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D I G I T A L R E A D E R

JUNE 2015

THE OIL, GAS INDUSTRY IS A TECHNOLOGY INDUSTRY

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06

OIL DEMAND AND THE CASE OF THE MISSING BARRELS

04

PAIR DEVELOPS MOBILE APP TO HELP FIELD CREWS IN OIL, GAS

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D I G I T A L R E A D E R

JUNE 2015

CAREERS EDITORValerie Jones

EMEA EDITORJon Mainwaring

APAC EDITORCheang Chee Yew

SENIOR EDITORSDeon DaughertyKaren Boman

ASST. EUROPEAN EDITORAndreas Exarheas

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CONTENTS

MANAGING EDITORSaaniya Bangee

DESIGNERSergio Garcia

CREATIVE DIRECTOREric Duenas

VP CONTENTBertie Taylor

06

Oil Demand And The Case Of The Missing Barrels

04 Pair Develops Mobile App to Help Field Crews in Oil, Gas

JUNE 2015 EDITION

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08 Survey: Detected Cyber Attacks, Financial Losses Fall but O&G Readiness Declines

10 The Oil, Gas Industry is a Technology Industry

11 Oil Price Downtrend a Boon for Asian Consumers
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RZNEWS DIGITAL READER JUNE 2015

PAIR DEVELOPS MOBILE APP TO HELP FIELD CREWS IN OIL, GAS

By Valerie Jones

@rz_careernews

Rigzone: Describe your experience in oil and gas.

Forsyth: My experience in oil and gas has been concentrated in field work. After graduating from the University of Okla-homa, I started as a field engineer working on a frac crew in Wyoming. I then transitioned to working as a field engineer in West Texas planning and performing production/comple-tions operations. I have also worked in several other posi-tions involving field and office engineering.

McInerney: My career has been in finance, first as an invest-ment banker and recently transitioned to a corporate merg-ers and acquisition role for an IT services company. Though Ive never worked directly in the industry, the investment bank I worked at specialized in restructuring and was partic-ularly busy in oilfield services and equipment in the second half of 2014. Growing up in Oklahoma, my family was deep-ly connected to the industry and I helped my father with his research in using microorganisms to improve oil recovery.

In an age where employers across all industries are trying to do things better, smarter, quicker and for less money it sets the stage for innovative methods and adoption of new technologies.

In oil and gas, many exploration and production companies have had to halt operations, postpone projects and cut CAPEX in a number of ways as a result of a sharp decline in global commodity prices that began in 2014. So determining more cost-effective and efficient ways to get the job done has become a priority for many oil and gas employers.

And with a wave of millennials expected to enter the industry, bringing with them new ideas and undoubtedly, a hunger and love for new technology, it will be interesting to see how the future manifests.

Ross Forsyth and Matt McInerney are the founders of Viitori, LLC a mobile business intelligence application for field crews in oil and gas. It took them six months to develop the app which they hope will solve decision-making impediments for the industrys field workers. Rigzone caught up with the pair to discuss why they created Viitori, how the app will appeal to Baby Boomers and the future of mobile apps in the industry.
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Rigzone: Tell me about your app.

Forsyth: Viitori is a mobile app that allows the field user to remotely input production/completion job data into their mobile device using a smart workflow. The data is then returned to them in a spreadsheet with basicengineering analysis and a wellbore diagram. The spreadsheet can be easily integrated into current office workflows for tracking field variables.

Throughout my career, I have seen the redundant nature of field data report-ing. First data is recorded into a tally book by field personnel, then after the work is completed at the end of the day, the data is entered into a reporting system. The next day the same data is checked and input into one-off spread-sheets for individual variable tracking. Many details are being left out with this plan-perform-report cycle. Viitori aims to report all the data in real time and on the fly while capturing greater details and saving time for both field and office personnel.

McInerney: When we started think-ing about a name for this project, we were thinking about the future of field reporting not only in oil and gas, but in all industries. Ive personally and professionally looked to invest in the mobile enterprise application market, which I estimate to be over $150 billion and others estimate as high as $280 billion in the next few years, thanks to the proliferation of BYOD (bring your own device) policies. Oil and gas takes up a small sliver of that market size despite being an inherently mobile industry. Bringing communication and analytics to a field workers fingertips will be a major driver to the future of employee productivity for both manual and knowledge workers. This idea that the future of the mobile enterprise

technology is still in its infancy, partic-ularly in oil and gas, led us to brand the app Viitori, which is Romanian for future.

Rigzone: Why should E&P companies use this app?

Forsyth: E&P companies will find that Viitori enables their field workers to report data in real time with the conve-nience of their mobile devices. The data will be returned in a comprehensive spreadsheet with all the necessary data and basic engineering analysis. Manag-ers and engineers will be able to have this data in their hands quickly and in a form that makes it easy to analyze.

Rigzone: How will the app appeal to older field workers, perhaps Baby Boomers, who may be slower to adapt to new technology?

Forsyth: Baby Boomers are spending more time than ever on their devices texting with their grandchildren, using FaceTime and sharing on social net-works. Viitori is a natural progression to that. Mobile technology is a power-ful tool in that it focuses the workflow and directs the content. This eliminates a common hurdle to the adoption of any new technology by providing easy access to the actual task at hand.

McInerney: User adoption is always an impediment. By now, even a tech-savvy corporation has likely participated in a very costly software implementation filled with headaches. The IT services industry is working to fix that problem by focusing on user-friendly designs and putting the software in the cloud to eliminate some of the issues with proprietary systems going haywire. Our goal as we continue to make enhance-ments to Viitori is to make sure that entering a days work on a smartphone

is as intuitive as making a phone call. Rigzone: What specific issues with the current methods used by field workers does the app address?

Forsyth: Viitori makes data reporting and analysis easier and more conve-nient than ever. I feel that the qual-ity and detail of field data is directly proportional to the ease of input. With mobile technology, the ease of data entry is greatly enhanced. For instance, when perforating, it is paramount that depths, phasing, hole size and number of shots fired all be confirmed for each run and documented. This is a tedious task, one that often gets copied and pasted each time. With Viitori, entry of this data is quick and easy. I think E&P companies are going to find that they have better data and are in a better position to solve problems before they happen.

Rigzone: Experts are saying innovation will be the key to future success in the oil and gas industry. Do you think well begin seeing more mobile apps in the industry? Specifically in E&P?

McInerney: Definitely. I think work in general is becoming more mobile with the idea of a central office becoming obsolete. Apps focus a workflow for specific functions so greater detail can be obtained on a certain task. This is a really good thing for field jobs, where work is done in one location and re-ported to a central office for analysis.

Forsyth: Viitori makes this process much simpler for E&Ps since so much of the work depends on field employees making important decisions in real time. With our apps dashboards and a central platform for viewing the data coming this summer, I think field data analysis has a bright future.

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OIL DEMAND AND THE CASE OF THE MISSING BARRELS

By Deon Daugherty

@Deon_Daugherty

Against a backdrop of consistent upward demand revisions, the International Energy Agencys (IEA) recent admission of oil being lost in a phantom missing barrels category suggests global demand is regularly underestimated.
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Analysts at Raymond James & Associates said in a note on Monday that the 1.2 million barrels per day (MMbpd) of crude reported last week equaled a high not matched since 1998.

As RayJa explained, missing barrels is a number used by the IEA called miscella-neous to balance (MTB) when changes in global oil supply and demand dont add up to measured changes in inventory. A positive MTB number exists when supply is overstated; demand is understand; inventories are understated or a combination of those factors.

Over time, the IEA data [like U.S. economic data] typically goes through numerous revisions, RayJa said. This means we should not rely too heavily on the accuracy of recent reported data that has not been revised.

Most of the time, oil demand is the category that makes up for the missing barrels. In the last 14 of 15 years, IEA has revised that figure by 700,000 MMbpd on average, the analysts said.

This implies [assuming supply and changes in stocks are not reesponsible] that global oil demand estimates and meaningfully understated on a consisted basis by the IEA, RayJa said.

Analysts at Tudor Pickering Holt & Co. in Houston noted the discrepancy in a note to investors that discussed the missing barrels. EIA had projected a missing barrel count of 1.6 MMbpd in 4Q and 1.2 MMpbd in 1Q 2015. Those numbers suggest recent demand is understated, supply is overstated or a combination of both.

All of this is to say that we can expect revised numbers to be closer to the reality of the oil supply/demand equation. The oversupply in 2014 needs to be revised to 300,000 barrels per day (bpd), half the initial 600,000 bpd states, RayJa said.

More importantly, the 2015 model goes from being 1.2 MMbpd oversupplied to a much more reasonable 300,000 bpd oversupplied, the analysts said. Simply put, this means the global oil market is meaningfully tighter than the original IEA numbers would have suggested, thereby implying potential upside to current prices.
http://www.rigzone.com/news/oil_gas/a/139075/IEA_Report_Suggests_Global_Oil_Demand_May_Creep_Up_on_Production

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SURVEY: DETECTED CYBER ATTACKS, FINANCIAL LOSSES FALL BUT O&G READINESS DECLINES

By Karen Boman

@KarenBoman

he average number of detected cy-bersecurity incidents and estimat-ed total financial losses related to

these attacks declined from 2013 to 2014. But many oil and gas companies have yet to deploy up-to-date monitoring and threat-detection processes and technolo-gies, according to a recent survey by PwC.

In 2014, the average number of detected security incidents, or adverse incidents threatening some aspect of computer security, totaled 5,493, down from 6,511 in 2013, the survey of oil and gas com-panies found. Estimated total financial losses associated with these attacks was $4 million per incident in 2014, down 35 percent from the $6.1 million per incident in 2013, according to PwCs report The Global State of Information Security Survey (GSISS) 2015.

PwC said the decline might be due to companies deploying technologies that can detect intrusions before they can do financial harm. One explanation for the seemingly counter-intuitive finding is that oil and gas companies increased security spending by 32 percent in 2013, which may have allowed them to im-

plement solutions and processes to help prevent attacks.

Whats more, as businesses deploy monitoring and logging technologies they will detect more incidents that are benign, which may lead to some orga-nizations to discount them as security threats, said Jim Guinn, managing director of PwCs Advisory practice, in a statement.

PwC also attributed the drop in detected incidents due to the timing and cycli-cal nature of cyber attacks. After being relatively inactive until June, several large-scale coordinated attacks were announced. The firm expects a spike in detect incidents next year.

Spending on information security measures by oil and gas companies rose, from an average annual information security budget of $5 million in 2013 to $5.7 million in 2014. Information securi-ty spending as a percentage of oil and gas IT budgets also grew from $3.3 million in 2013 to $3.9 million in 2014, accord-ing to the report.

Despite the declines in the overall num-ber of detected incidents and associated costs and rise in cybersecurity spending, one-third of oil and gas companies sur-veyed said they did not have an incident management response process in place. PwC found that not only should a plan be in place, but it also must be exercised on an annual basis using tabletop scenar-ios so that cyber-response professionals are comfortable with the plan and know how to execute it when an event occurs.

The number of cybersecurity incidents caused by current employees rose from 26 percent in 2013 to 48 percent in 2014, the survey found, and could have critical implications for oil and gas companies. This is partly due to employees becoming pawns of external threat actors, who use spear phishing to steal the credentials of employees with privileged access to data and networks, then use the information to infiltrate the companys network.

But managing insider threats not only takes technology, but training workers to be aware of suspicious behavior and risk indicators. PwC said it was troubling to find that the number of companies

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that have an employee training and awareness program declined significantly from 54 percent in 2013 to 45 percent in 2014. PwC also noted that 35 percent of companies surveyed dont perform personnel background checks, a very basic precaution. Tools to manage insider threats are often lacking, with the usage of most types of tools declining from 2013 to 2014.

Oil and gas companies also are falling short on training workers to become more aware of cyber threats. Companies need to treat cybersecurity as an opera-tional imperative as they do with health, human and safety programs, said Guinn.

Having personally worked offshore, I know that energy companies invest a lot in capital in training their staff on what to do in an actual emergency, and cyber-security should be no different.

The number of attacks launched by former employees against companies grew slightly from 27 percent to 29 per-cent. The number of cyber attacks from competitors also rose from 15 percent in 2013 to 25 percent in 2014, as did cyber attacks launched by current service pro-viders, consultants and contractors, from 16 percent in 2013 to 21 percent in 2014.

Cyber criminals are targeting oil and gas companies to steal intellectual proper-ty, sabotage websites, hurt corporation reputations, and disrupt production. Over the past 12 months, the number of assaults oil and gas companies has risen, including the state-sponsored cyber-espionage campaign, also known as Dragonfly or Energetic Bear, infected

industrial control systems of thousands of organizations across North America, Asia, and Europe.

Cyber attacks have not yet impacted production capabilities, but the situation is changing as these attacks are progres-sively maleficent, sophisticated, and hard to detect.

Clearly, its no longer possible to protect all data, networks, and applications at the highest level, said Guinn. But a proac-tive cybersecurity program that enables businesses to prioritize protection and more quickly react to attacks is the best defense against todays adversaries.

The oil and gas industry faces an in-creased risk of cybersecurity the rising use of digital oilfield technology expands the attack survey, PwC reported. This sensor-based remote field equipment, which connects to operational and IT systems, contains embedded computer devices and operating systems that are generally not control with the same rigor as corporate IT systems, and typically lack built-in security guards. As a result, 15 percent of survey respondents said that, in 2014, their embedded systems were exploited, and 13 percent reported that operational systems were compromised.

Oil and gas companies surveyed do appear to be addressing this risk, with 42 percent of respondents saying they have a security strategy for the convergence of technologies, and an additional 25 percent are implementing a strategy.

Oil and gas companies surveyed saw for-

eign nation-states and current employees as the fastest growing sources of cyber-security incidents for oil and gas compa-nies. The number of survey respondents who cited foreign-nation states as a source of incidents rose 108 percent in 2014. Nation-states are keenly interest-ed in oil and gas company intellectual property, such as drilling techniques, oil and gas findings, refinery engineering information, and merger and acquisition plans, and the survey found that only 50 percent of survey respondents to protect this property.

How the recent drop in oil prices could impact spending on cybersecurity remains to be seen. But the merger and acquisition activity that could result from the downturn could put at risk compa-nies who do not adequately assess the security practices of target companies. Cyber adversaries may infiltrate small-er or distressed acquisition targets that presumably have less-mature security programs via third-party vendors, then wait for the target to be acquired by a larger organization.

When the organizations information systems are integrated, the threat actors may attempt to access the networks of the acquiring firms and exfiltrate trade secrets, M&A data, and other valuable information.

Of the companies surveyed, 54 percent said they conducted compliance audits of third parties that handle personal data of customers and employees, while 55 per-cent said they perform risk-assessments on third-party vendors.

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THE OIL, GAS INDUSTRY IS A TECHNOLOGY INDUSTRY

By Jon Mainwaring

@oiljon

In spite of being a necessary part of modern human life, the oil and gas industry is one of those sectors that generally gets a bad press. Mainstream journalists tend to seize upon any bad news that comes out of the sector whether it be an oil spill, a fatal platform disaster or the fact that the oil and gas industry itself is often seen as solely to blame for climate change-caus-ing carbon emissions rather than the industrys ultimate cus-tomers (car drivers, plane passengers, home heaters, television watchers, computer users i.e. us!).

In Europe, and in the UK in particular, the public perception of the industry is not a good one. Adjectives associated with it in the public consciousness are usually negative: dirty, danger-ous, old-fashioned

Certainly, two of these adjectives are difficult to argue with. Hydrocarbons are dirty in that when they are burned they create pollution whether it be ground-level diesel-particulate matter, nitrogen oxides and other nasties, or the extra carbon dioxide that many people believe is causing the planet to heat up. And, although plenty of the industrys companies now insist that the health and safety of their employees are prior-ities, working in oil and gas remains a potentially hazardous occupation.

But old-fashioned? People working in the industry will know that that is bunkum, yet ask the average Joe in the UK where the future of energy lies and his reflex response will be that renewables are where its at.

Maybe in the long future an energy technology will emerge that can challenge the mobility of oil and (increasingly) gas as well as their ability to store large amounts of energy in small volumes. But for now and for the foreseeable future, oil and gas will continue to be in great demand. According to the International Energy Agencys World Energy Outlook 2013 Factsheet, the share of fossil fuels in the worlds energy mix is set to fall from a current level of about 82 percent to 76 percent by 2035, which of course means that gas, oil and coal (probably in that order too) will remain the dominant forms of energy.

So, the trick will continue to be about how Mankind can se-cure supplies of oil and gas at an affordable cost. This is where technology comes in.

Last months Offshore Technology Conference in Houston showed that the oil and gas sector, far from being an antiquat-ed industry, remains a high-tech business. Attending the show, Rigzone covered an array of new concepts and solutions for upstream oil and gas operations. These ranged from a medical CT scanning technology that is being used to appraise the in-tegrity of coated, deepsea pipelines to the use of data analytics that will aid enhanced oil recovery efforts to drones that are employed to inspect offshore platforms.

So, if technology is your thing, you could do a lot worse than get involved in oil and gas.
https://twitter.com/Deon_Daughertyhttps://twitter.com/oiljonhttp://www.rigzone.com/news/oil_gas/a/138417/OTC_2015_Consortium_Gives_Oil_Gas_Access_to_Other_Industry_Toolboxes/http://www.rigzone.com/news/oil_gas/a/138417/OTC_2015_Consortium_Gives_Oil_Gas_Access_to_Other_Industry_Toolboxes/http://www.rigzone.com/news/oil_gas/a/138444/OTC_2015_Data_Analytics_Could_Unlock_Huge_Prize_of_Global_Oil_Supply/http://www.rigzone.com/news/oil_gas/a/138444/OTC_2015_Data_Analytics_Could_Unlock_Huge_Prize_of_Global_Oil_Supply/http://www.rigzone.com/news/oil_gas/a/138456/OTC_2015_Rigzone_Talks_to_Sky_Futures_CoFounder_about_Drones_in_Oil_Gas/http://www.rigzone.com/news/oil_gas/a/138456/OTC_2015_Rigzone_Talks_to_Sky_Futures_CoFounder_about_Drones_in_Oil_Gas/

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China overtakes the United States as the largest oil consumer around 2030 but, as its demand growth slows, India emerges as a key driver of growth, as do Southeast Asia, the IEA noted in the report.

By 2040, two out of every three barrels of crude oil traded internationally are destined for Asia, up from less than one in two today, drawing to Asia a rising share of the available crude from the Middle East and beyond, the Paris-based agency added in the fact-sheet accompanying the report.

Indias Emergence Earlier this month, a senior executive of Saudi Ara-bias national oil company Saudi Aramco visited New Delhi, underscoring the growing significance of India to the largest producer in the Organization of Petro-leum Exporting Countries (OPEC).

It doesnt require much imagination to conclude that the Saudis are interested in expanding their relation-ship with India, given it is becoming the main driver

Up until the middle of 2014, the oil and gas industry operated virtually in a default mode as far as pric-es were concerned, where a $100 a barrel oil a level where it had been trading in previous years was accepted as a norm, giving producers the upper hand in business deals with consuming countries. But there has been a role reversal in the global market place, including Asia, as oil has now fallen to the high $50s to low $60s a barrel, down at least 40 percent from a year ago.

This sharp turnaround in fortunes is manifested in Asia, home of expanding economies in China, India and Southeast Asia, where a sustained rise in energy demand in recent decades has transformed the re-gion into a major growth market for producers, an observation highlighted by the International Energy Agency (IEA) in its World Energy Outlook 2014 report released November 2014.

By Chee Yew Cheang

@cheeyew_cheang

Oil Price Downtrend a Boon for Asian Consumers
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of crude demand growth in Asia, Reuters columnist Clyde Russell said June 15 on Saudi Aramcos Execu-tive Director for Marketing Ahmed Al-Subaeys trip to India.

However, Saudi Aramco is likely to face stiff compe-tition from fellow OPEC producers Iran and Iraq for a share of the Indian market, which imported 3.942 million barrels of crude oil per day during the first four months of 2015, Russell said.

The changed relationship between consumers and producers in the oil and gas industry was illustrated in an interview given by Indias Oil Minister Dharmen-dra Pradhan to Reuters published June 13 in which he explained that the country will move beyond asking for additional import barrels in talks with exporters to seeking deals to strengthen Indias economy and create jobs.

According to Pradhan, Indias new oil diplomacy aims to:

buy oil and gas acreage source imports on better terms increase investment in sectors such as pipelines

and refining get business for engineering and construction

companies with jobs for skilled Indian labor

South Korea lifts slightly more oil than we buy from the Middle East but its participation in engineering and construction business is doubled than ours, Pradhan said.

South Korean contractors, comprising Samsung Heavy Industries Co. Ltd., Hyundai Heavy Industries Co. Ltd. and Daewoo Shipbuilding & Marine Engi-neering Co., Ltd., are actively involved in the Middle East engineering, procurement and construction market.

Asian Interests to Own Upstream Assets Stay High

While a supply glut currently exists, most Asian oil and gas firms still prefer to own upstream petroleum

assets, particularly in the region, as acquisition costs fall in tandem with lower oil prices ownership of producing assets will insulate them against future price hikes and ensure energy supply security.

In Indonesia, a major oil importer in Southeast Asia, the focus of upstream acquisitions is no longer con-fined to asset sales by foreign petroleum firms. A trend emerging in the local petroleum sector is the competition to take over expiring production sharing contracts (PSC) a segment now dominated almost exclusively by national oil company PT Pertamina.

Pertamina, which will take over as operator of the Mahakam PSC in East Kalimantan in January 2018, hopes to take over more expiring blocks in Indonesia. The firm has already submitted a proposal to the Ministry of Energy and Mineral Resources (MEMR) to assume operations of East Kalimantans Sanga-Sanga PSC from current operator Vico Indonesia when the contract expires in 2018.

But unlike its takeover of the Mahakam block, Pertamina may face competition from an emerging local rival PT Saka Energi Indonesia, the upstream arm of state-owned gas distributor Perusahaan Gas Negara (PNG) Tbk.

Its good if Saka [Energi] farms into Sanga-Sanga block, MEMRs Director General of Oil and Gas IGN Wiratmaja Pudja told local industry publication Petromindo June 11, adding that Vico has not applied for extension of the PSC.

Saka Energis interest to acquire an interest in the San-ga-Sanga block is understood to be well received by the joint venture as partners prefer to farm out their stakes than to lose it upon expiry of the PSC as in the case of the Mahakam block, Petromindo said.
http://www.rigzone.com/news/oil_gas/a/138435/OTC_2015_Indonesia_to_Decide_Mahakam_Transit_Deal_MEMR_OG_Top_Post_Soonhttp://www.rigzone.com/news/oil_gas/a/138435/OTC_2015_Indonesia_to_Decide_Mahakam_Transit_Deal_MEMR_OG_Top_Post_Soonhttp://www.rigzone.com/news/oil_gas/a/138841/Indonesias_Pertamina_Proposes_to_Take_over_SangaSanga_Oil_Blockhttp://www.rigzone.com/news/oil_gas/a/138841/Indonesias_Pertamina_Proposes_to_Take_over_SangaSanga_Oil_Block

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