THE MAGAZINE FOR LEADERS IN AMERICAN ENERGY
January / February 2021
OilmanMagazine.com
Upstream A&D Market
Josh Robbins, Founder, Beachwood
Offshore Industry Executes
Great Effort in Hurricane
Preparedness
p. 44
Avoid Getting Blindsided by
Safety Culture in your Next
M&A
p. 8
Real-Time Completions
Renement with
Electromagnetics
p. 38
Interview: Ryan Lailey,
CTO, WolfePak
p. 22
508 West Vandament Avenue, Suite 304 l Yukon, OK l (405) 265-7050 l bchwdx.com
Beachwood navigates teams
to find deals that no one else can.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
1
IN THIS ISSUE
Feature
Cover Story: Acquiring More than Assets: Sarah Skinner ...................................................................................................................24-26
In Every Issue
Letter from the Publisher ...................................................................................................................................................................................2
OILMAN Contributors .....................................................................................................................................................................................2
OILMAN Online // Retweets // Social Stream ...........................................................................................................................................3
Downhole Data .................................................................................................................................................................................................. 3
OILMAN Columns
Interview: Ryan Lailey, CTO, WolfePak: Eric R. Eissler .............................................................................................................................22
Interview: Chad Valentine, Partner, Assurance Services, Weaver Accounting: Eric R. Eissler ............................................................27
Where Does the Industry Go After COVID-19? Eric R. Eissler .............................................................................................................34
America’s Energy: 2021 and Beyond: Mark A. Stansberry .........................................................................................................................35
A Look Inside 2021: Outlook and Predictions for the Oil and Gas Industry: Tonae’ Hamilton ........................................................36
Oilman Cartoon: Steve Burnett ......................................................................................................................................................................46
Living the Crude Life: Jason Spiess ................................................................................................................................................................ 53
Guest Columns
Tax Considerations for Oil and Gas Partnerships Deliberating Bankruptcy and Debt Restructuring: Jon R. Roberts and
Jon Pezzi ...............................................................................................................................................................................................................4
The State of the Oil Industry 2020: An Updated Look at Things to Come: Henry Berry .................................................................... 6
Avoid Getting Blindsided by Safety Culture in your Next M&A: Josh Williams and Eric Michrowski ................................................8
Technologies to Detect and Mitigate Pipe Corrosion: Raul Palencia ....................................................................................................... 10
How to Control Target Areas During Hydraulic Fracturing: Andres Ocando ....................................................................................... 13
The Dangers of Unreliable Data: Pallav Sarma, Ph.D. ............................................................................................................................... 16
COVID-19 Testing and Background Screening Are Now Essential for Safe Workplaces: Alla Schay ...............................................20
Measuring Oil and Gas Volumes in Different Countries: The U.S. and Russian Cases: Eugene M. Khartukov and
Alexander Novak...............................................................................................................................................................................................28
Young Professionals in the Oil and Gas Industry: Interview with Ahmed Elgohary: Alan Alexeyev ................................................32
Real-Time Completions Renement with Electromagnetics: Sam Young ...............................................................................................38
Squeezing the (Remaining) Golden Geese: Renery Closures May Lead to Increased Tax Scrutiny on Operating Facilities:
Jay Adams and Bill Backstrom ........................................................................................................................................................................ 41
Offshore Industry Executes Great Effort in Hurricane Preparedness: Nick Vaccaro .......................................................................... 44
The Drilling Conundrum – Efciency Versus Reliability: Shrikant Tiwari..............................................................................................47
Oilmens Salaries Across the World: Eugene M. Khartukov ......................................................................................................................50
The Economic Superorganism: Beyond the Competing Narratives on Energy, Growth and Policy: Carey W. King ......................54
Oilman Magazine / January-February 2021 / OilmanMagazine.com
2
Mark A. Stansberry
Mark A. Stansberry, Chairman of The
GTD Group, is an award-winning
author, columnist, lm and music
producer, radio talk show host and
2009 Western Oklahoma Hall of Fame
inductee. Stansberry has written ve energy-related
books. He has been active in the oil and gas industry
for over 41 years having served as CEO/President of
Moore-Stansberry, Inc., and The Oklahoma Royalty
Company. He is currently serving as Chairman of the
Board of Regents of the Regional University System
of Oklahoma, Chairman Emeritus of the Gaylord-
Pickens Museum/Oklahoma Hall of Fame Board of
Directors, Lifetime Trustee of Oklahoma Christian
University, and Board Emeritus of the Oklahoma
Governor’s International Team. He has served on
several private and public boards. He is currently
Advisory Board Chairman of IngenuitE, Inc. and
Advisor of Skyline Ink.
Joshua Robbins
Josh Robbins is the Founder of
Beachwood. He has consulted and
provided solutions for several industries,
however the majority of his consulting
solutions have been in manufacturing,
energy and oil and gas. Mr. Robbins has over 15
years of excellent project leadership in business
development and is experienced in all aspects of
oil and gas acquisitions and divestitures. He has
extensive business relationships with a demonstrated
ability to conduct executive level negotiations. He
has developed sustainable solutions, successfully
marketing oil and natural gas properties cost
effectively and efciently.
Jason Spiess
Jason Spiess is an award winning journalist,
talk show host, publisher and executive
producer. Spiess has worked in both the
radio and print industry for over 20 years.
All but three years of his professional
experience, Spiess was involved in the overall operations
of the business as a principal partner. Spiess is a North
Dakota native, Fargo North Alumni and graduate of
North Dakota State University. Spiess moved to the
oil patch in 2012 living and operating a food truck in
the parking lot of Macís Hardware. In addition, Spiess
hosted a daily energy lifestyle radio show from the
Rolling Stove food truck. The show was one-of-a-kind
in the Bakken oil elds with diverse guest ranging from
U.S. Senator Mike Enzi (WY) to the traveling roadside
merchant selling ags to the local high school football
coach talking about this week’s big game.
Steve Burnett
Steve Burnett has been working in the oil
industry since the age of 16. He started out
working construction on a pipeline crew
and upon retirement, nished his career
as a Pipeline Safety Compliance Inspector.
He has a degree in art and watched oil and art collide in
his career to form the “Crude Oil Calendars.” He also
taught in the same two elds and believes that while
technology has advanced, the valuable people at the
core of the industry and the attributes they encompass,
remain the same. With a humorist for a father, he also
learned that a dose of comedy makes everything better.
The major inuences on his cartooning style were the
Ace Reid Cowpokes cartoons, the Dirk West sports
cartoons and V.T. Hamlin’s Alley Oop comic.
JANUARY FEBRUARY 2021
PUBLISHER
Emmanuel Sullivan
EDITOR-IN-CHIEF
Rebecca Ponton
MANAGING EDITOR
Sarah Skinner
ASSISTANT EDITOR
Eric R. Eissler
ASSOCIATE EDITOR
Tonae’ Hamilton
COPY EDITOR
Shannon West
CREATIVE DIRECTOR
Kim Fischer
CONTRIBUTING EDITORS
Steve Burnett
Joshua Robbins
Jason Spiess
Mark Stansberry
ADVERTISING SALES
Eric Freer
Diana George
To subscribe to Oilman Magazine, please
visit our website, www.oilmanmagazine.com/
subscribe. The contents of this publication are
copyright 2021 by Oilman Magazine, LLC, with
all rights restricted. Any reproduction or use
of content without written consent of Oilman
Magazine, LLC is strictly prohibited.
All information in this publication is gathered
from sources considered to be reliable, but
the accuracy of the information cannot be
guaranteed. Oilman Magazine reserves the
right to edit all contributed articles. Editorial
content does not necessarily reect the opinions
of the publisher. Any advice given in editorial
content or advertisements should be
considered information only.
CHANGE OF ADDRESS
Please send address change to
Oilman Magazine
P.O. Box 42511
Houston, TX 77242
(800) 562-2340
Cover photo courtesy of
Josh Robbins, Beachwood
LETTER FROM THE PUBLISHER
CONTRIBUTORS — Biographies
Emmanuel Sullivan, Publisher, OILMAN Magazine
This past year was challenging for many of us, having to
deal with the disruptions from COVID-19 in virtually every
aspect of our daily routines. In the oil and gas industry,
companies struggled to survive, many were forced into
bankruptcy and some closed for good. There were ma-
jor mergers last year stemming from the nancial crunch
companies faced as a result of the pandemic. Several of
the mega-acquisitions are still being worked out, which
may result in more layoffs. The energy industry is known
for annual trade shows and, because of the pandemic, we
were forced to change our networking pattern from in-person to virtual. With all
that said, I’m optimistic about the oil and gas industry moving forward this year.
Industry events and conferences are planned for the second half of this year and
I’m sensing the enthusiasm to get out and network again. There is no doubt all
of us had to pivot in some way to continue business as usual. At
OILMAN
we
did as well. Not only did we adjust to survive, by focusing on our customers and
core product, we launched a new magazine,
OILWOMAN.
Yes, indeed, a daunt-
ing endeavor to pursue in a challenging business climate, but it was the right time
and the feedback has been positive. It’s the optimistic spirit in our industry and
as Americans that moves us forward. Please take time to read the feature article
about Josh Robbins, founder of Beachwood, and one of our longest
OILMAN
contributors. He discusses the A&D market and how he started his business in
Oklahoma.
OILMAN
has a slightly new look as we move into the new year. Sim-
ilar to
OILWOMAN,
the cover page is now a portrait of the guest in the feature
article. Hope that you enjoy this issue, happy new year, and all the best in 2021!
Oilman Magazine / January-February 2021 / OilmanMagazine.com
3
Week Ending December 30, 2020
DIGITAL DOWNHOLE DATA
Gulf of Mexico: 17
Last month: 13
Last year: 23
New Mexico: 65
Last month: 65
Last year: 105
Texas: 161
Last month: 159
Last year: 404
Louisiana: 43
Last month: 43
Last year: 58
Oklahoma: 17
Last month: 16
Last year: 52
U.S. Total: 351
Last month: 348
Last year: 805
OIL RIG COUNTS
*Source: Baker Hughes
Brent Crude: $50.88
Last month: $46.88
Last year: $68.91
WTI: $47.50
Last month: $45.58
Last year: $61.76
CRUDE OIL PRICES
*Source: U.S. Energy Information Association (EIA)
Per Barrel
Gulf of Mexico: 32,777,000
Last month: 45,159,000
Last year: 59,351,000
New Mexico: 33,519,000
Last month: 30,708,000
Last year: 29,594,000
Texas: 143,640,000
Last month: 138,933,000
Last year: 163,072,000
Louisiana: 2,446,000
Last month: 2,528,000
Last year: 3,883,000
Oklahoma: 13,043,000
Last month: 13,328,000
Last year: 18,643,000
U.S. Total: 322,984,000
Last month: 325,842,000
Last year: 392,849,000
CRUDE OIL PRODUCTION
*Source: U.S. Energy Information Association (EIA) – October 2020
Barrels Per Month
Gulf of Mexico: 36,765
Last month: 47,495
Last year: 86,698
New Mexico: 179,349
Last month: 165,294
Last year: 156,870
Texas: 763,147
Last month: 750,679
Last year: 823,698
Louisiana: 259,460
Last month: 251,833
Last year: 279,489
Oklahoma: 219,782
Last month: 223,193
Last year: 278,887
U.S. Total: 2,996,276
Last month: 2,917,020
Last year: 3,119,983
NATURAL GAS
MARKETED PRODUCTION
*Source: U.S. Energy Information Association (EIA) – October 2020
Million Cubic Feet
Per Month
Connect with OILMAN anytime at
OILMANMAGAZINE.com and on social media
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@OilmanMagazine
#OilmanNEWS
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delivered online at OilmanMagazine.com
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Oilman Magazine / January-February 2021 / OilmanMagazine.com
4
OILMAN COLUMN
Many oil and gas companies have
sought debt reduction through bank-
ruptcy protection or debt restructur-
ing in response to nancial difculty
brought on by the COVID-19 pandem-
ic. When considering options to reduce
debt, companies should understand
the tax consequences that these actions
can bring. This is particularly true for
partnerships, which have special rules
that affect certain allocations related to
canceled or restructured debt.
Tax Impacts of Debt Discharges
Debt discharges can have signicant tax
consequences that oil and gas partner-
ships must assess when considering
debt reduction options. When a debt is
discharged, the difference between the
outstanding debt and any amount paid
as consideration for the debt is deemed
cancellation of indebtedness income
(CODI). While taxpayers are generally
required to include CODI in their gross
income, they can exclude it in certain
circumstances, including bankruptcies
and insolvency. Specically, IRC Section
108 allows taxpayers to exclude CODI
from gross income in Title 11 cases,
which include Chapter 7 liquidations,
Chapter 11 reorganizations and Chapter
13 bankruptcies for individuals. Insol-
vent taxpayers can also exclude CODI
from gross income to the extent of
their insolvency.
A discharge of debt from a bankruptcy
or a reduction of debt from debt re-
structuring requires taxpayers to reduce
their tax attributes by the amount of
CODI excluded from gross income.
Section 108(b) requires this reduction in
the following order: net operating losses
(NOLs), general business credits, mini-
mum tax credits, capital loss carryovers,
basis reduction, passive activity loss
and credit carryovers and foreign tax
credit carryovers. In an exception to
the ordering rules, taxpayers can choose
under Section 108(b)(5) to reduce basis
in depreciable property rst.
Partnership Allocations
In determining whether to seek debt
reduction, oil and gas partnerships must
understand the treatment of CODI
under the special partnership allocation
rules. Under Section 108(d)(6), CODI is
recognized at the partnership level with-
out any exclusions from gross income,
but it is allocated to the partners under
the rules of IRC Section 702 and IRC
Section 704.
Under these rules, the exclusions of
CODI from gross income for bank-
ruptcy and insolvency are determined
at the partner level. While the partner-
ship may be insolvent, the individual
partners may be solvent and required to
recognize the CODI income as gross
income. The process can also produce
signicant differences between partners,
as insolvent partners may exclude their
share of CODI from gross income
while solvent partners are taxed on
their share. Failure to consider this can
result in unanticipated tax liabilities for
individual partners.
Given these possible differences in
the tax impact of debt reduction, how
a partnership allocates CODI to its
partners is a signicant issue in partner-
ship bankruptcies and debt restructur-
ings, as allocation can depend on how
the CODI arose as well as on the terms
of the partnership agreement. For
example, Section 704 provides that the
partnership agreement determines the
allocation of tax items. However, if the
partnership agreement does not ad-
dress tax allocations or the agreement’s
tax allocations do not have substantial
economic effect, then the tax allocations
are made in accordance with the part-
ner’s interests in the partnership.
Tax Considerations for Oil and Gas
Partnerships Deliberating Bankruptcy
and Debt Restructuring
By Jon R. Roberts and Jon Pezzi
Photo courtesy of Vitaliy Vodolazskyy – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com
5
OILMAN COLUMN
Debt Restructuring Options
Under these partnership allocation rules,
oil and gas partnerships must also take
into account the tax consequences for in-
dividual partners when considering debt
restructuring options such as debt for
equity exchanges, debt work-out plans,
asset sales under Section 363 of the U.S.
Bankruptcy Code and purchase-money
debt reductions.
Debt-for-equity exchanges: Debt-
for-equity exchanges can provide oil
and gas partnerships debt relief in
exchange for partnership capital or
an interest in prots. In these transac-
tions, a partnership transfers a capital
or prots interest in the partnership
to a creditor in satisfaction of its debt.
The excess of the debt over the fair
market value of the partnership capital
or prot interest results in CODI.
The regulations provide a safe harbor
for partnerships under which the fair
market value of the partnership inter-
est is deemed equal to the liquidation
value that the creditor would receive,
allowing the debt-for-equity exchange
to reduce or eliminate CODI. Section
108(e)(8) requires CODI that results
from these transactions to be allocated
to those partners that were partners
immediately before the exchange, and
the exclusion for bankruptcy or insol-
vency is made at the individual partner
level.
Debt work-out plans: A debt work-
out plan or debt restructuring involves
modications to the original debt
instrument that produce debt relief.
Typical restructuring includes changes
in yield, timing of payments, obligor
or security, or changes in the nature of
the debt instrument. Under Treas. Reg.
§1.1001-3, these types of “signicant
modications” in the terms of the
debt could result in CODI, as they are
treated as an exchange of that debt
instrument for a new debt instrument.
Section 363 sales: With private equity
rms looking for investment opportu-
nities, selling assets to settle outstand-
ing debt could be an option. Section
363(b) of the U.S. Bankruptcy Code
allows for court-approved sales of
assets during bankruptcy that allow a
debtor to have more control over the
terms of the sale than they would oth-
erwise have in a Chapter 7 liquidation.
Section 363 sales, however, can have
signicant tax consequences not only
from CODI but also from possible
state transfer taxes and taxes on any
gain on the sale of the asset.
Purchase-money debt reduction:
Solvent taxpayers not in bankruptcy
could nd an exception to CODI
if they negotiate a reduction of
purchase-money debt from the seller.
Section 108(e)(5) treats this type of
reduction as a purchase price adjust-
ment if the reduction would otherwise
be treated as CODI. Given that the
treatment of CODI is determined at
the partner level, the IRS waived the
bankruptcy and insolvency restrictions
for partnerships. Under IRS guidance,
the exclusions apply at the partner
level, making the bankruptcy or insol-
vency of the partnership irrelevant for
the application of Section 108(e)(5).
A bankrupt or insolvent partnership
can treat a reduction of an indebted-
ness as a purchase price adjustment
if the transaction would qualify as a
purchase price adjustment but for the
bankruptcy or insolvency of the part-
nership. This allowance does not apply
if any partner adopts a federal income
tax reporting position for the debt
discharge that is inconsistent with that
of the partnership.
Conclusion
When considering discharges of debt
through bankruptcy, insolvency or debt
restructuring, oil and gas partnerships
must assess the tax impact of CODI
allocations on individual partners. This
assessment includes understanding how
the partnership agreement will affect
CODI allocations and how this will
impact the nancial position of each
partner. Partnerships that do not fully
understand the tax implications of bank-
ruptcies and debt restructurings could
cause individual partners to incur an
unexpected tax liability.
Jon R. Roberts,
CPA, Partner, Tax
Service, has more
than a decade of
public accounting
experience, with
a focus on serving oil and gas
exploration, production and
service companies. He has
extensive experience in federal
and state taxation of partnerships,
corporations, S corporations and
limited liability companies, as well
as serving their individual owners.
Roberts is also experienced in
tax planning for business and
individual clients and providing
tax services for closely held
family groups. A certied public
accountant, he is a member of the
Texas Society of Certied Public
Accountants (TSCPA), American
Institute of Certied Public
Accountants (AICPA) and the
Wednesday Tax Forum. Roberts
earned a Bachelor of Business
Administration in accounting
from Abilene Christian University.
Jon Pezzi, CPA,
Partner, Tax
Service, has more
than 13 years of
public accounting
experience which
includes federal and state taxation
of partnerships, corporations,
S corporations and limited
liability companies. His focus
is on providing tax consulting
for mergers and acquisitions,
including tax structuring and
tax due diligence. Pezzi also
has experience handling multi-
state taxation issues and public
company taxation issues,
including ASC 740 issues. He is
a certied public accountant in
Texas and Virginia. Pezzi earned
a Master of Science in accounting
with a concentration in tax
consulting from the University of
Virginia, as well as a Bachelor of
Science in accounting from Ohio
State University.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
6
OILMAN COLUMN
Each year, an array of industry analysts
makes its predictions on the specic
directions the oil and gas industry
could be heading in the coming
months. However, it’s fair to say that a
detrimental global pandemic was not
factored into any of those calculations.
We know that oil is the lifeblood of
industrialized nations, but COVID-19
has forced even this thriving industry
to reevaluate and reset.
Henry Berry, director of the U.K. oil
company, Tristone Holdings, believes
that an investigation of the oil industry
as it stands now – rather than where
it may have been six months ago – is
paramount. With business continuing
to change rapidly, there certainly will be
developments to come, but Berry has
identied distinct areas in which solid
trends seem to be manifesting.
Agile Practice
The pandemic has thrown the oil busi-
ness into a new era, one in which agility
has proven a mandatory trait for any
company that wants to grow and suc-
ceed in the undetermined times ahead.
Oil companies will need to consider a
substantial level of agility and exibility
within the industry as crucial for the
foreseeable future.
It’s no surprise that in such an uncer-
tain climate only the ttest and most
competent businesses will survive.
Even prior to COVID-19, a few suc-
cessful companies identied the need
for exibility and started to lay the
necessary foundations for increasingly
agile practices. Oil giant, bp, for ex-
ample, announced last year that it had
been able to cut its logistical costs in
Azerbaijan by a considerable $60 mil-
lion. The “scrum” technique was the
main catalyst in this business develop-
ment plan. Essentially, this technique
is all about teamwork, bringing the
right conglomeration of professionals
together and allowing them to develop
and implement the ideal solution to a
problem.
The benet of putting this type of agile
practice in motion within a company is
its incredible simplicity. Each utilized
member would be an expert in their
eld, enabling a quick and efcient way
of problem solving.
The need for this shift has signicantly
accelerated. While these practices may
have enabled certain companies to get
ahead of the game a few months ago,
they are now considered essential for
industry survival.
Sustainability
Across all industries, oil companies
included, there is a large focus and ef-
fort on contributing to environmental
care by cleaning up essential processes.
It goes without saying that in an indus-
try revolving around a particular fossil
fuel, an effort to use more sustainable
practices can only go so far. There is,
however, a lot that can be implemented
in order to make the oil industry, as a
whole, much cleaner.
It’s important to evaluate strategies and
make sure that even the smallest inef-
ciencies are running as smoothly as
possible. There is a signicant amount
that can help make processes more
sustainable, from recycling and reduc-
ing freshwater wastage to mitigating
methane leakages.
Tristone Holdings has identied that
utilizing technology is a contributing
factor in making this endeavor more
successful. As a range of companies
have discovered, using drones can
effectively detect ozone-destroying
leakages of methane, one of the most
harmful greenhouse gases. Making
The State of the Oil Industry 2020:
An Updated Look atThings to Come
By Henry Berry
Photo courtesy of wrightstudio – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com
7
OILMAN COLUMN
small changes like this can help oil com-
panies cut costs and adapt for success
in the future.
Diversifying Interests
Expansion into the natural gas market,
for any oil operator that has the means
to do so, is highly recommended. Natu-
ral gas is the fastest growing fossil fuel,
according to the 2019 edition of
bp’s
Energy Outlook
. With an estimated
annual growth of 1.7 percent between
2017 and 2040, its volumes are set to
continue their increase.
Likewise, liqueed natural gas (LNG)
is also predicted to grow steadily. In the
uncertain period we’re all experiencing,
the prospect of investing our interests
safely with a more diverse asset portfo-
lio seems a sagacious move. While natu-
ral gas, like crude oil, has taken a hit as a
result of the pandemic, it’s also likely to
return to form in the coming year.
An Example from Tristone Holdings
Tristone Holdings’ primary vision is
to pursue high-value crude oil assets
located in the Cherokee Valley in the
United States. It’s fair to say, however,
that diversication is most denitely an
option. The area we focus on not only
features existing wells, but also a very
well-established natural gas pipeline net-
work, too. Pursuing such a prospect can
allow us to secure an asset, which is not
only high value, but extremely versatile,
as well.
It’s important to note that no mat-
ter how well prepared your company
may be, this year has emphasized the
signicance of being able to evaluate
and adapt your approach. You can be
acutely organized and still fall victim
to an unforeseen event – like a global
pandemic – that has the capability to
disrupt even the most thoroughly pre-
pared of businesses.
Consequently, agility and exibility are
fundamental strategies for companies
looking to succeed in the industry in
this unprecedented time. Be smart
and vigilant in the way you have your
business structured. That allowance
for diversication will place you in a
substantially better position to deal with
any new challenges that arise.
Henry Berry is a
director at Tristone
Holdings, an energy
company based in the
U.K. with a primary
focus in the U.S. It nds, develops
and produces essential sources of
energy and its portfolio includes high-
quality conventional oil and natural
gas assets in the top U.S. onshore
plays. Currently, it is raising capital
to acquire and expand its energy
base, specically in the oil and gas
sector. For more information visit
tristoneholdings.com.
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Oilman Magazine / January-February 2021 / OilmanMagazine.com
8
OILMAN COLUMN
While the pace of oil and gas mergers
and acquisitions (M&A) deal-making
declined throughout 2020 in both
value and number of deals,
1
experts
are highlighting the potential growth in
cross-border M&A, as well as increas-
ing trends toward “responsible invest-
ments” with a greater focus on environ-
mental, social and governance (ESG)
screening as part of due diligence.
2
This intensies the importance of not
being “blindsided” by safety culture in
your next M&A. In two recent con-
versations with senior executives that
had experienced fatalities in their newly
acquired companies, they reinforced
the importance of conducting a deeper
due diligence process prior to acquiring
a new company and in accelerating the
pace of safety culture integration.
Aligning safety culture effectively on the
front end will help avoid a myriad of
challenges on the back end. It will also
help prevent serious injuries and fatali-
ties (SIFs) down the road. Although it’s
not necessary to merge with a company
that has the same safety culture, it IS
critical to manage the cultural differ-
ences well and identify them early.
Step 1: Assess Safety Culture in
M&A Target Companies
As part of the due diligence process,
leaders should perform a robust,
independent and thorough safety
culture analysis to diagnose differences
and similarities. When this cannot be
completed as part of the due diligence
process, it should be completed as soon
as possible prior to integration. This is
increasingly more critical when dealing
with cross-border transactions and to
meet more stringent ESG requirements.
Potential approaches include:
Interviews with managers and em-
ployees to provide insight into how
workers of each organization view
the prioritization of safety and leader-
ship commitment to safety culture.
Employee surveys should be em-
ployed to assess attitudes, behaviors
and intentions when it comes to
safety ownership, accountability and
performance.
Learning culture should be assessed
to determine if organizational lead-
ers treat close calls and incidents as
opportunities to learn or occasions to
punish.
Safety risk analyses should be con-
ducted with safety metrics, systems,
policies and procedures.
Step 2: Rapidly Establish a Safety
Culture Integration Plan
Once M&As are complete, leaders
need a game plan to rapidly integrate
safety cultures. While safety culture is
a component of the overall integra-
tion, it needs dened expertise, focus
and urgency to drive forward. In our
experience, speed is of high importance
to mitigate risk. The integration plan
should explore the following questions:
Where are current goals and vision
already aligned?
What aspects of both the target and
parent company’s safety culture need
to change and which should stay the
same?
What differences between the two
safety cultures present challenges?
What differences could be compli-
mentary?
What can be learned from the target
company that needs to be integrated
into the larger organization?
What should the culture look like
moving forward?
When differences exist, proper planning
and management of the integration
process can alleviate negative ramica-
tions and prevent culture clash. It is
important to establish a documented
process for working through differences
between the two safety cultures prior to
the integration.
3
Charting a clear path
removes ambiguity during the transition
period and aligns leaders on a common
goal moving forward.
Step 3: Safety Culture Integration
Leaders must be proactive in driving
safety transformation initiatives dur-
ing company integration. These efforts
include communicating expectations,
establishing trust, encouraging em-
ployee participation, providing adequate
resources, and holding the organization
accountable for performance dur-
ing and after the change management
process. The following are 10 “musts”
Avoid Getting Blindsided by Safety
Culture in your Next M&A
By Josh Williams and Eric Michrowski
Photo courtesy of Propulo Consulting
Oilman Magazine / January-February 2021 / OilmanMagazine.com
9
OILMAN COLUMN
to accelerate the pace of safety culture
integration:
1. Paint a picture of desired
organizational values and culture.
2. Set clear expectations around safety
and safety culture.
3. Boost trust throughout the
organization.
4. Promote participation.
5. Provide mentoring, coaching,
training and guidance to ease the
transition.
6. Drive out fear.
7. Demonstrate you care.
8. Show people the ropes.
9. Check to see how people are doing.
10. Learn from new employees.
Step 4: Sustainment
Safety champions should be identied
to ensure integration efforts are sus-
tained. Explore themes such as safety
metrics, leading indicators, training,
processes and systems to ensure new
employees are effectively aligned with
the values and goals of the organiza-
tion. This includes coaching and men-
toring employees as they adapt to their
new environment. Pre and post-pulse
assessments are also used to measure
M&A success, and to strategically and
behaviorally address remaining gaps.
Also, “safety” is a unifying force to get
people on the same page so that every-
one goes home safely to their families.
Improving and aligning safety culture
before, during and after the M&A
process builds on successes already
attained. It also helps prevent serious
injuries and fatalities in the future.
The Bottom Line
Like in the movie,
The Blind Side
,
introducing someone new may have
surprising effects that benet everyone.
The upheaval that is sometimes
created with M&As provides a rich
environment for larger organizational
improvement. This is especially true
with safety culture. Bringing in a new
partner triggers a focus on how things
are currently being done. Holding up a
mirror and honestly assessing strengths
and weaknesses is an important rst
step to improvement. Also, new partner
organizations may have creative ideas
and best practices to further strengthen
the organization.
M&As, while challenging, offer an
outstanding opportunity for leaders to
improve safety culture throughout the
organization and prevent SIFs. Dont
let the opportunity escape you!
References:
1. S&P Global Market Intelligence. Oil, gas deal
tracker: COVID-19 fallout stied Q3’20 M&A.
October 14, 2020.
2. Intralinks. What Will Oil & Gas M&A
Dealmaking Look Like in 2021? November 5,
2020.
3. Schweiger, D. M., & Lippert, R. L. (2005).
Integration: The critical link in M&A value
creation. In G. K. Stahl & M. E. Mendenhall
(Eds.), Mergers and Acquisitions: Managing
Culture and Human Resources (pp. 17–45).
Stanford, CA: Stanford University Press.
Eric A. Michrowski
is president and CEO
of Propulo Consult-
ing, a global manage-
ment consulting rm
delivering signicant and sustainable
improvements in organizational
performance. He is a globally rec-
ognized thought leader and guru in
safety and operational performance,
and a highly sought-after executive
speaker, who is recognized for his in-
novative evidence-based approaches
to safety and operations. He has
been featured on TV, in articles and
on podcasts, and his upcoming book
will be published by ForbesBooks
this year. Contact: eric.michrowski@
propulo.com.
Dr. Josh Williams is a
partner with Propulo
Consulting. For over
20 years, Williams has
partnered with clients
around the world to drive increased
discretionary effort and improved
strategic execution. He is the author
of Keeping People Safe: The Human
Dynamics of Injury Prevention and
received the Cambridge Center Na-
tional First Prize for his research on
behavioral safety feedback. Contact:
josh.williams@propulo.com.
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10
OILMAN COLUMN
Corrosion can be dened as the dete-
rioration that a metal suffers from being
under exposure to electrochemical mol-
ecules that are in its environment, creat-
ing permanent damage to the surface
and, in many cases, even worse.
In the article, “Corrosion – The Lon-
gest War” published by Schlumberger,
it mentions that in 2015 the annual
cost of the effects of corrosion was
$500,000 in the United States alone.
This budget was six times bigger than
the one for natural disasters.
Corrosion is one of the most frequently
recurring problems the oil industry faces
today, just as it has in the past. The ar-
ticle written by Kermany in 1995 for the
Society of Petroleum Engineers (SPE)
mentions that out of the failures that
occur in the operations of the gas and
oil industry, the most important is cor-
rosion, which was involved in 33 per-
cent of the cases at that time.
This number has dropped over time due
to the use of new alloys, but challenges
related to reservoirs with more contami-
nating uids also increased, as did both
hydraulic and matrix stimulations. All
these factors cause metals to come into
contact with uids for which they are
not normally prepared, accelerating the
corrosion process and, in some cases,
even creating corrosion immediately,
compromising the structures and lives
of the wells over time.
In view of the different problems, there
are different tools and technologies that
are designed to detect corrosion early
on and others designed to mitigate such
processes.
Technologies to Detect Corrosion
Corrosion not only affects the opera-
tional sector of the oil and gas industry,
it also affects the tasks performed in
a rening complex. This is why Impe-
rial College London-Permanense
developed the use of Radio Fre-
quency Identication (RDIF) sensors
upon request from bp, to be installed in
its 11 reneries worldwide.
RDIFs are sensors widely used for dif-
ferent activities. For corrosion detec-
tion in pipes, they focus on the use of
radio waves that travel the metal surface
where multiple emitters are distributed
throughout the pipe.
The emitting sensors are also informa-
tion receivers and together they are able
to provide an overall picture of the
pipe’s integrity. Using sounds, they go
off when corrosion occurs, which can
be noticed at different levels, thus facili-
tating early detection and being able to
choose which type of repair methodol-
ogy to use.
In 2017, the company Draper took no-
tice that in the U.S. alone, gas and oil
pipelines travel over 2.5 million miles of
mountains, forests and urban wetlands,
whose characteristics create the per-
fect conditions for corrosion to occur.
Overhead pipelines were not prepared
and losses related to pipe problems and
repairs increased.
For this reason, Draper decided to focus
its efforts on creating an economical
and reliable technology to detect cor-
rosion in pipes around the country.
Draper’s team of engineers developed
WiSense, an identication network,
which centers on the detection of the
pipe’s magnetism, corrosion being one
of the erce enemies of this character-
istic in metals. WiSense is placed directly
on the pipe, emitting a conductive signal
on the metal and, when it detects a drop
in its magnetism, it emits a signal to the
checkpoint, thus detecting the growth
of corrosive agents immediately.
Draper is dedicated to the transportation
of hydrocarbon, knowing that in order
for this technology to succeed both low
costs and minimal human operation
are needed. They used the Internet of
Technologies to Detect and
Mitigate Pipe Corrosion
By Raul Palencia
Pipe corrosion. Source: PV Productions - www.freepik.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com
11
OILMAN COLUMN
Things (IoT) to create a conductive
loop, where each of the responses from
the magnetic sensors located throughout
the pipe is monitored by its hydrocarbon
distribution system, making it a single
data network where, in addition to being
able to read the pressure, temperature
and volume values of the uids, workers
can also check the integrity of the metal
equipment.
The lifespan of Draper’s patented
sensors is 10 to 20 years, during which
time no battery change or human
interference is required to ensure their
operation.
The inclusion of ber optics is in
the race to nd out which is the best
corrosion detector in pipes. The article,
“External and Internal Corrosion
Detection Sensors for Oil and Gas
Pipelines Using Fiber Optics,” written
by Dr. Nader Vahdati and company in
2018, presents a detailed study on the
technology provided by Fiber Bragg
Grating, which is based on the use of a
permanent magnet.
Following the same line as Draper,
FBG’s engineers designed a prototype
in which they took advantage of how
economic ber optics are to use them as
a data bus, and use the FBG sensor as a
detector, based on the reading of inter-
nal pipe material loss normally caused
by corrosion. In this rst prototype, the
FBG sensor is capable of issuing an
alert when the pipe drops below a 3mm
thickness.
A small sensor placed on a thin metal
sheet that is then bolted to the pipe
works as a thickness reader. By early
2021, FBG hopes to patent this innova-
tive tool, as well as its big brother, which
is capable of working with greater thick-
nesses.
Techniques and Technologies to
Avoid Corrosion
It is better to have an ounce of
prevention to a pound of cure. In his
article, “Use of Polyurethane Coating
to Prevent Corrosion in Oil and Gas
Pipelines Transfer,” written for the
University of Mahshahr, Iran, in 2012,
engineer Amir Samimi proposes a
plan to use a triple layer of coating
to improve the external corrosion
resistance in the pipe over time.
With the use of a rst layer of poly-
olen, this material acts as insulation
against the oxidizing ions in the metal
by limiting movement and its spread. As
an intermediate layer, copolymer is used,
which is responsible for improving the
adhesion of the polyolen and further
restricts the occurrence of electrolysis;
nally, it is covered with an epoxy coat-
ing, which acts as a sealant agent which
provides greater resistance to shock and
high temperatures to which the pipe is
exposed. The disadvantage to this type
of method is how difcult it is to install
in old, settled and working pipes, and in
turn it represents added costs for new
installations.
There is a great battle in the develop-
ment of corrosion inhibitors. One of
the competitors is Baker Hughes with
its CRONOX ™ corrosion control
solutions. This element can be used in
drilling or production areas as well as
in transport and rening areas. It has a
great duality thanks to its HP/HT char-
acteristics. It is also able to resist attacks
of oxidizing agents such as CO2 and
oxygen.
CRONOX was tested by Dr. Mihalea
Alexandra, which she writes about in
her article, “Corrosion Inhibition Pro-
cess of Carbon Steel in Hydrochloric
Acid by CRONOX,” written for Po-
litehnica Timi
ş
oara University in 2017.
In this study, she tested CRONOX
in two cases: weight loss and linear
polarization by the Tafel polarization
method.
In the experiment, a cylindrical disc
cut from a carbon sample was used;
hydrogen chloride or hydrochloric acid
or in its hydrated form (HCI), which is a
highly corrosive agent and is present in
most oxidation processes to which pipes
Draper WiSense. Source: Draper.com
FBG Sensor. Source: Research Gate
Continued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com
12
Figure 2: Tafel with CRONOX. Source: Research Gate
are exposed in the oil and gas elds, was
used as an oxidizing agent. Subsequently,
for the gathering of results, she used
electrochemical studies to detect
corrosion.
For the Tafel polarization method, the
disc was exposed to temperatures of
298°k to 338°k, with a concentration of
one M CHI and 0.1 percent of CRO-
NOX for 240 hours, and another experi-
ment was conducted without CRONOX
during the same time. The application of
CRONOX yielded positive results in im-
proving the resistance to oxidation. The
results are shown in
Figure 1 & 2.
In
Figure 1
you will notice how the oxi-
dation accompanies the piece through-
out the whole process, corrosion being
the lines that are in the lower plane.
In
Figure 2
you can see how CRONOX
inhibits the corrosion process by stop-
ping its occurrence during the experi-
ment.
Subsequently, a study was carried out on
the tested plates based on the mass loss
they experienced when CRONOX was
and was not present in the process. The
results gave a green light to the use of
this compound as an inhibitor.
The best way to work with corrosion is
to avoid any existence of it. Also, it is
known that some structures are already
very long-lived and were not properly
prepared before this derivation. How-
ever, there will always be detection meth-
ods to address the problem in time.
Raul Palencia is an engi-
neer and researcher with
more than 10 years of
experience as a geolo-
gist. He graduated from
the prestigious University of Andes
(ULA), later he received a master’s
degree in reservoir engineering at the
Venezuela Hydrocarbons University.
During his career development, he
worked for oil companies in posi-
tions such as: eld geologist, reservoir
engineer and reservoir simulation. He
has worked in Argentina, Ecuador,
Mexico and Venezuela. He currently
resides in Texas.
OILMAN COLUMN
Figure 1: Tafel without CRONOX. Source: Research Gate
CRONOX mass loss. Source: Research Gate
Oilman Magazine / January-February 2021 / OilmanMagazine.com
13
OILMAN COLUMN
Weight of Hydraulic Fracturing in
the Industry
Hydraulic stimulations in the oil and
gas industry are positioned as one of
the rst three solutions to elds where
the pressure has declined or in elds
where the permeability is very low,
either because of special conditions
or because the reservoir is unconven-
tional. In either case, it is an important
monetary investment, in which nor-
mally more than one service company
is involved with the operation in search
of the best results for an adequate and
effective extraction of hydrocarbons.
We try to alter the skin factor the for-
mation has with respect to the well
in order to make the passage of uid
from one place to another easier and
turn it into produced barrels. One of
the most important factors during the
fracking process is to be able to attack
the target area correctly. The target
area is chosen in multidisciplinary
meetings outside of the well, which in-
clude petrophysicists, geologists, reser-
voir engineers and all relevant, related
disciplines.
Importance of the Selection of the
Area
The selection of the target zone is the
rst step to the success or failure of
the fracturing, according to the article,
“Criteria for Selecting a Candidate Well
for Hydraulic Fracturing,” written by
F. Roshanai and J. Moghadasi. Impor-
tant factors when selecting a well are
detailed and the area or sand of the
well that is to be fractured is discussed
in-depth.
One of the requirements that is taken
into account is the permeability of the
area, noting that reservoirs that are
from 0.5 to 5 md are more favorable
for fracturing; on the other hand, the
content of this reservoir is detailed in
the following table:
Typical values of some parameters for candidate
well selection in hydraulic fracturing.
Source: OnePetro
In hindsight, the most inuential data
in the selection of a candidate reser-
voir to be fractured are the amount of
hydrocarbons contained in the sand,
along with the low permeability vari-
able, and a minimum sand size of 10
meters (32.80 feet) in thickness.
Analyzing the variables of low perme-
ability and sand thickness, we note that:
Low permeability is synonymous
with hard sands, with high Young
and Poisson cohesion values, as
they are resistant to separating their
grains and, at the same time, they’re
resistant to loads and have elastic-
ity around the direction of applied
force received.
On the other hand, these types of
sands to be fractured tend to be low
in thickness. Fractures are made in
multiple stages either because the
reservoir is a lenticular reservoir, or
we simply want to fracture different
reservoirs at the same time.
Therefore, taking into account that
the optimal selection of the area to be
fractured is what will decide the valid-
ity of the fracture, this task is divided
into two halves. One is on the surface
when a multidisciplinary team takes the
knowledge about the area as a tool, and
subsequently decides on the basis of
geological and reservoir data to choose
the area of interest. The second one is
when the fracturing starts.
Common Problems Associated
with the Selection of the Area to be
Fractured
When facing an area of high mechani-
cal strength values, and minimum sand
thicknesses, multiple risks are taken
when practicing the fracturing. These
types of conditions are normal in shale
How to Control Target Areas During
Hydraulic Fracturing
By Andres Ocando
Photo courtesy STI Group
Continued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com
14
OILMAN COLUMN
gas, but are also common in convention-
al reservoirs, since seismic movements
can divide a reservoir into several, be-
coming known as a lenticular reservoir.
A catastrophic error is the deviation of
the fracture uid to less-resistant areas.
This type of problem goes along with
poor synchronization of the sand. If
one takes into account the thickness of
32.8 feet, and that the wire-line opera-
tions have a margin of error of 10-15
feet, the margin of error is approxi-
mately 32 percent, which is normally de-
creased with the use of technology and
expertise of the engineers in charge.
Another common error is to hit the cas-
ing area, an error caused by erroneous
calculations on the elongation that the
wire will have at the time of starting the
fracturing. Errors of this type not only
compromise the hydraulic fracturing,
but also cause substantial damage to
the casing, making it necessary to use a
sidetrack to continue working the area,
in most cases.
On the other hand, accidents occur
when the acid used for shale gas sands
seeps into areas of ecological interest,
compromising the life of environments
and organic beings, causing much more
than monetary losses. In some cases,
in conventional reservoirs, there is the
possibility of opening communications
with aquifers, affecting the production
with high volumes of water. In any of
the cases mentioned, the bad reputa-
tion of hydraulic fracturing is further
entrenched.
During the planning of the fracturing
there is another term that can further
increase the difculty of the work: frac-
turing in multiple stages. This type of
fracturing is based on selecting differ-
ent areas to fracture along the wellbore;
these areas can sometimes be the same
hydrocarbon divided into several reser-
voirs. This modality can slightly com-
promise the success of the fracturing.
Tools That Can Mitigate Operational
Errors for Correct Selection of the
Area
The ACUMEN article, “Hydraulic
Fracturing Market Size Hit U.S. $83 Bil-
lion by 2026,” explains that hydraulic
fracturing practices are in position to
grow more than 10 percent, from 2019
to 2026, increasing their market value
to more than $80 billion by 2026. This
means that the use of fracking will con-
tinue to increase; therefore, the technol-
ogy industry looks for ways to mitigate
the operational problems that can com-
promise the operation.
In trying to give an answer to the op-
timal selection of the area, there are
several tools in the race to solve this
challenge.
One of them is The Tryton Multi-Stage
Frac System (MSFS). A tool designed
to operate in multi-stage fracturing, its
functioning is based on the use of me-
chanical balls technology, in which the
tool is lowered between the pipes, and
placed in the areas to be fractured.
After the system is pressurized and the
rst pressure area is pumped, this area
increases the pressure of the pipe and
the annulus causing the plugs of the
tool to open, isolating the areas. Finally,
the second area is pumped with the frac-
turing uid at the same time, the sleeves
open and the reservoir is fractured. This
type of tool works from bottom to top,
allowing optimum isolation of the areas,
and, as it is placed in between the pipes,
the margin of error in the area at the
time of the fracture decreases.
On the other hand, thanks to Weather-
ford, there is technology in which the
tool has two parts: the TRUFRA
COMPOSITE PLUGS. Like in the
previous case, the plugs work with a
mechanical sphere mechanism to
increase its internal pressure and
release the plug.
Along the operation there are
the opening sleeves: the SIN-
GLESHOT SLEEVE and the
MULTI-ARRAY SLEEVE. The
main difference between them is
the MULTI-ARRAY SLEEVE
can be installed in a series of
ve, and, in the case of the
SINGLESHOT, there is one for
each tube. It has a sphere opera-
tion and fractures can only be
performed from bottom to top.
As in the Tryton Multi-Stage, the
geo-location of the sleeves goes
hand-in-hand with the position
of the pipes. In this way, the po-
sition of the pipe in the bottom
is correlated with the point where
the sleeve was placed.
Finally, there is the LIMIT-
LESS™ Fracturing System. This
technology separates itself from
the normal manual process and
features automated technology,
with the use of the Limitless
More than 200,000 wells had been fractured in the U.S. by 2017. Source: FracTracker
Tryton Multi-Stage Frac System.
Source: Tryton Tool Services
Oilman Magazine / January-February 2021 / OilmanMagazine.com
15
OILMAN COLUMN
Sleeves that are smaller than the ones
mentioned above and have a coupling
in both directions to avoid errors. These
sleeves feature a hardened interior that
prevents erosion, and can be closed
after being open, providing exibility
throughout the entire operation.
The process of fracturing with this tool
does not require intervention with wire
or exible pipe as with the others men-
tioned, but the way to open the sleeves
is completely different as it has an auto-
mated mechanism with sensors.
The master secret of this tool lies in the
Limitless Dart, which replaces the me-
chanical spheres to automate the system
entirely, leaving the sphericity behind.
It is a completely soluble dart to avoid
any plugging in the future. When this is
dissolved, it leaves an important mark
in the production, making its disappear-
ance visible.
In turn, it works as a geo-locator, be-
cause outside of the well the position
the dart occupies in the subsoil is known
at all times, emitting a different signal
each time it crosses a sleeve. In this way,
the drilling maps can be correlated with
the desired depth of the reservoir and
the position of the sleeve, thus decreas-
ing the margin of error in the selection
of the optimal fracking area.
The dart is programmed to be located in
the desired sleeve and gives the signal to
open. It is not necessary to apply pres-
sure for its opening, so the execution
times decrease. It also has the ability to
open more than one sleeve with its pas-
sage and follow its path, or to only open
one at a time, turning the fracture into
one of multiple stages at the same time
or multiple selected stages.
These tools are designed to mitigate the
errors that can be caused by wireline
operations, and, in turn, decrease the
time and make the work during the
fracturing easier, raising the economic
feasibility of the activity because they
achieve a signicant decrease in the
preexisting margins of error.
Andres Ocando is a
30-year old petroleum
engineer, who has been
working for PDVSA for
ve years, facing posi-
tions such as reservoir engineer and
geomechanical engineer. He currently
works as a project analysis engineer.
There, he has optimized the data col-
lection process for the development of
geomechanical models. Ocando has ex-
perience in copywriting and is currently
a technical writer on topics related to
the oil and technology industries. He
collaborates for important technical
publications such as OILMAN Maga-
zine and SPE. Quality and responsibil-
ity are two words that describe him
perfectly. Ocando is currently pursuing
higher studies at the University of
Zulia to obtain his master’s degree in
petroleum engineering.
Advertise with us!
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marketplace? Do you have a product or service that would
benefit the industry? If so, we would like to speak with you!
We have a creative team that can design your ad!
OilmanMagazine.com/advertise Advertising@OilmanMagazine.com (800) 562-2340 Ex. 1
LIMITLESS™ Fracturing System.
Source: Advanced Upstream
Oilman Magazine / January-February 2021 / OilmanMagazine.com
16
OILMAN COLUMN
The beginnings of the digital transfor-
mation effort of the oil and gas indus-
try can be traced back at least a decade
when many of the oil majors started
their initial efforts on smart elds. Dif-
ferent oil majors had various names
for this concept – Shell called it Smart
Fields, Chevron named it Intelligent Oil
Fields, bp referred to it as Field of the
Future – but the basic premise was the
same: data combined with software and
technology would enable autonomous,
continuous optimization of oil elds.
The underlying technology enabling
smart elds is known as closed-loop
reservoir management, and is described
in
Figure 1
below.
The Real Reservoir box represents the
real oil eld over which one or more
objectives needs to be optimized. In
a typical application, it might be net
present value or cumulative oil pro-
duced. The optimization is carried out
by nding the optimal values of a set
of control parameters including, for
example, well rates for injection opti-
mization and well locations for inll
drilling optimization. The Models box
represents approximate models that are
mathematical representations of the
real reservoir. These could be complex
simulation models, analytical models
or machine learning models that relate
the control variables to the objective
functions. Since our knowledge of the
reservoir is generally uncertain and data
is noisy, the models and their output are
also uncertain. The closed-loop process
starts with an optimization performed
over the current models to maximize or
minimize the objectives.
The optimization provides optimal
settings of the controls for the next
control step. These controls are then
applied to the real reservoir over the
control step, which impacts the outputs
from the reservoir (such as water cuts,
BHPs, etc.) which are measured. These
measurements provide new informa-
tion about the reservoir, and therefore
enable the models to be updated (and
model uncertainty to be reduced). The
optimization can then be performed
again on the updated model over the
next control step, and the process re-
peated over the life of the eld.
We have come a long way since the
beginnings of the smart eld and
digital transformation revolution, and
COVID-19 has further accelerated the
adoption of digital transformation.
However, with data being the backbone
of such a transformation, one of the
key impediments to this digital trans-
formation process has been the lack of
standardized, high quality, easily acces-
sible data in a timely manner, making
it difcult to realize the full potential
of digital transformation. Particularly
with respect to closed loop optimiza-
tion, high quality and timely data is
critical to ensure that the models are
The Dangers of Unreliable Data
By Pallav Sarma, Ph.D.
Figure 1
Photo courtesy of JT Jeeraphun/Adobe Stock
Oilman Magazine / January-February 2021 / OilmanMagazine.com
17
OILMAN COLUMN
always “green” and reliable, and there-
fore the optimizations based on them
are reliable; otherwise, implementation
of these “optimal” decisions would be
disastrous.
Among the many kinds of data being
measured in oil elds, production data
are probably one of the most impor-
tant types, particularly because the eco-
nomic viability of an oil eld depends
directly on production. Additionally,
well and layer level production data are
required for most engineering work-
ows and even for regulatory purposes
like reserves reporting. Well level pro-
duction is typically measured via well
tests; however, such well tests are gen-
erally quite infrequent due to the cost,
production disruption and manpower
needed to conduct them. Further, layer
level measurements are even more dif-
cult and rare, as they require running
very expensive production logging tools
(PLTs) that completely disrupt produc-
tion and often are even not possible
due to wellhead jewelry. As such, there
is a need to allocate production to the
wellhead and layers on a daily basis that
is consistent with total production mea-
sured at the sales or distribution points.
Current approaches to surface alloca-
tion balance uid input and output
over the surface network so that inputs,
outputs and inventory changes in the
network are in balance for the selected
quantity measure (volume, mass, en-
ergy). Proportional allocation is the
most common method used to allocate
production, where the well tests are
normalized to the sales and distribution
point data. This proportional approach
is very simplistic and has a few key limi-
tations:
Inability of current methods to ac-
count for the physics of uid ow in
the surface network from the well-
head to the delivery point can lead to
inaccurate allocations.
Current approaches mainly use well
test data to calculate allocations,
which are then applied over periods
of time, until the next well test is
available. They don’t use all avail-
able data, such as pressure and tem-
peratures over the surface network,
which are usually more frequently
available than well test data.
Current approaches assume that al-
location factors remain constant over
periods of time when in reality sever-
al factors, like wellhead pressure and
injection-producer interaction, gener-
ate signicant changes, making the
allocation a dynamic process which
needs to be continuously calculated.
Using state-of-the-art machine learning
and data assimilation approaches with
well-known physical models and cor-
relations, it is possible to signicantly
improve over the current approaches
to continuously calculate daily oil, wa-
ter and gas rates at every wellhead and
other network nodes that match all
measured historical well tests, pressure
and temperature data. Furthermore,
such approaches can be operational-
ized using the power of cloud and edge
computing.
Figure 2
shows a surface network with
Continued on next page...
Figure 2
Figure 3
Oilman Magazine / January-February 2021 / OilmanMagazine.com
18
OILMAN COLUMN
21 wells and one gathering station. This
network is simulated with a full physics-
based network simulator to create a test
data set to compare the different ap-
proaches to allocation.
Figure 3
shows how employing such a
comprehensive approach can lead to
better allocation. Red is the “true” data
created with the simulator and is hid-
den from the proposed approach, black
is the well tests, blue is the allocation
based on current approach, and the
green ensemble is the result of applying
an ensemble estimator to a physics-
based network model to perform the
allocation. It is clear that such an ap-
proach leads to much better allocations
over a traditional allocation.
Similar to the surface allocation prob-
lem, the current approaches to layer
level allocation are also usually quite
simplistic and have many issues.
The most common approach is static
KH (permeability*thickness) based
allocation, which can again lead to
erroneous results.
Since injection rates, production
rates and connectivity are dynami-
cally changing, there is a need to do
layer level allocation on a continuous
basis, which is impractical with cur-
rent approaches.
Current approaches are determinis-
tic in nature and do not account for
uncertainty, which is necessary for
reliable results.
This process can be very time con-
suming and inaccurate if done manu-
ally, which is currently the norm in
the industry.
Again, combining state-of-the-art ma-
chine learning and data assimilation
approaches with well-known physical
models, layer level allocation can be
improved signicantly, to provide fully
automated, unbiased, layer level pro-
duction and injection rates on a daily
basis. Such an approach was tested us-
ing a data set from a real eld. The eld
has 98 active producers and 42 injectors
with a total of 83 reservoirs. The op-
erator measures well level production
using well tests and layer level injection
using injection surveys. The objective is
to calculate layer level production using
all available data.
In order to solve this problem, a con-
nection network for each layer was built
using the operator’s understanding of
the eld.
Figure 4
shows such a net-
Figure 4
Figure 5
Oilman Magazine / January-February 2021 / OilmanMagazine.com
19
OILMAN COLUMN
work for a particular reservoir.
A simple two-phase, physics-based uid
ow model is then solved over these
networks and combined with an en-
semble estimator to t the models to all
available historical well level prediction
and layer level injection data. The end
result is then oil and water production
rates estimated at each reservoir layer.
Figure 5
shows the quality of the t to
the well level historical rates.
The oil rate for one of the wells is on
the left and the water rate is on the
right. The red curves are the measured
rates, the black curve is from a tradi-
tional manual approach, the light blue
curves are the ensemble estimate from
the above approach, and the dark blue
curve is the mean of the ensemble. It
is clear that the proposed approach
provides a much better match to the
observed data, and even more so for
water rates compared to the traditional
approach. This is because the tradition-
al manual approach is quite complex, so
the engineers usually focus on match-
ing oil only. Additionally, the traditional
approach requires over three months
to do a full allocation compared to less
than an hour with the proposed auto-
mated approach!
Figure 6
shows the layer level alloca-
tions for one of the layers of the well
obtained using the approach above.
Such allocations can now be used for
many engineering workows like layer
level reserves estimation.
One of the fundamental drivers of
digital transformation is good quality,
reliable and timely production data. By
integrating different data sources with
physics, machine learning and data as-
similation approaches, combined with
cloud and edge computing, we can lead
to a step change in the quality and reli-
ability of such critical data.
Dr. Pallav Sarma is
chief scientist of
Tachyus responsible for
developing the funda-
mental modeling and
optimization technologies underlying
the Tachyus platform. He is a world-
renowned expert in reservoir man-
agement, with multiple patents and
numerous papers on the subject.
Sarma has over 12 years of expe-
rience working for Chevron and
Schlumberger. As a staff research
scientist for Chevron, he was re-
sponsible for its key simulation and
optimization technologies. He has
received many awards including the
Dantzig Dissertation Award from
INFORMS and Chevrons Excellence
in Reservoir Management Award.
Sarma holds a Ph.D. in petroleum
engineering and a Ph.D. minor in
operations research from Stanford
University.
Figure 6
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20
The COVID-19 pandemic has dra-
matically changed our entire lives, from
work to education, recreation and
more. What started out as a business
continuity challenge – ensuring an orga-
nization can continue to operate safely,
often requiring considerable changes
to operations to either stay open or
re-open – has evolved. For jobs that
require on-site attendance, temporary
accommodations are beginning to look
like more permanent solutions. It seems
like some changes may last even after a
vaccine is widely available.
The safety and well-being of employ-
ees and the community are the driving
forces. Ultimately, a key focus for com-
panies remains how they hire people
who meet the standards they set and
maintain safe environments, wherever
those may be.
Testing Helps Keep Your Workplace
Open and Safe
Organizations are doing everything they
can to protect their employees, custom-
ers and communities from the spread of
the virus. In addition, companies seek
to avoid a COVID-19 incident that may
cause a shutdown, which can be devas-
tating. The stakes are particularly high
in environments where social distancing
and other precautions are either chal-
lenging or almost impossible.
By now, we are all accustomed to high-
level screenings that occur in a range of
settings, where foreheads are scanned
for temperature and some basic ques-
tions about symptoms and potential
exposure are asked. Some companies
have made considerable investments in
training or hiring staff and purchasing
equipment.
It is possible, or even likely, to have the
virus and display no signicant symp-
toms. A more sophisticated, science-
based approach is testing individ-
uals for the active virus, leveraging
polymerase chain reaction (PCR), to
identify presence of COVID-19 at
that specic time. This can provide
a meaningful restoration of control,
giving companies necessary informa-
tion to manage and reduce the risk of
outbreak. With recent advancements in
non-invasive saliva-based testing, highly
reliable test results can be achieved
quickly to identify potential risk.
Establishing a Population “Bubble”
There have been some highly publi-
cized instances where a large group of
individuals, such as professional sports
leagues, has undergone COVID-19 test-
ing, with a negative test result required
for entry into a contained environ-
ment. We’ve seen this as one method
to attempt to keep the virus out of the
population, while continuing to test so
any positive cases can be quickly iso-
lated to reduce threat to the rest of the
group. A clearly dened and controlled
bubble requires all who enter to test
negative, with consistent negative tests
over time to remain inside.
Certain jurisdictions have established
strict testing and other requirements for
entry as the only way to avoid a lengthy
and potentially unrealistic quarantine
period, creating their own protected
environments. This can be most ef-
fective where there are limited points
of entry, as has been seen in Alaska,
Hawaii and other select states. These
types of locations provide a realistic way
to enforce testing and quarantine stan-
dards. Other places have enacted similar
requirements, but those with more
varied and open access (often through a
vast network of well-traveled roads and
highways) can yield lower compliance.
In these cases, abiding by regulations is
largely left to the individual traveler. As
was done for professional sports, some
companies have established their own
bubbles, either to help abide by local
regulations or to establish a higher stan-
dard in and around their own jobsites.
A Case Study in Creating a Bubble
Production and exploration within oil
and gas tends to be in remote locations
that feature strictly controlled access
points. An effective way to keep CO-
VID-19 and its devastating effects out is
through proactively testing all who will
be accessing the controlled environment
COVID-19 Testing and Background Screening
Are Now Essential for Safe Workplaces
By Alla Schay
Photo courtesy of Narongrit Sritana – www.123RF.com
OILMAN COLUMN
Oilman Magazine / January-February 2021 / OilmanMagazine.com
21
shortly before entry. Sterling has worked
with one of the largest privately-owned
oil and natural gas producers in the U.S.,
featuring employees and contractors ro-
tating in and out of the North Slope of
Alaska every two weeks. State mandate
requires all who enter to show proof of
a qualifying negative COVID-19 test.
Working with this client, Sterling estab-
lished a process where test kits are de-
livered to employees’ homes four days
prior to scheduled travel to Alaska. This
allowed sufcient time to collect the sa-
liva sample, return it to the lab, have the
sample analyzed, and to report results to
both the individual and company – all
before stepping into an airport for the
journey to the worksite. In this case,
testing has become one more routine
item for the pre-trip checklist. Follow-
ing a cycle away from Alaska, employees
follow the same process in advance of
their next work shift. To decrease the
likelihood of contracting the virus while
outside the bubble and to more eas-
ily enable re-entry, individuals practice
strict social distancing, masking and
commonly used hygiene procedures.
The Enhanced Role of Identity
Verication and Background
Screening
As you bring new workers onboard, you
are adding to your company culture and
introducing new people to your existing
employee base, and potentially to that
of your customers, partners and your
community as well. In short, new team
members can impact the people around
you and your brand and reputation. A
consistent, high-quality background
check remains a critical step in creating
a safe, secure workplace that includes
only those individuals who meet the
standards you set.
An effective background screening
program begins with identity verica-
tion from the rst interaction with a
candidate for a job. Government issued
identication is scanned and validated
for authenticity. Using a smart phone, a
match can be established between the
candidate and the information pre-
sented.
From there, criminal records can be
checked, employment and education
can be veried, and drug tests can be
administered, among other items. In
consultation with Sterling, clients can
select pre-dened background screening
packages designed for specic types of
jobs, unique screening solutions for spe-
cic needs or some combination. This
is a best practice for all employees, with
particular value for remote locations or
instances where extended time periods
are involved. Investing in consistent,
high-quality background checks every
12 to 24 months can provide critical
information about your workforce to
help reduce risk.
Methods for providing a safe working
environment will continue to change
over time. Managing through uncer-
tainty and staying one step ahead of any
threats is key. An end-to-end CO-
VID-19 testing plan, which helps reduce
risks associated with an outbreak, com-
bined with an identity verication and
background screening program, helps
protect people and make the tangible
statement that safety is a top priority
and critical part of company culture.
The information contained herein is for
informational purposes only. Sterling
is not a law rm, and none of the
information contained in this notice
is intended as legal advice. Clients are
encouraged to consult with their legal
counsel about the impacts of any
requirements. This, and other important
information can be found on the
Sterling website at sterlingcheck.com.
Alla Schay is the
general manager of the
Industrials, Government
and Education group
of Sterling, a leading
provider of background and identity
services. She previously served
as Sterling’s Client Services and
Account Management leader, Chief
Operating Ofcer, and Chief Human
Resources Ofcer. Schay is an
operations management professional
with experience in business
process transformation, Six Sigma
analysis, and software and CRM
implementation.
OILMAN COLUMN
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OILMAN COLUMN
Eric Eissler: My grandfather used
to tell me that there is nothing more
constant in life than change. He is
right and, for many, change is a hard
thing to deal with. With all the auto-
mation going on, how are you helping
companies adapt to change?
Ryan Lailey: At
WolfePak, we speak daily
with independent oil and
gas companies about
digital transformation and
automation. Discussions
may include how to get
started with an electronic process, what
should be taken into account when
digitizing workows, and ways to ensure
frictionless data transfer and integration
with operations.
WolfePak conducted a survey in April
to learn about what challenges our
customers were facing with practically
an overnight transition to remote work.
Their biggest hurdle was working with
paper-based processes. Many organiza-
tions are looking for ways to manage
their operations, customers, employees
and partners while working from home.
Couple these challenges with the market
volatility, and you have companies that
need to automate functions to do more
with less, lower general and administra-
tive costs, and reduce their reliance on
paper-based processes.
The oil and gas industry is primed for
this innovation and the events of 2020
gave the transition a “jump-start,” if you
will. In an industry where even the small-
est and least signicant transactions may
require complex interactions with own-
ers, stakeholders, oileld teams and more,
along with the need to make smarter
and faster decisions, now is the time for
companies to automate.
To survive market conditions and our
industry’s evolution, we must adopt new
practices and excel in a modern work-
place. Independent companies can gain
several benets by leveraging new auto-
mation technologies. It lets them become
more agile and gain a competitive edge
– all securely and cost-effectively.
EE: Automation usually spells layoffs
for many. Have you been seeing lay-
offs or are employees being re-trained
to do other, more technical jobs?
RL: Cost-cutting initiatives are just not
enough. Automation eliminates manual
tasks, enabling teams to do more with
less, and focus on higher priority work.
When implementing a digital transforma-
tion strategy, you not only need to deploy
new technologies, your team needs to
learn new skills and expertise. That
makes re-skilling and training the cur-
rent workforce all the more critical. To
complete a successful digital transforma-
tion, companies must embrace the right
technologies and invest in personnel to
learn modern approaches.
A recent report by Ernst & Young
showed that nearly 60 percent of today’s
oil and gas workforce needs re-skilling
for their companies to remain competi-
tive. Still, only 43 percent of them will
receive the training they need, which
averages about ten months to complete.
Re-skilling employees can be challenging,
but it’s not impossible. Companies are
augmenting the skills gaps by leverag-
ing automation technology, with more
than 51 percent of respondents already
in implementation mode and another 40
percent planning to do so.
It’s not just individual companies that
need to change. Our industry’s reliance
on paper-based processes for the back-
ofce is well past their expiration date.
The most signicant opportunity for the
industry is to collaborate and digitize the
entire ecosystem.
EE: What are the most essential con-
cepts for management and operations
teams to learn and promote while
undergoing these changes?
RL: Transformation denitely must start
at the top. Leadership sets the vision.
Communication is key. Start by giving
employees an overview of how the digi-
tized company will run and how it will
affect success. Assure them that it will
make everyone’s job more manageable
and show them how. If they can replace
rummaging through a le cabinet look-
ing for one piece of paper with a simple
Google-like search for the same docu-
ment, they will appreciate that. Employ-
ees will feel encouraged to rally around
this effort to make the organization more
efcient by saving time, resources and
money. This makes the learning curve
worth it.
Depending upon their size, companies
may house tens or hundreds of thou-
sands of documents with complex
workows. They will get overwhelmed if
they try to digitize everything at once. We
recommend a “point forward” process,
meaning the company sets a date to go
digital and stop the inux of paper as
it moves its procedures online. Then
companies can determine what the next
priority is and continue their journey
from there.
Additionally, companies need to evaluate
how their current software infrastruc-
tures are best supporting them. It’s not
enough to just cut costs. Companies have
to change how they operate in order to
thrive today. Ensuring that all of your
company’s software meets your best-t
requirements is tantamount to success.
We advise companies not to fall into the
“sunk cost” fallacy and continue to invest
in systems that arent agile enough to
maneuver in today’s climate.
EE: What kind of automation are you
seeing the most in your experience?
RL: The current pandemic has shed a
harsh light on the old-fashioned nancial
processes hindering oil and gas opera-
tors and production. The production side
has always been quick to implement the
latest technologies. Still, investments for
Interview: Ryan Lailey, CTO, WolfePak
By Eric R. Eissler
Oilman Magazine / January-February 2021 / OilmanMagazine.com
23
OILMAN COLUMN
the back ofce have not kept pace, so ac-
counting teams, among others, have had
to rely primarily on paper-based systems
and spreadsheets.
Huge le rooms of documents and
paper-based information are quickly
becoming a thing of the past with more
and more people having to work from
home. WolfePak’s Document Manage-
ment solution helps our customers with
digital transformation by automating
workows to the back ofce. Since
people aren’t going into the ofce to
pull a le or approve an invoice, digitiz-
ing documents is crucial for maintaining
business continuity.
With WolfePak’s document management,
employees working remotely can log
in from any computer with an Internet
connection and gain instant access to the
information they need to do their jobs.
For accounting pros, if you havent made
your workows electronic, something as
simple as asking many people to sign off
or approve invoices is difcult and inef-
cient. With the integration of DocVue
into WolfePak, customers can automate
this entire process.
When they do return to the ofce,
[employees] will be more efcient in
this environment, reducing their reliance
on huge le rooms of documents and
paper-based information. It’s a win-win
situation.
EE: Why WolfePak? What sets you
apart from the competition?
RL: WolfePak’s customers are active in
our strategic roadmap planning and are
the lifeblood of our organization. Every
company is unique, and it is our entire
team’s mission to collaborate with them
to learn how best to provide support
today and in the future.
WolfePak Software has been providing
software for independent oil and gas
companies for the past 30 years. Our
mission is to put technology, once re-
served for the biggest oil and gas compa-
nies, into the hands of independents to
enable automation. Automation will be
the key to optimizing costs and getting
the visibility companies need to make
better decisions.
Our goal is to automate as much of the
work as possible, providing solutions
for oil and gas accounting, oileld data
collection, document management and
inter-company business transactions. Our
customers trust us because we provide
information that helps them make better
business decisions to deal with today’s
volatile market conditions.
Today, virtually any company can auto-
mate its operations. Doing it correctly re-
quires forethought and planning. It’s not
just about data collection and transfer. It’s
about data insights and letting the data tell
you what to do next. In short, the only
way that companies can survive in what
is now a depressed market is to automate
and streamline everything they can.
EE: While we have seen ups and
downs in the past, it appears the
COVID-19 pandemic will have lasting
effects on how we live our lives and
do business. Some of these effects,
such as working from home, will
have major impacts on cities and
transportation. Given that transporta-
tion demand will shrink, and electric
vehicles are on the rise, which market
do you see oil and gas consumption
shifting to?
RL: COVID-19 has indeed changed the
way we live and work, perhaps forever.
What happens next is still up for debate.
But it doesnt mean the end of the ofce
as we know it. Dont forget that essential
workers, of which there are so many
within oil and gas, never left the ofce.
That said, companies need to do every-
thing they can to make data access, trans-
fer and integration as easy as possible to
manage for their teams, whether they are
remote or not.
Many work processes will never come
back. No one wants to push paper or
drive to the ofce to get a le when they
can access it online from wherever they
are. But not all manual work disappears;
the approach just changes.
And while the electric movement is excit-
ing, it doesnt signal the end of oil and
gas as an industry. We forget that there
are so many other things that rely on oil
and gas to run – trucks, boats, barges,
even irrigation systems on farms.
EE: Under the Biden administration,
how do you see oil and gas faring? Do
you believe there will be a lot more
regulations set forth?
RL: We work in a highly regulated
industry already. Our job at WolfePak is
to help our customers maneuver through
any market or political climate with ease.
Oil prices going negative is something no
one thought would ever be possible. This
year is a perfect example of our indus-
try’s resiliency and adaptability – we’ll get
through this together.
Our primary focus is on taking care of
our customers. We’re doing everything
we can to help them adjust to the “new
normal” of business, whether that’s get-
ting online remotely, implementing new
cloud and mobile technologies, or creat-
ing new business rules in our software
to account for so many of this year’s
industry rsts.
We work with our clients to navigate
their specic market requirements,
understand what insights they can glean,
and what new reporting needs they may
have. And we aim to provide our cus-
tomers with access to the right informa-
tion when they need it, in as few steps as
possible.
EE: Technology and the oil and gas
industry have come a long way. What
are your predictions for the next step
in this relationship?
RL: Technology is an enabler to a more
protable path. As I mentioned before,
we will continue to work with our cus-
tomers and partners to ensure we deliver
solutions that efciently help them reach
their business goals.
Cloud adoption has rapidly increased in
the wake of COVID-19. Customers un-
derstand the benets of cloud economics
and want the ability to scale as needed.
In addition to more cloud and mobile
deployments with the back ofce, we’ll
see more data analytics and business
intelligence (BI). Companies are sitting
on mountains of data, but need help
in gaining actionable insights from the
information.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
24
Whether it makes the front-page news
with names you know or it’s happen-
ing behind the scenes, oil and gas assets
are always being bought and sold. The
reasons vary. The oil industry is volatile
and always has been. Every year compa-
nies will examine many factors and try to
make predictions on what the future of
the market will be for the upcoming year.
I’m not sure anyone was able to accu-
rately predict or prepare themselves for
the roller coaster the last year brought.
According to Deloitte’s article from
October 2020, “The Future of Work in
Oil, Gas and Chemicals – Opportunity
in the Time of Change,” the oil indus-
try is in a “great compression.” This is
where companies’ room to maneuver
is restricted by multidecade-long low
prices, unforeseen demand destruction,
and changes in end-use consumption due
to mass telecommuting, mounting debt
loads, and a renewed focus on health
from COVID-19. This downturn is truly
like no other…and a big opportunity for
repositioning.
Josh Robbins, Founder of Beachwood,
has been a reoccurring contributor to
OILMAN Magazine
in the past concern-
ing acquisition and divestitures. Rob-
bins started Beachwood over ve years
ago as a contract business development
service that uncovers oil and gas deals
by outright calling oil and gas operators.
They make phone calls to potential sell-
ers, who then provide their off-market
deal specics to the Beachwood team.
Phone conferences are set up for both
buyers and sellers to talk to one another,
removing all the back and forth that
happens when there is a middleman. As
an exclusive buyer in a specic area, the
client will get to see everything: deals,
information about marketed deals and
useful data from the eld.
Companies and employees are fearful
right now. Given how the previous year
has transpired, some would consider
this a scary industry to be in. To truly
decipher the impact that 2020 had on an
industry in which many people are des-
FEATURE
Acquiring More than Assets
By Sarah Skinner
Photos courtesy of Beachwood
Oilman Magazine / January-February 2021 / OilmanMagazine.com
25
perate to keep their livelihoods, Robbins’
business seems like the perfect resource
to obtain information on what kind of
wreckage we’re looking at post-2020.
Sarah Skinner: The pandemic has
impacted every industry and oil and
gas are denitely no exception. I
can imagine the seller’s market has
grown exponentially during this time.
What effect has the pandemic had
on your business and what changes
and trends are you seeing now that
weren’t happening a year or two ago?
Josh Robbins: I think it is a fair assess-
ment to say that the pandemic affected
every business, regardless of industry
(unless you were in the business of mak-
ing face masks).
At Beachwood, we were no different.
First, I had to gure out what, exactly,
was an essential worker? We all work
to pay for the essentials, so I think the
rst three months of the pandemic put
everyone at home. I am on the road
for forty-plus weeks a year, and when
the pandemic hit, everything came to a
screeching halt. I started driving to my
ofce to work because getting anything
done while at home is so difcult. I
realized that I was driving 35 minutes
one-way, so I could sit in an ofce built
in 1972.
I looked at the headlines and commercial
real estate was collapsing. Renters were
disappearing, so many landlords started
offering discounted rates for their ofce
space. I realized I could save a signicant
amount of money, as well as a signicant
amount of time, by moving closer to
home. So, we packed everything up and
moved ofces.
In the meantime, I had picked up some
excellent clients. People that understood
that when everyone is going one way,
you go the other. We were able to close
six deals during the pandemic. Some
companies didnt have six operated deals
to list in 2020.
Everyone thought that properties were
going to be sold at a discount in 2015.
Everyone in the industry said that the
properties should be sold at a discount.
They said it all the way [through] 2015
and into 2016. Then, in 2017, when
people could have sold at a high point
in the market, they decided to wait it
out. After the price drop in 2018, the
talks started up again – things are about
to sell at a discount! But nothing sold,
and people kept talking about how there
should be deals on the market, and they
kept talking about it through all of 2018,
all of 2019 and into the rst two months
of 2020. Then COVID-19 hit and was
the single most destructive factor that
the entire industry has ever seen.
The trends are a direct reection of that
destruction. Future oil and gas compa-
nies have to run extremely thin but, to
everyone’s surprise, you can run thinner
companies when everyone works from
home. The industry had immediate buy-
in from every large and mid-size com-
pany because they knew they had to do
something to survive.
“Work from home” became its own ac-
ronym (WFH), and it became completely
acceptable, literally overnight, to have
kids running through your conference
calls. Again, serious adjustment time.
Through that time period, the industry
lost a ton of talent. Wave after wave of
emails outlining the layoffs continued to
hit the LinkedIn pages. So, when we see
trends, they will be from companies and
people who have made it through the
pandemic. Those people are going to be
cautious, the rigs they put in the ground
(if they put rigs in the ground) will be
checked (and quadruple checked) [to
ensure] that the well will make money in
this environment.
You wont see any large land grabs or
huge lease amounts. You will see disci-
plined teams working on common sense
deals that will increase the amount of
production they have for the least out-
of-pocket cost. I think you will start to
see a sell off of assets that can bring in
cash and remove liability.
SK: Is this a lucrative business to be
in at this time or is it the opposite?
JR: I honestly believe that the oil and
gas business is the best and most lucra-
tive business that exists. A close second
would be space exploration. Oil and gas
are the cornerstone of our world. Plastic
and fuel are in every corner of the world.
FEATURE
Continued on next page...
Buying oil wells. Josh Robbins with Jennifer Robbins, co-owner, Beachwood
Oilman Magazine / January-February 2021 / OilmanMagazine.com
26
FEATURE
Everyone will need oil and gas for the
rest of eternity. If that isn’t a winning in-
vestment strategy, I dont know what is.
SK: What changes has Beachwood
had to implement during this time
and how have you adapted?
JR: We have moved ofces [and] re-
placed travel with phone conferences. I
celebrate every time I can actually meet
someone for coffee. We have to change
and adapt in order to survive. Things are
different now, and people will want to
hold onto their old ways as hard as they
can. But, in a post-COVID world, most
people wont have a choice; they will
have to change and adapt.
We have worked with sellers more close-
ly. Everyone is looking for help during
this time, [whether it’s] with understand-
ing the market, the future of the asset
[or] the employee head count.
I built this company to help oil and gas
companies. I don’t care about the dollar
amount or the size of the tank battery; I
care about the people that are trying to
build companies. I care about building
local businesses and transforming com-
munities.
Oil and gas are always rst on the list of
donors or where people go to try to get
donations. And we always help. But we
are always the rst industry people slan-
der. We help our hometowns, our small
towns and our community downtowns.
All of those communities need our help
even more, and I want to help build the
companies that will be that lifeline.
SK: What do you think the future
looks like for acquisition and di-
vestiture (A&D) and where, in your
opinion, is the oil and gas market
headed?
JR: People will start selling. For one
reason or another, the more calls we
make, the more people are willing to
part with assets that no longer t into
their company. The life of a well will
be redened and companies will target
straight line decline over years instead of
what they have been looking for, which
was immediate pay-out, and a complete
disregard for how to produce the well in
the later years of its life.
I think gas assets are the rst step in
that asset buying phase. People want low
decline and stable pricing, and natural
gas provides that. I think if the LNG
market moves away from the Henry
Hub, we could be looking at another
boom, but that is nowhere close to the
current environment we are in. For now,
people will concentrate buying efforts
on natural gas in oil-friendly states. I
think the investment world will stay out
of Colorado until sureties can be given
from the state that oil and gas are, in
fact, essential to their economy.
Oil assets are going to be tough to
move. People are going to expect top-
tier pricing, but with so many other
people looking to sell, the market will be
lled with sub-par oil assets that need
new homes. Unless the sellers are willing
to take a real look at the current market,
there will be disappointment after 40 of-
fers are made and none are even close to
what they perceive the value to be. With
that being said, COVID-19 made “buy-
ing local” a term that is being picked
back up in the oileld. It makes so much
sense to sell an asset to an operator that
works in the same area you do. We man-
age to connect people every day, and
sometimes the companies know each
other. They drink coffee at the same
breakfast place. But they never reach out
about buying a well or selling a well that
no longer makes sense for them to own.
This business is fascinating. Every
single day I do something new. I meet
new people, interesting and intelligent
people. I help companies grow. I help
them sell for whatever reason they want
to. Building Beachwood was the best
way to get involved with every company
in the industry and help them out. On
our website, that is a key quote: “Our
success is driven by the client.” When
companies are building, growing and
making sound decisions, we have a
healthy industry.
Here’s to a healthy industry for the rest
of the 2020s!
Everything Robbins says about the
industry is not only insightful, but hope-
ful. He is not sugar-coating the situation.
He made clear that, “COVID-19 was the
single most destructive factor that the
entire industry has ever seen.” However,
it’s not all doom and gloom. Assets are
coming and going, but we’re gaining
more than assets, we’re gaining knowl-
edge – the ultimate source of power.
What we’re losing and whether we’re
really losing anything here is a matter of
perspective. There has been, and there
will continue to be, adaptability among
companies and employees. Day by day,
we’re all learning how to familiarize
ourselves with this now, not so strange,
environment.
This industry is resilient. Buying and
selling will occur as needs change, but
one thing remains constant. Oil and gas
arent going anywhere. We, as an indus-
try, will nd a way to grow from this. It’s
one heck of a learning curve and prob-
ably the biggest transition we’ll make in
our lifetime, but we will come out of it
better than before. With some of the
most intelligent individuals and the most
advanced technology across the globe,
condence is high and we have nowhere
to go but up.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
27
OILMAN COLUMN
Eric Eissler: What accounting and
nancial reporting methods can oil
and gas companies apply to help
manage future business decisions?
Chad Valentine:
Adopting the PCC
GAAP alternative for
goodwill can alleviate
pressures related to
goodwill impairment and
simplify business combi-
nation accounting as consolidations of
companies continue to increase in the
industry. While no one is recommend-
ing early adoption of ASC 842 - Leas-
es, the new pronouncement is coming
soon. Companies should prepare by
making schedules of all identied
leases and begin to comb through
repetitive monthly expenses to see if
leases exist under the new guidance.
EE: How should oil and gas com-
panies monitor and maximize lease
royalties?
CV: Companies should ensure that
they have good title on all leases and
do thorough due diligence for titles
on purchases to ensure they get their
money’s worth. Additionally, compa-
nies should monitor lease lives and
drilling requirements to ensure they
dont lose leases unnecessarily. Lastly,
companies should monitor costs by
their operators to make sure they are
in line with estimates and that they do
not indicate overspending or improper
well management. In certain cases, a
JIB audit may be the proper step to
xing or identifying any issues.
EE: What are some key tax con-
siderations energy companies can
apply to reduce liabilities?
CV: There are three common areas we
help our clients with each year to help
them save on taxes. Sales tax charged
incorrectly by vendors to operators
is one of the most common savings
opportunities, and companies can
look back multiple years for additional
savings. Property tax renditions should
be monitored each year as volatile oil
and gas prices can change a property’s
worth and there are chances to save
money in situations where the state
assessed a value too high. Lastly, there
are other state and local tax issues, as
well as federal tax savings, that can be
had in certain situations that are avail-
able to operators. These include fran-
chise taxes, manufacturer’s credits, and
research and development credits, just
to name a few. Taxes will always exist,
which means there is probably a way
for companies to reduce their burden
if the right experts are involved.
EE: How should oil and gas com-
panies structure a buy/sell agree-
ment?
CV: Companies on the buy or sell side
should consider having due diligence
experts conduct buy/sell side due dili-
gence to ensure you are getting what
you pay for. Protecting your invest-
ment dollars doesn’t begin with the
purchase, it begins with the budgeting
phase, which should include some
form of research and analysis of what
the company intends to buy or sell.
Furthermore, due diligence reports
can help a seller move assets quicker as
they show potential buyers a level of
condence and organization that other
companies may not have. Additionally,
a buyer can express its interest and
seriousness through buy side due dili-
gence, which could give a company the
edge in a bidding war. Due diligence
should always be considered in a buy/
sell transaction by management teams
to show investors you are keeping their
dollars safe and sound.
Interview: Chad Valentine, Partner,
Assurance Services, Weaver Accounting
By Eric R. Eissler
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28
OILMAN COLUMN
It is well known that, if all things
being equal (or in Latin
ceteris pari-
bus
or
caeteris paribus)
, the volume is
directly proportional to temperature
and inversely proportional to pres-
sure, which are applied to it. In other
words, under constant temperature
and pressure, the relationship between
the volume of gas and the number
of moles is direct. This law is known
as Avogadro’s Principle or Avogadro’s
hypothesis and was rst published by
Amedeo Carlo Avogadro (1776–1856),
an Italian scientist, in the year 1811.
For those who prefer a mathematical
language, we refer to Avogadro’s origi-
nal and simple modied equations:
V ÷ n = k, which means that the vol-
ume amount fraction will always be the
same value, if the pressure and tem-
perature remain constant.
Let V
1
and n
1
be a volume amount pair
of data at the commencement of our
research. If the amount is transformed
to a different value called n
2
, then the
volume will be altered to V
2
.
As we are aware that V
1
÷ n
1
= k and
we are acquainted with V
2
÷ n
2
= k.
Meanwhile, as k = k, we can determine
that V
1
÷ n
1
= V
2
÷ n
2
.
This equation of V
1
÷ n
1
= V
2
÷ n
2
will
be very useful in cracking Avogadro’s
Law problems. Here is the Law articu-
lated in fractional form:
And, if we emphasize that the tem-
perature should be presented in kelvins
(and Celsius degrees), and the pressure
in Pascals (which is how all the units
are accepted in modern chemistry and
physics, as well as in the SI, where 0 K
= -273.15°C and 1 Pa = 1 Newton/
m
2
= 0.00014503773 Psi), then the
needed equation is as follows:
V
x
= V
o
× (273.15 + T
n
) ¸ P
o x
P
n
,
where
V
x
– a new, sought-for volume
V
o
– an original volume in the same
units
T
n
– a new temperature in Celsius
degrees
P
o
– an original pressure
P
n
– a new pressure in the same units
Although the Avogadro’s Law relates
to an ideal gas (an abstract, theoreti-
cal gas composed of many randomly
moving point particles whose only in-
teractions are perfectly elastic collision),
the above equation is actually good
(universal) for any gaseous or liquid hy-
drocarbons.
There are no such problems with
weight measurements but, when it
comes to volumes, it is very important
to bear in mind that, in the U.S., the
oil/gas and energy business (and, im-
portantly, the API, DoE, PRMS and
USGS) now use the following set of
volume measurements, known as U.S.
standard temperature and pressure
(STP): 60°F (288.706 K, 15.556°C) and
14.696 psia (one atm, 1.01325 bar), also
known as “one standard atmosphere.
Using these standards, the volume of
one mole of a gas equals 23.6442 liters;
however, one cubic foot of a gas does
not equal 28.3168 liters (under any sim-
ilar measurements), but 28.8719 liters
(in line with the denition of the STP,
used by the International Gas Union
(IGU) (15°C and 760 mmHg).
These U.S. measurements are the most
Measuring Oil and Gas Volumes in Different
Countries: The U.S. and Russian Cases
By Eugene M. Khartukov and Alexander Novak
Oilman Magazine / January-February 2021 / OilmanMagazine.com
29
OILMAN COLUMN
commonly used, if not specied or
if unknown, worldwide to dene the
volume of what is termed “Sm
3
” (Stan-
dard cubic meter). [FYI: The earlier
International Union of Pure and Ap-
plied Chemistry (IUPAC) denition
of the STP (273.15 K and 101.325105
kPa), “is now discontinued worldwide,
as if it was ever used in the States or
elsewhere.]
It is noteworthy that the aforemen-
tioned “standard” and “normal” indi-
cate that these units are not strict vol-
umes of gas that are owing but quan-
tities of gas. An SCF corresponds to
one cubic foot of gas at 60°F (15.6°C)
and 14.73 psia, while a Nm
3
corre-
sponds to one cubic meter of gas at
15°C and at 101.325 kPa or 760 mil-
limeters in a mercurial barometer (760
mmHg). This is about 29.9 inches of
mercury and represents approximately
14.7 pounds per square inch (psi).
Sometimes, other sets of volume-
measurement units are utilized. In
particular, Normal Temperature and
Pressure (NTP) are commonly used
as a standard condition for testing and
documentation of air compressors,
blowers and fans capacities: They are
dened as 20°C (293.15 K, 68°F) and
one atm (101.325 kN/m
2
or kPa, 14.7
psia, 29.92 in Hg, 407 in H
2
O, 760
torr). A fan that produces a static pres-
sure of
3 in H
2
O
(a good average value)
will increase the absolute air pressure
by 3 (in H
2
O).
Currently, the IUPAC denes the NTP
as 273.15 K (0°C) of temperature and
100,000 Pa of pressure, while the Na-
tional Institute for Standards and Tech-
nology (NIST) denes it as 293.15 K
(20°C) and 101,325 Pa (760 mmHg).
Worldwide industrial applications have
the so-called Standard Ambient Tem-
perature and Pressure (SATP), which
are also used in chemistry as a reference
with a temperature of 25°C (298.15 K)
and pressure of 101.325 kPa and may
be called “normal conditions.” Under
these conditions, the volume of one
mole of a gas is 24.4651 liters.
The Montreal-based UN International
Civil Aviation Organization (ICAO)
invented “the international standard
atmosphere at sea level” (101325 Pa or
760 mmHg with a zero absolute and
relative humidity), which is often called
“normal pressure” and uses the follow-
ing measurement conditions: 288.15 K
or 15°C and 101,325 Pa or 760 mmHg.
In Europe, Australia and Latin Amer-
ica, for example, the STP conditions
used by the International Organiza-
tion for Standardization (ISO) (that
are 15°C and 101.325 kPa) have been
adopted, as a rule, and are used as the
base values for dening the standard
cubic meter.
In Russia 20°C and 760 mmHg, cor-
responding, in particular, to the U.S.
NIST’s NTP and EPAs STP, are of-
cially used for volume measurements.
This is almost the biggest difference
in temperatures used at present in the
oil and gas industry worldwide (20°C
and 60°F).
1
By Russian measurements,
Figure 1: Oil and gas volumes under the U.S. and Russian Current STP, in %.
Sources: Calculated and drawn by the author.
Table 1: Production of HCs in Russia and effects of different oil & gas measurements
Sources: Compiled and calculated by the author based on https://minenergo.gov.ru/ activity statistic,
http://www.cdu.ru/catalog/statistic and http://of-si.ru/rosstat-ocialnyj-sajt.
Continued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com
30
one U.S. cubic foot of a gas does
not equal 28.3168 liters, but nearly
28.7527 liters, or contains almost
1.54 percent more gas, while a U.S.
42-gallon barrel of oil is not equal to
158.987295 liters but accommodates
over 161.4345 liters (again by nearly
1.54 percent more) (
Figure 1
).
If taken in absolute physical terms,
with gas production in Russia now
standing at some 730 bcm a year and
that of crude oil and mixed/leased
condensate at over 560 mta, this is
more than what was actually pro-
duced last year in Vietnam (9.6 bcma
or 0.93 bcfd) or Peru (6.4 mta or 154
kb/d) or Russia (
Table 1
).
For its energy measurements, Russia
(like the IEA and the PRC) ofcially
uses an energy unit of tonne of oil
equivalent (toe), which net caloric
value (NCV) is dened, by conven-
tion, as follows:
1 toe = 11.63 megawatt-
hours (MWh)
1 toe = 41.868 gigajoules (GJ)
1 toe = 10 gigacalories (Gcal) – us-
ing the international steam table
calorie (calIT) and not the thermo-
chemical calorie (calth)
1 toe = 39,683,207.2 British ther-
mal units (BTU)
1 toe = 1.42857143 tonnes of coal
equivalent (tce)
A similar energy unit – barrel of
oil equivalent (boe) – is often used
in the U.S. for energy comparisons
and combinations. This is a unit of
energy based on the approximate
energy released by burning one bar-
rel (42 U.S. gallons or 158.9873 litres)
of crude oil. The BOE is used by oil
and gas companies in their nancial
statements as a way of combin-
ing oil and natural gas reserves and
production into a single measure,
although this energy equivalence
does not take into account the lower
nancial value of energy in the form
of gas.
The U.S. Internal Revenue Ser-
vice (IRS) denes higher heating
value (HHV) of the boe as equal to
5.8 mi llion BTU (5.8×10
6
BTU
59°F
e
quals 6.1178632×10
9
J, about 6.1 GJ
or about 1.7 MWh.) The value is
necessarily approximate as various
grades of oil and gas have slightly
different heating values. If one con-
siders the lower heating value instead
of the higher heating value, the value
for one boe would be approximately
5.4 GJ (
see toe above
). Typically,
5,800 cubic feet of natural gas or
58 CCF (100 cubic feet) are equiva-
lent to one boe. The USGS gives a
gure of 6,000 cubic feet (170 cubic
meters) of typical natural gas.
Over the northern border, in Canada,
the toe is used by the country’s min-
istry of energy – the National Energy
Board (NEB) – and leading Canadian
energy companies. NCV of this en-
ergy unit is dened as 41.868 giga-
joules (GJ) or 10 gigacalories (Gcal)
(
see above
). For natural gas and
NGLs, cubic metres (m
3
) are used
and measured at 15°C and 101.325
kPa (760 mmHg), which means that
Canadian STP fully corresponds to
those used in the EU (
see above
).
In Russia and the other former
Soviet countries, the tce (
see
above
) is widely used for energy
comparisons. This energy unit is
usually called tonne of standard
reference fuel (trf), net caloric value
of which is dened as 29.3 GJ or
7,000 kcal. In this case, it equals 0.7
toe and refers to energy contents of
various fuels in (
Table 2
).
1
To be exact, an even larger differ-
ence should be attributed to volumes
(of natural gas) exported by Russia to
the EU (almost 1.74%).
Eugene Khartukov is
a Professor at Mos-
cow State Univer-
sity for International
Relations (MGIMO),
Head of Center for
Petroleum Business Studies (CPBS)
and World Energy Analyses &
Forecasting Group (GAPMER) and
Vice President (for the FSU) of
Geneva-based Petro-Logistics S.A.
Alexander Novak is
Minister of Energy
of the Russian Fed-
eration, Chairman of
the Board of Direc-
tors of Transneft, a
member of the Board of Directors
of Rosneft, Gazprom and of the
Supervisory Board of Rosatom. In
1993, he graduated from Norilsk
Industrial Institute as a specialist on
Economy and Management in Met-
allurgy. In 2009, he graduated from
the economic faculty of the Mos-
cow State Lomonosov University
(evening education) as a specialist
on management. On May 21, 2012,
appointed Minister of Energy by
Presidential Executive Order.
OILMAN COLUMN
Table 2: Average energy contents of various Russian fuels. (incl. in relation to the reference fuel).
Source: Adapted from and calculated by the author based on https://studles.net/preview/5707551/ page: 6. (1) For dm3
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(800) 562-2340 Ex. 5
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32
OILMAN COLUMN
Young Professionals in the Oil and Gas
Industry: Interview with Ahmed Elgohary
By Alan Alexeyev
Alan Alexeyev: Tell us a little bit
about your current (or latest) posi-
tion and what you do, as well as how
you found a job.
Ahmed Elgohary:
I currently work as a
QHSE engineer. I started
out as a rig hand then I
became an operations
engineer with a drill-
ing contractor. When the slow down
happened, I was transferred to QHSE
where they felt there was a need for an
engineering team to revamp the organi-
zations safety system.
AA: What inspired you to start a
career in the oil and gas industry?
How did you decide to become a
petroleum engineer?
AE: I grew up in the Middle East where
politics is part of everyone’s life. The oil
eld is afliated with politics, which is
what inspired me to become part of the
game. I did not really know much about
the content studies in petroleum engi-
neering; however, I was one of the top
students in high school in Egypt, which
made me eligible to enroll in petroleum
engineering faculty in Suez Canal, as it
is very selective since they only accept
a handful of students from the entire
country.
AA: You often meet workers in
industry who do not have a formal
college degree but, in your case, how
valuable was it to get the university
experience?
AE: The way I see it, and excuse my
expression, having a university degree
(preferably engineering) and going to
work in the industry is like going to war
while having a more advanced weapon
to ght with. You are still going to ght,
and you might actually not win the
ght, but it gives you some leverage of
winning the ght. In other words, it is
a good idea to have a petroleum engi-
neering degree, but it is not a guarantee
you’ll make it to the top. As we all know,
most organizations care about hiring
someone who can have a positive con-
tribution to their business. This is when
soft skills and oil eld experience come
into play, and these are not acquired
through college.
AA: How did you nd yourself
transitioning from an academic envi-
ronment to the industry/corporate?
What would you tell people who are
about to make such a transition?
AE: It was a very tough transition going
from a petroleum engineering gradu-
ate working as a rig hand. You have to
turn on survival mode if you’re put in
such a situation; otherwise, you won’t
make it. The situation is different from
person-to-person, but my advice is to
try to make connections with industry
personnel and get industry internships
while in college as this would increase
your chances of landing a nice job after
graduation and, believe me, this is [far]
more important than your GPA. The
industry/corporate environment is a
totally different game that relies heavily
on being a people person and maintain-
ing good relationships and, above all,
being a leader.
AA: Has the industry taken initia-
tives to help smooth the transition
for young professionals into the oil
sector? What, if anything, could be
done better?
AE: Unfortunately, in my opinion, no.
And it’s not in the large corporations’
favor to do so. If you look at the big
corporations’ attrition prole, you’ll
notice they have relatively high attri-
tion. The reason is because joining a big
corporation is like going to the military.
In an organization, some will survive;
some wont, and they will quit. The nice
part here for the organization is that the
ones who survive are the good soldiers
and they’re now in the system and part
of a long-term process to become
future leaders. This brings us to one of
the main aspects of a leader which is to
be adaptable (in industry terms, to be
moldable). Now, if this transition was
so smooth, everyone would make it,
including individuals who are not willing
to do what it takes (and in the eyes of
an organization, they’re not leaders).
AA: The oil and gas industry has
tons of conferences and events.
Have you attended any of them? If
so, how useful do you nd them and
what’s your takeaway?
AE: Yes, I used to attend a lot of them,
with the mentality of trying to get a job,
and this was the issue. If I go back in
time, I would change my mentality from
trying to land a job to trying to make
good friends, and I mean it; you’re really
trying to make a friend, like you would
in college. You meet someone that you
feel you have a lot in common with –
maybe at the conference or the hotel
or the bars afterwards – and you make
friends with them and stay in touch with
them. Through pure friendship, this
person may be the reason you were able
to nd a job after graduation. If not,
you still have a good friend and a good
connection.
AA: If you communicate with
students on a regular basis, do
you think there’s an increased or
decreased interest among young
[people] to have a career in the oil
and gas industry, in comparison to
the past?
AE: I would say, in general, there’s de-
creased interest; however, unfortunately
a very slight decrease, since most of the
students are not really in tune with the
Oilman Magazine / January-February 2021 / OilmanMagazine.com
33
OILMAN COLUMN
industry or trying to predict if it [will
survive] or not. Picking a major nowa-
days is like picking a watermelon – you
never know what’s inside it until you
open it. My advice to young [people] is
do in-depth research before joining a
major and, above all, taking advice from
people who have been in this specic
industry for years. Also, follow your
passion.
AA: What advice do you give to
students who have an interest in
the oil and gas industry? Should
they pursue the career during these
constant downturns?
AE: I would love to tell them, yes, go
for it if it’s your passion, but my opin-
ion has changed recently. I literally just
convinced one of my best friends, who
was enrolled in petroleum engineer-
ing, to switch their major because of
the many downturns and the feeling
of instability. The only reason I would
tell someone to continue pursuing their
oil and gas career, if they still have not
nished college, is if they really know
someone or have a strong connection
with oil and gas industry higher ups. It’s
the ugly truth. It is all about who you
know not what you know, fellas!
AA: What main technical skills do
you think will be needed for the
industry in the near term based on
your experience so far?
AE: As I mentioned earlier, soft skills
and eld/industry experience are more
important. When it comes to technical
skills, however, I advise taking technical
courses or participating in organizations
to improve your leadership or manage-
ment skills. You could even enroll in a
minor in college that would improve
these skills. Depending on your inter-
ests, seek international technical certi-
ed courses related to what you’re trying
to do after graduation, which is some-
thing you MUST decide during college.
You can’t just say, for example, “I want
to become a petroleum engineer,” as
this is so broad. You have to be specic
and work toward your
focused
goal.
For instance, you’re very interested in
the drilling side, so you take well con-
trol, and stuck pipe prevention courses
through the IADC, or maybe look for
a drilling simulator course/internship,
preferably outside of college.
AA: What would you like to learn
in the near future from experienced
people who are in their mid-to-late
careers?
AE: I am an observer, so I like to make
conclusions myself instead of asking
leaders how they made it this far. There
is a reason why an organization decided
to put someone in a higher up position,
like a vice president, for example. If
you ask them about their advice, they’ll
give you a general answer like, develop
your skills and increase your exposure
with different departments/segments
within the company, or maybe even sign
up for global assignments, or take the
company’s offered training courses and
so on. Ask yourself, “Didn’t everyone
else around do the same thing?” so why
specically did this person become the
leader? You have to make the conclu-
sion yourself and you have to be a very
observant person. When you reach this
high a position within an organization,
the very small details matter, like your
body language, how you look, how you
talk – everything matters – and if you
want to be this person in the future, you
have to start learning the little details/
secrets they did not tell you about when
you asked their advice.
ADVERTISE WITH US!
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and gas marketplace? Do you have a product
or service that would benefit the industry?
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Oilman Magazine / January-February 2021 / OilmanMagazine.com
34
OILMAN COLUMN
COVID-19 has been a global disaster,
the likes of which havent been seen
since World War II in terms of disrup-
tion, and a lot of the old ways of oper-
ating are not going to return.
Jobs Reduction
A recent analysis reveals 107,000 lost
oil and gas jobs wont be recouped.
What will streamlined companies
look like in the future? Kirk Edwards,
president of Latigo Petroleum, says,
“Companies will be using and investing
in more and more technology, as it
becomes available, especially when
it comes to translating production
in the eld to digital formats.” Many
companies are already taking on new
software platforms to help them work
from home, manage assets, documents,
revenue, HR, taxes, operations and a
slew of other functions that make the
oil and gas industry tick.
There is still room in the ofce for
many workers who are in the eld, but
more frequently we are seeing automa-
tion free these workers to do other
things. While that has had a positive
impact on the level of productivity, it
is not, however, an easy task to retrain
workers and teach them new skills
(something that usually takes 10 to 12
months). Retraining and retaining loyal
workers, rather than laying them off, is
better for general morale, the company
and, most importantly, the economy.
Diversication
An extreme period of reduced demand
for oil and oil-based products has led
to a slump in oil prices which has oil
companies asking themselves, “Where
do we go from here?” Compounding
the future slump in prices, the utilization
of electric cars becoming more com-
monplace will also cause many in the oil
industry to pause and consider the new
reality that will dawn in the near
term. While many companies are
taking a look at diversifying into various
energy options, some other companies
that have natural gas assets are dou-
bling down on consumption over the
long term. Edwards goes on to explain,
“Many companies took the path to di-
versify last year and have pivoted away
from basins that are notoriously bad for
marketing, especially on the natural gas
side. These companies that maintain
steady, low-decline natural gas assets
should be well positioned for 2021 and
beyond.
Consolidation
With bankruptcies running rampant,
companies with stronger nancial posi-
tions will take advantage of the situa-
tion and acquire the smaller struggling
companies in order to expand their
presence, footprint and own operations.
Edwards adds, “The Big Four compa-
nies will use this period in our industry
to consolidate the larger, yet weaker,
independents in critical strategic areas
they are now calling ‘core.’ The 2,900 in-
dependent producers will still continue
the tradition of operating in a low-cost
environment and hopefully see a reward
when prices turn higher ahead . . . which
they always do!”
This year there have already been nu-
merous consolidations across the indus-
try, with large companies getting larger
or diversifying into other verticals of
the industry by acquiring downstream
operations or mid-stream transportation
solutions. There are abundant opportu-
nities in the current market.
Environmentalism
With extra time, many companies are
working hard to clean up the environ-
ment from decades of pollution. Many
are looking at ways to mitigate their
contributions to the carbon footprint
of the industry. Edwards mentions,
“Except for the operators in the Perm-
ian Basin that continue to are large
amounts of natural gas, operators have,
Where Does the Industry Go
After COVID-19?
By Eric R. Eissler
Illustration courtesy of Kristijan Aranjos – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com
35
OILMAN COLUMN
and always will be, strong in stewarding
their operations for a clean environ-
ment. The truth is this: everyone wants
a clean environment. For anyone to
preach differently is just wrong when it
comes to the modern oil and gas indus-
try practices of today.
The industry is making wise use of its
time to diversify, reduce, consolidate
and clean up the environment. While
there are going to be a lot of permanent
changes that occur or remain after the
pandemic ends, the industry is doing
its best to shore up against a lot of the
negative changes, by taking action now.
This month, we are completing a full
year of the pandemic. With vaccines
soon to be released, we are going to
turn the corner. Taking off on a new
and better trajectory, 2021 should be a
year of recovery.
The year 2020 was truly a time of
uncertainty and challenges, to say
the least. The future of regulations,
executive orders, tax issues, scal
and monetary policies, international
trade issues, COVID-19 vaccination
outcomes, supply and demand of
energy, and private/public education
challenges are some of the numerous
issues before us.
Energy education is needed more than
ever. Nothing moves without energy.
We need to work together to provide
energy efciency and environmental
preservation. The oil and gas industry
is strongly needed for necessary energy
usage and petrochemical products.
As I state in my book,
America Needs
America’s Energy: Creating Together
the People’s Energy Plan,
“Future
generations are depending on us to
keep the American dream alive. For too
long we in America have been wasting
time blaming the energy industry or
the government for failure to adopt
a national energy strategy, when we
should be responsible for creating the
plan. As consumers of energy, we must
drive the process, evaluating how we
can best leverage our natural resources
here at home to ensure long-term
energy independence and security.
American citizens must take individual
responsibility for the state of this great
nation, striving to protect the land we
call home.
The 24th Annual/Anniversary of
IEPC (Energy Policy Conference) –
Roundtable/Summit was held August
11, 2016, at the Renaissance Hotel
in Tulsa, Oklahoma. The roundtable
was hosted by IEPC, the Energy
Advocates and the Master of Energy
Program, University of Tulsa.
Roundtable participants included
representatives of state and federal
government, chambers of commerce,
public relations rms, concerned
citizens, various areas of the energy
sector, professors, think-tanks, energy
management students from across the
U.S. and the media.
Several issues were discussed regard-
ing energy issues and views. Since that
time, we have seen continued dialogue
regarding the ever-changing landscape
of energy and other economic areas
of interest. The energy sector will need
to form alliances with other economic
sectors in 2021 and beyond.
For example, one company, Ingenu-
itE, is looking at ways to assist energy
companies and businesses entering and
maintaining digital transformation. It
is able to provide consulting to energy
companies and businesses.
Former U.S. President Eisenhower
founded People to People International
(PTPI) in 1956. His great grandson,
Merrill Eisenhower Atwater, is the cur-
rent CEO of PTPI. At an event at the
University of Central Oklahoma, he
stated, “We can all make a difference
and together work toward solutions.”
Energy is the future of America, and
America Needs America’s Energy.
U.S. energy security is vital. It is impor-
tant that we develop and maintain the
proper infrastructure.
There are many countries and regions
of the world that have been added to
our watchlist for 2021, including the
Philippines, Armenia, Azerbaijan, Syria
and Iran. Of course, China, Russia,
India and OPEC continue to be on
the watchlist. America needs America’s
energy now, more than ever! Join our
effort by visiting Facebook: National
Energy Talk.
Americas Energy: 2021 and Beyond
By Mark A. Stansberry
Mark A. Stansberry
Oilman Magazine / January-February 2021 / OilmanMagazine.com
36
OILMAN COLUMN
The oil and gas industry experienced
signicant changes throughout 2020,
from digital transformation to cloud
migration. The industry has also seen
an increase in safety and training tech-
nologies and, in relation to the current
pandemic, a higher demand for person-
al protective equipment (PPE). With
2020 coming to a close, many busi-
nesses are left anticipating and gearing
up for what 2021 has in store.
While many companies are either
wondering what the future holds or
looking for information, mobile eld
operations management and software
solutions company, LiquidFrameworks,
has already developed its expectations
for 2021. CEO Travis Parigi shares his
predictions on 2021, what trends will
likely occur in the industry, and how
the oil and gas industry can respond to
these changes.
Like the rest of the world, the oil and
gas industry has experienced a major
shift in business operations due to
COVID-19. As a result, companies will
need to continue adjusting and revamp-
ing their practices in 2021 to accommo-
date the new reality. “Businesses have
had to take operations online practically
overnight. We will start to see compa-
nies embrace digital processes more
in the upcoming year as a long-term
operational adjustment rather than a
short-term solution. In doing so, these
companies will start to be more nimble,
agile and responsive with the tools they
are using and how they are conducting
operations,” says Parigi.
He also highlights how paper processes
once dominated operations in the oil
and gas industry but, due to the current
shift to digital processes, companies
have begun pushing their workforce to
use mobile capabilities such as phones
or tablets for communication and pro-
cess handling.
“In doing so, businesses are nding
their processes accelerating more ef-
ciently and effectively as digital commu-
nication is more productive for work-
ers,” Parigi notes. With the continuous
implementation of digital solutions, he
predicts that we will see a stronger push
for mobile tools and digital solutions
across companies as a whole. “The
companies that can successfully imple-
ment and execute this shift can and will
be the ones who can use digital trans-
formation as a competitive advantage in
garnering business.
With the signicant drop in oil prices in
the past, the industry has seen various
companies undergo consolidation in
the industry. With lower oil prices reoc-
curring in 2020, Parigi predicts that we
will see “many companies throughout
the world consolidating into big-
ger, broader reach companies to take
advantage of the scaling opportunities
across the globe. The businesses that
used their digital transformation as an
advantage with customers will coincide
with the ones that are able to success-
fully consolidate the market and will
provide a seamless transition into one
large organization.
Of all the predictions made for next
year, Parigi believes the most critical
trend will be digital transformation.
Adopting a full-edged and continu-
ous digital transformation will be crucial
for the success of companies in the oil
and gas industry now and in the fu-
ture. Many companies will enable some
change, such as requiring workers to
use new tools like tablets in the eld
or software to keep track of invoices.
He notes that without proper training,
implementation or full-edged invest-
ment in employees using new means of
operation, companies may likely revert
to old habits, which could lead to nega-
tive consequences. “Companies that
invest in digital transformation for the
long term, even when the industry expe-
riences difcult times, are the ones who
will go on to be leaders.”
Parigi’s company, LiquidFrameworks, is
at the forefront of these trends and is
focused on implementing a successful
digital transformation leading into 2021.
“Remote and socially distant work is
no longer a simple solution, but now a
A Look Inside 2021: Outlook and Predictions
for the Oil and Gas Industry
By Tonae’ Hamilton
Photo courtesy of Dilok Klaisataporn – www.123RF.com
Oilman Magazine / January-February 2021 / OilmanMagazine.com
37
OILMAN COLUMN
long-term practice,” Parigi says. “Com-
panies are going to need to implement
the proper tools and work processes to
effectively carry out their daily opera-
tions while maintaining protocols. Our
FieldFX technology is built to meet the
needs of companies from streamlining
communications to automating process-
es. We have many tools built into our
platform that help to make this process
as smooth as possible.
During these unprecedented times,
Parigi notes how the industry can utilize
this time to review its overall processes,
both digital and manual. “In doing so,
[operators] can take advantage of new
tools, processes and other means of op-
eration that will best benet their busi-
ness. Oil and gas service companies, in
general, have traditionally been slow to
adopt new technologies and tools into
their businesses. However, taking the
time now to make necessary changes,
such as implementing new technologies
and workow processes for the work-
force, will ultimately pay off in the long
run as operations resume to full force
and the energy market recovers in the
coming quarters.
In response to industry changes due
to COVID-19, LiquidFrameworks has
focused on simplifying training and
onboarding processes and developing
more efcient education tools for oil
and gas companies. “There is a pressure
to quickly hire and train new employ-
ees, including but not limited to how
to use equipment as well as what the
workow process looks like. This can
ultimately lead to challenges when it
comes to ramping up users and admin-
istrators using systems like FieldFX. At
LiquidFrameworks, we are reducing the
amount of work [businesses] need to do
to get their people up to speed on the
entire process, as well as providing the
ability to scale and effectively respond
to growth in the market. This includes
delivering new educational tools that
help our customers ramp up new em-
ployees from eld to back ofce quickly
and efciently,” Parigi shares.
The biggest trend to watch for in the
industry will be digital transformation.
Along with a push for digital, there has
been a steady integration of technology
in the industry and, as Parigi mentions,
we likely will see more technology
implemented in 2021. He describes how
the implementation of technology will
cover “everything from mobile eld
operation software to data asset man-
agement and more. As technology is
implemented into everyday operations,
we will see more and more data being
collected for companies to use. The
good news is that systems are also get-
ting smarter at analyzing and using data.
As this information is compiled, we
will see technology take advantage of
the data and simplify it for end-users so
that businesses can further adapt their
processes and become more efcient,
productive and reach their goals.”
Due to current events and society con-
stantly evolving, the oil and gas industry,
like many industries, will experience
major shifts and, as Parigi predicts, will
see a digital transformation in the com-
ing year. He emphasizes how the move
to modern technology is increasingly
important for the industry, especially as
it moves away from the traditional paper
processes and face-to-face interactions.
As companies have gone through a
digital shift in 2020 to keep operations
alive, this has created a jump start for
organizations to adopt a true digital
transformation for the long run. In
2021, we will see a more visible digital
transformation take place where compa-
nies are investing in smart infrastructure
that can sustain their operations now
and into the future.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
38
OILMAN COLUMN
A Troubled Year
To date, 2020 was one of the most
challenging years for a majority of
businesses, and the oileld industry
was no exception. Since the beginning
of last year, over 15 companies have
been bought or merged, while over 30
companies have led for Chapter 11
bankruptcy. However, many companies
have taken steps to remain competitive
and operational.
Benjamin Franklin famously said, “But
in this world nothing can be said to
be certain, except death and taxes.
If you have been in the industry for
any signicant amount of time, you
may argue that market volatility in the
oileld is certain. Operators overextend
their assets based on models’ predic-
tions that continue to fail the bottom
line with underperformance. This is
often paired with increased costs on in-
novative completions design programs
that, aside from production changes,
lack true validation. During downturns,
outdated upper management slashes
innovation budgets while technology
improvements remain stagnant and con-
tribute little true value. This is another
Groundhog’s Day
the industry cannot
afford.
Thousands of unemployed oileld
workers are left thinking, “What if
we did things differently?” Times are
changing and so should the way we
operate as an industry. To stay competi-
tive, energy companies must continue
to employ innovative technology.
A New Technology
Deep Imaging, a controlled-source
electromagnetics company based in
Tomball, Texas, has homed in on an
innovative technology, which allows
operators to make game-changing
decisions during their fracking opera-
tions through using real-time frac uid
imaging. This is done through an array
of highly sensitive nano-voltmeter
receivers and a grounded dipole system
laid directly over the wellbore trajectory
completely off the pad. On the surface,
a direct measurement of frac slurry
magnitude and direction is measured
then displayed as polygons taking shape
over the stimulated rock area. The
result is a 2D image shown in a map
view. A transmitter capable of inject-
ing 200 kilowatts of power into the
Real-Time Completions Refinement
with Electromagnetics
By Sam Young
Photo courtesy of Deep Imaging
Figure 1: Schematic of Deep Imaging operations
Oilman Magazine / January-February 2021 / OilmanMagazine.com
39
OILMAN COLUMN
ground is utilized to transmit a signal
via a grounded dipole. The receivers
on the surface are laid out with cables
connecting two rods in the ground that
measure electric potential. A swath of
receivers is turned on over the stage be-
ing fracked and records a baseline mea-
surement before fracking commences.
Voltage changes are measured at 50,000
samples per second during the frac, then
signals are processed for data quality.
Following processing, the baseline signal
is subtracted from the recorded signal
giving the nal image result.
The schematic in
Figure 1
explains how
this deployment is congured. The yel-
low cylinders represent the transmitter
wire grounding points, and the yellow
boxes represent the deployed receiv-
ers. The blue dotted lines represent the
interaction between two electromagnetic
elds – one from the transmitter that
the horizontal wellbore casing responds
to, which is perturbed by the second
one caused by the frac. This amplies
the frac response and is recorded by
receivers. The baseline signal recorded is
the response of the well’s casing alone,
which through subtraction, allows for
isolation of the frac response.
What does this all translate to? What
kind of data does this technology pro-
vide? First and foremost, a map view of
the data produced is shown in
Figure
2.
This map view can help companies
mitigate or prevent frac hits. In
Fig-
ure 2
, the polygons in the viridis color
palette ranging from blue (weak signal)
to yellow (strong signal) show the signal
migrating west to a parent well (P1).
These images allow for a signicant
depth of analysis to gather trends and
predictions for future completion stag-
es, including frac azimuth and extent,
as well as correlations of uid response
with corresponding completions data.
Additionally, the data can be analyzed
in complement with microseismic for
more extensive insights.
Successful Real-Time
Implementation
Originally, Deep Imaging’s technol-
ogy was developed with retrospective
imaging. Stages were delivered to the
operator a month after data acquisition.
However, Deep Imaging had a success-
ful trial in September 2020 where imag-
ing was delivered within three hours of
each stage’s end. On the nal stage, the
team generated images 20 minutes after
the stage had started. This means if the
operator saw any signs of plug failures,
extreme overlap into previously fracked
stages or runaway propagation toward a
parent well, they could alter the impact
of that stage while it was being pumped.
Figure 2: Map - view image of results
Figure 3: Map - view of the survey area
Continued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com
40
OILMAN COLUMN
No more waste. No more frac hits.
The primary goal of this assessment
was to gain an understanding of stage
to stage interactions. The scope of the
operation is in
Figure 3
.
In the map view above, the red line
represents the transmitter and the
horizontal yellow lines represent the
full sensor dipole or receiver array.
There were parent wells to the west
and depletion effects were expected.
However, using this technology, Deep
Imaging determined that the stages
were biased more toward the east
than toward depletion zones. This was
possibly due to a stress-conduit effect,
where previous nearby stages from
the opposing well created a path of
least resistance for stages to propagate
toward. In addition, frac azimuth and
extent were observed, where azimuth
corresponded with client model
predictions as well as microseismic
readings taken in the area. Stage over-
laps and the percentage between the
actual stimulated area versus what was
expected were assessed for wasted time
and materials. For detailed analysis,
refer to
Figure 4.
Figure 4
illustrates the informational
changes using this technology over
time. In real-time, Deep Imaging
provides calculated frac length and
azimuth. This is seen in the table in
the upper right corner of the image. It
includes corresponding measurements
on the frac polygon and rose diagram
in the lower right corner. The outlines
of previous stages, the calculation of
the total area covered by the frac stage,
and frac skewness are also automati-
cally provided.
Building Symbiotic Partnerships
Deep Imaging is converting its tra-
ditional practices into an updated,
real-time system to service larger scale
zipper frac operations. The company
partners its technology services with
companies who want to revamp their
completions design strategy and ac-
tively respond to undesired frac events,
resulting in true, real-time cost sav-
ings. This is especially needed during
economically challenging times. The
industry needs symbiotic partnerships
with technology service companies to
make it through this downturn. Work-
ing together, the oileld will weather
the storm and emerge stronger than
ever.
Sam Young is a
completions engineer
at Deep Imaging. He
helps Deep Imaging’s
partner operators
address and solve problems they
are facing with their completion
development strategy. With a wide
range of industry experience in
horizontal completions, operations
and reservoir engineering, Young
excels in unconventional design
optimization, data analytics and
enhancing well performance. He
holds a BS degree in petroleum
engineering with a minor in
mechanical engineering from
Texas Tech University. Contact:
samyoung@deepimaging.com.
Figure 4: Overall view of nal image
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Oilman Magazine / January-February 2021 / OilmanMagazine.com
41
OILMAN COLUMN
On November 4, 2020, Shell Oil
Company announced the closure of
its renery in Convent, Louisiana, a
situation that is far from isolated. As
reported in the
Wall Street Journal
ar-
ticle, “Pandemic Pushes Fuel Makers
in Richer Countries to the Brink,” 11
reneries from the U.S. to Japan have
announced intentions to close. Sev-
eral years of sinking oil prices, price
disputes, and overproduction among
OPEC+ nations, the move toward
renewable energy sources, and the
economic downturn associated with
the COVID-19 pandemic are causing
nearly unprecedented, simultaneous
strains on the entire oil and gas indus-
try. According to the research rm IHS
Markit, and reported in the
Houston
Chronicle
, more than three million bar-
rels per day of rening capacity will be
shut down as a result of the pandemic
alone. A rationalization of production
that was expected to be spread across
the next decade has now occurred in
the space of less than a year.
The closure of a major industrial facil-
ity, which is often one of the largest
employers and taxpayers in a local ju-
risdiction, has far-reaching impacts on
the owner of the closed facility, owners
of surviving businesses, individuals in
the local community, and state and lo-
cal governmental authorities. A closure
of this type will result in the loss of
millions of dollars in tax revenues and
present signicant challenges to local
tax recipient bodies. And for continu-
ing industrial facilities and other busi-
nesses in the jurisdiction, the closure
of a major industrial facility could
mean increased scrutiny by local tax
authorities as they attempt to make up
for the nancial shortfall.
The apparent opposing positions of
local tax recipient bodies (maintain or
increase tax revenues) and local oper-
ating businesses (preserve cash ow)
present unique challenges and oppor-
tunities. Among other challenges, own-
ers of operating businesses must be
aware of efforts by local governmental
authorities to recoup potential revenue
losses from facility closures and should
develop proactive strategies to balance
their business needs with the nancial
needs of the communities in which
they operate.
This article focuses on strategies busi-
nesses should implement to effectively
manage their local property tax re-
sponsibilities and opportunities. While
beyond the scope of this article, similar
efforts should be implemented with re-
spect to other state and local taxes, e.g.,
income, franchise, sales/use.
As Industrial Facilities are Lost,
Focus Turns to Remaining
Industrial Facilities and Other
Businesses
For decades, several states, including
the authors’ home state of Louisiana,
have viewed reneries and other large
industrial facilities as proverbial golden
geese. In return for certain economic
development incentives, such facilities
provided well-paying jobs to hundreds
of thousands of individuals. These
individuals in turn spent their hard-
earned wages in the local community.
In addition, local property and sales
taxes paid by owners of such facilities
went directly to local communities, as
well as a portion of state-level taxes
allocated to local governments by the
legislature. Through economic ups and
downs, this arrangement more or less
worked – until now.
Today, the oil and gas industry is con-
solidating and, in some cases, simply
closing down. Some closures are not
temporary. Many are permanent, in
part because consolidated or relocated
operations are likely to be more ef-
cient for the long term, but also
because it may be technically very dif-
cult to initiate a restart of an industrial
facility. In some instances, a shuttled
facility may never restart. More likely,
the owner may sell the facility to a
buyer that may dismantle and sell the
“scrap” from the facility. In a best-case
Photo courtesy of Milos-Muller/iStock
Continued on next page...
Squeezing the (Remaining) Golden Geese:
Refinery Closures May Lead to Increased
Tax Scrutiny on Operating Facilities
By Jay Adams and Bill Backstrom
Oilman Magazine / January-February 2021 / OilmanMagazine.com
42
OILMAN COLUMN
scenario, a new owner could repurpose
the facility for a different type of manu-
facturing.
The fair market value of a shuttled facil-
ity will be signicantly lower than the
fair market value of an operating facility.
As part of its closing strategy, the owner
should take proactive steps to work with
the local property tax assessor to make
the necessary adjustments to the fair
market value of the property remain-
ing at the shuttled facility to reect the
obvious obsolescence. The owner also
should be prepared to retain valuation
consultants to support requested valua-
tion adjustments, as well as take steps to
review its books and remove property
that is no longer in existence or located
at the shuttled facility.
While valuation negotiations with an as-
sessor may not be comfortable, they are
a necessary part of a company’s facility-
closing strategy. The goal is to reach an
agreement as to the fair market value
of the closed facility. These efforts, if
properly executed, will result in a much-
needed reduction of the property taxes
ultimately due by the owner.
At the same time, when a large industrial
facility closes and proper adjustments are
made to the value of the closed facility,
the local tax recipient bodies – schools,
law enforcement, public health, cultural
and other services and infrastructure au-
thorities – will see their funding sources
diminished, sometimes signicantly. In
addition, as the local workforce dwindles,
the money spent by the local workers
also will diminish.
The local tax recipient bodies will have
little or no choice but to seek replace-
ment funding sources. There are several
ways for local tax recipient bodies to
fund their operations, but the proverbial
“low hanging fruit” is increased tax col-
lections. For local property taxes, the
most likely ways to increase property tax
collections are to raise the local property
tax millage rates, increase the assessed
values of operational properties while
holding existing local millage rates steady
or both. All local authorities have an in-
terest in protecting their revenue streams,
but it all starts with the local assessor.
This leads us to the most important take-
away in this article. In local jurisdictions
where a large industrial facility closes, the
owners of continuing businesses must
implement proactive, strategic plans to
work with local governmental leadership
to protect the company’s interests, while
taking into account the revenue needs
of local tax recipient bodies. This begins
with communications with the local as-
sessor to resist any unwarranted increases
in the fair market values of the opera-
tional properties to increase resulting tax
revenues, which would be borne by the
continuing businesses.
The effort cannot stop with the local as-
sessor. Owners of operational industrial
facilities also must meet with other key
local leadership to discuss ways to keep
local property tax millage rates at ap-
propriate levels. Businesses and govern-
mental leaders should work together to
address the seemingly competing inter-
ests of operating businesses and local tax
recipient bodies.
Against efforts by local ofcials to offset
potential revenue losses, owners of con-
tinuing businesses must develop effec-
tive strategies that fairly reduce their tax
burdens without threatening the mutually
benecial relationship with the commu-
nities in which they operate.
Looking Ahead: Strategies for Tax
Fairness
A facility owner’s response to this rapidly
changing environment must have both
short-term and long-term components.
Before the ink is dry on checks for pay-
ment of 2020 property taxes, owners
should implement a property tax “health
check” for 2021 and beyond. The pro-
cess starts with preparing and ling
the 2021 property tax rendition form.
Shortly thereafter, negotiations with local
property tax assessors will begin.
Continuing businesses must make extra
efforts to assert and defend taxpayer-
initiated valuation adjustments to take
into account obsolescence factors. These
businesses also must defend against
unwarranted and unfair increases in the
assessed values of operating properties.
This process will continue beyond 2021
until the U.S. and global economies stabi-
lize. These efforts, if properly prepared
and pursued, will reap benets of lower
local property taxes and improved cash
ow.
Among other steps, owners should:
Proactively manage relationships with
local tax assessors and collectors, lo-
cal tax recipient bodies and other key
governmental leaders.
This requires a
government relations “health check.
Companies should take proactive
steps to develop and maintain positive
interactions with local governmental
ofcials that underscore their commit-
ments to nding mutually benecial
solutions to the challenges that lie
ahead. Businesses also should take ex-
traordinary efforts to fully understand
the budgets and budgetary processes
for all local tax recipient bodies.
Manage books and inventories closely.
More than ever, owners of large in-
dustrial facilities must become more
aware of their assets, expenditures
and property valuations. Books and
records should be scrubbed of any
assets that are no longer at the facility.
Businesses also must develop a clear
plan to identify and properly value
remaining assets. This component of
the plan should include resources for
outside valuation and legal profession-
als. With clear, mutually understood
data, businesses can present their cases
for valuation adjustments to reect the
current economic environment clearly
and persuasively to local governmental
leaders.
Seek experienced valuation consultants
and tax counsel.
Property tax issues,
including procedural issues, gener-
ally are complex, and they stand to
become even more complicated as
governments at every level take action
in response to the economic down-
turn. Property tax procedures in many
jurisdictions often present the prover-
bial “traps for the unwary.” Knowl-
edgeable guidance will be critical to
creating and executing an effective tax
Oilman Magazine / January-February 2021 / OilmanMagazine.com
43
OILMAN COLUMN
strategy in the months and years
ahead.
Constantly evaluate short-term
and long-term implications of
state and local business and tax
credits and incentives.
In many
jurisdictions, large industrial facili-
ties benet from state and local
tax credits and incentives. Now is
the time for a credits and incen-
tives “health check.” Businesses
need to review current credit and
incentive arrangements to deter-
mine if all terms and conditions
and reporting requirements are
up-to-date and achievable. If not,
businesses need to work with state
and local economic development
leadership as early as possible to
address any potential claw backs
or reductions of existing credits
and incentives. It may be neces-
sary for continuing, but strug-
gling, businesses to renegotiate the
terms of existing arrangements.
Continuing businesses also should
take proactive approaches to de-
termine if their current credits
and incentives packages can be
revised or extended and if new
credits and incentives are available.
Also, long before existing credits
and incentives expire, businesses
should work with local govern-
mental leadership to address the
impact the expiration will have on
both the business and the local tax
recipient bodies.
To revise our avian analogy from
golden geese to canaries in coal
mines, what is happening today in
the oil and gas industry is simply a
precursor of broader challenges to
come for local, regional and national
economies. The world is changing –
sometimes by design and sometimes
apparently randomly – but the busi-
nesses that succeed will be those that
take action in the face of rising chal-
lenges. Now more than ever, stra-
tegic, effective tax planning is a key
tool in this effort. To do nothing, or
very little, simply is not an option.
Jay Adams is a partner in
the Tax Practice Group and
leader of the state and local
tax team. Through partnering
with his clients, Adams has
developed a broad knowledge of the energy,
manufacturing, healthcare, transportation
and retail industries that allows him to
provide comprehensive and cost-effective
advice in those areas.
Bill Backstrom is a partner and
leader of Jones Walker’s Tax
Practice Group. For more than
35 years, he has focused on
state and local tax matters in
Louisiana and on a multistate basis. Back-
strom provides comprehensive, practical and
solution-focused tax guidance to a broad
range of business enterprises. Known for
the quality of his counsel, his commitment
to client service, and his ability to explain so-
phisticated issues in clear terms – particularly
with respect to Louisiana’s highly complex
state and local tax system – Backstrom is
recognized as a go-to tax attorney for clients
with interests and operations across the
region and nationally.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
44
OILMAN COLUMN
For those who reside along the Gulf
Coast of the United States, hurricane
preparedness is a term that yields anxi-
ety and reluctance. It is, however, a nec-
essary evil mandated simply by proxim-
ity to the tropical battlegrounds of the
Gulf of Mexico (GOM). Sharing the
stress of hurricane season, offshore oil
and gas companies who populate the
Gulf with assets must be keenly aware
of the tropical weather season and be
decisive in planning and evacuating
structures when necessary.
Regulated by the Bureau of Safety and
Environmental Enforcement (BSEE),
companies who perform operations
within the offshore industry must meet
Safety and Environmental Management
Systems (SEMS) requirements. Of the
various provisions required, any com-
pany performing offshore work must
be equipped with emergency response
and control procedures. Guidelines for
addressing hurricane threats are rooted
in emergency response plans.
With assets stationed in the GOM, hur-
ricane planning and preparedness are a
major role and concern of bp Interim
Manager of Crisis and Continuity Man-
agement, Carlton Landry. Each asset has
its own specic Emergency Action Plan,
or EAP. bp possesses specic proce-
dures that have been developed through
meticulous planning for addressing ap-
proaching tropical weather.
Many news reports depict Gulf Coast
residents initiating their evacuation strat-
egies when a hurricane or other tropical
weather is as close as 24 hours from
making landfall. bp, however, engages
its plans far sooner than that. Hurri-
canes and tropical activity are monitored
by the bp Crisis and Continuity Manage-
ment Team. Additionally, they consult
with meteorology professionals to
determine potential path and impact.
A storm doesnt have to have
entered the Gulf before we take
action,” says Landry. “Safety is our
absolute highest priority. Shutdown time
is what is considered. We make sure
we have enough time to shut down the
facility and safely evacuate personnel.
When the decision is made to evacuate
personnel, both air and vessel modes
are utilized. According to Landry, trans-
portation modes are highly dependent
upon weather activity at the time of
evacuation.
Besides offshore asset owners, con-
tractors of the industry must follow
SEMS requirements as well and develop
emergency response plans. Collabora-
tion is essential because contractors
typically have their own safety programs
and policies for working offshore. The
question, therefore, may arise of which
EAP to follow.
All personnel are to follow the facility
EAP,” says Landry. “These require-
ments are made known to individuals
through a facility orientation.
According to Landry, while drilling and
intervention vessels can move safely
out of tropical activity’s path, stationary
production facilities present a differ-
ent challenge. bp’s production facilities
may call for the evacuation of over
750 individuals. Transporting person-
nel off those facilities and returning
them safely shoreside is an efcient and
well-organized process. The Person on
Board (POB) Coordinator initiates a
pre-planned process when evacuation
Offshore Industry Executes Great
Effort in Hurricane Preparedness
By Nick Vaccaro
bp Atlantis production platform. Photos courtesy of bp.
bp Mad Dog 2 production platform with
transportation vessel at is base.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
45
OILMAN COLUMN
orders are given. A main factor applied
to the process is to max out all evacua-
tion craft.
“Third-party or contract personnel
are evacuated rst from bp assets with
facility leadership being the last to go,
Landry explains. “We have access to
three Sikorsky S-92 (18-passenger) heli-
copters and have always had enough to
meet our needs.”
Beyond the priority of personnel safety,
bp must also take care to maintain
operational integrity, not for nancial
factors, but instead for environmental
concerns and preservation. Constructed
to withstand hurricane force winds,
damage from storms is typically
minimal. Although this is a positive
factor, Landry says that production
is still shut-in when tropical force
conditions present themselves.
Although bp’s team has developed a
carefully designed plan of preparedness
and action, support entities are avail-
able should their presence be needed.
Landry states that once bp has initiated
its evacuation process, the team im-
mediately noties BSEE and the Coast
Guard in order to provide and maintain
clear communications throughout the
endeavor.
According to Captain Matthew Denning
of the U.S. Coast Guard Eight District,
evacuation plans must be approved. Any
signicant changes made afterwards
must also be met with approval.
In 2014, a “report by exemption”
change was implemented and carried
through the 2020 hurricane season. The
U.S. Coast Guard Eight District Gulf
of Mexico Outer Continental Shelf
Marine Safety Information Bulletin
(MSIB) 20-04 requests that all manned
offshore facilities and Mobile Offshore
Drilling Units (MODUs) relay when
any personnel who were intended to
be included in evacuation measures
are stranded on board. It also requests
notication of any MODU that is
unable to relocate to avoid approaching
storms. Captain Denning states that
oil and gas companies are required
to alert BSEE when evacuation plans
are enacted and that MSIB 20-04
was specically designed to reduce
duplication of reporting requirements
in accordance with 30 CFR 250.192.
“We want to hear if evacuation plans
are unable to be carried out,” says
Captain Denning. “We want to offer our
immediate assistance and help them in
any way possible.
When the hurricane or tropical system
threat has dissipated, companies such as
bp activate their return-to-work plans.
Landry states that an initial yover is
conducted when it is deemed safe to do
so. This allows for a damage assessment
to be determined.
“Thirty-six individuals land on the asset
to restore its capability and check for
damage,” Landry explains. “Their main
goal is to establish habitability prior
to allowing non-essential personnel
onboard.
bp’s team has developed a course of
action for re-manning offshore assets
post tropical threat. Order designation
is determined by contractor need with
those performing the most critical work
returning sooner than others.
SIMOPS is a well-known term used
regularly in the offshore vocabulary.
Simultaneous operations (SIMOPS)
are simply dened as two operations
that occur at the same time and within
the same location. Industry standards
specify good communication between
the parties conducting the work. True to
form, evacuation procedures within the
GOM can be an effort of simultaneous
operations. Landry says that although
each offshore asset owner has its own
EAP, discussions take place to compare
notes.
Hurricane and tropical threat evacua-
tions require great thought and are a
major responsibility to the personnel
tasked with enacting the measures. Ex-
ecuting plans and carrying them out can
be stressful; remaining calm and deliber-
ate is key.
“Making decisions 100 hours out based
on storm predictability is probably the
greatest challenge of the evacuation
process itself,” says Landry.
According to Landry, each hurricane
season offers lessons that can be used
for improvement. His team reviews bp’s
seasonal activity at the end of every year
to identify success factors and deter-
mine if changes are necessary.
“No storm is treated differently,” says
Landry.
BSEE’s November 4, 2020, Hurricane
Zeta Final Report indicated that 23
production platforms had been evacu-
ated. This accounts for 3.58 percent of
the 643 manned platforms occupying
the Gulf of Mexico. These measures
resulted in 48,092 BOPD (barrels of
oil per day) shut-in. Additionally, 89.28
MMCFD (million standard cubic feet
per day) of gas was also shut-in. These
statistics depict an image of the Gulf s
large size and its contribution to oil and
gas production.
The BSSE report also states, “From op-
erator reports, BSEE estimates that 2.6
percent of the current oil production
in the Gulf of Mexico has been shut-
in. BSEE estimates that approximately
3.29 percent of the natural gas produc-
tion in the Gulf of Mexico has been
shut-in. The production percentages are
Continued on next page...
bp Mad Dog production platform with
helicopter transport craft making landing.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
46
Oilman Cartoon
By Steve Burnett
calculated using information submitted
by offshore operators in daily re-
ports. Shut-in production information
included in these reports is based on
the amount of oil and gas the opera-
tor expected to produce that day. The
shut-in production gures therefore are
estimates, which BSEE compares to
historical production reports to ensure
the estimates follow a logical pattern.
Captain Denning applauded the end of
the 2020 hurricane season and states
that a successful outcome is due to a
collaborative effort between the oil and
gas companies, BSEE and the Coast
Guard.
“We never received any reports that
evacuation measures could not be
met,” says Captain Denning.
Reecting on his past experiences
with hurricane preparedness, Landry
believes Hurricane Laura of 2020 will
stand out. The enormous wind eld of
the storm and its continually changing
track presented a great challenge for
him and his team.
“This year’s hurricane season was un-
precedented when you consider all of
the circumstances,” says Landry. “The
season was record-based with the num-
ber of named storms we experienced.
On top of that, add the COVID-19
prevention measures before anyone
can even go out to the asset. It made
for great challenges this year, but this
is what we train for and we couldn’t be
prouder of our team’s dedication and
resilience.
Nick Vaccaro is a
freelance writer and
photographer. In
addition to providing
technical writing
services, he is an
HSE consultant in
the oil and gas industry with eight
years of experience. Vaccaro also
contributes to SHALE Oil and
Gas Business Magazine, Louisiana
Sportsman Magazine, and follows
and photographs American Kennel
Club eld and herding trials. He
has a BA in photojournalism from
Loyola University and resides in
the New Orleans area. Vaccaro
can be reached at 985-966-0957 or
navaccaro@outlook.com.
OILMAN COLUMN
Oilman Magazine / January-February 2021 / OilmanMagazine.com
47
OILMAN COLUMN
It is a well-known fact that drilling
oil and gas wells is fraught with risks.
Several disastrous accid
ents have taken
place in the industry and caused grave
harm economically and environmen-
tally. They have even resulted in the
tragic loss of human life. A blowout is
one such event, which can take place
in a well during drilling or even in the
post-drilling phase. The event initiates
with a simple hydrostatic imbalance
or failure of barriers in a well. Hydro-
static head of fluid in a well is the first
line of defense. As long as the hydro-
static pressure in the wellbore is higher
than the formation pressure, the well
is under control. If this control is lost,
the formation uid could start enter-
ing in the well, which is termed as a
“kick” (
Figure 1
).
1
T
here are several situations that can
cause loss of primary control of the
well. Rig crews are trained to avoid
these conditions through mandatory
refresher courses and regular drills on
the rig site. If all those safety mea-
sures are circumvented and primary
control is lost, the secondary control
is exercised through blowout preven-
tion equipment (BOPE) by shutting
in the well on the surface. (
Figure 2
)
2
shows an example of BOPE stack ar-
rangement, which varies depending on
well equipment. All companies have
standard practices, equipment testing
requirement and training programs
to ensure that a kick is detected and
controlled in its earliest stage to avoid
a blowout. This is the top priority and
companies exercise all their efforts in
this direction. In spite of these efforts,
disasters like blowouts are common in
the industry. Most post-mortems of
incidents reveal that there were signs
well in advance and the incident could
have been averted through timely ac-
tion and intervention. Companies
have a well-developed system of cap-
turing lessons learned but, many times,
investigations reveal the reasons as
overlooked initial indications and not
following basic practices.
There are other drilling troubles like
sticking pipe, loss of circulation,
downhole equipment rupture or fail-
ure, hole collapse, underground blow-
outs, etc. All these may not cause loss
of human life, but they do cost com-
panies dearly in the form of damaged
equipment or equipment lost in the
hole, loss of time to recover and loss
of production. Once a downhole trou-
ble starts, the recovery time and cost
can be signicant. By some estimates,
it can easily range from 20 percent to
27 percent of the drilling budget (
Fig-
ure 3
).
3
There are several underlying
factors which cause these events. Most
of the causes and remedies are very
well known in the industry. All compa-
nies equip drilling rigs with necessary
equipment and personnel with re-
quired training to be able to detect and
avoid these situations. Drill teams exer-
cise all their efforts to avoid downhole
problems but, in spite of these efforts,
downhole troubles occur frequently,
adversely affecting protability of the
companies.
Safety needs to be balanced with the
desire for companies to achieve high
drilling efciency. It’s even more rel-
evant in low oil price and low prot
market environments. Increasing the
rate of penetration (ROP) helps drill-
ing a well to planned target depth
faster, thus reducing overall well cost.
ROP depends on several factors like
energy input to the drill bit, vibrations
in drill string, mud system, drill bit
type and formation type, just to name
a few. All of these factors are critically
evaluated while planning a well based
on information from offset wells, well
objectives, geological information
and many more critical aspects. Well
progress is closely monitored dur-
ing drilling and operating parameters
are continually adjusted to optimize
ROP. Meticulous planning, along with
Photo courtesy of Song Qiuju – www.123RF.com
Continued on next page...
The Drilling Conundrum –
Efficiency Versus Reliability
By Shrikant Tiwari
Oilman Magazine / January-February 2021 / OilmanMagazine.com
48
OILMAN COLUMN
a knowledgeable and trained engineer-
ing workforce and experienced crew on
the rig are required to achieve the best
results. All these are important links in a
chain of optimized process and need to
be executed well for continued success.
However, as it is said, the chain is only
as strong as its weakest link. A weak link
in this chain not only jeopardizes the
optimized process but can create condi-
tions which can lead to major downhole
trouble, nullifying any potential gains of
improved ROP.
There are two schools of thoughts in
the industry. One propagates maximiz-
ing ROP, which is an obvious advantage
to the company in reducing cost and
improving protability. If a drill bit,
drill string and mud system are appro-
priately selected and designed based on
all factors, ROP is adversely impacted
primarily due to improper energy input,
loss of energy in the string vibrations or
hydraulic dysfunction. The concept of
founder point and mechanical specic
energy (MSE) has been well researched
and successfully used by many drilling
teams (
Figure 4
).
4
Another school of thought emphasizes
risk management. Aggressive operating
practices to drill or trip fast have the po-
tential to increase exposure to risks and
can lead to cutting accumulation, surge,
swab, string stuck ups and wellbore
instability to name a few. If the well
encounters these troubles, ROP gain is
a moot point and, in fact, could lead to
disasters with huge impact to a com-
pany’s reputation and, in some cases,
even its nancial feasibility. Therefore,
it’s better to go slowly and avoid any
downhole troubles.
It is a given fact that you need to know
your limits through good engineering,
planning and control measures, so that
steps taken for increasing ROP do not
adversely impact the well conditions and
do not pose any unnecessary risk. Maxi-
mizing drilling efciency without the
visibility of increasing risk is like speed-
ing on an icy highway. Most disasters
are found to be avoidable in hindsight,
which clearly points toward a huge
technological gap in the industry to be
able to detect the troubles in time and
take appropriate action to avoid them.
Individual skills and intervention time-
frame are of immense importance to
catch and mitigate disasters. Companies
spend enormous amounts of money
on training and developing engineer-
ing resources to be able to drill a well
in a safe manner. However, every plan,
every control process and every key
individual involved in the process has
to be 100 percent right all of the time,
which is a lot to ask. The process still
relies on individual skills to catch early
indications, interpret them correctly,
and advise appropriate measures to the
operations team in a timely manner, in
order to avert a disaster. Heavy reliance
on individual skills is frightening. This
is the concern that makes most opera-
tions teams default to a safe approach
and avoid going for fast paced drilling,
which could reduce reaction time and
land the well in trouble.
In this day and age of digital real time
data and articial intelligence, leaving it
to a select few to make right decisions
every single time on multi-million dol-
lars wells is irrational. Real-time data
transmission software is commonly
used by companies, but most of them
only relay the data in real time and still
rely on individual skills to accurately
interpret it and take timely action. It is
equally surprising that regulatory agen-
cies and underwriters have not made it
mandatory for companies to deploy risk
mitigating software to minimize if not
eliminate the risk to these expensive op-
erations. The solution lies in a software
with Watch, Warn and Advise (WWA)
capability that detects preliminary indi-
cators of a developing risk, warns the
user on-site and ashes recommenda-
tions based on a tried and tested knowl-
edge base, while also using articial in-
telligence (AI) to continually enrich the
recommendations based on well type,
eld, offset well experience, etc.
The drilling conundrum of choosing
between drilling efciency and drilling
Figure 1: Hydrostatic Balance in a well
1
Figure 2: A typical stack arrangement of
Blow Out Prevention Equipment
2
Oilman Magazine / January-February 2021 / OilmanMagazine.com
49
safety can be addressed by develop-
ing and deploying predictive and
advisory software and deploying it
on-site. Real time operation centers are
great, but the need is to have WWA
set up on-site for quick detection of
developing risk and recommendations
for corrective steps to avoid downhole
troubles right at ground zero. Drilling
efciency and reliability are not mutu-
ally exclusive but are complementary.
The conundrum and different schools
of thoughts in the industry are due to
lack of foolproof and dependable sys-
tems, which can generate condence
in the drilling teams that risks can be
identied and mitigated in time even
while aggressively pushing for perfor-
mance.
A simple analogy is trafc regulations.
Highways have higher speed limits due
to multi-lane, unidirectional trafc. A
warning ashes on highways to alert
drivers to reduce speed if icy or foggy
conditions develop. Residential streets
have lower speed limits because there
are stop signs, trafc lights, pedestrians
crossing, school and playground areas,
which require a higher level of alert-
ness. Reduced speed provides more re-
action time to avoid accidents. A simi-
lar guiding tool is needed in the drilling
industry. There is absolutely no harm
in pushing for efciency as long as well
conditions permit. This proposed tool,
WWA software, will Watch closely for
conditions developing in the well while
drilling, Warn of upcoming risks and
Advise appropriate actions in time.
References:
1. Admin. (2017, August 29). Bottom Hole
Pressure Concept, from https://www.drilling-
course.com/2017/08/bottom-hole-pressure-
concept.html
2. D. (2012, June 26). BOP Stack Organization
and BOP Stack Arrangement, from http://
www.drillingformulas.com/bop-stack-organi-
zation-and-bop-stack-arrangement/
3. Dodson, J. K. (jan. 1, 2004). Gulf of Mexico
‘trouble time’ creates major drilling expenses.
Offshore.
4. Krall, M., & Dupriest, F. (2006, January 1).
New drilling process increases rate of pen-
etration, footage per day. Retrieved December
07, 2020, from https://www.offshore-mag.
com/business-briefs/equipment-engineer-
ing/article/16754615/new-drilling-process-
increases-rate-of-penetration-footage-per-day
Shrikant Tiwari is an
engineering profes-
sional and innovator
who has worked in the
upstream oil and gas
industry for over 33 years. Tiwari has
worked internationally in several en-
gineering leadership positions with
multi-national and national oil and
gas companies.
Figure 3: Trouble time types and a typical distribution
3
Figure 4: Founder Point Concept for Improving ROP
4
OILMAN COLUMN
Oilman Magazine / January-February 2021 / OilmanMagazine.com
50
OILMAN COLUMN
The job of an oilman is generally quite
difcult and is associated with working
in harsh environments for long periods
of time away from one’s home and
family. Unsurprisingly, average salaries
for this job are comparatively high.
However, it varies considerably accord-
ing to specialization, experience and
location (country and region). Thus, a
petroleum engineer in Russia with up
to two years working experience on
average typically earns a minimal salary
of 59,700 RUB per month or 612,000
RUB (slightly more than US$9,855)
per year
1
while a petroleum engineer
in south Australia with more than ve
years of experience typically earned
$189,737 per year in 2018-2020.
2
In the U.S., according to Simply Hired,
a recruitment advertising network based
in Sunnyvale, California, the salary of
an average oilman (all job positions,
ranging from a superintendent to a
maintenance person) in 2019 was
$6,330 a month (or $75,963 for the
year), with the top 10 percent earning
nearly $151,100 for the last year.
1
As
per Payscale, a Seattle, Washington,
compensation software and data
company, in 2020 a petroleum engineer
in Texas earned $13,695 per month
on average, which totals $164,340 per
year (compared to an average annual
salary nationwide for a U.S. employee
of nearly $60,300). Second in rank
was Colorado, which paid slightly less
than Texas, at $13,042 a month for
a petroleum-related job, which totals
$156,500 per year
2
(Figure 1)
.
The Texas pay was not the highest in
the world for a petroleum engineer
(companies in Australia pay even more
– on the average gross salary of US$
142,721 per year), but it is still far more
than in Nigeria, which paid its petro-
leum engineers an average annual sal-
ary of NGN 4,000,000 (approximately
$11,110).
In comparison, petroleum engineers in
Saudi Arabia were paid an average of
“only” SAR 237,206, which is equal to
$63,250 per year.
2
As for oilmen in Russia – one of the
world’s leading oil producers and a
country that is in dire straits – a Rus-
sian citizen, on average, now earns less
than a petroleum worker in the small
country of African Equatorial Guinea.
Russian petroleum drilling engineers
earn on average only 464,386 (RUB)
(less than $6,630) per year (or a bit more
than $550 a month).
6
Unfortunately, this
is a huge salary in Russia now! I have
Oilmen’s Salaries Across the World
By Eugene M. Khartukov
Photo courtesy of CareerStint.com
Figure 1: Highest average gross salaries of petroleum engineers in the U.S. in mid-2020
Source: Petroleum Ninja
3
Oilman Magazine / January-February 2021 / OilmanMagazine.com
51
OILMAN COLUMN
to confess (at the risk of being disre-
spected by better-off readers) that my
own monthly salary as a professor at
the most prestigious educational entity
in the former Soviet Union (FSU) does
not exceed, even with all the bonuses
and premiums, $1,600 – really fantastic
by current Russian standards!
At any rate, according to the Society of
Petroleum Engineers (SPE), average
oil salaries in mid-2020 in the U.S. were
the highest, while those in northern and
central Asian countries were the lowest
across the world (here we are not talking
about Russia, where oil salaries are not
even assessed by SPE)
(Figure 2).
The highest salary in North America’s
petroleum industry is typically paid to
a project manager. According to the
London-based international OilPrice
online services, in 2018, a project
manager with at least six years of
experience in the oil and gas industry
on average earned $157,795 annually
9
The 10 Highest Paying Jobs in Oil
and Gas https://www.baystreet.ca/
commodities/3555
(Figure 3)
.
Still, according to the ofcial Bureau of
Labor Statistics (BLS) data, average pay
for oil and gas jobs in the U.S. in 2019
was far from the highest. Some medical
professionals typically were paid more –
$156,780 on average for petroleum en-
gineers as compared, for instance, with
$261,730 for anesthesiologists (physi-
cians who administer anesthetics and
analgesics for pain management prior
to, during or after surgery), $213,270 for
family and general practice physicians,
and $178,260 a year for dentists.
11
It is widely assumed that the hard work
in oil and gas is mainly for men – in
2018 the share of women worldwide
was eight percent and even in the most
high-tech petrochemical industry it is
only nine percent.
9
The situation with salaries looks sub-
stantially different when we bear in
mind the taxation and cost of living
in different countries
(Table 2).
This
is highly relevant as up to half the pay
is subject to personal income taxes,
in some countries, and a considerable
Figure 2: Average annual oil salaries in selected countries and regions in mid-2020. Source: SPE
7
Continued on next page...
Figure 3: Top paying jobs in the hydrocarbon industry of North America in 2018 (according to Airswift
and Energy Jobline). Source: Oilprice.com
10
Oilman Magazine / January-February 2021 / OilmanMagazine.com
52
OILMAN COLUMN
portion of the remaining salary will be
spent to make ends meet.
However, the situation changes only
slightly even after undertaking those
adjustments. The highest pay for a pe-
troleum engineer remains in the U.S.
and Australia while India and Nigeria
“enjoy” the lowest salary rates.
No doubt, the COVID-19 pandemic
has greatly inuenced the oil and gas in-
dustry, with some 107,000 jobs vanish-
ing from the U.S. oil, gas and chemicals
industry between March and August
2020. According to the London-based
Deloitte international audit consultancy,
about 70 percent of the jobs lost in
2020 may not come back by the end of
2021.
14
References:
1. Petroleum Engineer Average Salary in Russia
2020 http://www.salaryexplorer.com/salary-
survey.php
2. Petroleum Engineer Salaries in Australia
https://au.indeed.com/salaries/petroleum-
engineer-Salaries
3. Oilman Salaries https://www.simplyhired.
com/salaries-k-oil-man-jobs.html
4. Petroleum Engineering Salaries Worldwide
https://interestingengineering.com/
petroleum-engineering-salaries-worldwide
5. Learn How to Become an Oil Baron https://
petroleum.ninja/petroleum-engineer-salary
6. Oil and Gas Drilling Engineer Salary https://
www.salaryexpert.com/salary/job/oil-and-
gas-drilling-engineer/russian-federation
7. Petroleum Industry Salaries Begin to Rise
After Downturn https://pubs.spe.org/en/
jpt/jpt-article-detail
8. Petroleum Engineer Salary https://www.
salary-expert.com/salary/job/petroleum-
engineer
9. The 10 Highest Paying Jobs in Oil and Gas
https://www.baystreet.ca/commodities/3555
10. The 10 Highest Paying Jobs in Oil and Gas
https://oilprice.com/Energy/Energy-General
11. 25 Highest Paid Occupations in the U.S.
for 2019 https://www.investopedia.com/
personal-nance/top-highest-paying-jobs
12. List of Countries by Personal Income Tax
Rate https://tradingeconomics.com/country-
list/personal-income-tax-rate
13. Cost of Living Index by Country 2020 Mid-
Year https://www.numbeo.com/cost-of-
living/rankings_by_country.jsp
14. The Future of Work in Oil, Gas and
Chemicals https://www2.deloitte.com/us/
en/insights/industry/oil-and-gas/future-of-
work-oil-and-gas-chemicals.html
Table 1: Comparative 2020 average annual salaries (net of bonuses) of petroleum engineers in
selected countries. Source: Based mainly on SalaryExpert.com
8
Table 2: Nominal and adjusted average annual salaries of petroleum engineer in selected countries.
Source: Compiled and calculated by the author from: Interesting Engineering,
4
Petroleum Ninja,
5
Trading Economics
12
and Numbeo
13
Eugene M. Khartukov is a professor at the Moscow State
Institute/University for International Relations, (MGIMO),
head of the Moscow-based Center for Petroleum Business
Studies (CPBS) and of the World Energy Analyses and
Forecasting Group (GAPMER), and vice president (for
Eurasia) of the Geneva-based Petro-Logistics S.A. He is
the author and co-author of over 360 scientic publications and speaker
at more than 170 international oil, gas, energy or economic fora.
Email: khartukov@gmail.com.
Oilman Magazine / January-February 2021 / OilmanMagazine.com
53
The Crude Life engages with industry experts and energy
enthusiasts every day with interviews, radio programs, social
media posts, print features, video content and podcasts.
These conversations range from CEOs to truck drivers to
authors to engineers to cafe owners. Just like our diverse
experts and interviews, the conversations have depth and
worldly experience. Here are some quotes from people Liv-
ing the Crude Life.
“When I rst got involved, we were still talking about units,
like 160 acres, which meant one well pad for every 160 acres
and then you’d round a lot of those out from that, and then
it went to 640. Then it went to 1,280. I don’t know where it
is now in terms of acreage. I mean, when you go 3.8 miles
out, it’s an immense amount of acreage and what that means
is you know you’re recovering the economic value under an
ever-growing piece of land with an ever smaller footprint
proportionally.
Tom Shepstone, president, NaturalGasNow
Last week sometime, there was a
Citibank analyst who essentially came
out and predicted that they foresee a
Bitcoin price in the next year or two
of $321,000 per Bitcoin from $20,000.
Yes, it sounds ridiculous, doesnt it,
but the interesting thing about the
way Bitcoin works is that it is a con-
trolled distribution of the Bitcoin or
of the production of Bitcoin. So, there
will only ever be 21 million Bitcoin
ever made. Right now, in circulation
there’s approximately 18 million so
that means that there will only ever be
three million Bitcoin minted here in
the next 100 years. That’s why opera-
tors are now looking very closely at
converting their ared gas into Bitcoins.
Tom Masiero, founding partner, Great American Mining Co.
We’ve really kicked off what we call the Digital NOW
platform. Mainly focused at this point on e-commerce that
is allowing our customers to place their orders online and
be able to do research. And in some cases, through our new
platform that we just released, customers are being able to
design packages completely on their own. Whereas in the
past, with the historical way that business has been done, you
might be sitting down shoulder to shoulder with one of our
personnel going over those BOMs and determining what
needs to be there.
Josiah Black, Distribution NOW
The United States has the
ability to provide France
with access to the cleanest
and most efcient source
of natural gas in the world.
Importing more U.S. LNG
strengthens the U.S.-
France trade relationship
and provides France with
signicant environmental
and geopolitical benets.
If Frances true objective is
to lower carbon emissions
from energy imports while
ensuring access to a reliable
and secure energy source, then the choice is clear: U.S.
LNG provides the country the best option compared to its
alternatives.
U.S. Senator Kevin Cramer
We’re outside of New Orleans on an intercoastal canal, so
where we’re located is, I guess you can call the calmer waters,
but that intercoastal canal reaches Texas, all the way to Ala-
bama. So there’s some lochs in between, but Lake Charles is
basically almost to Port Author, the next closest bigger city
at Beaumont. So that’s on the other side but they had a lot
of construction going on over there. We’re sticking here and
trying to service folks here with their barges…”
John Vindas, Bayou Energy and Repair Services
I had heard gures as high as $500,000 in savings per well
by using the sand mined here in west Texas versus bringing
sand in from somewhere else.
Danny Skiff, Specialized Desanders USA
I’m all about efciency and I
think that as far as the industry
goes, that’s where we always are
moving. We’re trying to get more
efcient, get our wells drilled
cheaper, get our wells frac[ked]
cheaper, use less water than we
have to, but get it, use as much
as we need. So, there’s this ne
line and that’s— the oil and gas
business constantly pushes those
limits.”
Brandon Davis, CEO, Swan Energy
Living the Crude Life
By Jason Spiess
Bitcoin Mining Container
U.S. Senator Kevin Cramer (left), U.S.
Secretary of Energy Dan Brouillette
(middle left), U.S. Senator John Hoeven
(middle right) and North Dakota
Governor Doug Burgum (right)
Currently Swan Energy has
operations in Oregon, Oklahoma
and Texas, and assets in Oregon,
Oklahoma, Texas and Colorado.
OILMAN COLUMN
Continued on next page...
Oilman Magazine / January-February 2021 / OilmanMagazine.com
54
OILMAN COLUMN
Some of the largest oil and gas companies know that renewable
energy is the future of the industry. Baker Hughes alone rewrote [its]
mission statement way back in early 2000 to reect this. Then we have
companies, such as Occidental Petroleum and bp, who are making
very aggressive statements towards their plans at achieving very low to
zero emissions to counteract the attacks seen on the industry thus far.
The International Energy Agency projects that renewable energy gen-
eration will more than quadruple by 2040 and, given the history of its
projects, that’s probably a very conservative estimate. Companies aren’t
able to ght these macro trends, but they can adapt their businesses to
stay exceptionally relevant. This ultimately means some major oil com-
panies are slowly going to become renewable energy companies. With
all this being said, it is still very crucial to let our industry be heard and
educate all others outside of it. We all want to be more environmental-
ly conscious; this takes time and a team effort from all. We must stand
up for our industry going into 2021.
Bailey Midkiff, W.I.C.
The Crude Life Podcast can be heard Monday
through Friday with a Week in Review news program
aired on the weekend. For more info, visit
www.thecrudelife.com.
Jason Spiess is a multi-industry, multi-
award-winning journalist, entrepre-
neur and content strategist. He has
over 30 years of media experience
in broadcasting, journalism, report-
ing, producing and principal ownership in media
companies. Spiess has also worked as a guest cor-
respondent for a number of local and global news
organizations from 660 KEYZ-AM Williston to
CNBC to the BBC World. He is a full-time father,
cancer survivor, environmentalist, author and
graduate of North Dakota State University.
To understand and perhaps guide
the purpose of our economy, econo-
mists and scientists think about future
energy-economic options by mix-
ing laws and theory (scientic, legal,
socio-political and economic) with
data by inserting them into a computa-
tional oven of some sort that spits out
results for interpretation. Depending
upon the knowledge and worldview
of the critic interpreting the results, as
well as the quality of input ingredients,
the results are described anywhere
from an elegant soufé to a half-baked
pile of soggy dough.
If the taste and shape of our energy
and economic dessert does not meet
our expectations, then how do we
know whether or not the ingredients
were combined incorrectly, the oven is
broken, the recipe is poorly designed
or we just simply can’t get what we
want? If we determine we can’t get the
result we want, and if we just change
the inputs and assumptions to get
our desired result, will anyone notice?
After all, “it’s complicated,” right?
At some point in the process of mix-
ing and baking the ingredients that
will rise into our future, we go from
historical energy and economic data
to energy and economic narratives.
Somewhere between physical laws
and data lies the theoretical economic
oven, or “black box,” that uses a
mathematical equation or computa-
tional algorithm to convert inputs to
outputs, data to information. We use
these black boxes, or models, to help
us peer into the future, to learn and
project what enables future prosperity
or poverty, to better understand how
different the world might be if pow-
ered by fossil [fuels] versus renewable
energy. Sometimes people dont even
use a black box, but only the intuition
they believe they have within their gray
matter, or brain. Sometimes a reason-
able argument is made, sometimes not.
For better or for worse, people with
gray matter design our computational
models and black boxes. These people,
all of us, are affected by our cultures,
our languages, our environments and
our narratives. For more information
visit www.careyking.com.
The Economic Superorganism:
Beyond the Competing Narratives
on Energy, Growth and Policy
By Carey W. King
Call 1.800.988.8033 and mention OILMAN for special event pricing.
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