oilfield technology volume 07 issue 4-april 2014
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ILFIELD TECHN
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APRIL 2014 | EXPLORATION | DRILLING | PRODUCTION
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VOLUME 07 ISSUE 4-APRIL 2014
Final-processed image (above) from wide-azimuth acquisition compared to interim-processed Fast Trax image (below) from the new StagSeis acquisition technique over the same line location.
StagSeisTM
Fast TraxTM results from Gulf of Mexico available now
For more information contact our Houston of� ceAllie [email protected]
cgg.com/stagseis
Final-Processed Wide-Azimuth RTM
Interim-Processed StagSeis RTM (available now)
13A-SV-611-V1 StagSeis Fast Trax_OilfieldTech_April_2014.indd 1 18/03/14 16:35
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ILFIELD TECHN
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APRIL 2014 | EXPLORATION | DRILLING | PRODUCTION
www.energyglobal.com
VOLUME 07 ISSUE 4-APRIL 2014
OFC_OT_April_14.indd 1 07/04/2014 16:33
ISSN 1757-2134
Contents April 2014 Volume 07 Issue 04
4918
03 Comment
05 World news
12 Down Mexico wayAdrian Lara, GlobalData, USA, examines Mexico’s Energy reform, from the legal possibilities to an operating reality.
18 East meets WestOilfield Technology correspondent Mark Robinson examines the opportunities in the Gulf of Mexico that are drawing the attention of Asia’s NOCs.
22 Co-operation is keyAnne-Mette Johansen, Ramboll Oil & Gas, Denmark, explains the importance of co-operation between companies working to keep the world’s largest jack-up drilling rig fully operational.
27 Shedding light on LEDsBen Myer, Dialight, USA and Eric Peterson, Friedman Electric Supply, USA, explain how LED lighting can improve drill site safety and efficiency.
33 On the riseStewart Maxwell, Aquaterra Energy, UK, discusses the fatigue implications of multi-well campaigns using drilling risers.
37 Rising integrityAlex Rimmer, 2H Offshore, UK and Edward Elletson, Pulse Structural Monitoring, UK, describe a real time monitoring system for measuring the structural response of a high pressure drilling and completion riser in the North Sea.
44 A mean, clean, oil recovery machineAs more oil and gas production technology moves from the surface to the seabed, subsea water treatment is lagging behind. Eirik Dirdal, Seabox, Norway, discusses how the results from the world’s first full-scale pilot of a subsea treatment plant could be a game-changer.
49 Controlling flow at greater depthsBen Wait, Trelleborg Offshore & Construction, UK, discusses why operators are focusing less on economics and putting increasing emphasis on project specific qualification and product reliability when it comes to subsea architecture and pipeline insulation coatings.
53 New technologies for a new environmentSvein Erik Gregersen, Emerson Process Management, Norway, explores the developments in subsea multiphase meter technologies that are helping these devices operate in ever-harsher conditions.
58 Stay awhile by the NileMike Main, Viking SeaTech, UK, highlights the challenge of applying the latest subsea mooring technology offshore Egypt.
63 Putting deepwater ropes to the testTaking testing a step further to investigate ‘what if’ scenarios, rope performance in arctic conditions and cut-resistant mooring rope technology holds the key to operators successfully developing new deepwater fields, as Neil Schulz, Lankhorst Ropes, the Netherlands, explains.
67 Seeing with soundAngus Lugsdin, Tritech International Ltd, UK, reviews recent developments in mooring integrity monitoring systems for FPSOs.
71 Downhole tool developmentsBrian Sidle, Welltec, Denmark, explores some of the latest developments in downhole tool technologies that are helping the oil and gas industry boost output rates and extend the lifespan of producing wells.
75 Keeping an eye openFrancis Neill, EV, UK, investigates the significant changes in downhole video technology.
81 Making way for the next generationScott Powell, Brad Ivie and Benoit Botton, National Oilwell Varco, USA, take a look at the next generation of performance drilling combining PDC bits and high frequency axial percussion.
89 Understanding inventoriesRon Laidman, Guardian, a ShawCor company, Canada, explains how advances in tubular inventory management can result in reduced costs and downhole failures.
94 The importance of isolationAs services that support multi-stage fracturing have increased in price, new wellbore pressure isolation technologies have been developed to eliminate the need for expensive rig-ups whenever possible. Sammy Clary, Magnum Oil Tools International, USA, explains.
97 Casing centralisers revisitedChristian F. Brown and Alfredo Sanchez, Top-Co Cementing Products Inc., USA, offer a practical guide for drilling engineers and field personnel on relevant testing, planning and selection for today’s wells.
103 Anti-ageing technologyJustin Bowersock, TAM International, USA, reviews various technologies that are helping operators overcome cement integrity challenges key to the revitalisation of ageing Gulf of Mexico assets.
108 Abandoned but not forgottenWith many oil and gas fields now including a mix of operating, suspended and abandoned wells, Dr Liane Smith, Wood Group Intetech, UK, examines how well integrity management not only reduces the risk associated with decommissioning, but can improve recovery rates, well design and construction.
113 Better than evolutionBrian Teutsch, Baker Hughes, USA, uses developments in drilling fluid technology as an example to show how the mere evolution of technology is not always enough to meet the demands posed by industry.
117 Identifying inhibitorsFiona Mackay, LUX Assure, UK, discusses a new testing kit for analysing the concentration of methanol and monoethylene glycol (MEG) in water, crude oil and condensate.
120 Choosing the right chemicals for unconventionalsRichard Lanthier, AES Drilling Fluids, USA, details some of the latest drilling fluid developments that are helping operators drill unconventional wells.
123 Upstream oil & gas brand review 2014David Haigh and Richard Yoxon, Brand Finance Plc, UK, provide an overview of the biggest brands in the upstream oil and gas industry and look into what makes a brand stand out.
Copyright © Palladian Publications Ltd 2014. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK. Images courtesy of www.bigstockphoto.com.
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Comment April 2014
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April 2014 Oilfield Technology | 3
Cecilia Rehn, [email protected]
Sometimes bad luck can haunt the most promising of ventures. I know I am not alone in looking at Kashagan and shaking my head in disbelief at how something with such potential could face so many pitfalls.
Following seismic tests in the 1990s, Shell drillers confirmed that a giant field lay beneath the shallow waters of the Caspian Sea. It remains one of the largest discoveries in the last 40 years, with an estimated 13 billion barrels of
recoverable reserves. The government of Kazakhstan, keen to modernise and establish itself as an oil and gas nation independent from its former Soviet masters, struck a deal with foreign firms including Eni, Shell, Total SA and predecessor companies of ConocoPhillips and Exxon Mobil Corp. It was decided in 2001 that Italy’s Eni would lead the US$ 10 billion project, but all companies in the international consortium including Kazakhstan’s state-owned KazMunaiGas (KMG), were given veto power.
First oil was expected back in 2005, but now nine years later and at least US$ 30 billion over budget; operations have been halted indefinitely. A disappointing false-start last autumn led to the discovery of leaks along the 55 mile gas pipeline, caused by sulphide stress cracking. At time of press, the North Caspian Operating Company (NCOC) has confirmed that the project has been shut down and it is expecting test results on excavated sections of the pipeline soon. The project could remain offline until 2016.
It is understandable that the US media has enjoyed documenting this downfall. After all, when Kashagan was first announced, the US was looking at a vastly different energy landscape before game-changing tight oil discoveries and hydraulic fracturing breakthroughs. The country is now on track to energy independence.
Americans thrilled about their newfound reserves can also thank their political stability and largely co-operative culture for the success. Both onshore and offshore the industry is booming, and the USA remains a secure investment for many. The deep waters of the Gulf of Mexico are considered some of the world’s most challenging. Yet despite new rules and regulations in the post-Macondo era, the region is still considered a predictable, safe bet. It contributed 17% of the crude oil produced in the US in 2013 according to the EIA, and remains an attractive area for all the majors. Government estimates report that some 48 billion barrels could still be recovered from the Gulf, a healthy number considering it has seen decades of production.
“A barrel of discovered oil in the Gulf of Mexico is difficult to beat for value anywhere else, even with the increased costs of doing business,” Jez Averty, Senior Vice President of North American Exploration at Statoil commented last year.1
In contrast, the challenging environment can only be blamed for some of Kashagan’s troubles. True, the shallow waters freeze all the way to the sea floor in winter, making drilling with conventional rigs impossible. The high sulphur content means another set of infrastructural challenges, but reported management disputes between the partner companies, punishing requirements for local workers and financial penalties levied by the Kazakh government for delays have arguably affected the project more severely. One cannot help but ask whether there are simply too many cooks in the kitchen?
The US oil and gas industry sees over US$ 200 billion in investments each year, and its skilled workforce, solid property rights and stable political landscape ensure a strong platform for this industry.
The Gulf of Mexico continues to demonstrate the tenacity and talent of engineers, executives and operators. It is the host of many exciting new projects such as Chevron’s Jack/St. Malo development. Delivered earlier this year, the floating production platform could eventually double its initial 170 000 bpd capacity, making it one of the largest in the world. I expect many of those involved in the project have stories to tell and experiences to share.
Lauded as the world’s foremost event for the development of offshore resources in the fields of drilling, exploration, production, and environmental protection, the Offshore Technology Conference in Houston is an impressive exhibition of celebration, collaboration and friendly competition.
On that note, a senior official at KMG described the lack of co-operation and communication between Kashagan partner firms as “a marriage that is made in hell.”2 In contrast, the projects in the Gulf of Mexico are enjoying an extended honeymoon phase.
If you’ve got a success story to share, or are seeking a resource for monthly updates on the latest technologies and oilfield solutions, the Oilfield Technology team will be at OTC (booth 11101). See you there!
1. Hays, K. and Wade, T., ‘Analysis: From Big Foot to Bluto, Gulf of Mexico set for record oil supply surge’, Reuters, (27 October 2013).2. Williams, S., Amiel, G. and Scheck, J. ‘How a Giant Kazakh Oil Project Went Awry’, The Wall Street Journal, (31 March 2014).
© 2014 Baker Hughes Incorporated. All Rights Reserved. 40155 02/2014
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World news April 2014
In brief
April 2014 Oilfield Technology | 5
Russia and Iran working towards oil-for-goods deal potentially worth up to US$ 20 billionAccording to sources familiar with the negotiations, Russia and Iran have moved a step closer to agreeing on an oil-for-goods deal that has the potential to be worth up to US$ 20 billion and would enable Tehran to boost its energy exports and flout Western sanctions.
According to one Russian source, at the time of writing all that remained for the deal to be complete was a final agreement on the price that would be set on the Iranian oil. In exchange for the oil, Russia would supply food and various industrial goods including metals. The source also stated that the deal would ultimately reach some US$ 20 billion in value, but it would be launched in stages with the first stage due to be worth US$ 6 - 8 billion.
It is believed that in exchange for the goods, Iran will provide Russia with approximately 500 000 bpd of oil for 2 to 3 years. One Iranian official was quoted as saying, “Iran can swap around 300 000 bpd via the Caspian Sea and the rest from the Gulf, possibly Bandar Abbas port.” The official added that “the price under negotiation is lower than the international oil price, but not much, and there are few options. But in general, a few dollars lower than the market price.”
The Iranian official quoted by Reuters was recorded as saying that missiles would be involved in the deal along with Russian assistance in the construction of two nuclear power plants. This contradicts other sources who have ruled out the possibility of military equipment being exchanged.
As yet, neither the Russian nor Iranian governments have commented on the deal.
Genel Energy plc in Angola exploration licences dealGenel Energy has announced that, together with White Rose Energy Ventures (WREV), it has agreed to acquire 15% working interests in Blocks 38 and 39 offshore Angola for US$ 281 million. The two blocks, situated in the Kwanza basin, cover an area of 14 000 km2 in water depths ranging from 1500 to 2500 m.
Jim Bradley, Chief Executive of WREV was quoted as saying that the blocks were in an area “where acreage is extremely tightly held and access to opportunities is rare. We have successfully negotiated entry to two blocks with high quality, high volume, low risk, strategic prospects offering the potential for early proof of value and attractive investment returns on interest.”
Other companies involved in Block 38 include Statoil with a 55% stake and Sonangol with a 30% stake. Block 39 will be similarly split, with Statoil holding 40%, Sonangol with 30% and Total with 15%.
Pluspetrol uses Dopeless technology in Vaca MuertaPluspetrol successfully used Dopeless® technology for the first time in a horizontal well in Vaca Muerta, a field in the Argentine province of Neuquén. This field has technically recoverable resources of 20 billion bbls of oil and 583 trillion ft3 of gas (Vaca Muerta y Los Molles).
The company selected 7 in. and 5 in. casing with TenarisHydril Wedge 513™ and Wedge 563™ Dopeless premium connections. TenarisHydril Wedge Series 500™ connections were specially designed for demanding applications in which high torque strength is critical. Tenaris also provided technical assistance throughout the operation.
Pluspetrol drilled the PSO-1009h well to a total depth of 3900 m (11 811 ft). The operation was completed safely without rejects and re-makeups.
Dopeless technology is a dry, multifunctional coating applied at Tenaris mills in a controlled industrial process.
New Zealand Energy and Resources Minister Simon Bridges has launched New Zealand’s third block offer for oil and gas exploration. The blocks on offer cover an area of 405 000 km2 and include three offshore basins: the East Coast Basin, Tarankai Basin and the West Coast Basin.
UK According to a statement by Francis Eagan, the CEO of Cuadrilla Resources, the UK “would take two, three or four years to get up to appreciable production rates” of shale gas if restrictions on hydraulic fracturing were removed in case of a national emergency.
Tensions surrounding Russia’s recent actions in Ukraine have raised concerns over Europe’s ability to access energy supplies in a major crisis. Michael Fallon, Minister for State and Energy said that without shale, the UK would need to import 70% of its gas by 2025.
Croatia Ivan Vrdolijak, Croatia’s Minister of Economy has announced the opening of the country’s first offshore oil and gas licensing round in the hopes of attracting US$ 5.2 billion of investment.
The licensing round will see a total of 29 blocks (covering 36 823 km2) become available. Contracts will be based on a production sharing model and will last 30 years with a five year exploration phase and a 25 year production phase.
Vrdolijak was quoted as saying that the government had “streamlined bureaucracy and removed obstacles to investment.” The deadline for bids has been set for early November, and awards are expected in early 2015.
6 | Oilfield Technology April 2014
World newsApril 2014
In brief Seadrill in US$ 319 million jack-up contracts win It has been announced that the offshore drilling company, Seadrill has won multiple contracts and one extension for various jack-up units. The total revenue potential for the four new contracts and one extension is approximately US$ 319 million.
These new contracts were for the West Tucana, West Telesto, West Prospero and West Ariel units with a four month extension for the West Mischief. The new contracts were awarded by Cabinda Gulf Oil Company, Origin Energy, JVPC and Eni Congo (which also extended the charter of the West Mischief) respectively.
Despite the company having mentioned in an earlier earnings report that “2014 and 2015 may show slower growth in activity levels than earlier anticipated”, it has already contracted out 92% of its jack-up capacity for 2014 and 64% for 2015. The order backlog for the fleet now comes to US$ 4.4 billion, with an average contract length of 2.6 years.
Lukoil kicks off production at Iraq’s West Qurna-2Iraq’s oil out put is set to rise to record levels as Lukoil has launched commercial production at the giant West Qurna-2 field; estimates show the field’s recoverable reserves to lie in the region of 14 billion bbls.
Initial production from the field is 120 000 bpd, with 400 000 bpd targeted for the end of 2014. Once running at full capacity, it is hoped that West Qurna-2 will produce approximately 1.2 million bpd, effectively doubling Lukoil’s overseas production.
Vagit Alekperov, Lukoil’s President, was quoted as saying, “The start of production at West Qurna-2 is strategically important for Lukoil. Starting up the field on a tight schedule and reaching the target production level underscores Lukoil’s ability to independently and efficiently manage the implementation of complex, large-scale projects.”
The field is situated in southern Iraq, 65 km from Basra. Total estimated reserves in place come to 35 billion bbls.
Norway oil worker strike called off after last minute wage dealA strike amongst Norwegian oil services workers that would have impacted work at around 125 companies, many of which serve the offshore oil industry, has been averted by a last minute pay rise deal.
The deal awarded to the workers will see their average salary rise by 3.3%, allow more beneficial contract terms for offshore workers and the right to negotiate pension deals. Offshore oil services workers specifically will benefit from the deal, as in addition to the wage supplement and contract terms, they will be given four weeks of rest for every two weeks offshore, which is in line with other oil workers. Had the deal not been reached, more than 11 000 workers would have gone on strike, potentially followed by more as the strike continued. Companies that would have suffered as a result of a strike would have included: Aker Solutions, Kvaener, Aibel, WorleyParsons, Nexans and National Oilwell Varco.
Unions and employers enter wage negotiations every two years; in 2012 after failing to reach an initial agreement, many oil workers went on strike for more than two weeks, which resulted in the shutdown of many of the industry’s operations in the region. Stein Lier-Hansen, the Director of the Norski Industri employer’s group was quoted as saying, “This deal is more expensive than I had hoped but we can still live with the terms of the settlement.” Some have argued that repeated wage increases has eroded Norway’s competitiveness as other European nations continue their economic recovery.
Mexico TGS has announced that it has signed a Letter of Intent with Seabird Exploration to charter up to four 2D seismic vessels to be used over the next 36 months. The Letter of Intent gives TGS priority rights to the vessels subject to the issuance of seismic acquisition permits for the offshore waters of Mexico.
In December 2013, Mexico’s Congress gave final approval to a historic energy reform bill that ends the 75 year state monopoly of the country’s oil and gas industry and invites foreign investment. “The publicly announced legislative changes will allow for outside investment in exploration projects in Mexico, including geophysical surveys. TGS is prepared to acquire a regional 2D programme as soon as regulations are in place and permits are in-hand”, stated Rod Starr, Senior VP Western Hemisphere for TGS.
USA According to a recent report, oil production from Alaska’s North Slope is, despite upwardly revised output figures, set to decline by 1.8% overall for the fiscal year ending June 30th.
Alaska’s Department of Revenue is now predicting an average output of 512 800 bpd, marking a slight increase on its earlier estimate of 508 200 bpd. By 2023, production from the North Slope is set to have fallen to 315 000 bpd.
Brazil After a successful appeal against their earlier dismissal, the charges against Chevron and 11 of its employees relating to the Frade oil spill have been reinstated by Brazilian judges.
Chevron has confirmed the new ruling and stated that it “continues to believe that the complaint is without merit.” A statement from the prosecutors said, “arguments that there is no proof of an environmental crime are wrong.”
April 2014
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8 | Oilfield Technology April 2014
April 2014World news Diary dates
Chevron and PGNiG to work together in search for shale gas in southeastern PolandAmid ongoing tensions with Russia its recent annexation of the Crimea, Poland’s PGNiG has agreed to collaborate with Chevron in the search for shale gas as Poland looks to diversify its energy sources. The Polish Prime Minister, Donald Tusk, was quoted as saying, “The experience of recent weeks shows that Europe must show more solidarity in the energy sector.”
According to PGNiG, the agreement with Chevron is part of the company’s new policy of openness towards other companies involved in shale gas exploration projects in Poland. The collaboration will enable the parties to reduce costs, share risks, and increase the pace of the exploration work. As a result, it is hoped that the process of assessing potential shale gas resources in Poland will be completed sooner.
Mariusz Zawisza, President of PGNiG’s Management Board confirmed this new attitude when commenting on the deal with Chevron: “By collaborating with Chevron we will be able to draw on its extensive experience in shale gas exploration. We hope that this partnership will be beneficial to both parties by allowing us to optimise the costs and improve the effectiveness of our exploration efforts.”
Under the agreement, the two companies will collaborate in appraising shale gas deposits in four exploration licence areas in southeastern Poland – two owned by PGNiG (Tomaszów Lubelski and Wiszniów-Tarnoszyn) and two belonging to Chevron (Zwierzyniec and Grabowiec). The precise scope and schedule of the exploration work has yet to be confirmed and will be determined by a Joint Technical Committee; the joint efforts will involve the drilling of at least one exploration well.
Progress update: PGS Triton FAZ GeoStreamer survey Gulf of MexicoThe PGS Triton full azimuth (FAZ) GeoStreamer® survey in the central western Gulf of Mexico is progressing well – at the time of publication, the company expects the survey to be approximately 60% complete. Acquisition began in November 2013 and Triton covers 10 000 km2 and 390 OCS blocks in Garden Banks and Keathley Canyon, many of which are coming available for license or farm-in opportunities in the near future.
Triton represents an advance in tailored acquisition design and depth imaging. For this survey, PGS has developed a new approach to acquisition that utilises a total of five vessels in the unique PGS Orion™ configuration. PGS Orion combines two high-capacity streamer vessels, each towing ten 8 km GeoStreamer dual-sensor cables, in combination with three independent source vessels in a simultaneous long-offset (SLO) configuration, to achieve an effective far offsets in excess of 16 km.
Triton is being acquired in the central western area of the Gulf of Mexico, an area proven to be a highly prospective for hydrocarbons in recent years. The Keathley Canyon and Garden Banks areas, in particular, have hosted BP’s sub-salt Tiber discovery in Keathley Canyon 102; several significant wildcat wells, including BP’s Gila well in Keathley Canyon 93; and Cobalt’s North Platte discovery in Garden Banks 959, to name a few.
PGS is using GeoStreamer acquisition technology for this survey because the system was specifically developed to provide the broadest possible seismic bandwidth without any compromise in pre-stack data quality or acquisition efficiency. The use of GeoStreamer is particularly relevant as the broadband nature of data enables an increase in resolution, in addition to improved penetration due to signals richer in lower frequencies. Generally, this type of broadband seismic has been demonstrated to improve interpretability, resulting in better geological models, as well as improved prospect definition and identification. Utilisation of this technology will help companies place wells with greater precision through more accurate estimation of reservoir and overburden properties. Its ability to record complementary wavefields has enabled the development of revolutionary imaging technologies that exploit both primary and multiple energy, generating reservoir images of enhanced clarity and reliability.
PGS Orion™ configuration used in the Triton survey – detailed view.
10 - 12 June, 2014
Global Petroleum ShowCalgary, CanadaE: [email protected]
15 - 19 June, 2014
World Petroleum CongressMoscow, RussiaE: [email protected]
16 - 19 June, 2014
EAGEAmsterdam, the NetherlandsE: [email protected]
25 - 28 August, 2014
ONS 2014Stavanger, NorwayE: [email protected]/2014
27 - 29 October, 2014
SPE ATCE Amsterdam, the NetherlandsE: [email protected]/atce/2014
April 2014
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10 | Oilfield Technology April 2014
A digest of recent reports on Energy Global, read the full articles onlinefrom energyglobal.com
Upgraded MWD/LWD tools from GEReliable, precise and efficient downhole MWD systems are key prerequisites for accurate well placement with an optimal ROP. Downhole directional sensor related failures are the second largest source of failure, and constitute approximately one-fifth of all the MWD failures that require operators to pull out of hole (POOH) to change out equipment.
The GE Oil & Gas range of MWD equipment aims to provide simple, dependable functionality for all types of directional surveying and steering operations. The probe-based Tensor-compatible
MWD platform is designed to be retrievable and re-seatable to reduce lost-in-hole risk.
Critical directional measurements of tool face, hole inclination and azimuth in order to drill directional or horizontal wells is offered in the Directive™ system.
Overall, systems such as these will serve to address significant oil and gas industry requirements in the area of high temperature, high shock and vibration drilling measurement; minimising downtime incidents and reducing the total cost of ownership. FULL VERSION
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Baker Hughes 100 year milestoneIt has been 100 years since the first chemical oil and water separator was patented in April 1914.
Underground water breaking through an oil reservoir and mixing with crude through various production methods created serious emulsion problems for early oil producers, pipeline operators, and refiners until William S. Barnickel patented the first chemical oil and water separator on the 14th of April 1914. He branded it the Tret-O-Lite demulsifier.
The new demulsifier technology was an industry milestone because it was the first officially recognised and patented chemical treatment to separate water from crude oil.
Today, the new generations of the Baker Hughes TRETOLITE™ fluids separation technologies continue to treat any crude composition, from conventional to shale to deepwater, to heavy oil and oilsands production and future frontiers. FULL VERSION
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Subsea 7 unveils the Seven ArcticAs oil and gas operators venture further offshore and technology allows for more complex subsea installations, there is a growing demand for a new generation of heavy construction vessels (HCVs).
Subsea 7’s newly-commissioned HCV will be equipped with a 325 t Huisman Vertical Pipelay System, a 7000 t MAATS underdeck basket for storage of flexible pipe/umbilical and a new design, 900 t Huisman Rope-Luffing Knuckle-Boom Crane.
The crane’s large lift capacity is matched by significant workability advantages. With a 58 m radius it can move equipment from every corner of the deck, thereby reducing the need for deploying skidding systems, and allowing the vessel to maximise its operational time.
Designed for the deepwater markets, the Seven Arctic will be equally at home operating in the Gulf of Mexico, the North Sea, offshore Brazil, or the West Coast of Africa. FULL VERSION
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New technologies sought for UK O&G sectorThe disconnect between capital investment into oil and gas production and declining production results revealed by the recent Wood Report and the annual activity survey by Oil and Gas UK is a major concern for the UK oil and gas industry.
Oil companies are only seeing average rates of around 46% recovery of product from North Sea oilfields (the highest recovery factor in the world). So, the issue right now is not solely a lack of oil in the ground – it is finding the right tools and processes to maximise return rates.
One breakthrough technology is Distributed Acoustic Sensing (DAS). DAS uses a fibre optic cable as an acoustic sensor that senses the movement and changes in well characteristics via acoustic vibrations allowing geoscientists and engineers to ‘visualise’ and record what is going on downhole at every point of the well in real time.
Investment in technologies such as DAS is key to improving recovery and maximising production from UK wells. FULL VERSION
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A WORLD OF EXPERTISE IN YOUR PART OF THE WORLD.
Superior solutions that span the globe.As a company committed to swiftly meeting the needs of our oil and gas customers, we’ve always
believed in going beyond what was expected. That commitment extends around the world as we
continue to expand our drilling, completion and production-related services into new international
markets. Wherever you need us to be—we’re Superior.
Explore superior solutions at: www.superiorenergy.com
DRILLING PRODUCTS & SERVICES | ONSHORE COMPLETION & WORKOVER SERVICES | PRODUCTION SERVICES | SUBSEA & TECHNICAL SOLUTIONS
OTC | MAY 5-8 | BOOTH 5633
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12 |
The recent history of the debate surrounding the structural issues of Mexico’s oil and gas sector is long and entails different legal, political and economic perspectives. However,
in the context of the current energy reform, the main issue seemed to be the unsustainability of the heavy taxes imposed upon the national oil company (NOC), Pemex, leading to reductions in profits. Through this heavy taxation Pemex has funded 32 – 35% of the federal government’s expenses and as a result has been left with a limited budget for any significant reinvestment strategy for the most promising but geologically and technologically complex prospects. As a consequence, in the last 10 years Pemex has faced increasing difficulties in both managing decreases in total production and successful development of additional hydrocarbon reserves.
In addition to these constraints, the subject of oil in Mexico is highly ideological and political. Any topic related to hydrocarbons is connected to a nationalistic interpretation based on the 1938 expropriation. Other administrations have made efforts in the past to reform specific parts of the hydrocarbon sector but their success has been limited. Because of this, and although the current energy reform was part of a larger package of reforms orchestrated by a new administration, there is still uncertainty on whether any changes to the main hydrocarbon law will be achieved in the end.
In terms of different options for private participation in the sector, the initial proposal sent by President Peña Nieto last August was more conservative than what was finally approved. In the past, whenever private companies have been allowed to enter the sector it has usually been either through a special agreement or a single sub-component of the value chain. Some of the most liberal cases of these previous
Adrian Lara, GlobalData, USA,
examines Mexico’s Energy reform,
from the legal possibilities to an
operating reality.
| 13
14 | Oilfield Technology April 2014
changes have amounted to the creation of service contracts with performance indicators or private participation in the midstream sector for natural gas. The current changes to the law that will allow private companies to participate in exploration and production activities under various, liberal contracting schemes are therefore without precedent.
However, and in spite of all the potential of the energy reform, the constitutional changes are still very general regarding the actual terms for the new schemes of participation. It is only after the so-called secondary laws have been approved that further details on the actual fiscal terms for the new contracts will be announced. It is also important that potential investors are aware of the areas that will be open for future bidding. More specifically, these investors are most interested in knowing which of these areas will have Pemex as a mandatory partner and which ones will be left for private participation with no involvement from Pemex.
Which contracts for which areas?In August 2012 the executive branch of the Mexican government sent a proposal for reforming the energy sector to Congress, its legislative branch. The proposal argued that the bulk of the country’s remaining hydrocarbon reserves were located in challenging areas from both a geological and engineering perspective. As a result, their recovery requires sophisticated and expensive technology. Although Pemex has ample expertise in shallow
waters it does not have the expertise to enter more complex projects located in offshore deepwaters or onshore shale plays. Moreover, the proposal established that from a business point of view it would be unwise to let Pemex assume the risk of such projects.
According to the transitory articles included in the approved reform, the contracting options for hydrocarbon exploration and production must include service contracts, profit or production-sharing contracts and licenses. Nonetheless, the changes to the constitution do not specify which type of contract will be applicable to which types of hydrocarbon exploration and production projects or areas. Also, the inclusion of the words “among others” in the bill text may include more tailored contracts, which can give the state flexibility in terms of including the right fiscal incentives for private companies.
The related secondary legislation will still be general in terms of specifying actual tax rates and other important fiscal details. It will not be until the first bidding round, aimed at attracting private investors that any of the new contracting schemes will be used and all fiscal details will be revealed. An initial preferential round only for Pemex, known as ‘Round Zero’, will have Pemex formally requesting to remain in control of the producing and exploration assets that the company considers strategic in their future plans. For instance, it is expected that Pemex will retain its producing assets, such as shallow water and mature fields as well as areas where the company has made exploratory investments that have led to the identification of prospective resources.
From the perspective of Pemex the deepwater, shale and even shallow water projects can benefit from a combination of technology transfer, capital expenditure in exploration and development, and managerial expertise. In recent interviews and communications, Pemex has already indicated its keen interest in keeping the areas in the Gulf of Mexico where it has been successful in its exploratory activity. Also, it is speculated that existing Mexican service companies could now enter the sector as small independent exploration and production (E&P) companies that may be interested in partnering with Pemex in smaller scale projects such as the ones related to mature fields.
Any potential partnership with Pemex will most likely take place under either a profit or a production sharing contract. In turn, the licenses could be used for attracting the necessary capital to invest in areas of the Gulf of Mexico considered under-explored with the objective of compensating the companies for a high exploratory risk. Nonetheless, the licenses will remain a politically sensitive and costly issue since they are likened to the concession schemes that allow for a more independent
operability with no involvement of the NOC. For accounting and financial purposes, the approved reform allows a participating oil and gas company to report a contract and its associated benefits. In the case of licenses it is relevant how secondary legislation will provide more detail in terms of financially reporting the benefits of such a contract. The question is whether this will be enough to book benefits in the same way reserves are booked with the purpose of leveraging a company’s balance sheet.
Service contracts will remain the preferred scheme for contracting with oil and gas services companies and some schemes may also incorporate a
Table 1. High potential areas in the Mexican deepwater area
Region Number Area Risk Wells drilled
Pemex drilling forecast (2012 - 2016)
Water depth
North deep water
1 Perdido Fold Belt Low-moderate6 47
> 2000
2 Oreos Moderate-high 800 - 2000
3 Nancan High2 9
500 - 2500
4 Jaca-Patini Moderate-high 1000 - 1500
South deep water
5 Nox-Hux Moderate
23 71
650 - 1850
6 Temoa High 850 - 1950
7 Han Moderate-high 450 - 2250
8 HolokLow-moderate (Western) High (Eastern)
1500 - 2000 (Western) 600 - 1100 (Eastern)
9 Lipax Moderate 950 - 2000
Source: Pemex, GlobalData
Figure 1. Main deepwater areas in Mexico’s GOM.
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