4,000
Reserves, million boe
Exports of oil and gas make up around

two thirds of Russian export income
and half of Russian government revenue. In attempting to put pressure on
the Russian state, sanctions therefore
target the Russian state-controlled oil
companies, Rosneft and Gazprom Neft
in particular.
As Fig. 2 shows, however, Russian
oil production has so far kept up, and
both second-half 2014 and first-quarter 2015 showed year-on-year growth
of 0.4% and 0.8%, respectively. These
more modest growth rates reflect a
slowdown that started well before
sanctions, suggesting they have had
little immediate impact on Russian oil
production. The question is what effect
they will have in the longer run.
The Russian Ministry of Energy
FIG. 2
350
Million boe
The expected fall in Russian oil

output is linked to the decline in production from existing fields, the substantial investment needed to counter
this decline, and the dominant role in
the industry of state-controlled Rosneft. Rosneft produces more than 40%
of Russian oil and its debt burden, in
combination with sanctions-limited
access to finance, make it unlikely that
the company will be able to commit
the resources necessary to maintain
current production levels (Fig. 1).
The fall in oil prices aggravates the
predicament of the Russian oil sector, but for Rosneftwhich has low
production costs, especially after the
drop in the value of the rublesanctions are the main problem. Also
other oil companies, among them
Russias largest private oil company
Lukoil, are revising investment budgets, suggesting more new production
is likely to be shelved.
Russia is the worlds second largest
oil exporter, and developments in the
Russian oil sector affect international
markets, both for supplies and services and for the oil itself. The effect (or
not) of sanctions (Table 1) is therefore
significant for both Russia and the
global petroleum sector.
No sanctions
Financial sanctions
Export sanctions
3,500
3,000
2,500
Russkoe, Rosneft
Filanovskogo,
Lukoil
1,000
500
Yurubechno-Tokhomskoe,
Rosneft
Vostochno-Messoiakhskoe,
Gazprom Neft
2,000
1,500
FIG. 4
Prirazlomnoe,
GPNSH
Novoportovskoe,
Gazprom
Kulumbinskoe, Rosneft +
Gazprom Neft Tagulskoe, Rosneft
Kharampurskoe,
Rosneft
Zapadno-Messiakhskoe,
Gazprom Neft + Rosneft
Salym-Bazhenov,
Lodochnoe,
Shell + Gazprom
Rosneft
Tazovskoe, Gazprom
Piakiakhinskoe, Lukoil
Suzunskoe, Rosneft Russkoe-Rechenskoe, Rosneft
Naulskoe, Rosneft
Trebs & Titova,

Bashneft
Khaliamerpalutinskoe, Lukoil
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Russian Ministry of Energy
Production start
67
TECHNOLOGY
ROSNEFTS DEBT REPAYMENT

25
$ billion
20
15
10
5
0
2014
2015
Novak introduced two scenarios,

both reflecting the main ideas in the
General Oil Scheme of 2010, a government strategy document that was
drafted but never adopted:
Do nothing and watch oil production drop.
Introduce tax stimuli and prompt
its rise.
Peak production could be postponed to 2017 and 2010 production
levels maintained until past 2022, according to this scheme. The government launched a massive tax break
2019
2020
program and production growth
stayed on course (Fig. 3).
Novaks report also put forward a
list of new fields that would have to
come on stream in order to avoid production declines. Should current sanctions impede these
projects, the consequence would be reduced production.
Fig. 4 links the Energy Ministrys planned projects and
current sanctions. Only one project, Shell and Gazproms
Bazhenov exploration at the Salym fields, is affected by the
export ban. The two planned offshore projects are either already in production (Prirazlomnoe) or in shallow water, and
therefore largely unaffected by the sanctions (Filanovskogo).
Rosneft and Gazprom Neft, however, which now face
FIG. 5
2016
2017
Year due
2018
Source: Rosneft
warned already in 2010 that 90% of greenfield and 30% of

brownfield resources would be uneconomic under the existing fiscal and legislative framework and that production
would therefore decline unless taxes were reduced.1 Energy
Minister Alexander Novak reiterated the warning in a government discussion on tax reform in 2012: production remained comfortably high, but maturing fields introduced
vulnerability, and increased investment was needed to avoid
decline (OGJ Online, Aug. 12, 2013).
ROSNEFT 2015 FINANCIAL OUTLOOK1

Variable
Market factors
Oil price, $/bbl
Exchange rate, rubles/$
Income
Revenue, $ billion
Revenue, rubles billion
Expenditure, rubles, billion
Opex
Production, operating costs
Hydrocarbon refning services
Corporate costs
Transportation
Exploration
Gross taxes
Export duty
Net earnings
EBITDA, rubles billion
EBITDA, $ billion
Financial obligations
Capex, $ billion
Capex, rubles billion
Debt due, $ billion
Debt due, rubles billion
2014
Table 2
Forecast 2015
Change, 20142015, %
Comment
98.9
38.42
60
50
39
30
Average, market analysts expectations.2
143
5,503
87
4,345
39
21
100% correlated with oil price.

Combination of oil price and exchange rate.
4,446
469
495
114
471
19
1,195
3,840
469
495
114
471
19
943
14
21
1,683
1,329
21
1,057
28
505
10
52
63
13.9
534
n/a
n/a
9.73
487
23.5
1,175
30
9
n/a
n/a
Assumes 100 % Russian cost base; 0% infation.
Tax burden reduced in line with oil price and adjusted by

exchange rate. Price and exchange rate coeffcients simplifed in
tax rate calculation formulas.
From statement by Rosneft Pres. Sechin.

Affected by exchange rate.
At $60/bbl crude. 2Analysis from: Conerly Consulting LLC, University of Stavanger, OilPrice.net, Nordea, Barclays, DNB Markets, and ABN AMRO.
Sources: Rosneft, Sigra estimates
68
TECHNOLOGY
PLANNED PRODUCTION, 2012 VS. 2015
FIG. 6
140
120
100
Million boe
80
60
40
2025
2025
2024
2024
2023
2023
2022
2022
2021
2021
2020
2020
2019
2019
2018
2018
2017
2017
Debt vs. investment
2016
2016
20
2015
2015
credit constraints due to the sanctions,

respectively operate 10 and 1 of the 19
fields planned for production. These
fields are also the largest, accounting
for more than 75% of the total planned
new fields output.
The overview of planned projects in
Fig. 4 is not exhaustive (Lukoil for instance has tight-oil projects not listed),
but it is clear that Russia does not have
any other giant fields short-term. Do
Russias oil companiesand Rosneft
in particularhave the financial resources to keep projects on schedule?
Or, will they start to slide?
Million boe
Russias production outlook appears to

hinge on Rosneft and the companys fiRusskoe
Russkoe
nancial ability to sustain its field devel2012
2015
Kuiumbinskoe
Kuiumbinskoe
opment program. But the acquisition
Yuburechno-Tokhomskoe
Yuburechno-Tokhomskoe
of TNK-BP in 2013 left the company
Source: Sigra Group
with significant debt, a large repayment chunk of which is due this year
(Fig. 5). This payment normally might
REVISED PRODUCTION OUTLOOK, SCENARIO 1
FIG. 7
have been manageable, but Rosneft is
4,100
both barred from refinancing in West3,900
ern markets and faces a substantial
1.1
0.3
0.9
revenue shortfall due to the lower oil
3,700
0.2
0.6
0.5
prices. Rosneft Pres. Igor Sechin stated
0.2
3,500 0.0
0.5
0.1
0.2
0.3
1.0
0.7
in February that capital expenditure
0.1
3,300 0.0 0.3
0.1
1.0
(capex) would be cut by 30% from
0.4
0.6
3,100
2014 (in US dollars).
1.5
Table 2 recalculates key financial
1.5
2,900
1.7
statistics for Rosneft for 2015. Assum2,700
ing production stays at 2014 levels,
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Rosnefts revenue for 2015 is adjusted
Postponed
Estimated production
Status quo decline
production
so that the relative revenue reducgrowth; year-on-year, %
from target
Expected
New production
tion (in US dollars) from 2014 to 2015
replacement
growth; vs. 2014, %
forecast
matches the decline of the oil price
Source: Sigra Group
from the average $98.90/bbl in 2014 to
an estimated $60/bbl for 2015. The exchange rate is adjusted to 50 rubles/$ to reflect the oil prices
essentially the money Rosneft retains after selling its prodeffect on the value of the ruble.
ucts and paying the direct costs of production, which it may
Costs are assumed to be 100% sourced from Russia and
then channel to debt servicing or capital investments, for
subject to zero inflation, keeping nominal operating expeninstance in new fields.
diture (opex) constant in the same way production values
According to this example there will be a 50% slide in
were. The exception is gross taxes, which are reduced in line
EBITDA from 2014 to 2015 and a more than 60% reduction
with the oil price and boosted in line with the exchange rate
as measured in dollars. Rosneft will have $10 billion left after
to reflect current gross tax-rate calculation practices.
paying production costs, making it difficult to finance both
Converting dollar revenue to rubles and subtracting ruble
a debt repayment of $23 billion and a planned capex budget
costs yields earnings before interest, tax, depreciation, and
of close to $10 billion.
amortization (EBITDA). Since gross taxes constitute the vast
Rosneft has applied several times for investment support
majority of taxes payable and are already subtracted, this is
from the Russian National Welfare Fund in an effort to close
69
TECHNOLOGY
REVISED PRODUCTION OUTLOOK, SCENARIO 2
FIG. 8
4,100
3,900
Million boe
3,700
0.6
3,500
0.0
3,300
0.0
0.8
1.1
0.0
0.7
0.3
0.9
0.4
1.0
0.1
loosely assessed and is kept out of the

calculations in this article. It is clear,
however, that even a 10% Vankor Neft
buy-in from China still would not resolve the imbalance between Rosnefts
obligations and income.
Outlook
With access to capital markets barred,

Rosneft is in dire straits. Without
2,900
spending 30-50% of the National
2,700
Welfare Fund to support field devel2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
opment, projects will be postponed.
Postponed
Status quo decline
from
target
growth;
vs.
2014,
%
Rosneft has already signaled that
production
development of Russkoe and YuruExpected
New production
forecast
replacement
bechno-Takhomskoe (the two largest
Source: Sigra Group
fields in Fig. 4) will be postponed until
2019 and 2018. These delays mark 2
and 1-year adjustments to a schedule
this gap. In September it applied for 1.5 trillion rubles to
that had already been revised and may not be the last recover its capital needs for the coming year. Rosneft subseschedulings.
quently raised its application to 2 trillion rubles, refused by
Even with government support, therefore, it is hard to see
the Ministry of Finance, which pointed to a total fund size
where Rosneft will find sufficient funds for any capital exof only more than 3 trillion rubles, 60% of which was earpenditure in 2015. The company also has considerable debt
marked for national infrastructure investments.
maturing in 2016 and 2017. If the current income situation
Rosneft returned early this year with a revised request for
persists, Rosneft may have to hold back planned investment
1.3 trillion rubles. But the government is holding back, and
in those years as well.
it seems Rosneft can expect no more than 300 billion rubles,
The following three scenarios will guide the rest of this article:
enough to still make it the welfare funds largest single in Scenario 1 shows the effect of postponing Russkoe and
vestment.2
Yurubechno-Takhomskoe fields for 2 years and 1 year, reThis level of support will leave a large enough deficit that
spectively, as Rosneft has already announced, and also Kuilimiting capex reductions to 30% seems optimistic. Standumbinskoe field for 2 years.
ing $7 billion short of just repaying its $23 billion dollar
Scenario 2 presents a more restricted investment outdebt, it is unclear how Rosneft will afford any field developlook than that so far proffered by Rosneft, postponing the
ment investments at all.
same three fields for a full 5 years.
China could serve as an alternative source of financing
Scenario 3 demonstrates the effect on Russian oil profor Russian oil and gas companies. Gazprom expected to
duction should Rosneft choose to stick to its revised investreceive $55 billion in the form of advance payment for the
ment plan for the three fields in question but do so at the
$400-billion natural gas pipeline deal with China, but this
expense of all other investments in new production.
condition was omitted in final price negotiations.
Since Gazprom Neft is also subject to sanctions, it could
Tangible results for Rosneft from the Chinese connection
be included when calculating postponed production in the
have been limited. China National Petroleum Co. and Rossecond scenario. But its modest size compared with Rosneft
neft have concluded a framework agreement on the former
limits its impact and to highlight Rosnefts importance, Gazacquiring a 10% stake in Vankor Neft (holding the licenses
prom Neft is excluded.
for Vankor, Suzunskoe, Tagulskoe, and Lodochnoe fields),
with unnamed Chinese investors also said to be interestScenario 1
ed in investing in enhanced oil recovery (EOR) in Rosnefts
Along with Russkoe and Yuburechno-Takhomskoe fields,
fields in Ingushetia.
Vostochno-Messoiakhskoe and Kuiumbinskoe are among
The Vankor deal may provide some relief, but quantifying
the largest in the Energy Ministrys plans for the near fuits effect is problematic. The sales price was not disclosed,
ture and are also subject to sanctions. Gazprom Neft has
nor were updated investment plans for the fields encomalso asked for funding from the National Welfare Fund for
passed. Rosnefts Chinese connection can therefore only be
Kuiumbinskoe (a joint development with Rosneft), and we
assume it will also be postponed, for 2 years from 2017 to
2019. Vostochno-Messoiakhskoe appears to be in full devel3,100
1.6
1.5
2.1
2.5
70
TECHNOLOGY
Million boe
opment already and is assumed to reREVISED PRODUCTION OUTLOOK, SCENARIO 3

FIG. 9
main on schedule.
4,100
Applying these adjustments and
Rosnefts already warned postpone3,900
ments (Fig. 6) yields 370 million bbl
3,700
of postponed production from 2015
3,500
to 2023 compared with the Energy
1.5
1.0
1.7
3,300
Ministrys 2012 projections, roughly
2.2
2.5
2.6
3.2
4.1
10% of total 2014 production. Fig. 7
3,100
5.3
combines the postponed production
6.4
2,900
7.6
with data from the Ministry of Ener2,700
gys 2012 forecast and the draft 2035
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Energy Strategys production forecast
Lost
Status quo decline
from target
growth; vs. 2014, %
(Fig. 3).
production
The production forecast in the draft
Expected
New production
forecast
replacement
2035 Energy Strategy is chosen as a
Source: Sigra Group
baseline for the production outlook
rather than the ministrys tax reform
scenario because the former is more
recent and in line with the actual production trend over the
fields come on stream than if they had not been postponed
last 2-3 years. Production was above target in 2014, however,
at all.
so that the starting point has been revised to match actual
This presumes that other planned developments continfigures and annual growth has been revised to keep 2025
ue at full speed in addition to the developments that were
production in line with the forecast.
postponed, implying increased investment capacity after the
The decline in production envisioned in the ministrys
postponement. Given that the rationale for postponing projstatus quo scenario is interpreted as inherent decline from
ects in the first place is limited investment capacity, it seems
existing fields that must be replaced to maintain production
counterintuitive that the investment capacity should be
levels and subsequently subtracted from the revised forecast
greater than planned later, particularly after a period of lowto derive expected production replacement.
er revenue due to production decline and a lower oil price.
Production in Fig. 6 is also postponed to reflect changes
A more plausible outcome is that when resuming develin timing for the three projects shown, leading to a 9-year
opment of the postponed fields, Rosneft will sacrifice other
dip below targeted production. Production will decline evinvestments. These could include the remaining seven Rosery year until 2018, when it will be 1.7 % below 2014 (Fig.
neft fields in Fig. 4 as well as EOR and other smaller develop7).
ments not included in the ministrys 2012 plans.
In Fig. 9, Rosneft continues work on Russkoe, YuburechScenario 2
no-Takhomskoe, and Kuiumbinskoe fields according to the
Once a project has been postponed, it often gets postponed
schedule in Scenario 1, but to do so it sacrifices all other
again. Given Rosnefts capital constraints, it would not be
investments until 2025. In this scenario, limited investment
surprising if this happened to Russkoe, Yuburechno-Takcapacity causes the sanctions-induced field postponements
homskoe, and Kuiumbinsko.
to bring Russian production into long-term decline, 2 years
Fig. 8 presents a scenario in which production at these
earlier and starting from a substantially lower level than enthree projects is delayed for 5 years until 2020. Production
visioned in 2012 (Fig. 3). From 2014 levels, Russian producwill decline year-on-year up to 2018 and by 2019 be at least
tion decreases on average 0.7 %/year, resulting in 7% lower
2.5% lower than 2014 production. This still rather conserproduction by 2025.
vative adjustment yields a total postponed production of
Actual decline, however, may turn out to be greater. Gazroughly 530 million bbl, 44% more than in Scenario 1 and
prom Nefts request for government support suggests it is
equivalent to 13% of Russias 2014 production.
facing similar problems, and Lukoil has also signaled that
capital expenditure will be cut 20-25%.3 In sum, more fields
Scenario 3
and EOR projects are likely to be delayed, increasing the
Both Scenario 1 and Scenario 2 assume that Russian proamount of postponed (and potentially lost) production.
duction will return to targeted levels after production from
Lower oil prices also contributed to these effects. For
postponed fields reaches planned levels. But for this to hapcompanies with limited debt such as Gazprom Neft or compen, production growth must be stronger after postponed
71
TECHNOLOGY
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panies not subject to sanctions such as Lukoil, the oil price

in fact may be the main driving force. But for Rosneft, sanctions are the biggest difficulty. If Rosneft could refinance its
maturing debt, it would have sufficient operating income
to support its revised investment program. With capex and
opex both near $5.00/bbl,4 supporting investments through
credits would have been possible even at $50-60/bbl crude
prices.
References
1. General Development Scheme, Oil Industry of the Russian Federation for the Period Until 2020, Ministry of Energy,
Russian Federation, June 2010.
2. Lyutova, M., Papchenkova, M., and Starinskaya, G.,
Government decides how much money Rosneft needs from
FNB, Vedomosti, Apr. 14, 2015.
3. Fedun, L., Financial Results, First-quarter 2015, Lukoil, Moscow, June 2015.
4. Q4 2014 IFRS financial results presentation, Rosneft,
Mar. 4, 2015.
The authors
Daniel Fjaertoft (daniel.fjaertoft@sigragroup.
com) is managing director at Sigra Group, Oslo.
He previously served as a petroleum analyst at
Econ Poyry and advisor on petroleum and maritime issues at the Barents Secretariat. He holds
a MS in economics from the University of Oslo.
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OGPE.COM
OIL, GAS
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33 (0) 1 30 71 11 19
danielb@pennwell.com
Singapore
Michael Yee
+65 9616 8080
yfyee@singnet.com.sg
Altronic LLC . . . . . . . . . . . . . 9 MOXA Americas . . . . . . . . . . 13

BORSIG Compressor Parts GmbH . 12 Proto Industrial . . . . . . . . . . . 4
CARHARTT . . . . . . . . . . . . . 7 REMBE GmbH . . . . . . . . . . . . 8
CENTA Transmission . . . . . . . . . 6 Schroeder Industries . . . . . . . . . 5
D&L Oil Tools . . . . . . . . . . . 11 Sensonics Ltd. . . . . . . . . . . . 10
Oil, Gas & Petrochem Equipment makes every reasonable effort to verify its content.
However, neither Oil, Gas & Petrochem Equipment nor our parent firm,
PennWell Corporation, assume responsibility for validity of manufacturer claims or statements made in published items.
Kobelco Compressors America Inc. . 3 Advertiser Product/Service Followup 15

Magnatrol Valve . . . . . . . . . . 10
For Print / Online Advertising Information, Assistance:
http://www.ogpe.com/index/advertise.html
OGPE.com
August 2015
Need Reprints of your ad or recent editorial?

Contact Foster Printing for a quote:
866 879 9144 / pennwellreprints@fosterprinting.com
K O B E L C O
C E N T R I F U G A L
C O M P R E S S O R S
VISIT US
at the Turbo Symposium
Sept 14th - 17th, 2015
Booth# 2537!
multiple centrifugal compressor solutions for

your most challenging environments
High-efficiency performance in the largest refineries
and power applications around the world, Kobelcos
API compliant Integrally Geared and Single Shaft
Overhang (DH) compressors work in the harshest
flammable, explosive, corrosive and toxic
environments.
Thousands of Kobelco centrifugal compressors
have been in service worldwide in air separation,
refining, petrochemical, energy services and many
other applications. Kobelcos integrally geared
compressor is a perfect fit for cryogenic services and
air separation services while keeping a small footprint.
Kobelcos DH compressor offers an open back-end
design to eliminate powder build up and simplify
maintenance.
Let Kobelco take you where others dont.
Call today and ask how.
SCREW
RECIPROCATING
CENTRIFUGAL
Kobelco Compressors America, Inc.

Houston Office: sales@kobelco-kca.com
713.655.0015
www.kobelcocompressors.com
Kobelco DH compressor allows for easy

maintenance because of its simple design.

P4
Special Report: Primer Movers
Industrial turbines upgraded: 53 MW output

The next upgrade of model SGT-800 industrial gas turbine is announced with
a power output of 53 MW plus 39% electrical efficiency in simple cycle applications.
In a 2x1 combined cycle configuration,
the power output is 150 MW at net efficiency of more than 56% with dual fuel
Dry Low Emission system. The latter is
capable of below-15-ppm NOx levels below as well as below-5-ppm CO
emissions.
Upgraded SGT-800 is in addition to present versions with 47.5 and 50.5MW power outputs, respectively.
Siemens Power & Gas Division: Duisburg Germany
VSD pump solution = 70% oil,

gas, industrial energy savings
Open or closed-loop motion control variable
speed drive pump solutions provide up to 70%
energy savings for equipment in oil and gas or
marine, manufacturing, and machine building industries.
Solutions can include one or more of the manufacturers PVM variable piston, Hydrokraft variable piston, or VMQ fixed vane pumps.
Together with smart control of the firms variable speed drives including PowerXL DG1 general purpose or SPX 9000 high performance
the system is controlled to match precise load
requirements of the current duty cycle.
Eaton Hydraulics Group: Eden Prairie MN
Motor control centers now

available as catalog offering
Heres Siemens motor control centers are
now a standard catalog offering.
This eliminates the need for a customized
quote or negotiated lead times for new motor
control centers and units (replacement buckets). Traditionally MCCs needed to be configured, customized, and engineered for each
order resulting in multiple-week lead times.
Catalog MCC units and structures will ship as
soon as five days after an order is entered.
Siemens Motors: Norwood OH For FREE Literature select #250 at ogpe.hotims.com
Free Info or Literature Click the link Get Response!
For FREE Information,

select #403 at ogpe.hotims.com
OGPE.com
August 2015
TOTAL ENGINE
7.2015 Schroeder Industries.
CONTAMINATION
PROTECTION
Protect Your Critical Engine Components

) )In-Line Bulk Diesel Fuel Coalescing Filter (ICF) ())On-Board Diesel Fuel
Coalescing Filter (HDP-BC)) )())
) ) )() ))
) ) )(
)) )( ))
)()!)
() ( ) ) ( ) )())( ()
()")
(
! ! (!#) )()
) ))()
) )()) ()() )))) ()

ICF:
Clean Fill InLine Diesel Fuel
Dispensing
Filter
HDP-BC:
On-Board
Diesel Filter
$ )% )*(
() () &)$)$ () ()) ()
(
( ' (

Advanced Fluid Conditioning Solutions
&'() ((
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((( (&(((( !(("""#$

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P6
New Products & Services
New tablets withstand sand, dust,

water, 4-ft drops
XRF spectrometer = fast lab-quality

at-line elemental analysis, is new
Latitude 12 Rugged Tablet

is newly introduced for harsh
environments.
It delivers a crisp 11.6-in.
Direct-View outdoor-readable
HD display with gloved-enabled multi-touch. The new
tablets are designed to survive water spills, sand and
dust, drops from over 4 ft, and extreme temperatures
. . . and feature Dell security, manageability, and reliability.
Models are prepackaged with Fourth Generation
QuadCool thermal management plus Fifth Generation
Intel Core M processors. Each has up to 12 hr (1) battery life with two two-cell batteries.
Solid state storage is offered up to 512GB along with
connectivity anywhere via 802.11ac Wi-Fi as well as optional mobile broadband and dedicated GPS.
Complete Latitude 12 specifics are yours free.
Dell: Round Rock TX
New portable SPECTROSCOUT

X-ray fluorescence spectrometer brings laboratory-quality
elemental composition monitoring and quality control testing
to at-line analysis.
Durable and compact, the easily transported instrument is designed to significantly enhance
QC productivity in at-line analysis. It eliminates time
spent transporting samples from plant floor to lab to
wait in queue for testing and audit-traceable results
directly from the floor. Accuracy and sensitivity over
wide detection levels provide precise at-line analysis
from high-percentage concentrations to trace elements.
This includes sulfur in fuels per ASTM D4294 on
which a free application brief is available.
SPECTRO Analytical Instruments, AMETEK:
Kleve Germany and Mahwah NJ
MAKE THE CONNECTION

Trust the innovator-trust CENTA.
Over 20 unique designs

CENTAX-Series N/NL
For reciprocating compressors
CENTAFLEX-Series A
For compressors & pumps
Over 16 million sold
CENTA POWER TRANSMISSION

L E A D I N G B Y I N N O VAT I O N
2570 Beverly Dr. #128, Aurora, IL 60502 T 630.236.3500
Catalog downloads at www.centa.info | Email inquiries to oge@centacorp.com
OGPE.com
August 2015
CARHARTT 2112 OUTERWEAR
THEYLL NEED
IT SOON. WHICH
MEANS YOU
NEED IT NOW.
Nows the time to equip your crew with the 2112-certied
outerwear to power through winters worst. Head to toe,
nothing outworks Carhartt. United we outwork them all.
P8
ATEX-rated Non-intrusive
pig signaling
Small NH3-optimized TDL analyzer
ATEX-rated Pig Signaler, the

CD52 Bandit is a permanent
solution to monitor for the passage of pipeline pigs non-intrusively to any pipeline.
Inexpensive permanent magnets are attached to any pig
you wish to detect. Upon passage the CD52 Bandit system
records the time and date of
the event.
Along with its LCD display, the CD52 can provide
feedback of passages to SCADA systems, or email and
text via satellite radio.
Complete CD52 Bandit Pig Signaler information is
available free upon request.
CDI: Broken Arrow OK
T +49 2961 7405-0

T +1 704 716 7022
T +65 6702 3707
Made
in
Germany
SERVOTOUGH MiniLaser Ammonia is unveiled as the worlds smallest cross-stack Tunable Diode Laser
gas analyzer and only TDL analyzer
specifically optimized for ammonia
measurement.
The new instruments are optimized for fast, accurate, and responsive NH3 measurement in hot or
hazardous conditions. MiniLaser Ammonia is particularly suitable for ammonia slippage applications on coalfired power plants, its noted.
The new gas analyzers are 90% smaller and 80% lighter than comparable TDL designs, its declared.
Servomex: Houston
3,000 - 12,000-psi carbon, SS ball and

fow control valves range available
A complete range of ball
valves and flow control
valves in carbon steel or
stainless steel handle
3,000 to 12,000 psi.
Floating Ball design ensures a positive, leak-free
seal plus automatic seat
wear or misalignment compensation. The quarter-turn
positive operating models feature a hard-chrome-plated
micro-smooth ball to reduce friction and seat wear.
Models operate in corrosive oil, gas or chemical processing without costly contamination/breakdown.
STAUFF: Waldwick NJ
Your Specialist for

PROCESS SAFETY
in the
OIL & GAS INDUSTRY
worldwide
Consulting. Engineering. Products. Service.
Gallbergweg 21 | 59929 Brilon, Deutschland

F +49 2961 50714 | info@rembe.de | www.rembe.de
REMBE | All rights reserved
OGPE.com
August 2015
Wireless gas detector secures SIL 2

GS01 wireless gas detectors are third-party Safety
Integrity Level (SIL) 2 certified, its announced.
The hydrocarbon gas
detectors are designed as
truly wireless based on
MEMS technology for battery-powered gas detection
with wireless communication.
GS01 offers flexibility during installation, reliable infrared operation, and freedom from calibration.
Other wireless detector features, beyond the new SIL2
certification include hazardous area intrinsically safe
design, lightweight, lower power configuration with
no inspection schedules needed for Exd equipment.
GasSecure, A Drger Company: Oslo Norway
The future of control is in your hands!

DE-3000/3000+ and the TE-1000 Integrated Telematics Module for Gas Compressor Package Automation
Combining Altronics vast experience in control system development and production with Enbase Technologys advanced
telematics and software engineering has produced a breakthrough
automation platform that integrates local and remote engine and

analytics.
Together, Altronics DE-3000/3000+ System plus the add-on/plug-in
TE-1000 Telematics Module comprise an innovative gas compressor package platform that provides local, area, and simultaneous
long-distance monitoring and control access to the skid.
The DE-3000 platform is known for its quality and stability. The
seamless integration of the TE-1000 Telematics
Module extends that wireless functionality and control to any enabled PC, tablet, or smartphone via an
on-board Wi-Fi server. A cellular or satellite modem
connection offers the same access and control
of the DE-3000 system from virtually anywhere in

setpoint adjustment, and remote monitoring via
sophisticated telematics and predictive

analytics.
The value of this new approach to gas compressor monitoring and controlone that
combines a stable and proven local control
with a robust, seamless communication
systemis limitless.
Contact your local Altronic
Distributor for further
information on how the
DE-TE package can
deliver a whole new
level of value to you and
to your gas compressor operations.
Find a distributor near you at www.altronic-llc.com

P10
Mobile entity tracking & analysis system = 360 unbiased operation transparency
Newly patented ARsite Mobile Entity Tracking and Analysis System provides the oil and gas industry the revolutionary ability to virtually realize 360 unbiased operational transparency in both real-time and retrospectively for analysis.
Designed so companies better monitor off-site work activity, ARSite takes an indoor or outdoor location and
virtually represents it, then analyzes all motion-based on-site assets in real-time primarily humans and moving
machines. Each asset is issued a small, unobtrusive tracking tag and associated profile containing identification
information, privileges, permissions, rules, statistics, etc. All tagged asset activity (motion, zone interaction, etc) is
projected in real-time on 2D and 3D representations of the physical location. This allows supervisors to manage all
asset activity and monitor compliance from their on-site and/or remote portal.
ARsite simultaneously records and stores all activity data for on-demand and/or retrospective reporting for analysis.
Peritus Resource Group: Tulsa OK
Improved truck loading, tank battery oxygen removal safety,

reduced emissions via vac pump/carbon beds/operating system
The Air Defender is introduced to improve safety and reduce emissions during truck loading operations. It also minimizes oxygen entering tank head space in a crude and condensate
loading facility plus aids safe removal of oxygen from tank batteries.
Product technology reduces oxygen ingestion into storage tanks during truck loading when
vapor-balancing occurs. It also reduces overall emissions in nonattainment areas where air
quality regulations require vapor recovery.
The Air Defender is shipped on a skid base and easily installed as three major components.
AEREON: Austin TX
Magnatrol high quality, two-way bronze and stainless valves

control the flow of oil/fuel oil, biofuel, natural gas, solvents,
hot liquids and gases, corrosive fluids, water, steam, and
other sediment-free fluids.
Handle temperatures to 400F and pressures to 500 PSIG
Flanged ends or NPT threads from 3/8 to 3
Continuous duty coils for all AC/DC voltages
Options include manual overrides,
position indicators, NEMA 4X, explosionproof, water tightand more.
Fully tested to
ensure Magnatrol
quality performance
and supported by
trained customer
service personnel.
SEISMIC
w
ne
Need a Rugged, Field-Proven

Solenoid Valve for Oil,
Gas, or Petrochem
Operations?
SAFETY
SWITCH
Sensonics SA-3 Seismic Switch
High integrity, low-noise Piezoelectric seismometers

with unique self-testing
Seismically qualifed,Robust and weatherproof steel enclosure
For safety applications up to SIL-2 Explosion-proof versions

for hazardous areas
Ideal for Oil & Gas applications
Magnatrol Valve Corporation

67 Fifth Avenue Hawthorne, NJ 07507
OGPE.com
August 2015
Tel: +44 (0) 1442 876833 sales@sensonics.co.uk
www.sensonics.co.uk
AB14-823
For more information call 973-427-4341, E-mail:

info@magnatrol.com or visit magnatrol.com.
P12
316 stainless steel enclosures data
Filtration/Separation products/services
TS 8 Freestanding Enclosures
of stainless steel are described,
illustrated and specified in this
free eight-page brochure.
Construction of the models is
xcited to be impervious to corrosive atmospheres and resistant to high temperatures, common chlorides including salt
in seawater, as well as sulfuric
acid, bromides, and iodides. TS
8 resists stress cracking, pitting, and crevice corrosion.
Designs provide 30% more available mounting space
than traditional unibody types of equal dimensions.
They comprise a four-point latching systems plus continuous foamed-in-place gasket for a water and dustproof environmental seal.
Rittal Corporation: Schaumburg IL
Sixteen pages of filtration and

separation products and services highlight this free brochure for offshore exploration
and production, gas processing
and transmission, refinery and
petrochemical, or power generation.
Air, gas, and liquid filter
designs are described and illustrated along with filtration
support services, plus vessel parts and internals. Some
13 filtration styles and designs are presented in more
than 50 series for broad applications. These include
two-phase separation. various liquid filtration, as well
as JonAIR Air filter elements for power generators, gas
turbines, and air compressors.
Jonell Incorporated: Houston
For FREE Literature, select #254 at ogpe.hotims.com
Free Info or Literature Click the link Request Get Response!
ADIPEC 2015
11
Booth No. 87

OGPE.com
August 2015
P14
IR cameras add image blending

Maintenance professionals can
now analyze equipment health
more quickly and accurately as
image blending is added to TiS
Performance Series Infrared
Cameras.
The new models deliver up to
2.5-times more pixels and a 70%
improvement in distance-to-spot
than earlier designs. This provides better image quality to enhance identification of potential
equipment problems. Cameras also feature large 3.5-in.
screens to help pinpoint issues, along with one-touch
image access to eliminate scrolling through a menu to
view images.
Fluke Corporation: Everett WA
GPS module added to tracking

devices for harsh environment uses
Geoforce, provider of oil and gas asset management solutions, has integrated OriginGPS technology into its
GTx series of GPS tracking devices.
This integration minimizes GPS power consumption
as it reduces the time to first fix (TFFF) for easier assets
tracking in harsh environments, remote locations, and
in motion.
Geoforce chose OriginGPS for reliable fast cold fix time
anywhere, even with limited sky view and lower power
consumption to accommodate non-powered equipment
like containers, tanks or trailers. Further details are free.
OriginGPS: Airport City Israel
Next-gen intelligent fxed-point gas

detectors introduced
XgardIQ intelligent gas detectors and transmitters are available
fitted with a variety of flammable,
toxic, or oxygen gas sensors.
They may also be installed with a
remote sensor housing up to 15 m
from the transmitter.
With analog 4-20 mA and RS485 Modbus signals as standard,
XgardIQ is optionally available with alarm and fault
relays and HART communications. The comprehensive
set of output interfaces ensures compatibility with practically any control system, notes the manufacturer.
Crowcon Detection Instruments Ltd.:
Abingdon, Oxfordshire United Kingdom
OGPE.com
August 2015
PROFIBUS-to-fber converters
connect in remote, hazard locations
ICF-1180I & ICF-1280I PROFIBUS-to-Fiber converters help connect PROFIBUS devices in
remote or hazardous locations. They
now feature Class 1 Div. 2, IEC Ex, and
ATEX certification.
Upstream and downstream petrochemical processing and chemical plant-applicable converters are designed for areas where explosive vapors are present.
With the ICF devices, oil and gas operations can now use optical fiber to connect PROFIBUS devices and controllers.
They are rated for -40 to +75C. and capable of distances up to 2.5 miles on multi-mode fiber;
up to 28 miles on single-mode fiber.
Additional converters specifics are yours free.
MOXA: Brea CA
Free portable holiday detectors data

SPY portable holiday detectors are described and illustrated
in this free six-page brochure for
accurate, reliable inspection of
any coating, onshore or offshore.
Three designs are highlighted
to combine field proven cases,
probes, and electrode configuration with leading-edge circuitry.
Among holiday detector features are infinitely adjustable
voltage, automatically regulated output voltage, rugged
ergonomic design, easy installation battery, plus horn
and light for holiday detection.
Pipeline Inspection Company, Ltd.: Houston
OEM DP transmitter
collection
Smaller, lighter, less expensive OEM
differential pressure transmitters
are now on the market.
Instruments are offered in both
piston sensor and diaphragm sensor
designs durable and waterproof
for outdoor uses.
Models have pressure bodies machined from solid
blocks of aluminum which are anodized to withstand
high-line pressures and rated to 3,000 psi. IP65 electronics enclosures protect internal wiring.
Orange Research: Milford CT
P15
Advertiser Product & Service Followup
July Advertiser Product & Service Followup

Companies featured here advertised their equipment, products, systems, or services in Jul6 6 OG&PE within Oil
& Gas Journal. These summaries give you an opportunity to receive free information on them and their oil and
gas specialties. Go to OGPE.com and use the Click Here for Product Information button on the right. You
will receive prompt, complete response from these valued OG&PE clients.
Valves, fttings, tubing handle

extreme oil/gas conditions, pressures
When your SIS is your last line of

defense: Moore Industries is there
Count on HiP proven valves, fittings, and tubing to

handle extreme conditions and pressures in all oil, gas,
and petrochem needs because no one does it better.
Our name represents high pressure in all oil, gas, and
petrochemical conditions, demands, and high pressure
applications. For over 60 years, HiP continues to deliver
quality, dependable products, and services across the
globe. We are an ISO 9001 certified company.
High Pressure Equipment Company: Erie PA
HighPressure.com
Like a good goalkeeper, a Safety Instrumented System

(SIS) is your dependable last line of defense. This
means you need reliable Functional Safety products
to anchor your team with SIL 3 &SIL 2 exida approval.
You can count on Moore Industries FS Functional
Safety Series products designed for SIS and to IEC
61508 standards. Alarm trips, relays, isolators, and
splitters help your SIS perform at its highest level.
Moore Industries: North Hills CA
miinet.com/safetyseries
By any measure, AMETEK knows your petroleum process product needs

AMETEK Chandler Engineering Model 292B port-able natural gas chromatographs are compact and lightweight yet include fully integrated sample handling and onboard storage for up to 1,000 sample runs.
Drexelbrook Universal IV CM water cut monitors deliver high-accuracy water-in-oil measurements.
AMETEK Process Instruments Model 5100 Gas Analyzers measure moisture in bulk gas or hydrocarbon
streams via Tunable Diode Laser Absorption Spectroscopy.
Drexelbrook Impulse wave-guided radar level systems generate total level, distance or volumetric outputs
unaffected by variations in process material electrical characteristics.
AMETEK PMT IDT intrinsically safe pressure transmitters deliver 0.2% full-scale accuracy for critical applications as they meet FM, ATEX, and IECEx.
AMETEK Thermox WDG-V Combustion Analyzers offer improved control and process safety as they measure
excess oxygen, hydrocarbon, and combustibles in flue gas.
AMETEK U.S. Gauge all-welded process gauges comprise integrated seal for lower cost than gauges and seals
purchased separately.
Grabner MINIVAP ON-LINE process analyzers automatically monitor vapor pressure of gasoline, crude oil, and
liquefied or natural petroleum gas.
IPS-4 Spectrophotometers detect and quantify thousands of chemical species up to eight at once to verify
feedstock, intermediate, and final product quality.
AMETEK: Berwyn PA AMETEK.com
Upcoming special reports:

September: Oil & Gas Instrumentation & Controls
with bonus distribution at SPE ATCE
October: Valves & Actuators
November: Midstream Products & Services
December: Natural Gas Drilling, Production,
Processing & Pipelining
As a first-Monday-of-every-month Oil & Gas Journal section
we distribute the same conferences and exhibitions!
OG&PE Magazine & OGPE.com:
All Products All The Time Since 1954
Appear in this advertisers only section

Schedule any size ad in OG&PE
The following month we publish a free Advertiser
Product & Service Followup summary as editorial
complement like the ones on these pages, and drive
additional traffic to your website
Your product and literature press releases receive optimum editorial consideration for future editions as our media partner
OG&PE & OGPE.com
August 2015
OGPE.com
P16
Control lines move downhole or

smart well hydraulic, other fuid
Ethernet wireless gateway with AES

encryption offered
PermaFlow control line

products move hydraulic
or other fluid in smart well,
permanent downhole cable
applications.
They incorporate Alloy 316L
or Alloy 825 stainless steel welded metal tubes and are
encapsulated with high performance thermoplastic or
elastomer materials function in 150 or 200C. operating environments. Complete PermaFlow data are free.
RSCC Wire & Cable Downhole Metal Clad:
East Granby CT
Secure RF traffic with this new

DH3 Ethernet Wireless Gateway with AES encryption.
It is a primary data collection point for the manufacturers Wireless Automation
Networks which offer remote
viewing of Modbus data, data
logging and trending capabilities, as well as Ethernet
connectivity.
DH3 is engineered to collect, analyze, and use more
data to make better operations decisions, its noted.
This is with robust wireless performance plus secure,
forward-looking Ethernet-based connectivity.
OleumTech Corporation: Foothill Ranch CA
Space saving 1,200 psi solenoid valves

Wattmizer Series Solenoid Valves are for limited-space
areas as high efficiency miniature designs with operating pressures up to 1,200 psi.
With low-wattage coils from 0.65 to 9-w to draw less
current, the valves operate on both AC and DC responding in 6 to 9 ms.
Wattmizers are rated for continuous operation. Tests
demonstrate performance in excess of 60-million cycles
without failure. The solenoid designs are suited for
most fluid and gas applications. They come in two and
three-way configurations.
Solenoid Solutions Incorporated: Erie PA
New trapped key interlocks enhance

lockout tagout
Assurance energy isolation procedures cannot be circumvented is
provided by KIRK trapped key
interlocks.
They are designed to enhance
lockout tagout on equipment that
may contain hot fluids, blades,
fans, pinch points, or moving parts
hazards.
According to the maker: this partnership between
the trapped key interlock and lockout tagout mitigates
the opportunity for personnel mistakenly removing the
lock and tag, and re-energizing the equipment. The
key is removed from the trapped key interlock and kept
by the person leading the lockout tagout procedure.
Kirk Key Interlock: North Canton OH
Improved corrosion anomaly tracking

and management systems introduced
New onshore and offshore corrosion tracking systems support improved integrity and corrosion anomalies tracking and management.
An expanded anomaly management module has been
created for its makers cloud-based 360integrity toolset,
RISCm (Risk, Integrity & Strategic Corrosion Management). It delivers the ability to more consistently analyze, track, and monitor inspection anomalies.
As RISCm already hosts component records, all substrate types (pipes, vessels, structures) on site, it quickly
links substrate anomalies to relevant integrity management and inspection records.
Strategic Corrosion Management: Northumberland UK
Active harmonic flters for variable

frequency-motor drives
Oil and gas variable frequency-motor
drives that control pumps and motors are served by active harmonic
filters systems like this.
The integrated designs provide harmonic compensation up to the 50th
order in real-time. With 100, 150, 200,
250, 300, 350, and 400A capacities, operating at 480VAC
(10%), they provide nonlinear loads with reactive compensation and load current load balancing.
Schaffner EMC Incorporated: Edison NJ
Visit OG&PE at Turbomachinery & Pump Symposia: Booth 2228

August 2015
OGPE.com
SERVICES | SUPPLIERS
IMCA
Bruno Faure, Group Senior Vice President Subsea Projects and Operations at
Technip, a world leader in project management, engineering and construction
for the energy industry, has taken over
the role of President of the International
Marine Contractors Association (IMCA),
the association representing the interests
of over a thousand offshore, marine and
underwater engineering companies in
more than 60 countries.
In addition to becoming President of
IMCA, having served as Vice President
of IMCA since September 2014, he also
becomes Chairman of the associations
Overall Management Committee (OMC).
Bruno Faure joined Technip in July
2014 as Group Senior Vice President
Subsea Projects and Operations. He is a
Civil Engineer with a degree in Finance,
and has had 30 years in the oil and gas
industry. He joined Coflexip in 1985 as
a structural engineer, then installation
engineer, project engineer and then
occupied various positions in projects
for UK, Norway, Asia Pacific, USA and
Africa, before moving on to General
Management roles to become COO
Africa in 2006.
In 2006 he joined Stolt Comex
Seaway (now Subsea 7) as Projects and
Operations Director for Africa Region
and then became President for Region
Africa, Gulf of Mexico and Mediterranean
in Subsea 7 based in London.
ANTELOPE OIL TOOL

Antelope Oil Tool, an industry leading designer, manufacturer and seller
of patented casing and cementation
equipment, has developed the CentraMax PI1, an addition to the CentraMax
Series.
The CentraMax PI1 is used as an
alternative solution to centralizer subs in
close tolerance applications. The design
allows for both reciprocation and rotation
type applications, and is always pushed
when installed between two external
anchor devices. The CentraMax PI1 is
to be used when the annular clearance
between the casing O.D. and restriction
I.D. are sufficient, negating the require-
ment for a more expensive centralizer

sub solution.
The one-piece centralizer design contributes proven and effective restoring
force and standoff in under-reamed hole
sections, while being able to compress
and pass through narrow tolerance restriction sections, resulting in low starting
and running forces.
The CentraMax one-piece design
presents superior mechanical integrity,
high yield and tensile strengths, and
eliminates the potential of failure of
welds. The slip-on design can accommodate virtually any casing weight, grade
and threaded connection types.
CGG
CGG announced that it has been
awarded a contract by the Tanzanian
Petroleum Development Corporation
(TPDC) to acquire high-resolution gravity
gradiometry and aeromagnetic data over
two onshore areas along the SouthEastern Tanzanian Coastal Basin and the
eastern arm of the East African Rift.
Acquisition over a total area of
30,000 sq km will commence in midAugust 2015 and is scheduled to last up
to two months. Using the industrys lowest noise Gravity Gradiometry, FALCON,
CGG will deliver high-resolution data and
interpretation to help evaluate the hydrocarbon potential of these basins ahead
of future licensing rounds.
Tanzania has already established itself as a highly prospective hydrocarbon
province in East Africa with a series of
significant discoveries offshore and CGG
is excited to be part of this next phase
of TPDCs exploration of the onshore
basins. This survey will benefit from the
experience gained through the completion of many projects throughout Africa
using the most advanced technologies
available in the industry.
Earlier, the Parliament of the United
Republic of Tanzania passed a new Petroleum Bill, which will be signed soon.
Under the new Petroleum Bill, TPDC is
now lawfully recognized as a National Oil
Company (NOC). The NOC will participate fully in exploration and production
of oil and gas and this campaign in
particular signifies the commercial commencement of NOC in E&P activities in

Tanzania.
OMNITEK ENGINEERING CORP

Omnitek Engineering Corp., a developer
and seller of proprietary diesel-to-natural
gas engine conversion systems and
complementary products, including
new natural gas engines that utilize the
companys technology, announced the
appointment of Richard L. Miller as chief
financial officer, succeeding Alicia Rolfe
who elected to retire from her position to
honor personal commitments, as noted
in a recent Form 8-K filing.
Richard Miller, 55, has more than
16 years of financial management and
accounting experience. Prior to joining
Omnitek, he served as controller for
American Rim Supply, Inc., a privately
held company based in Carlsbad, California. He previously served as assistant
controller for Crestone Group, LLC, a
Carlsbad-based commercial bakery with
three facilities. Earlier in his career, Miller
was a tax manager with J.H. Cohn, LLP,
a regional full-service accounting firm
headquartered in New Jersey. He is a
certified public accountant (inactive) and
double majored in communications and
psychology, earning a Bachelor of Arts
degree with honors from the University
of California, Los Angeles.
WEATHERFORD INTERNATIONAL
Weatherford International plc announced
the commercial release of its Revolution rotary-steerable system (RSS) at the
Unconventional Resources Technology
Conference (URTeC). The ability to minimize risks and reduce time while drilling
is integral for operators seeking to arrive
at the production stage quickly and avoid
future intervention. The new generation
suite of Revolution RSS provides capabilities for diverse directional drilling applications in complex wellbores. Its point-thebit technology delivers clean, accurately
placed and completion-ready wellbores.
With advanced sensors and telemetry, the
system gives operators a reliable method
for drilling from vertical to horizontal in a
single run.
73
Weatherford was one of the first service providers to offer a rotary-steerable
system for HPHT environments. The
system allows operators to drill in HPHT
zones with temperatures exceeding 300
degrees F (149 degrees C), allowing
operators to produce wells in the increasingly challenging environments with
precise drilling control in long laterals,
high-angle curves and parallel vertical
sections in a single run. The point-the-bit
design and real-time geological control
of the Revolution RSS enable operators
to drill in a variety of wellbore environments, including unconventional fields,
HPHT environments, deepwater fields,
damaged and underbalanced formation
and brown fields.
The Revolution RSS has completed
several successful drilling projects for
major operators in the Eagle Ford Shale
in Texas. Recently, in an onshore horizontal well, Revolution RSS was used to
drill a well through a challenging, dense
limestone and sandstone formation to
a total depth of 16,559 feet (5,014 meters) and high temperatures up to 328
degrees F (164 degrees C). The average
rate of penetration was 75 percent faster
than conventional steerable motor assemblies. On a separate project with six
wells in the Eagle Ford, Revolution RSS
achieved an average of 180 ft/hr (55 m/
hr) on all six wells and a record of 227 ft/
hr (69 m/hr) on one well, reducing the
drilling cycle by two weeks and saving
the operator more than $1 million in
operational costs.
The Revolution RSS is compatible
with the full Weatherford suite of loggingwhile-drilling (LWD) formation evaluation
services, including real-time feedback
on tool settings and status, resulting in
smooth wellbores, which can be cased
with the extensive Weatherford casing
portfolio.
PENNTEX MIDSTREAM
PARTNERS, LP
PennTex Midstream Partners, LP, a
growth-oriented master limited partnership focused on owning, operating,
acquiring and developing midstream
energy infrastructure assets in North
74
America, announced that Richard (Rick)

S. Walker has been appointed to the
board of directors of the Partnerships
general partner (the Board), effective
July 24, 2015.
Mr. Walker is an independent director
and will serve as chairman of the audit
committee of the Board and serves as
the Managing Partner in the Houston
office of DHR International, a leading
global executive search firm.
Mr. Walker holds a BBA from Loyola
University, New Orleans and a MBA
from Bowling Green State University. Mr.
Walker is a certified public accountant in
the State of Texas.
ATLAS COPCO RENTAL

Atlas Copco Rental, a leading provider
of sustainable productivity solutions, has
acquired the operating assets of Mustang Services, a specialty dryer rental
business that primarily serves the rental
industry to supplement their existing
fleets.
Mustang Services rents out its
equipment, mainly adsorption type air
dryers, after coolers and filters to the
rental industry which service industrial,
pipeline and other end-users that require
dry compressed air in their processes.
The products are often rented together
with air compressors to provide customers with a total rental solution.
Dan Dorran is assuming the position of Vice-President of Operations for
Mustang Services. Dan has an extensive
and long career in the compressed air
and accessories rental business.
BAKER HUGHES
Baker Hughes announced the commercial release of its Integrity eXplorer
cement evaluation service: a radical
change in the evaluation of the cement
integrity of oil and gas wells. Existing
evaluation techniques, which have been
used for over thirty years, are acousticbased and may not provide the accuracy
needed when faced with some of todays
challenges. This new electromagneticacoustic technology allows operators to
directly assess the integrity of cement
bonds in any current wellbore environ-
ment or cement mixture.

Operators in the upstream sector
rely on the accuracy of cement-bond
logs to make critical decisions that can
affect long-term well integrity and the
environment. While cement compressive
strength has typically been used as a
key indicator of cement quality, todays
challenging environments require a
more detailed assessment. The Integrity
eXplorer service provides operators with
accurate and comprehensive data about
the properties of the respective cement
thereby enabling them to make critical
decisions to help protect their assets, reduce non-productive time, and minimize
unnecessary remediation. The Integrity
eXplorer service is the latest example
of Baker Hughes strategy to improve
well efficiency, optimize production and
increase ultimate recovery.
FAIRMOUNT SANTROL
Fairmount Santrol launched the Reducing Cost per BOE campaign at the
opening of the three-day Unconventional Resources Technology Conference
(URTeC).
During the conference, the company showcased field results verifying
self-suspending proppant technology
and a portfolio of resin-coated sand are
enabling operators to produce more oil
and gas at a lower cost per barrel of oil
equivalent.
The technologys hydrogel polymer
coating rapidly hydrates in water, which
allows proppant to resist settling and to
stack higher within the fracture. In this
thin fluid, proppant transport improves to
maximize the propped length and height
without polymer damage to the formation
and proppant pack, as with traditional
hydraulic fracturing fluids.
The company also highlighted how
curable resin-coated sand is lowering the cost per barrel of oil equivalent
with comprehensive proppant flowback
prevention. One south Texas operator increased the value of 23 wells by
$115,000 per stage, or $2.6 million total,
compared with the operators 23 other
wells treated only with frac sand in the
same field. The difference was proppant
flowback prevention that increased well
uptime.
Fairmount Santrols product portfolio
also includes CoolSet curable resincoated sand that sets without activator
to prevent proppant flowback; Super LC
curable resin-coated sand; Super DC
curable resin-coated sand, OptiProp
G2 curable resin-coated sand; PowerProp precured resin-coated sand; TLC
precured resin-coated sand; and THS
precured resin-coated sand.
HALLIBURTON
Halliburtons Wireline & Perforating
business has introduced the Reservoir
Monitor Tool 3-Detector (RMT-3D)
pulsed-neutron tool that helps solve for
water, oil, and gas saturations within
reservoirs using three independent
measurements (Sigma, CO, and SATG).
Relying on only one or two independent
measurements can reduce the accuracy
of results depending on conditions in
the formation and formation fluids. The
RMT-3D tool allows operators to calculate saturations using different methods
to acquire accurate results. The data is
collected with one trip in the hole, reducing nonproductive time and the potential
for costly additional trips.
LAYNE CHRISTENSEN COMPANY

Layne Christensen Company announced
the appointment of J. Michael Anderson
as Chief Financial Officer, effective July
20, 2015. Mr. Anderson will succeed
Andrew Atchison, who has served as
Laynes Chief Financial Officer, on an
interim basis, since August 1, 2014. Mr.
Atchison will continue to support Layne
through the leadership transition and has
agreed to serve as a consultant to support corporate initiatives.
Mr. Anderson brings more than 25
years of experience in senior management roles at publicly-traded companies
in the water and energy industries, and
in commercial and investment banking.
Mr. Anderson joins Layne from Southcross Energy Partners, L.P., a Master
Limited Partnership engaged in the natural gas midstream business, where he
served as Chief Financial Officer since
2012. Mr. Anderson previously served as

Chief Financial Officer of Exterran Holdings, Inc. and Exterran Partners, L.P.,
a global market leader in natural gas
compression and oil and gas services,
from 2003 until 2012.
Mr. Anderson spent ten years in investment banking at J.P. Morgan Chase
& Co. where he specialized in mergers
and acquisitions. He earned an MBA
in Finance from The Wharton School
of the University of Pennsylvania and
graduated with honors from Texas Tech
University with a BBA degree in Finance.
HYUNDAI CONSTRUCTION
EQUIPMENT AMERICAS
Hyundai Construction Equipment Americas has launched the HX series of Tier
4 Final-compliant hydraulic excavators
in the United States and Canada. The
first models, which range from 22 to 52
metric tons and include the HX220L,
HX260L, HX300L, HX330L, HX380L,
HX480L and HX520L, are hitting the
ground now. Smaller models and compact-radius models will follow in 2016.
Most notable is the all-new 8-inch
(20.3 cm) interactive, adjustable,
touchscreen cluster-monitor with haptic
remote control for all major functions,
easier operator accessibility and better
ergonomics. The haptic remote control
delivers reactive, tactile sensations using
vibrations and pulses to guide the operator through menu selections.
The new cab also features a more
powerful, climate-control system with
improved air efficiency and temperature
response, 15-percent more capacity, improved defrost capacity and more airflow
mode selections for optimized operator
comfort. Other innovations that make the
new Hyundai HX cab exceptionally comfortable for the operator include 13-percent more leg and foot space from the
seat to the pedals, reduced in-cab sound
level, optional single-pedal straight travel,
new heated operators seat with standard
air suspension and integrated console,
Bluetooth audio system, Miracast wireless functionality for viewing a mobile
device screen on the monitor, hot/cold
storage box, sunglasses compartment
and a large storage box with a retention

net for personal items.
The new Hyundai HX series models
HX220L, HX260L, HX300L, HX330L
and HX380L are powered by Cummins
engines, and the larger HX480L and
HX520L models are powered by Scania
engines. Cummins and Scania engine
technologies both achieve Tier 4 Final
emissions compliance through a combination of SCR (selective catalytic reduction) and DOC (diesel oxidation catalyst)
systems using DEF (diesel exhaust fluid).
New Tier 4 Final engine technologies, a
more efficient vertically stacked cooling
design, efficient electronic fan clutch,
plus many hydraulic system innovations
on the Hyundai HX series excavators
contribute to an overall fuel efficiency improvement of up to 10 percent compared
with 9A series models.
BMT GROUP
BMT Group, the leading international
maritime design, engineering and risk
management consultancy, has announced the appointment of Sir John
Hood KNZM as Chairman of BMT Group
Ltd with effect from 1 October 2015,
following the retirement of Dr Neil Cross
at the end of BMTs financial year on 30
September.
Sir John Hood is a non-executive
Director of BG Group plc and WPP plc,
Chairman of Urenco Ltd (from which he
will retire later this year), Matakina Ltd,
and Study Group Ltd; President and
Chief Executive Officer of the Robertson
Foundation; and Chair of the Rhodes
Trust and Teach For All. For five years
Sir John served as Vice-Chancellor of
the University of Oxford and, before that,
as Vice-Chancellor of the University of
Auckland after a successful career at
Fletcher Challenge, New Zealands largest industrial conglomerate.
With a Bachelor of Engineering and a
PhD in Civil Engineering from the University of Auckland, Sir John was awarded
a Rhodes Scholarship to study at the
University of Oxford where he read for an
MPhil in Management Studies. He was
appointed a Knight Companion to the
New Zealand Order of Merit in 2014.
75
STATISTICS
IMPORTS OF CRUDE AND PRODUCTS

Districts 1-4
District 5
Total US
7-17
7-10
7-17
7-10
7-17
7-10
7-18*
2015
2015
2015
2015
2015
2015
2014
1,000 b/d
Total motor gasoline .............

Mo. gas. blending comp.....
Distillate...............................
Residual ..............................
Jet fuel-kerosine ..................
Propane-propylene ..............
Other ...................................
775
731
153
97
147
72
700
676
667
132
78
32
62
846
41
39
41
57
75
16
86
7
5
14
36
135
14
67
816
770
194
154
222
88
785
683
672
146
114
167
76
913
624
614
91
114
122
57
780
Total products ......................
1,944
1,826
316
273
2,259
2,099
1,788
Total crude ...........................
6,753
6,176
1,187
1,178
7,940
7,354
7,406
Total imports ........................
8,697
8,002
1,503
1,451
10,200
9,453
9,194
EXPORTS OF CRUDE AND PRODUCTS
Total US
7-17-15
7-10-15
*7-18-14
1,000 b/d
366
366
375
144
144
112
1,228
1,228
1,146
390
390
382
600
600
301
1,013
1,013
803
3,741
3,741
3,119
571
571
273
4,312
4,312
3,392
5,888
(1,482)
7,370
5,141
(1,642)
6,783
OGJ CRACK SPREAD
7-24-15* 7-25-14* Change Change,

$/bbl %
SPOT PRICES
Product value
Brent crude
Crack spread
71.57 116.60 (45.03) (38.6)

55.75 106.40 (50.65) (47.6)
15.81 10.20
5.61
55.0
FUTURES MARKET PRICES

One month
Product value
75.24 120.55 (45.31) (37.6)
Light sweet crude
49.26 103.26 (54.00) (52.3)
Crack spread
25.98 17.29
8.69
50.3
Six month
Product value
67.77 115.65 (47.87) (41.4)
Light sweet crude
52.09 98.49 (46.40) (47.1)
Crack spread
15.68 17.15 (1.47) (8.6)
*Revised.
Source: US Energy Information Administration
Data available at PennEnergy Research Center.
Finished motor gasoline

Jet fuel-kerosine
Distillate
Residual
Propane/propylene
Other oils
Total products
Total crude
Total exports
NET IMPORTS
Total
Products
Crude
Additional analysis of market trends is available

through OGJ Online, Oil & Gas Journals electronic
information source, at http://www.ogj.com.
*Average for week ending.

Source: Oil & Gas Journal
5,803
(1,331)
7,134
*Revised.
Source: Oil & Gas Journal
CRUDE AND PRODUCT STOCKS

District
Motor gasoline
Blending
Jet fuel,
Fuel oils
PropaneCrude oil
Total
comp.
kerosine
Distillate
Residual
propylene
1,000 bbl
PADD 1 .....................................
PADD 2 .....................................
PADD 3 .....................................
PADD 4 .....................................
PADD 5 .....................................
14,292
139,089
234,313
21,803
54,387
60,803
48,300
73,547
6,468
27,167
55,404
42,329
63,698
4,740
24,444
11,495
6,007
17,349
589
8,667
49,298
31,255
43,973
4,361
12,630
8,800
1,142
24,784
263
4,277
4,207
25,246
55,180
1
3,057
July 17, 2015 ...........................

July 10, 2015 ............................
July 18, 20142 ...........................
463,884
461,418
371,072
216,285
218,011
217,871
190,615
192,612
188,196
44,107
43,510
37,303
141,517
141,279
125,934
39,266
40,193
36,165
87,690
87,382
65,451
Includes PADD 5. 2Revised.

REFINERY REPORTJULY 17, 2015

District
REFINERY
OPERATIONS
Gross
Crude oil
inputs
inputs
1,000 b/d
REFINERY OUTPUT
Total
motor
Jet fuel,
Fuel oils
Propanegasoline
kerosine
Distillate
Residual
propylene
1,000 b/d
PADD 1 ..............................................
PADD 2 ..............................................
PADD 3 ..............................................
PADD 4 ..............................................
PADD 5 ..............................................
1,198
3,745
8,901
627
2,690
1,173
3,741
8,733
630
2,593
3,194
2,559
2,110
324
1,635
95
249
845
30
502
345
1,063
2,912
182
571
63
61
223
16
108
216
346
929
1
166
July 17, 2015 ......................................

July 10, 2015 ......................................
July 18, 20142 .....................................
17,161
17,111
16,811
16,870
16,825
16,598
9,822
9,806
9,789
1,721
1,657
1,667
5,073
5,093
5,207
471
373
406
1,657
1,652
1,592
17,962 Operable capacity
95.5 utilization rate
Includes PADD 5. 2Revised.

76
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STATISTICS
OGJ GASOLINE PRICES
OGJ PRODUCTION REPORT
BAKER HUGHES RIG COUNT
Price
Pump
Pump
ex tax
price*
price
7-22-15
7-22-15
7-23-14
/gal
(Approx. prices for self-service unleaded gasoline)
Atlanta ..........................
213.4
259.3
Baltimore ......................
216.6
262.4
Boston ...........................
220.5
265.4
Buffalo ..........................
207.4
276.3
Miami ............................
214.9
269.3
Newark ..........................
222.3
255.2
New York........................
220.8
289.7
Norfolk...........................
204.0
239.7
Philadelphia ..................
224.4
284.6
Pittsburgh .....................
221.4
281.6
Wash., DC......................
229.7
271.6
PAD I avg ..................
217.8
268.7
354.6
356.7
361.1
363.6
372.1
350.4
364.6
361.4
369.4
364.2
364.4
362.0
Chicago .........................
Cleveland ......................
Des Moines ....................
Detroit ...........................
Indianapolis ..................
Kansas City ...................
Louisville .......................
Memphis .......................
Milwaukee .....................
Minn.-St. Paul ...............
Oklahoma City ...............
Omaha ..........................
St. Louis ........................
Tulsa .............................
Wichita ..........................
PAD II avg .................
249.5
226.5
232.2
212.5
202.1
223.6
240.0
221.5
234.0
229.8
208.4
214.6
241.1
221.6
218.9
225.1
307.0
272.9
272.6
272.9
262.3
259.3
290.9
261.3
285.3
276.8
243.8
260.3
276.8
257.0
261.3
270.7
401.1
379.3
349.4
352.4
355.4
347.3
360.3
362.3
361.4
354.4
325.5
339.4
329.3
323.3
351.2
352.8
Albuquerque ..................
Birmingham ..................
Dallas-Fort Worth ..........
Houston .........................
Little Rock .....................
New Orleans ..................
San Antonio ...................
PAD III avg ................
218.5
207.5
209.2
209.3
212.5
213.3
212.4
211.8
255.7
246.7
247.6
247.7
252.7
251.7
250.8
250.4
344.5
340.4
337.7
342.7
341.1
345.0
342.1
341.9
Cheyenne.......................
Denver ...........................
Salt Lake City ................
PAD IV avg ................
230.9
243.2
247.3
240.5
273.3
283.6
290.2
282.4
357.8
369.9
362.9
363.5
Los Angeles ...................

Phoenix..........................
Portland ........................
San Diego ......................
San Francisco................
Seattle...........................
PAD V avg .................
Weeks avg. ..................
June avg........................
May avg.. ......................
2015 to date .................
2014 to date .................
344.6
259.6
252.5
331.9
352.7
272.8
302.4
233.1
229.5
219.7
201.7
305.4
412.8
297.0
302.0
400.1
420.9
328.7
360.2
280.4
276.9
267.0
249.0
352.6
412.9
383.2
393.2
401.9
412.2
378.2
397.0
360.5
367.9
365.0
7-24-15
7-25-14
Alabama............................................
Alaska ...............................................
Arkansas ...........................................
California ..........................................
Land................................................
Offshore ..........................................
Colorado ............................................
Florida ...............................................
Illinois ...............................................
Indiana..............................................
Kansas ..............................................
Kentucky............................................
Louisiana ..........................................
N. Land ...........................................
S. Inland waters ..............................
S. Land............................................
Offshore ..........................................
Maryland ...........................................
Michigan ...........................................
Mississippi ........................................
Montana ............................................
Nebraska ...........................................
New Mexico........................................
New York............................................
North Dakota .....................................
Ohio...................................................
Oklahoma ..........................................
Pennsylvania .....................................
South Dakota.....................................
Texas .................................................
Offshore ..........................................
Inland waters ..................................
Dist. 1 .............................................
Dist. 2 .............................................
Dist. 3 .............................................
Dist. 4 .............................................
Dist. 5 .............................................
Dist. 6 .............................................
Dist. 7B ...........................................
Dist. 7C ...........................................
Dist. 8 .............................................
Dist. 8A ...........................................
Dist. 9 .............................................
Dist. 10 ...........................................
Utah ..................................................
West Virginia .....................................
Wyoming............................................
OthersNV-1 ...................................
1
11
4
11
11
0
39
1
2
0
11
3
76
25
4
17
30
0
0
2
1
2
51
0
69
20
107
44
0
374
1
0
48
41
16
20
4
23
4
35
148
13
4
17
7
18
21
1
6
5
11
46
45
1
69
2
3
2
30
3
119
29
18
17
55
0
0
15
6
1
94
0
178
43
204
53
0
886
2
0
121
83
60
30
8
31
15
100
318
42
15
61
27
27
52
1
Total US ........................................
Total Canada ................................
876
200
1,883
395
Grand total ...................................

US oil rigs..........................................
US gas rigs........................................
Total US offshore ...............................
Total US cum. avg. YTD .....................
1,076
659
216
31
1,116
2,278
1,562
318
60
1,824
2
7-24-15
7-25-14
1,000 b/d
(Crude oil and lease condensate)

Alabama .................................
27
Alaska ....................................
455
California ...............................
605
Colorado .................................
318
Florida ....................................
7
Illinois ....................................
28
Kansas ...................................
130
Louisiana ...............................
1,339
Michigan ................................
18
Mississippi .............................
70
Montana .................................
80
New Mexico.............................
430
North Dakota ..........................
1,233
Ohio ........................................
72
Oklahoma ...............................
350
Pennsylvania ..........................
21
Texas ......................................
4,010
Utah .......................................
117
West Virginia ..........................
38
Wyoming .................................
245
Other states ...........................
50
Total
9,643
1
OGJ estimate. 2Revised. Source: Oil & Gas Journal.
US CRUDE PRICES
Alaska-North Slope 27 .........................................
Light Louisiana Sweet ...........................................
California-Midway Sunset 13 ..............................
California Buena Vista Hills 26 ...........................
Wyoming Sweet .....................................................
East Texas Sweet ...................................................
West Texas Sour 34 ..............................................
West Texas Intermediate........................................
Oklahoma Sweet....................................................
Texas Upper Gulf Coast .........................................
Michigan Sour .......................................................
Kansas Common ...................................................
North Dakota Sweet ...............................................
Research Center.
WORLD CRUDE PRICES

OPEC reference basket
Rotary rigs from spudding in to total depth.

Defnitions, see OGJ Sept. 18, 2006, p. 46.
Source: Baker Hughes Inc.
IHS PETRODATA RIG COUNT

7-17-15
/gal
JULY 24, 2015

Total
supply
of rigs
Spot market product prices

No. 2 Distillate
Motor gasoline
Low sulfur diesel fuel
(Conventional-regular)
New York Harbor ......... 187.60 New York Harbor .........
Gulf Coast .................. 191.40 Gulf Coast ..................
Los Angeles ................
Motor gasoline
Kerosine jet fuel
(RBOB-regular)
New York Harbor ......... 297.60 Gulf Coast ..................
165.40
159.40
163.70
150.70
Propane
No. 2 heating oil
New York Harbor ......... 153.20 Mont Belvieu .............. 43.30
US Gulf of
Mexico. . . . . .
South
America
Northwest
Europe. . . . .
West
Africa. . . . . .
Middle
East. . . . . . .
Southeast
Asia. . . . . . .
Worldwide. . . .
Marketed
Marketed
supply
Marketed utilization
of rigs contracted rate (%)
110
74
58
78.4
71
67
60
89.6
101
95
84
88.4
73
68
54
79.4
159
152
136
89.5
97
853
89
767
57
637
64.0
83.1
Wkly. avg.
$/bbl
7-24-15
53.19
Mo. avg., $/bbl
May-15
June-15
OPEC reference basket.......................

Arab light-Saudi Arabia .......................
Basrah light-Iraq .................................
Bonny light 37o-Nigeria........................
Es Sider-Libya ......................................
Girassol-Angola....................................
Iran heavy-Iran.....................................
Kuwait export-Kuwait ...........................
Marine-Qatar........................................
Merey-Venezuela ..................................
Murban-UAE .........................................
Oriente-Ecuador ...................................
Saharan blend 44o-Algeria ...................
Other crudes
Minas 34o-Indonesia ............................
Fateh 32o-Dubai ...................................
Isthmus 33o-Mexico .............................
Brent 38o-UK ........................................
Urals-Russia ........................................
Differentials
WTI/Brent .............................................
Brent/Dubai..........................................
Includes state and federal motor fuel taxes and state

sales tax. Local governments may impose additional taxes.
Source: Oil & Gas Journal.
7-17-15
/gal
7-24-15
$/bbl*
57.76
43.51
42.35
51.39
40.89
41.50
39.50
44.50
44.50
38.25
36.50
43.75
36.00
*Current major refners posted prices except N. Slope lags 2

months. 40 gravity crude unless differing gravity is shown.
Source: Oil & Gas Journal. Data available at PennEnergy
REFINED PRODUCT PRICES
26
422
604
228
6
27
134
1,317
21
65
93
332
1,111
24
353
15
3,383
100
17
212
47
8,537
62.16
62.62
60.40
65.30
63.22
65.51
61.38
60.92
63.26
55.09
66.18
58.04
64.12
60.21
60.94
58.63
62.19
60.79
63.28
59.86
59.29
61.79
51.74
64.59
56.71
61.69
62.98
63.54
63.78
64.32
64.33
60.09
61.76
63.48
61.69
62.52
(5.04)
0.78
(1.88)
(0.07)
Source: OPEC Monthly Oil Market Report.

US NATURAL GAS STORAGE1

7-17-15
Producing region ................

Consuming region east ......
Consuming region west ......
Total US .............................
Total US2 ............................
7-10-15
7-17-14
bcf
1,094
1,082
747
1,276
1,235 1,092
458
450
367
2,828
2,767 2,206
Change,
Apr. 15
Apr. 14
%
1,804
1,066
Change,
%
46.5
16.8
24.8
28.2
69.2
Source: EIA Weekly Petroleum Status Report.

78
Source: IHS Petrodata

Data available in PennEnergy Research Center
Working gas. 2At end of period.

Source: Energy Information Administration
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STATISTICS
PACE REFINING MARGINS
US Gulf Coast
Composite US Gulf Refnery..............
Mars (Coking) ..................................
Mars (Cracking) ...............................
Bonny Light ......................................
US PADD II
Chicago (WTI)...................................
US East Coast
Brass River ......................................
East Coast Comp .............................
US West Coast
Los Angeles (ANS) ............................
NW Europe
Rotterdam (Brent) ............................
Mediterranean
Italy (Urals) ......................................
Far East
Singapore (Dubai) ............................
WORLDWIDE NGL PRODUCTION
May June
July
July
2015 2015 2015
2014
Change
$/bbl
Change,
%
14.96
14.86
11.29
10.55
15.87
16.74
13.55
13.68
17.63
19.32
15.69
12.99
11.20
11.86
8.78
6.11
57.4
62.8
78.7
112.7
19.79
19.84 24.78
12.98
11.80
90.8
11.91
13.23
17.62 17.03
21.63 21.13
6.54
6.78
10.49
14.35
160.4
211.7
28.22
16.46 35.52
7.23
28.29
391.2
6.43
7.45
6.91
6.88
4 month
Change vs.
average
previous
Apr.
Mar.
production
year
2015
2015
2015
2014
Volume
1,000 b/d %
Brazil ...................................
Canada................................
Mexico .................................
United States ......................
Venezuela ............................
Other Western
Hemisphere .......................
Western
Hemisphere..................
90
703
311
3,313
213
90
730
340
3,181
213
94
708
337
3,144
213
82
690
364
2,759
213
11
18
(27)
385
13.7
2.7
(7.4)
13.9
229
243
240
244
(4)
(1.6)
4,859
4,797
4,735
4,352
384
8.8
330
71
372
47
345
57
317
67
28
(10)
8.8
(14.5)
5.18
5.79
7.33
1.23
6.10
497.4
6.17
6.64
6.49
0.46
6.03
1,311.4
Norway.................................
United Kingdom ...................
Other Western
Europe ...............................
10
(1)
(10.0)
5.65
5.67
3.79
0.87
2.92
335.1
Western Europe .............
410
428
411
394
17
4.4
Russia .................................
Other FSU ............................
Other Eastern
Europe ...............................
Eastern Europe ..............
753
157
753
157
756
156
719
168
37
(12)
5.1
(7.3)
13
923
13
923
13
925
14
902
(1)
23
(8.2)
2.6
Algeria .................................
Egypt ...................................
Libya....................................
Other Africa .........................
Africa..............................
340
205
50
83
678
340
204
50
83
677
340
202
50
83
674
340
190
44
82
656
12
6
19
6.3
14.3
0.5
2.8
Saudi Arabia........................
United Arab Emirates ..........
Other Middle East ................
1,700
400
691
1,700
400
691
1,700
400
691
1,830
400
657
(130)
34
(7.1)
5.1
Middle East.....................
2,791
2,791
2,791
2,887
(96)
(3.3)
Australia..............................
China...................................
India ....................................
Other AsiaPacifc ...............
AsiaPacifc ...................
TOTAL WORLD .................
72
105
314
491
10,151
79
105
314
498
10,113
74
104
314
491
10,027
71
102
341
513
9,702
2
(27)
(21)
325
4.6
2.0
(7.8)
(4.2)
3.4
Source: Jacobs Consultancy Inc.

US NATURAL GAS BALANCE

DEMAND/SUPPLY SCOREBOARD
Apr.
Total
YTD
Apr.
Mar.
Apr. 20152014 YTD 20152014
2015
2015 2014 change 2015
2014
change
bcf
DEMAND
Consumption ...................
Addition to storage ..........
Exports ............................
Canada .........................
Mexico ..........................
LNG ...............................
Total demand ..................
2,044
405
123
52
71
2,572
2,636
181
163
89
74
2,980
1,975
323
122
65
57
2,420
69
82
1
(13)
14
152
10,780 10,535
718
629
563
545
279
323
278
219
6
3
12,061 11,709
245
89
18
(44)
59
3
352
SUPPLY
Production (dry gas) ........
Supplemental gas............
Storage withdrawal..........
Imports ............................
Canada..........................
Mexico ...........................
LNG................................
Total supply .....................
2,239
5
84
205
202
3
2,533
2,299
4
375
257
242
15
2,935
2,058
5
105
201
198
3
2,369
181
(21)
4
4
164
8,885 8,164
19
20
2,059 2,465
995
976
954
957
1
41
18
11,958 11,625
721
(1)
(406)
20
(3)
(1)
23
334
Totals may not add due to rounding.

Source: Oil & Gas Journal.
OXYGENATES
NATURAL GAS IN UNDERGROUND STORAGE

Apr.
Mar.
Feb.
Apr.
2015
2015
2015
2014
Change
bcf
Base gas
Working gas
Total gas
4,364
1,804
6,168
4,364
1,482
5,846
4,363
1,677
6,040
4,357
1,066
5,423
Apr.
Mar.
YTD
YTD
2015
2015 Change
2015
2014
Change
1,000 bbl
2,477
738
3,215
Source: DOE Monthly Energy Review.

Data available at PennEnergy Research Center. NOTE: No new data at press time.
Fuel ethanol
Production ..................
Stocks .........................
27,910
20,787
MTBE
Production ..................
Stocks .........................
1,368
704
29,489 (1,579)
20,865
(78)
823
889
545
(185)
113,942 109,698
20,787 17,356
3,708
704
4,430
671
4,244
3,431
(722)
33
Source: DOE Petroleum Supply Monthly.

Data available at PennEnergy Research Center. NOTE: No new data at press time.
US COOLING DEGREEDAYS
June
2015
June
2014
Normal
2015 %
change
from
normal
New England ................................................................

Middle Atlantic .............................................................
East North Central........................................................
West North Central .......................................................
South Atlantic ..............................................................
East South Central .......................................................
West South Central.......................................................
Mountain ......................................................................
Pacifc ..........................................................................
67
137
134
213
402
369
460
302
186
72
134
172
196
365
342
455
256
118
63
117
147
192
319
296
431
229
100
6.3
17.1
(8.8)
10.9
26.0
24.7
6.7
31.9
86.0
111
220
205
264
910
611
919
421
221
78
152
228
292
775
551
867
416
200
69
140
198
266
679
488
857
373
157
60.9
57.1
3.5
(0.8)
34.0
25.2
7.2
12.9
40.8
US average*............................................................
256
238
213
20.2
459
415
375
22.4
Total degreedays
Jan. 1 through June 30
2015
2014
Normal
% change
from
normal
*Excludes Alaska and Hawaii.

Source: DOE Monthly Energy Review.
80
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P6
D&L Oil Tools

www.dloiltools.com
Deep Offshore Technology
Italy
www.deepoffshoretechnology.com
Ferruccio Silvera, Viale Monza, 24 20127 Milano Italy;

Tel:+02.28.46 716; E-mail: info@silvera.it
Fidelity Investments
Japan
www.fidelity.com
e.x.press sales division, ICS Convention Design Inc.

6F, Chiyoda Bldg., 1-5-18 Sarugakucho, Chiyoda-ku,
Tokyo 101-8449, Japan, Tel: +81.3.3219.3641, Fax:
81.3.3219.3628, Masaki Mori, E-mail: Masaki.Mori@
ex-press.jp
China / Korea / Singapore / Asia-Pacific
Fincantieri
P13
81
www.offshorewestafrica.com
Oil & Gas Journal
72
79
57
Phoenix Park Gas Processors

LTD
19, 20
www.ppgpl.com
33
PNEC Conferences
87
www.pnecconferences.com
Fugro Geoconsulting LTD
Gas Processors Association Europe
United Kingdom / Scandinavia / Denmark /

The Netherlands
www.gazprom-international.com
65
Graham Hoyle, 10 Springfield Close, Cross, Axbridge,

Somerset BS26 2FE, Phone: +44 1934 733871 Mobile:
+44 7927 889916, grahamh@pennwell.com or ghms@
btinternet.com
GITA Oil & Gas Pipeline

Conference & Exhibition
West Africa
Greatwall Drilling Company
Dele Olaoye, Flat 8, 3rd Floor, Oluwatobi House, 71

Allen Ave., Ikeja Lagos, Nigeria; Tel: +234 805 687 2630;
Tel: +234 802 223 2864; E-mail: dele.olaoye@q-she.com
Hempel A/S
15
7
47
www.us.hsbc.com/cashmanagement
P8
P5
www.fuelfiltrationmanager@schroederindustries.
com
Sensonics Ltd
P10
Thermamax GMBH
21
www.thermamax.com
Weatherford
6, C4
www.weatherford.com
www.honeywellprocess.com/oilandgas
HSBC
P4
www.sensonics.co.uk
www.hempel.com/avantguard
Custom Publishing
Rembe GMBH Safety + Control

Schroeder Industries
77
www.gwdc.com.cn
Honeywell
Proto Industrial Tools
www.rembe.de
www.pipelineweek.com
Rhonda Brown, Foster Printing Co., Reprint Marketing

Manager; 866.879.9144 ext 194, Fax: 219.561.2023;
4295 Ohio Street, Michigan City, IN 46360;
rhondab@fosterprinting.com. www.fosterprinting.com
C3
www.protoindustrial.com/tethered
www.gpaeurope.com/
Gazprom International
Power-Gen Natural Gas 2015

www.power-gennaturalgas.com
www.fugro.com/problem-solved
Michael Yee, 19 Tanglin Road #05-20, Tanglin Shopping

Center, Singapore 247909, Republic of Singapore; Tel: 65
9616.8080, Fax: 65.6734.0655; E-mail: yfyee@singnet.
com.sg
OGJ Reprints
41
www.moxa.com
Offshore West Africa

P11
61
www.mechanixwear.com
Moxa Americas, Inc.

www.centa.info
www.matrixservicecompany.com
Mechanix Wear
Carhartt
P10
www.prosysslm.com
Matrix Service Company

11
P3
www.magnatrol.com
Mangan
P12
13
www.kobelcocompressors.com
Magnatrol Valve Corp

18
www.klxenergy.com
Kobelco Compressors America, Inc.

23
17
www.kenwoodusa.com
KLX Energy Services

31
PAGE
www.iri-oiltool.com
JVCKenwood
P9
www.american-usa.com
Stan Terry, (713) 963-6208, stant@pennwell.com
Stefy Picoitti Thompson, Tel: +33(0)4 94 70 82 63; Cell:

+33(0)6 21 23 67 02, stefaniat@pennwell.com.
Daniel Bernard, 8 allee des Herons, 78400 Chatou,
France; Tel: 33(0)1.3071.1119, Fax: 33(0)1.3071.1119;
E-mail: danielb@pennwell.com
C2
www.altronic-llc.com
American
COMPANY NAME
Industrial Rubber Inc
www.afpm.org
Mike Twiss, Miklin Business Services, Unit 15,

3 Benjamin Way, Rockingham, Western Australia 6168;
Tel +61 8 9529 4466, Fax +61 8 9529 4488
Email: miklinbusiness@bigpond.com
Jim Klingele, (713) 963-6214, jimk@PennWell.com
1455 West Loop South, Suite 400, Houston, TX 77027
PAGE
25
Wilhelm Layher GmbH & Co.KG
29
www.oilandgas.layher.com
Roy Markum, Vice-President/Custom Publishing, roym@

pennwell.com, Phone: 713-963-6220, Fax: 713-9636228
PennWell
1455 West Loop South, Suite 400, Houston, TX 77027
www.ogj.com
This index is provided as a service. The publisher does not assume any liability for errors or omission.
86
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THE EDITORS PERSPECTIVE
EPA initiatives
give new meaning
to political gridlock
by Bob Tippee, Editor
Bad energy policy has one positive attribute: a
strong tendency for mistakes to devour themselves.
At the US Environmental Protection Agency,
that historically prolific manufacturer of energy
mistakes, a predictable reckoning might be
especially thorough.
EPA soon will publish final rules on its
Clean Power Plan capping emissions of greenhouse gases from existing and future generators
fueled by fossil energy.
The dominant public response so far, to the
extent one exists, is the cuddly supposition
that EPA is acting against deleterious climate
change.
That view will change when effects become
more than press-release projections from
groups dismissed now as special interests.
NERA Economic Consulting expects
electricity prices in the US to increase by an
average 12-17%. The North American Electric
Reliability Corp. has warned of grid-reliability
problems.
To a citizenry increasingly dependent on
electronic convenience, such outcomes would
not inspire cheery thoughts about the elected
leadership. Politics will require change.
Meanwhile, EPA proposes a new standard
for ground-level ozone that will place an estimated 331 counties out of compliance, atop
227 counties in violation of a standard set in
2008. In some areas, the proposed standard is
below background ozone levels.
Costs of meeting the toughened standards
will be high. And EPA will be able to withhold
federal transportation funding in noncompliant
areas.
Herein resides the extra self-correction
mechanism.
According to the US Chamber of Commerces Institute for 21st Century Energy,
failure by the Washington, DC, region to meet
ozone standards would jeopardize $511 million
in funding for 13 area transportation projects in
fiscal 2019 and 2020.
The work includes a streetcar, railway
capacity expansion, highway interchanges, and
other plans addressing what the institute calls
some of the worst traffic conditions in the
country.
About the time Americans everywhere are
experiencing brownouts and diminishingly affordable electricity, therefore, Washington, DC,
will become gridlocked.
So demands will consolidate for politically
induced rationalization. And the unbridled regulators who caused it all will beto everyones
benefitstuck in traffic.
(From the subscription area of www.ogj.com,
posted July 24, 2015; authors e-mail: bobt@
ogjonline.com)
88
WATCHING GOVERNMENT
Nick Snow
Washington Editor
Starting with whats possible

Before anyone snickers too loudly that
the comprehensive energy bill the
US Senate Energy and Natural Resources Committee planned to mark
up on July 28 contained no significant
oil and gas provisions, consider this
long-held congressional truth: Start
with whats possible before attempting the impossible.
That obviously was what Committee Chair Lisa Murkowski (R-Alas.)
had in mind when she proposed
ending restrictions on exports of USproduced crude oil and establishing
shares of federal revenue for coastal
states from production off their
shores in a separate measure.
Keeping such controversial issues
out of the broader bill clearly made it
more palatable to its cosponsor, Ranking Minority Member Maria E. Cantwell
(D-Wash.). It also continued the
committees bipartisan tradition, which
sets it apart from most other congressional bodies, so it could discuss other
pressing energy policy issues.
After months of working together,
the bipartisan legislation we introduced today marks a critical step
toward the modernization of our federal energy policies, Murkowski said
when she and Cantwell introduced
the bill on July 22.
By focusing on areas where
agreement was possible, we have
assembled a robust bill with priorities
from many senators that will promote
our economic growth, national security, and global competitiveness, the
committees chair indicated.
Cantwell cited the bills provision
that would permanently reauthorize
the Land and Water Conservation
Fund. This important program has

helped to protect many of our nations
iconic and most popular national
parks, forests, and public lands, and
is itself a treasure, she said.
The bills primary oil and gas
provisions deal with the Strategic
Petroleum Reserve, LNG exports, and
working more closely with states on
oil and gas exploration and production oversight.
Governors concerns
This last point aligns with what Utah
Gov. Gary R. Herbert (R) said when
he became chairman of the National
Governors Association at that groups
summer meeting on July 25. His
2015-16 initiative, States: Finding
Solutions, Improving Lives, aims to
enhance federal-state partnerships,
highlight state solutions, and share
best practices.
Herbert and other Rocky Mountain
governors did not like the US Bureau
of Land Managements approach to
regulating hydraulic fracturing on the
onshore public and Indian tribal lands
it oversees.
Murkowski, meanwhile, called
proposals calling for the sale of 101
million bbl of SPR crude for $9 billion
to partially pay for the federal highway
bill a bad deal on July 27 as she
issued a new report highlighting the
reserves importance to domestic
energy security.
It would be like cashing in our
home insurance policy to pay for
repaving the driveway, Murkowski
said. She wants a full SPR review
before Congress raids that particular
cookie jar.
Brought to you by the most

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Oil & Gas Journal.
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NORTHWEST EUROPE EXPLORATION, APPRAISAL WELLS

Cornyn calls for more

Drilling activity declines slightly

Gazprom Neft advances

Joint venture plans

Egypt advances refinery

Oseberg B is one of three platforms in Statoil

REFINERS REALIGNMENT, 1995 2015

FLOW CURVE, LOW-PERMEABILITY CORES

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EXPLORATION & DEVELOPMENT

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CBM producer Walter Energy files for Chapter 11

Oil & Gas Journal

How can we conduct a class inspection

Fugro Subsea provides ROV systems

ICE BRENT / NYMEX LIGHT SWEET CRUDE

US INDUSTRY SCOREBOARD 8/3

Latest week 7/17

TOTAL PRODUCT SUPPLIED

Refining, 1,000 b/d

Crude runs to stills

Latest week 7/17

Stocks, 1,000 bbl

ICE GAS OIL / NYMEX HEATING OIL

Supply, 1,000 b/d

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB

Product supplied, 1,000 b/d

WTI CUSHING / BRENT SPOT

Light sweet crude ($/bbl)

PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU

Note: Monthly average count

NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3

available 2Reformulated gasoline blendstock for oxygen blending

BAKER HUGHES RIG COUNT: US / CANADA

Oil & Gas Journal | Aug. 3, 2015

INVENTING. COLLABORATING. LEADING.

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