Fundamentals in the Oil
Field Matter Even More
with Big Data
p. 28
Safety Practices and Procedures
in the Oil Industry and
Technology’s Inuence
p. 13
U.S. Federal Regulatory
Bodies in the Energy
Sector
p. 12
How Oil and Gas Companies
Can Use AI Technology When
Disasters Occur
p. 6
THE MAGAZINE FOR LEADERS IN AMERICAN ENERGY
November / December 2018
OilmanMagazine.com
BRIDGING THE GAP IN
OIL AND GAS TRAINING
ONE APP.
ONE TABLET.
The Spotter inspection app is equipped
with every tool you need to record,
capture, and report on the spot.
With the Spotter inspection app you can trade in your pen, paper, and camera
for one tablet. Spotter uses tablet functionalities to create fully-customizable,
accurate, and thorough inspections whether you’re in the Gulf or at the top
of a cracking tower. Upgrade your inspection process and increase safety and
eciency at any facility with Spotter and intrinsically safe tablets.
Work oine with no internet connection required
Take photo, video, and audio directly in the report
Automatically route workows for digital signatures
Implement high accountability by GPS location capture
Create custom inspection forms with a powerful,
user-friendly template builder
Integrate into any internal system, accounting or ERP
Stay safe with Class I, Div II Intrinsically Safe tablet
devices and cases
START YOUR FREE TRIAL
envoc.com/energy
ANY INSPECTION.
ANY LOCATION.
Proudly developed in Louisiana by Louisiana natives at Envoc. Learn more about how we can help your
business run more eciently with custom software solutions that work for you.
envoc.com
by
IN THIS ISSUE
Feature
The Missing Piece: Educating the Oil and Gas
Workforce to Bridge the Skills Gap
By Sarah Skinner - pages 22
24
In Every Issue
Letter from the Publisher – page 2
OILMAN Contributors – page 2
OILMAN Online // Retweets // Social Stream – page 3
Downhole Data – page 3
State Oil & Gas Associations – page 8
Product Showcase: Fox Thermal – page 11
OILMAN Columns
Eric R. Eissler: U.S. Federal Regulatory Bodies in the Energy Sector – page 12
Tonae’ Hamilton: Safety Practices and Procedures in the Oil Industry and Technology’s Inuence – page 13
Eric R. Eissler: Blockchain in Oil and Gas is Not Hype – page 14
Mark A. Stansberry: Forty-Five Years Later… – page 15
Josh Robbins: Oil and Gas Acquisition Market 2019 Outlook – page 15
Tonae’ Hamilton: Interview: Kent Bartley, President, Maviro – page 25
Jason Spiess: The 75K Well Drilling Prots in the Illinois Basin – page 36
Guest Columns
Corrosionpedia: How New Oil & Gas Extraction and Transportation Methods are Inuencing Pipeline Corrosion – page 4
Tim Willis: How Oil and Gas Companies Can Use AI Technology When Disasters Occur – page 6
Rick Pedley: Protective Clothing Buyer’s Guide for the Oil Industry – page 9
Joe Dancy: Drones Making Headway in Advancing E&P – page 10
Aaron Kline: Solving the Capacity Crunch in Today’s Petrochemical Supply Chain – page 16
Joe Saunders: How Runtime Application Self-Protection (RASP) Can Prevent Cyberattacks in Oil & Gas Environments – page 18
Merrick Alpert: Advanced Anti-Corrosion Coating Utilized on Two North Sea Offshore Platforms – page 20
Kent Landrum: Preparing for Digital Downstream Supply Chain Capabilities – page 26
Shiva Rajagopalan: Fundamentals in the Oil Field Matter Even More with Big Data – page 28
Evan Cox: The ROI of Business Continuity Can Be Found in the Cloud – page 30
Shane Randolph: Commodity Hedging: Lessons Learned by Early Adopters of New Hedge Accounting Rules – page 32
Jeff Berkowitz: In The New Age Of Activism, Minimizing Political And Reputational Risk Is Key – page 34
Oilman Magazine / November-December 2018 / OilmanMagazine.com
1
ONE APP.
ONE TABLET.
The Spotter inspection app is equipped
with every tool you need to record,
capture, and report on the spot.
With the Spotter inspection app you can trade in your pen, paper, and camera
for one tablet. Spotter uses tablet functionalities to create fully-customizable,
accurate, and thorough inspections whether you’re in the Gulf or at the top
of a cracking tower. Upgrade your inspection process and increase safety and
eciency at any facility with Spotter and intrinsically safe tablets.
Work oine with no internet connection required
Take photo, video, and audio directly in the report
Automatically route workows for digital signatures
Implement high accountability by GPS location capture
Create custom inspection forms with a powerful,
user-friendly template builder
Integrate into any internal system, accounting or ERP
Stay safe with Class I, Div II Intrinsically Safe tablet
devices and cases
START YOUR FREE TRIAL
envoc.com/energy
ANY INSPECTION.
ANY LOCATION.
Proudly developed in Louisiana by Louisiana natives at Envoc. Learn more about how we can help your
business run more eciently with custom software solutions that work for you.
envoc.com
by
Gifford Briggs
Gifford Briggs joined LOGA in 2007 working
closely with the Louisiana Legislature. After
nearly a decade serving as LOGAs Vice-
President, Gifford was named President in
2018. Briggs rst joined LOGA (formerly
LIOGA) in 1994 while attending college at
LSU. He served as the Membership Coordinator and helped
organize many rsts for LOGA, including the rst annual
meeting, Gulf Coast Prospect & Shale Expo, and board
meetings. He later moved to Atlanta to pursue a career in
restaurant management. He returned to LOGA in 2007.
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-(Boone) 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.
Thomas G. Ciarlone, Jr.
Tom is a litigation partner in the Houston
ofce of Kane Russell Coleman Logan PC,
where he serves as the head of the rm’s
energy practice group. Tom is also the host of
a weekly podcast on legal news and develop-
ments in the oil-and-gas industry, available at
www.energylawroundup.com, and a video series on effective
legal writing, available at www.theartofthebrief.com.
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 to running a
food truck, 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.
Joshua Robbins
Josh Robbins is currently the Chief Executive
Ofcer of Beachwood Marketing. 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.
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
after retirement, nishes 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.
As we get closer to the end of the year and look back at the activity during the past
several months, it’s easy to say that the industry can be termed as the bounce back
year. Some may say it has been a steady year, with not much to discuss, and yet a few
in the industry felt the pain of further cut backs.
On the nancial side, the price per barrel has remained in a range comfortable for
most producers to earn a prot. This in turn fuels a healthy market for companies
to buy equipment, hire personnel and invest in expansion. Proof of this is clearly
shown in the Permian and Eagle Ford Basin. Operators are doing so well there, they
are producing record amounts of oil and gas, but getting it to the market has been painful. The pipeline
bottleneck and shortage of truckers has slowed down ow for export to the Gulf of Mexico. However, it
has been reported over the past year that several new pipelines will open in 2019 and in turn will improve
the ow to export terminals.
Product and service technology in the oil and gas market is growing and improving at every turn.
The industry now has a taste for machine learning and what IoT can do and there is no turning back.
Blockchain still in its infancy in the crude market, but it will be just as common in years to come.
Innovation and technology are key to improving business efciency so that employees and processes
perform better. If the correct technology is in place and employees are performing well with its use, the
results in many companies are often improved market share and a business that is thriving.
In this issue of OILMAN our feature article is about oil and gas training and continuing education. As
I mentioned, deploying the best technology that is the right t for each employee’s role is key, but not
training or hiring qualied employees ultimately weakens a company’s capital investment in the new
technology. Knowledge transfer is crucial as well. When older employees are set to retire it’s in a company’s
best interest to transfer long held knowledge to younger employees entering the eld. Recent graduates
or entry level employees often come with fresh ideas. Companies benet the most when they merge time-
tested knowledge from seasoned personnel with new processes from recent recruits, when that’s coupled
with emerging technology, the end result is improvement in productivity.
MAGAZINE
NOVEMBER DECEMBER 2018
PUBLISHER
Emmanuel Sullivan
MANAGING EDITOR
Sarah Skinner
ASSOCIATE EDITOR
Tonae’ Hamilton
FEATURES EDITOR
Eric Eissler
GRAPHIC DESIGNER
Kim Fischer
CONTRIBUTING EDITORS
Gifford Briggs
Steve Burnett
Thomas Ciarlone, Jr.
Joshua Robbins
Jason Spiess
Mark Stansberry
SALES
Eric Freer
To subscribe to Oilman Magazine, please
visit our website, www.oilmanmagazine.
com/subscribe. The contents of this
publication are copyright 2018 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 reflect 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 771872
Houston, TX 77215
(800) 562-2340
Cover image courtesy of
Orlando Rosu – www.123RF.com
LETTER FROM THE PUBLISHER
CONTRIBUTORS — Biographies
Oilman Magazine / November-December 2018 / OilmanMagazine.com
2
Emmanuel Sullivan, Publisher, OILMAN Magazine
Oilman Magazine / November-December 2018 / OilmanMagazine.com
33
For The Week Ending October 26, 2018
DIGITAL DOWNHOLE DATA
Colorado: 32
Last month: 33
Last year: 33
North Dakota: 54
Last month: 53
Last year: 49
Texas: 537
Last month: 529
Last year: 441
Louisiana: 61
Last month: 62
Last year: 65
Oklahoma: 141
Last month: 141
Last year: 125
U.S. Total: 1,068
Last month: 1,054
Last year: 909
OIL RIG COUNTS
*Source: Baker Hughes
Brent Crude: $80.45
Last month: $78.90
Last year: $57.69
WTI: $69.25
Last month: $70.80
Last year: $50.61
CRUDE OIL PRICES
*Source: U.S. Energy Information Association (EIA)
Per Barrel
Colorado: 13,741,000
Last month: 12,736,000
Last year: 10,902,000
North Dakota: 39,073,000
Last month: 36,575,000
Last year: 32,222,000
Texas: 138,548,000
Last month: 132,698,000
Last year: 106,687,000
Louisiana: 3,959,000
Last month: 3,879,000
Last year: 4,353,000
Oklahoma: 16,873,000
Last month: 15,717,000
Last year: 13,734,000
U.S. Total: 339,895,000
Last month: 320,856,000
Last year: 289,132,000
CRUDE OIL PRODUCTION
*Source: U.S. Energy Information Association (EIA) – July 2018
Barrels Per Month
Colorado: 151,332
Last month: 143,773
Last year: 139,706
North Dakota: 63,825
Last month: 59,474
Last year: 51,351
Texas: 679,594
Last month: 648,235
Last year: 621,007
Louisiana: 247,966
Last month: 232,273
Last year: 166,507
Oklahoma: 252,022
Last month: 241,436
Last year: 213,033
U.S. Total: 2,782,895
Last month: 2,642,766
Last year: 2,478,626
NATURAL GAS
MARKETED PRODUCTION
*Source: U.S. Energy Information Association (EIA) – July 2018
Million Cubic Feet
Per Month
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Oilman Magazine / November-December 2018 / OilmanMagazine.com
4
How New Oil & Gas Extraction and
Transportation Methods are
Influencing Pipeline Corrosion
By Corrosionpedia
OILMAN COLUMN
The oil and gas industry has been steadily
increasing production rates to keep up with the
rising global demand for energy. According to
statistics from BP, global oil production has
increased from 63 million barrels per day in 1980
to 92 million barrels per day in 2016. In addition,
global natural gas production has risen from
approximately 1,430 billion cubic meters to over
3,500 billion cubic meters during the same time
period. New technologies have been introduced to
meet the demand, but they create new challenges
in terms of the impact they place on existing
infrastructure. This makes the importance of
protecting pipeline assets all the more important.
Not only are companies less able to afford
delays or mistakes, but more robust pipeline
protection systems typically mean less scheduled
maintenance.
Here, we’ll take a look at some of the oil and gas
extraction methods being used and their impact,
as well as some possible solutions for reducing
that impact.
Enhanced Oil Recovery
To meet rising demand, advanced oil and gas
extraction techniques, called EOR (Enhanced Oil
Recovery), are used to help increase the efciency
of extraction and transportation of oil and gas
from natural reserves. These increased production
rates, combined with the aggressive environments
produced by enhanced oil recovery techniques,
have placed extra burdens on existing wells,
pipelines and their associated components.
Pipeline corrosion is a well-known issue in the oil
and gas industry worldwide. In a study conducted
by NACE, it is estimated that pipeline corrosion
costs anywhere between $5.4 billion and $8.6
billion in the U.S. alone. (For more on this subject,
see 21 Types of Pipe Corrosion & Failure.)
Unfortunately, in the dynamic and fast-paced
oil and gas industry, an increase in production
is not always equally met with a bigger budget.
Often, operators are pressured to ensure the
optimum efciency of pipelines while keeping
costs to a minimum. Furthermore, some critical
components, such as anges, and by extension,
ange isolation components (washers, bolts and
gaskets) used in wells and pipelines have remained
largely unchanged for the past 50 years. Industry
sources estimate the global cost of corrosion in
the oil and gas industry to
be in excess of $1.3 billion.
For offshore facilities, some
operators estimate 60 to
70 percent of maintenance
costs are directly related to
corrosion issues.
Pipeline corrosion in
petrochemical plants and
reneries typically come in
the form of:
Internal corrosion, which
is due to aggressive gases
such as carbon dioxide
(CO2) and hydrogen
sulde (H2S).
Flow-induced corrosion or erosion corrosion,
which are caused by high-velocity, high-pressure
ow rates in the pipeline.
Enhanced oil recovery techniques meant to
increase the extraction volume and efciency can
greatly increase the risk of the types of corrosion
previously mentioned. The three main methods of
EOR commonly used are thermal injection, gas
injection and chemical injection. We’ll have a look
at these in depth here. However, it has become
apparent that new technologies are needed to
match the increased production volumes and
the aggressive physical and chemical properties
of extracted oil and gas. Because, rest assured,
enhanced oil recovery methods are not going
away. In fact, the problem is likely to only become
more prevalent as these methods persist and oil
and gas becomes sourer over time.
Gas Injection
Gas injection, or miscible ooding, is currently
the most common method of EOR. It is typically
used after water ooding to help sweep the
formation for remaining oil deposits that may
have either been missed or trapped due to waning
pressure. A gas, such as CO2, is injected into the
well at its supercritical phase (temperature, 87.9°F
(32°C); pressure, 1070 atm). During this phase,
the CO2 adopts the properties of a liquid that,
despite its low viscosity, is miscible with oil, and
also expands to help boost declining pressure in
the formation.
However, when supercritical CO2 reacts with
water in the oil reserve, carbonic acid (H2CO3) is
produced. This acid lowers the pH in the reserve
to create an environment that is highly corrosive
for metallic components. In addition, hydrogen
sulde gas (H2S) may also be mixed with CO2
before gas injection to improve miscibility
between the petroleum and the injected CO2. H2S
is, however, very toxic and also highly corrosive,
which can further exacerbate the corrosion of
piping and equipment.
Thermal Injection
Thermal injection involves raising the temperature
in the reservoir to reduce the viscosity of the
heavy crude and improve its mobility within
the reservoir. Increasing the temperature in
the formation is most commonly achieved by
pumping steam into the well in a fashion similar to
gas injection.
When the steam moves away from the injection
well and comes into contact with the oil, its
temperature drops and the steam condenses to
hot water. This hot water heats the oil, causing it
to expand and become less viscous.
Because some formations may contain acidic
minerals, the steam may also dissolve some of
these compounds, causing toxic gases to blow
out at the surface. In addition, the intense heat
generated by this process can cause excessive wear
and degradation of pipeline components.
Photo courtesy of Corrosionpedia
Oilman Magazine / November-December 2018 / OilmanMagazine.com
5
OILMAN COLUMN
Chemical Injection
Chemical injection involves using specially
formulated chemical solutions to improve the
efciency of oil recovery from an oil formation.
The chemicals achieve this by either increasing
the viscosity of the injected water to improve the
sweep efciency of water ooding or by acting as
a soap-like substance, thereby reducing the surface
tension between the oil and water in the reservoir.
Chemical injection does not produce the same
harsh environments as gas or thermal injection
and is therefore not considered to be a major
contributor to well and pipeline corrosion.
However, due to relatively high costs, chemical
injection methods make up less than 1% of all
EOR conducted in the United States.
Corrosion Prevention and Mitigation
These new oil and gas extraction methods have
created an increased demand in the corrosion
industry for components - particularly anges
- made of more corrosion resistant alloys and
made with more robust designs to better resist
the corrosive nature of gas injection procedures.
The higher rates of pipeline pressure, as well as
the addition of heat and more corrosive elements,
puts additional pressure on pipeline components,
increasing the rate of corrosion. To ensure the
success of long-term planned operations, it is
essential that all components of the well, from the
wellbore to the completion equipment, be able
to withstand the harsh corrosive environments
produced by EOR methods.
Gaskets
In addition to metallic components, special
attention must also be given to non-metallic
elements such as ange gaskets. Gaskets and seals
are essential for preventing direct contact between
anges at connection points. This separation is a
process known as ange isolation. Flange isolation
is a crucial element of the overall corrosion
protection system as they are necessary for:
Cathodic Protection – In well and piping
networks with ICCP systems, ange isolation
acts as a dielectric insulating barrier between
connecting anges. This isolation limits the
extent and cost of cathodic protection by
electrically “splitting up” lengthy pipelines into
distinctive cathodic protection regions. This
ensures that the DC current generated by the
rectier is contained within the section of pipe
to be protected.
Galvanic Protection – Flange isolation is also
required at connections between dissimilar
metals. Under certain conditions, when metals
of different compositions are in direct contact
with each other, they can form a type of cell
known as a bimetallic couple due to their
difference in electrode potential. The potential
difference between the two metals allows for
the free ow of electrons between the anode
and the cathode giving rise to an electric
current. (For more on this topic, see ‘Why Do
Two Dissimilar Metals Cause Corrosion?’)
Flange isolation gaskets eliminate direct contact
between the dissimilar ange materials by
acting as an insulating barrier that prevents the
formation of the bimetallic couple and thus
galvanic corrosion.
Commonly used glass reinforced epoxy (GRE)
gaskets have been shown to be unsuitable for
demanding EOR applications. GRE gasket
construction consists of layers of resin-saturated
woven berglass sheets. This laminated structure
is prone to delamination under the high pressures
imposed by enhanced oil and gas extractions.
Furthermore, the operating temperatures for
GRE gaskets typically range between 150°C
to 200°C (302°F to 390°F); much lower than
the temperatures found in thermal injection
methods. Elevated temperatures combined with
high pressures can compound gasket issues and
accelerate deterioration of the laminated bers.
GRE has also shown high susceptibility to
chemical breakdown when exposed to sour gases.
Compromised gaskets can result in direct ange
to ange contact that can reduce or nullify the
effectiveness of cathodic protection systems,
encourage galvanic corrosion, and increase the
risk of leaks and blowouts.
New high-temperature, high-pressure and
chemically resistant gaskets have been developed
to replace GRE and other inadequate gasket
materials. Fully coated and encapsulated gaskets
move away from the traditional plastic and
ber laminated gaskets that are susceptible to
delamination. In addition, newly developed gasket
coatings have been shown to possess high levels
of abrasion, pressure, temperature and electrical
resistance to safeguard against various types of
corrosion.
Pipeline Regulations
Evolving regulations regarding pipelines also drive
the incentive for change. In the United States,
the PHMSA (Pipeline and Hazardous Materials
Safety Administration) is considering imposing
regulations on locations previously dened as
MCAs (Moderate Consequence Areas). This
means that upstream equipment such as gathering
lines, which were previously unregulated, are
expected to be subject to stricter requirements,
thus highlighting the need for more effective
corrosion control and appropriate construction
materials at these areas.
Conclusion
Due to the rising demands of the oil and gas
industry and the increased rigors imposed on
pipelines by regulations and EOR methods, it
has become evident that standard extraction
equipment must be upgraded to match these
demands. The selective use of corrosion resistant
materials for both metallic and non-metallic
components is of the utmost importance to
ensure the longevity of equipment and safety of
on-site personnel.
No w Av A i l A b l e : Th e C r u d e l i f e Cl o T h i N g
w w w .s h i r T s i C l e .C o m /T h e C r u d e l i f e
Oilman Magazine / November-December 2018 / OilmanMagazine.com
6
How Oil and Gas Companies Can Use AI
Technology When Disasters Occur
By Tim Willis
Oil and gas companies bear a unique
responsibility in providing the raw power all
other companies need to function. When a
disaster occurs, there is an outward ripple
effect that signicantly impacts numerous
stakeholders. It is critical for oil and gas
companies to maintain proper functioning
even in the face of disastrous events and
essential that they use every available
technology to do so.
The Rise of Public Information and
Articial Intelligence
As technology has advanced to include
hand-held devices, easily accessible wi, and
multiple social media platforms, large-scale,
web-based, public sharing of information
has grown exponentially. Datasets providing
weather predictions, earthquake seismic
activity or ight patterns are readily available
at the tap of a screen and can potentially
provide insights that inform mission-critical
business and operational activities for oil
and gas companies. But the volume of
information can also present a challenge.
If, in the face of an impending disaster,
companies are unable to wade through the
vast amount of reporting available in a
timely manner, they run the risk of failing
to identify the all-important rst indicators.
That’s where AI (Articial Intelligence)
technologies can have profound impact.
Issue Identication
Each oil and gas company has its own
self-dened and layered security approach,
utilizing different forms of information
within its overall risk management process.
In-house teams uniquely understand their
own specic operating environments and
plan accordingly for those disruptive events
that are foreseeable based on local factors.
For example, a company with operations in
multiple countries may nd it necessary to
be on heightened alert in locations where
elections are underway. For companies with
U.S. operations on the East and Gulf coasts,
hurricane season brings the possibility for
enormous business impact from storm-
related events.
In responding to scenarios like these, speed
and quality of information gathering are
the ultimate critical success factors. AI
technology that delivers information in real
time and provides important context in
gaining a full understanding of a developing
situation has signicant meaning for oil
and gas companies. A service like Dataminr
has the ability to unearth relevant signals
from social media and publicly available
information sources and alert its customers
as an event is happening in real time.
Moment-in-time specicity opens a virtual
window, affording unmatched insight into
events taking place on the ground – whether
its commentary, pictures or video. All
the pieces are evaluated in context with
one another to provide corporate crisis
management and security teams a more
comprehensive view of events that can lead
to better informed business decisions.
Internal Organization
Once a disaster is identied, there are
clearly dened escalation protocols to
initiate and crisis management plans to
implement. Senior management teams need
to convene as quickly as possible to begin
the carefully coordinated corporate response.
Business leaders from every department –
health and safety, legal, internal/external
communications, operations and nance –
combine their individual areas of expertise
to collectively decide how to address the
issue. How rapidly this happens correlates to
the ultimate speed with which the company
is able to respond. AI technology-backed,
real-time alerts have the ability provide the
rst indications of
impending disasters
relevant for oil and
gas companies, giving
an invaluable gift of
time when marshalling
internal resources.
Response
Mobilization
With the crisis
identied, and a united
senior team assembled,
the company can initiate
its response plan. Assets
need to be quickly
secured; whether its
ground transportation to an airport, seats
on the last commercial ight out of an area
or resource procurement for sheltering in
place, these actions need to be taken both
swiftly and decisively, and backed by the best
possible information. When the initial tumult
of the disruption dies down, attention
immediately turns to business continuity.
Oil and gas companies are vulnerable to
any number of disasters which have the
potential to cripple fundamental operations.
Response formulation is entirely dependent
on the speed with which information can
be gathered. AI technology can be used to
deliver real-time alerts, ensuring companies
get notied of major events as they happen,
allowing for fast and effective response with
as little business disruption as possible.
Tim Willis is Director,
EMEA Corporate
Security Sales for
Dataminr, a technology
platform that creates real-
time, actionable breaking
news alerts from public social media
activity. Dataminr’s powerful algorithms
instantly transform all publicly available
Twitter data and other public datasets
into alerts that enable security, operations,
nancial & communications professionals
to be alerted to critical information as
events unfold. Prior to joining Dataminr,
Tim spent over ten years in a variety of
corporate security roles across Europe,
Africa and the Middle East.
OILMAN COLUMN
For more information, call
Rob Newman, 334-315-4040
rnewman@nationalland.com • www.nationalland.com
For Sale - 1,251 acres in Crenshaw County, AL located 30 miles south of Montgomery off
I-65. This property is in the fertile Black Belt soil region best known for trophy bucks and
abundant wildlife. A newly built cabin and pole barn with water and power. Established
food plots with shooting houses. 1,251 acres - owner will divide.
Alabama Natural Gas Association (ANGA) .................................................................................................................................... ALNGA.ORG
Alaska Oil & Gas Association (AOGA) .....................................................................................................................................................AOGA.ORG
Arkansas Independent Producers & Royalty Owners Association (AIPRO) ........................................................AIPRO.ORG
Texas Pipeline Association (TPA) ..................................................................................................................................TEXASPIPELINES.COM
California Independent Petroleum Association (CIPA) ............................................................................................................ CIPA.ORG
Colorado Oil & Gas Association (COGA) ...............................................................................................................................................COGA.ORG
Eastern Kansas Oil & Gas Association (EKOGA) ........................................................................................................................EKOGA.ORG
Energy Association of Pennsylvania .........................................................................................................................................ENERGYPA.ORG
Florida Independent Petroleum Producers Association (FLIPPA) ....................................................................FLIPPAOIL.ORG
Florida Natural Gas Association (FNGA) ........................................................................................................................... FLORIDAGAS.ORG
Houston Energy Club ............................................................................................................................................HOUSTONENERGYCLUB.ORG
Illinois Oil & Gas Association (IOGA) ........................................................................................................................................................ IOGA.COM
Independent Oil and Gas Association of New York (IOGA of NY) (IOGANY) ...................................................IOGANY.ORG
Independent Oil & Gas Association of Pennsylvania ..............................................................................................................PIOGA.ORG
Independent Oil & Gas Association of West Virginia (IOGA-WV) ........................................................................... IOGAWV.COM
Independent Oil Producers Association Tri-State (IOPA) ................................................................................IOPATRISTATE.ORG
Independent Petroleum Association of New Mexico (IPANM) ......................................................................................IPANM.ORG
Indiana Energy Association .............................................................................................................................................. INDIANAENERGY.ORG
Indiana Oil & Gas Association (IOGA) .................................................................................................................................. INDIANAOGA.ORG
Kansas Independent Oil & Gas Association (KIOGA)...............................................................................................................KIOGA.ORG
Kentucky Oil & Gas Association (KOGA) ...................................................................................................................................KYOILGAS.ORG
Louisiana Oil & Gas Association (LOGA) .................................................................................................................................................... LOGA.LA
Louisiana Mid-Continent Oil and Gas Association .................................................................................................................LMOGA.COM
Michigan Oil and Gas Association (MOGA) .............................................................................................MICHIGANOILANDGAS.ORG
Mid-Continent Oil & Gas Association of Oklahoma ..........................................................................................................OKMOGA.COM
Midwest Energy Association (MEA) ...................................................................................................................................... MEAENERGY.ORG
Mississippi Independent Producers and Royalty Owners (MIPRO) ..............................................................................MIPRO.MS
Montana Petroleum Association (MPA) .................................................................................................. MONTANAPETROLEUM.ORG
Natural Gas & Energy Association of Oklahoma (NGEAO) .............................................................................................. NGEAO.ORG
Natural Gas Society of East Texas (NGSET) ..................................................................................................................................... NGSET.ORG
Natural Gas Society of the Permian Basin (NGSPB) .............................................................................................................. NGSPB.COM
Nebraska Petroleum Producers Association (NPPA) .........................................................................................................NEBPPA.ORG
New Mexico Oil & Gas Association (NMOGA) .............................................................................................................................NMOGA.ORG
New York State Oil Producers Association (NYSOPA) .... NEWYORKSTATEOILPRODUCERSASSOCIATION.COM
North Dakota Petroleum Council ............................................................................................................................................................NDOIL.ORG
Northeast Gas Association (NGA) ..................................................................................................................................NORTHEASTGAS.ORG
Northwest Gas Association (NWGA) .....................................................................................................................................................NWGA.ORG
Ohio Oil & Gas Association (OOGA) .........................................................................................................................................................OOGA.ORG
Oklahoma Independent Petroleum Association (OIPA).........................................................................................................OIPA.COM
Oklahoma Mid-Continent Oil and Gas Association..........................................................................................................OKMOGA.COM
Panhandle Producers & Royalty Owners Association (PPROA) ..................................................................................PPROA.ORG
Pennsylvania Independent Oil and Gas Association (PIOGA) .........................................................................................PIOGA.ORG
Permian Basin Landmen's Association (PBLA) ...............................................................................................................................PBLA.ORG
Permian Basin Petroleum Association (PBPA) ............................................................................................................................. PBPA.INFO
Petroleum Association of Wyoming (PAW) ................................................................................................................................. PAWYO.ORG
Southeastern Ohio Oil & Gas Association (SOOGA) .............................................................................................................. SOOGA.ORG
Southern Gas Association (SGA)....................................................................................................................................... SOUTHERNGAS.ORG
Southwest Kansas Royalty Owners Association (SWKROA) ................................................................................... SWKROA.COM
Tennessee Oil & Gas Association (TOGA) ....................................................................................................................................TENNOIL.COM
Texas Alliance of Energy Producers ..............................................................................................................................TEXASALLIANCE.ORG
Texas Energy Council ............................................................................................................................................. TEXASENERGYCOUNCIL.ORG
Texas Independent Producers & Royalty Owners Association (TIPRO) ...................................................................TIPRO.ORG
Texas Oil & Gas Association (TXOGA) ...................................................................................................................................................TXOGA.ORG
Texas Pipeline Association (TPA) ..................................................................................................................................TEXASPIPELINES.COM
West Virginia Oil & Natural Gas Association (WVONGA) ............................................................................................ WVONGA.COM
Western Energy Alliance (WEA) ....................................................................................................... WESTERNENERGYALLIANCE.ORG
Western States Petroleum Association ..............................................................................................................................................WSPA.ORG
Alabama
Mississippi
Minnesota
Colorado
North Dakota
Kentucky
Tennessee
Arkansas Nebraska
New Mexico
Illinois
Oklahoma
Massachusetts
West Virginia
Michigan
Wyoming
Alaska
Montana
Florida
Ohio
Louisiana
Texas
California
New York
Kansas
Pennsylvania
Indiana
Oregon
State Oil & Gas Associations
Oilman Magazine / November-December 2018 / OilmanMagazine.com
9
Protective Clothing Buyer’s Guide
for the Oil Industry
By Rick Pedley
The oil and gas industry is dangerous because
of the hazardous activities that take place at the
worksite. It’s the responsibility of employers
in this industry to recognize and control the
potential hazards as much as possible, which
means creating a workplace safety culture and
providing the right equipment for the job to
ensure that the risk of injuries and fatalities are
minimized as much as possible.
Oil and Gas Risks
Oil and gas workers are at an increased risk of
exposure to struck-by and re hazards. Moving
equipment and vehicles are common—being
struck by falling, ying, swinging, or rolling
objects causes three out of every ve fatalities
in these industries. Heavy moving objects have
the potential to strike workers and pedestrians
alike and cause injury or death. Accidents can
be minimized by workers who are aware of
their surroundings. If they are working where
they’re supposed to, and talking to equipment
operators, they still need to wear personal
protective equipment (PPE) that can protect
them from impacts and other injuries on the
job. They also need to be seen, which can be
hard in an industry where dark environments
arent uncommon.
Oil and gas workers are exposed to
re hazards as well. They are
also exposed to explosive gases
and particles, electrical hazards,
sparks, and ames, and in the
event of an accident, can
suffer from severe burns,
blindness, broken bones,
and death. Flash res
(which spread rapidly when
vapors or particles ignite
and explode) and electric arc
ashes (which occur when
electrical currents pass through
ionized air from an electrical fault)
are both risks in the oil and gas industry, which
makes it one of the top markets for FR apparel.
Most of the severe burn injuries and fatalities
on a job site happen when non-FR clothing is
worn in an accident and burns once ignited.
You can minimize the chances of an accident
occurring, but can’t take that likelihood away
completely. PPE exists to decrease the chance
of a tragic accident, but also to increase the
survivability of any accidents that do happen.
Given that the oil and gas sector is full of
safety hazards—
the ammable
materials, work
methods and
processes, and
environment all
present a danger
to workers—oil
and gas workers
need to wear FR
clothing. OSHA
released a memo
in 2010 listing the
activities where
workers must wear
FR clothing, but
many employers are starting to require PPE to
be worn at all times as a standard uniform.
Hi-Vis and FR Clothing Recommendations
High-visibility clothing, that is also re-
resistant, can help protect employees from
struck-by and re hazards and should be
part of basic PPE. All hi-vis and FR clothing
must be labeled appropriately and compliant
to the job that you’re using them for—never
assume that protection is a guarantee. Also,
dont assume that putting on hi-vis clothing
over your FR clothing will protect you from
ames unless the vest is also FR-rated
because the materials need to be
treated differently. The same goes
for jobs where arc ashes are a
hazard. While arc ash clothing
is also re resistant, FR and AR
(arc-rated) clothing is rated for
different hazards and therefore
more appropriate to certain jobs.
The apparel you’ll need
depends on the job that you’re
doing—not all re hazards are
the same, and not all clothing will
meet all standards. If you’re in charge
of acquiring PPE for your workers, make sure
that what you buy complies with the standards
and regulations appropriate for your line of
work. Fire-retardant materials can be made into
vests, shirts, jackets, pants, coveralls, hoods, and
other clothing designed to self-extinguish or
resist ignition, be visible even in dingy working
conditions, and stay comfortable in any kind of
weather or worksite.
The proper care of your FR equipment is
crucial, particularly for the oil and gas sector.
Not only is this an industry focused on reducing
costs and expenses, but it’s also a dangerous
one, and only gear that’s properly maintained
can retain maximum re hazard protection for
a long time. Investing in high-quality garments
that are resistant to abrasion and easy to clean
means that you wont have to replace your gear
as often and it will remain safe for its life. There
are commercial laundry programs available that
can effectively remove ammable hydrocarbon
contamination. Make sure that you dont treat
your gear with chlorine bleach or wash it with
non-FR clothing. If you have FR-treated cotton
fabrics, dont wash them in hard water, as this
can diminish their effectiveness.
FR gear should be inspected on a regular basis
to ensure that it’s still t to be worn. Garments
that are thin or worn in some areas arent going
to offer optimal thermal protection, and any
cuts or holes will reduce the gear’s ability to
protect the wearer. Either repair damaged gear
with ame-resistant like materials or replace it
completely to make sure that your workers are
safer for longer.
Take your time reviewing your oil and gas safety
equipment options and use a trusted supplier to
help you through the process and answer your
job safety questions.
Rick Pedley, PK Safety’s President and CEO,
joined the family business in 1979. PK Safety,
a supplier of occupational safety and personal
protective equipment, has been operating since
1947 and takes OSHA, ANSI, PPE, and CSA
work safety equipment seriously. PK Safety’s
customer service can be reached at 800-829-
9580 or online at https://www.pksafety.com/
contact-us.
OILMAN COLUMN
Photos courtesy of PK Safety
Oilman Magazine / November-December 2018 / OilmanMagazine.com
10
Photos courtesy of Professor Kenton Brice and Joseph Dancy -OU College of Law
Santa Rita #1 Well from OU drone view Mr. Dancy at the Santa Rita #1 Well
Professor Kenton Brice pilots the drone over the site,
recording video data that was later edited for viewing
Santa Rita #1 Well at ground level
Drones Making Headway in Advancing E&P
By Joe Dancy
OILMAN COLUMN
Technological advances have been a theme in
the energy sector through the decades, used
by aggressive operators to make drilling or
production activities more efcient and cost
effective. Recently, many of these technological
advances have involved horizontal drilling
or completion techniques in unconventional
reservoirs.
One of the more intriguing and unconventional
technological developments now being adopted
is the use of drones, otherwise known as
UAVs (unmanned aerial vehicles), to assist the
operator in oil and gas drilling, development, and
operational activities.
Drones have been used in the industry
for surveying, equipment inspection, spill
documentation, emission monitoring, and to
record surface damages caused by developmental
activity. Several state regulatory agencies have used
drones to inspect producing properties, to check
on ice dams during the winter in streams near
producing wells, and to try to locate abandoned
wellheads.
With the focus on oil and gas activity we decided
to test out our newly acquired drone to analyze its
capabilities. The number of oil and gas projects
we could participate in were limited since we
were not an oil and gas operator. We considered
partnering with a state oil and gas regulator, but
timing and personnel issues made such a test
program unfeasible.
As an alternate, to test our drone capability, we
proposed to use a UAV to lm the Santa Rita #1
wellsite. This location is a historical site that has
been preserved and is situated well away from
civilization. Should we have operational issues, we
reasoned, a problem experienced at the remote
site would likely minimize the damage inicted,
as compared to say, a test ight and video in
the Barnett Shale over well to do residential
neighborhoods in Fort Worth.
Located in rural West Texas, an hour or so from
Midland, the remote Santa Rita #1 well location
is the discovery well of the Permian basin. Drilled
in 1923 to a depth of 3,050 feet, the well “blew
in” at 100 barrels per day. Unfortunately, due to its
remote location, very few investors back in the day
were interested in developing the eld even after
the discovery well proved successful.
The drone we purchased was one that is
commonly used in the industry and sold
commercially, costing around $1,500. It has a
top speed of roughly 50 mph and can climb to
roughly 20,000 feet, an altitude above which many
smaller planes can safely attain.
Used by hobbyists, no license is necessary to y a
drone. But ours was an educational venture, not
a hobbyist outing. We realized we would need a
FAA drone operator’s license for the ight and
lming.
UAV licenses are awarded based on a knowledge
based test administered by the FAA. The applicant
has to be at least 16 years of age and uent in
English. The license applicant must also pass a
TSA screening test. We passed our FAA exam two
weeks before lming.
The Santa Rita #1 Well from the railroad tracks that
brought the drilling rig to the remote location
Oilman Magazine / November-December 2018 / OilmanMagazine.com
11
Mr. Dancy using the virtual reality equipment at
The University of Oklahoma College of Law library
PRODUCT SHOWCASE
FOX THERMAL has launched a new product
- the Model FT4X Thermal Mass Flow Meter
- ideal for serving Oil & Gas and Industrial
applications.
The new FOX Model FT4X allows the user to
enter a Custom Gas Composition to optimize
the ow meters calibration and calculate
Density and Gross Heating Value.
The FT4X is a high-end ow meter, and it
features a robust design. The notable new
feature of the Model FT4X is the Data
Logger. The FT4X Data Logger records ow
rate, totals, and other events and alarms. The
advanced features of the Model FT4X Data
Logger include:
40 daily totals
Settable Contract Time denes
Contract Day
Time/date stamped alarm & event
logs; 7 year history
Power off totalizer; power failure
creates event log entry
View Density and Gross
Heating Value of selected gas
The logs in the Model FT4X also
display information about the
meter’s setting and functionality:
Gas or gas mix composition
Flowmeter’s conguration settings
Calibration Validation historical test data
Logs of events and alarms
The FT4X has a long list of other advanced
features:
2nd generation non- cantilevered DDC-
Sensor™ - Advanced Direct Digitally
Controlled sensor
Expanded Gas-SelectX® Menus – 3 onboard
gas selection menus
CAL-V™ - In-situ Calibration Validation
RS485 Modbus RTU or HART -
Communications options
Standard USB Port – Connect a PC
FT4X View™ - Software for conguring,
graphing, and logs
The 2nd generation DDC-Sensor™ eliminates
the sensor element vibration which can lead
to metal fatigue and failure. Its unique design
provides a technology platform for calculating
accurate gas correlations for the Gas-SelectX®
feature.
The FT4X was designed to be used in Oil &
Gas and Industrial applications. It is ideal for
monitoring pure gases or even complex are
gas compositions. Gas-SelectX® provides an
expanded selection of gases from 3 menus:
Pure Gas Menu (11 common gases)
Mixed Gas Menu (11 common gases - mix in
0.1% increments)
O&G Gas Menu (C1 – C9+, Nitrogen, and
CO2 gases - mix in 0.1% increments)
The FT4X’s CAL-V™ feature allows users to
conrm that the meter is functioning properly
and accurately -- with just a simple push of a
button.
FT4X View™ software allows easy adjustments
to the meter conguration, evaluation of alarm
conditions, collection of process data, and
measurement viewing from your PC or control
station. Moreover, this software can be used to
initiate CAL-V™ -- and it automatically
logs the results of each CAL-V™ test. If
any regulatory submission is required, the
software will generate a certicate for easy
recordkeeping.
Greg Smith, Sales Support & Customer Service Manager
FOX THERMAL, Inc.
399 Reservation Road, Marina, CA 93933
(831) 384-4300 | www.foxthermal.com
Fox Thermal
Precision Mass Flow Measurement
An ON
I
CON Brand
OILMAN COLUMN
Under FAA regulations lming can only be
done during the day. The drone is limited to a
maximum height of 400 feet. Some areas have
been designated as restricted airspace,
limiting drone operations. The FAA can
grant exceptions to these regulations,
but we felt we could successfully record
and lm under these conditions without
requesting an exception.
In addition to federal regulations, state
regulations also apply. In Texas there is
an exception allowing for lming if it is
being done for educational purposes. We
were also ying over public lands and a
public right-of-way. So we were not, in
this situation, restricted by State of Texas
regulations in the lming process. If
we were not an educational venture the
ability to lm, and the required approvals,
might have been more complicated.
We shot our video using a Garmin 360 camera
mounted on the bottom of our drone. Due to
the brisk wind, and the weight of the camera,
the drone was initially somewhat unstable and
wobbled a bit, but we were able to control that
problem.
Once we had the lming complete, we took the
video back to the University of Oklahoma, edited
the two hours of lm, and prepared a 15 minute
virtual reality tape that students can view in The
University of Oklahoma College of Law library.
A sixteen hour road round trip to the Santa Rita
#1 is no longer necessary to explore the discovery
well of one of the largest oilelds on earth – if
not the largest. The student can experience the
narrated Permian Basin expedition in a custom,
air conditioned, seat in front of a computer screen
425 miles away from the well.
Technology continues to create niches in the
energy sector, both from an operational and
educational standpoint. Over the longer term
we are all better for it.
Oilman Magazine / November-December 2018 / OilmanMagazine.com
12
OILMAN COLUMN
U.S. Federal Regulatory Bodies
in the Energy Sector
By Eric R. Eissler
As one can imagine, there is more than just
the DOE (Department of Energy) involved in
the regulation of the U.S. Energy industry. The
DOE is the all-encompassing branch of the
government which is responsible for all types of
energy regulatory matters. There are additional
regulatory bodies that are responsible for more
granular levels of the energy industry from the
discovery and mining of natural resources to
the distribution and transmission of fuels and
electricity directly to consumers. This article will
provide an introduction to the many agencies,
branches of government and independent
regulatory bodies that work within the U.S. oil
and gas industry. This is not an exhaustive list
of agencies. In the latter section of this article,
there are notes on how even agencies such as the
U.S. Forest Service is involved in the oil and gas
industry.
The Regulators
The FERC (Federal Energy Regulatory
Commission), NRC (Nuclear Regulatory
Commission), BOEM (Bureau of Ocean Energy
Management), NIST (National Institute of
Standards and Technology) and OSM (Ofce of
Surface Mining Reclamation and Enforcement)
provide varying degrees of regulation and
oversight over energy for the U.S. While still
important for energy regulation, the NRC will
not be covered here, as it does not play a part in
the regulation of the oil and gas industry.
The Federal Energy Regulatory Commission
Created in 1920 as part of the Federal Energy
Act, this independent (from the government—
it’s not an agency) provides oversight of the
natural gas and oil industry as well as, the general
electricity market, however, not at the retail level
of power distribution. The Federal Energy Act
of 2005, signed into law by President George
W. Bush, expanded the powers of FERC and
give it the ability to issue permits for interstate
electricity transmissions.
Bureau of Ocean Energy Management
Offshore oil and gas producers deal directly with
this government agency as it is the foremost
powerful in issuing permits and allowing oil
and gas exploration along the coastlines of
the U.S., in particular the Gulf of Mexico,
where a vast majority of the country’s subsea-
based hydrocarbons are located. The BOEM
is responsible for oil and natural gas leases,
environmental reviews and renewable energy
activities. BOEM has ofces in Louisiana,
California, and
Alaska.
Ofce of
Surface Mining
Reclamation and
Enforcement
While not directly
associated with the
oil and gas industry,
the OSMRE
sometimes can be
associated with it, due
to its regulation of
mining and natural
resource extraction
for resources such as
coal and water-quality
control. This ofce would be involved in the
writing of regulations for produced water
from hydraulic fracturing processes; ensuring
that the local water is not being contaminated
from fracking and mining processes.
National Institute of Standards and
Technology
One of the oldest ofces in the U.S., NIST was
founded in 1901. It is an agency located within
the Department of Commerce. It works with
all businesses within the engineering world to
promote scientic innovation—which trickles
down into the oil and gas industry via new
technologies for energy production among
others.
Even More Branches of Government
There are a few more arms of the government,
which regulate the oil and gas industry further,
from the agencies written about above.
The Department of the Interior regulates the
extraction of oil and gas from federal lands.
The Bureau of Land Management regulates
oil development, exploration and production on
federal onshore properties.
The Ofce of Natural Resources Revenue
collects royalties owed to the government for
onshore and offshore production.
Government Connections Run Deeper
The more one looks into oil and gas regulations,
the more one will nd that there are less obvious
arms of government and agencies that all work
in the oil and gas industry. The BLM (Bureau
of Land Management), works with other
government agencies such as the BIA (Bureau
of Indian Affairs), which regulates what can and
cannot be done on Native American lands. The
following passage provides deeper insight to how
much the BLM actually regulates:
The BLM manages the Federal government’s
onshore subsurface mineral estate – about
700 million acres (30% of the U.S.) held by
the BLM, U.S. Forest Service and other
Federal agencies and other surface owners
– for the benet of the American public. It
also manages some aspects of the oil and gas
development for Indian tribes.
From the above passage from the BLM’s
website, even the U.S. Forest Service is somewhat
involved in the regulation of the oil and gas
industry! As one can imagine, there are even
more regulatory bodies at the state level, but
those are not covered in this article.
More Regulation Than Meets the Eye
While there is much regulation in the oil and
gas industry, until further inspection and a little
research, it quickly spills out to many bodies
that govern the oil and gas industry. From the
highest level such as the DOE, which oversees
all Energy matters in the country, to the
individual states’ regulatory bodies such as the
Texas Railroad Commission, down to the most
granular level of local laws, for example, the La
Salle County Clerk, it is clear that there is not
just one or two government agencies regulating
the oil and gas industry, but a majority of all
government agencies on all levels: Federal, State,
and Local.
Photo courtesy of Phongphon Sutantayawalee – www.123RF.com
Oilman Magazine / November-December 2018 / OilmanMagazine.com
13
Safety Practices and Procedures in the
Oil Industry and Technologys Influence
By Tonae’ Hamilton
Among the industries at risk for health and
safety hazards, the oil industry is one of the
most susceptible. Oil and gas workers are
consistently exposed to hazards such as conned
spaces, motor vehicle accidents, slips, trips, and
falls, and especially, res and explosions. When
workers succumb to such hazards, it is not only
detrimental to the worker, their health, and
performance, but also to the performance and
reputation of the company.
Companies can face costly fees/lawsuits,
penalties, and ultimately incur damage to their
brand and image. With that said, it is important
for all three segments of the oil and gas industry
(upstream, midstream, and downstream) to
ensure safe and healthy work sites through
various measures. Isaac Dantin, Senior Safety
Manager at Danos, understands the importance
of HSE (Health, Safety and Environmental)
practices in the workplace and describes how
such practices are implemented at Danos. He
talks about how his company and others in the
oil industry are able to stay on top of safety
practices and procedures through various
methods, and even more so through the use of
technology.
When initially asked about the importance of
HSE practices in the workplace and the industry,
Dantin stated, “Workplace safety is not a priority,
but a value. At Danos, it is the core of who we
are. It is critical and essential. Safety is the lifeline
of our success. The health and wellbeing of our
employees come rst. Safety means that we also
meet or exceed our customer’s expectations. We
want to make sure our employees are managing
every procedure properly, and we want them
to go home the same way they came in that
morning.
Dantin was also asked to discuss specic
practices implemented at Danos. He described
how Danos is a diverse service provider,
mentioning that they have different product lines
including production operations, construction,
automation services, scaffolding, coatings and
project management, and therefore, policies
(including training details and behavioral-based
safety programs) are made readily available on
their internal company site. Dantin also credited
how technology has had a hand in helping Danos
commit to workplace safety. “We have an app
that we created two years ago, which allows our
employees to observe others perform tasks. It
also allows management to give feedback. If an
employee records a near miss in the eld, the app
sends an email to the management team. From
there, we are allowed to get “in
the bucket” with them and can
help them work through their
job tasks and take advantage
of learning opportunities. We
encourage employees to use our
system to record observations,
and there are no repercussions,
said Dantin.
Further describing the app that
is simply called “Danos Watch
Card,” Dantin said, “It is not
only designed for our employees,
but also for our customers and
family members. They are also
able to participate in our safety program. If a
teenager notices something unsafe at home, they
are able to enter an observation as a third party
user. We will use the data they submit to help
communicate with our broader organization.
All you have to do is go to your app store on
any smart device, search Danos, and register as
a guest.
Dantin also discussed other technological
developments that Danos uses to improve
worker health and safety conditions. “With
our internal program called EMS (Electronic
Management System) employees can access all
their personal training and track the participation
of our different safe work practices. Our EMS
program is where we document our safety action
plan goals. Staff and personnel participate in
our safe work initiatives including hand & JSEA
audits, offshore visits, crew change meetings, and
our Stop Work and BSS (Behavioral Based Safety
Program),” said Dantin.
When asked if he thought technology, overall,
could help improve conditions in the oil industry,
Dantin described how benecial technology
has been for the industry and Danos, and how
heavily sought after it is by both customers and
competitors. “I recently attended an offshore
meeting in Houston with some other suppliers,
and technology is something that everyone is
focusing on. At Danos, we are also seeking a
technological answer to our current app. Our app
is designated for BBS, but we hope to implement
and capture audits in the eld through the app
as well. With technology, we have been able to
advance our data analytics. Just by entering safety
information into our app, we can better gauge
where we’re at in our learning opportunities and
our successes,” said Dantin.
Dantin also described some of the HSE safety
practices he has seen from other companies in
the oil and gas industry. He expressed how more
companies are starting to have compassion for
human performance and are becoming more
xated on how to improve operations to better
accommodate employees. “Everyone in the oil
eld is doing a good job of looking beyond
the human element and instead, focusing on
process improvement. People will make mistakes,
but instead of solely analyzing if that human’s
mistake is acceptable, we are now thinking about
what we can do to better improve operations to
prevent or reduce mistakes. It’s a better way of
thinking,” said Dantin.
Dantin expressed what health and safety
improvements, technological-based or otherwise,
he’d like to see happen in the oil industry and for
his company in the future. He emphasized how
the industry should be measured more on the
safeguards that are already in place. “Rather than
looking at incidents for being the measuring stick
of a safety culture, we should be looking at the
positive, proactive things that a company does. I
would also like to see more personal safety and
care across the industry from the top down,” said
Dantin.
Dantin shared how Danos does a great job of
focusing on a positive and a caring workplace,
but that there is room for everyone to improve.
“When I started with Danos in 1996 as a
roustabout, it meant the world to me to shake the
hand of an owner or executive. Our employees
have that opportunity quite often. Our executive
team doesnt have shiny new steel toe boots, but
rather scuffed and dirty ones. Their boots will tell
you that they spend time in the eld face to face
with the people we are working hard to protect.
The industry needs to continue that push, the
“We Care” push,” said Dantin.
OILMAN COLUMN
Photo courtesy of Pornsngar Potibut – www.123RF.com
Oilman Magazine / November-December 2018 / OilmanMagazine.com
14
Blockchain in Oil and Gas is Not Hype
By Eric R. Eissler
Blockchain, cryptocurrency,
Bitcoin, these are all the words
that have been buzzing around
since this time last year.
Bitcoin was on a meteoric
rise unlike any investment
ever seen before. Since this
there have been more than
2,000 companies that have appeared and are
riding the blockchain wave on the pretense of
ICO (Initial Coin Offering) fame. Most of these
companies have done well at raising money and
attracting attention, but after the ICO comes the
token crash and value disappears. While many
companies follow this pattern, not all of them
do, some offer actual blockchain-based solutions
without all the hype, the ICOs and the let down
when the token price inevitably crashes.
OILMAN Magazine had the opportunity to speak
with the President and CEO James Graham of
GuildOne, a Calgary-based blockchain company
working in the oil and gas industry to provide
new, emerging technologies such as blockchain,
machine learning, and articial intelligence. On
top of developing blockchain-based solutions for
the oil and gas industry, the company is working
with First Nations to develop a more efcient
royalty payment system, called Thunderbird
Consensus.
From the ground up, platforms matter
In the blockchain and crypto world, choosing the
right platform is an important part of building
a quality blockchain. Graham gave a detailed
description of the platform and technologies that
his company is using.
We built our EBX blockchain business network
on R3’s Corda blockchain platform using
Amazon Web Services (AWS). Corda was
designed for use in nance and banking and so
meets the highest standards of one of the most
complex and highly regulated industries in the
world. Knowing the strict standards R3 used
to build its platform was a key differentiator
for us when we chose a platform upon which
to build the Royalty Ledger. R3 and AWS have
both since become valued partners as we move
forward with our blockchain research and
applications.
Hydrocarbon measurements and calculations
Current projects include the Hydrocarbon
Measurement Ledger, which is exploring the
use of blockchain to exchange value at custody
transfer points. The project includes committing
the IoT (Internet of Things) device level
measurements to a distributed ledger – and using
these measurements to calculate the ow of
hydrocarbon volumes through the system. As
counterparties commit to shared contract terms
and shared source data for measurement and
ow calculation, new “frictionless” models of
hydrocarbon accounting emerge. As stakeholders
acquire and spend ledger positions the
opportunity to transact the native asset value – i.e.,
settling accounts via exchanging ledger positions
rather than at cash mechanisms.
OILMAN COLUMN
Photo courtesy of Arrow – www.123RF.com
Agreeing on and
encoding appropriate
smart contracts
would require:
1. Recognition of Indigenous title of
traditional lands.
2. Steps for consultation and
accommodation for environmental
considerations, cultural heritage
sites, and remediation.
3. Business opportunities and
compensation by industry or
government.
James Graham
Oilman Magazine / November-December 2018 / OilmanMagazine.com
15
Forty-ve years ago, October 17, 1973, the
Arab oil embargo began as agreed to by the
OPEC oil ministers. Since that time, beginning
with the embargo, U.S. energy and economic
direction has been impacted due to that decision.
(The members of the Organization of Arab
Petroleum Exporting Countries “OAPEC”
initiated the oil embargo.)
A few months later, (1974), The International
Society of The Energy Advocates, now known
as The Energy Advocates, was founded in
Tulsa, Oklahoma. The mission of The Energy
Advocates was to educate the public about
energy issues and policies, therefore, combating
the OPEC stronghold.
This would be the rst time the Arab (OPEC)
nations would wield the oil. At a time when
America was experiencing upheaval and
uncertainty on nearly all socio-economic fronts,
the energy crisis threatened the very fabric of the
American way of life. (It was an honor for me
to serve as president of The Energy Advocates
from 2003 to 2009.)
Prices reacted almost instantly, and the effects of
the Arab oil weapon were felt by citizens across
America. Fuel shortages were commonplace
during the period of the fall of 1973 to the
summer of 1974. This was the rst time since
World War II that U.S. citizens experienced lines
at the pump. This cut in the global supply of oil
was devastating to the U.S. economy and soon
other western nations experienced high ination
and economic recession.
Now 45 years later, America has turned the
corner. The U.S. today has been proven to
possess an abundance of both oil and natural
gas. There is the rallying cry for American
energy.
However, despite this move in the right energy
direction, we cannot afford to let up. Our energy
security depends on the development of a
comprehensive domestic energy policy.
Energy education is more important than ever
as we envision America’s energy transformation.
National Energy Talk, an Energy Advocate
initiative, is a platform of engaging a national
dialogue on energy issues, views and solutions.
We address the needs, plans and issues. Through
discussion, we can create a national energy plan.
National Energy Talk, www.nationalenergytalk.
com, is helping lead a dialogue on energy issues,
views and solutions through events, publications,
videos, audio and online content.
As advisory
board chairman
of IngenuitE, an
Oklahoma City
based IT company,
I am fully aware
that “to maximize
potential and
attract a new and
needed younger
workforce,
companies of all
sizes are going to
have to focus on content, analytics, and digital
transformation. Large amounts of data from
many sources can be collected and analyzed
quickly, which leads to being more informed
and making better decisions.” U.S. technology,
research and workforce will lead the way.
The founders of The Energy Advocates would
be proud to know that America is becoming
less dependent on OPEC. We are faced with
America’s energy dreams and global economic
realities. America needs America’s energy and the
world needs the U.S. energy industry!
Go to FACEBOOK: National Energy Talk with
over 23,000 supporters and growing.
Forty-Five Years Later…
By Mark A. Stansberry
OILMAN COLUMN
The solution offers a more transparent and
shareable view of the assets currently residing
within and through a production system. This
offers great improvement to processes involved in
the nancial valuation and potential performance
yield(s) of the system.
First Nations
In Canada, the First Nations People receive
royalties paid by oil and gas companies operating
on their lands. However, ensuring that these
royalty payments are transparent and honored has
been a sore point in the relationships between the
Government of Canada, oil and gas operators,
and the Indigenous peoples. Graham stated that
“Using blockchain technologies, funds due to
Indigenous groups can be distributed immediately
upon the production of resources or the use
of infrastructure. Distribution would be tightly
documented and veried to the satisfaction of all
parties.
This would be a major benet to the First Nations
to ensure that they are paid the correct amount
on time. “Further,” continued Graham, “Varying
and changing interpretations of contracts
between Indigenous groups and governments
has been a source of difculty over our history.
But blockchain and smart contracts require very
precise language and interpretations.
Placing agreements like this on the blockchain
would be benecial to both parties and it would
help to close the wound of mistrust.
Breaking out of the “Crypto Mold”
As a nal and most telling question OILMAN had
for GuildOne about how it sees itself and wants
others to see it during these times of the “Wild
West” in the crypto sphere. OILMAN asked if
GuildOne conciders itself a “crypto company”
or a company more geared towards ntech and
securities in a traditional sense, but implementing
new digital platforms.
Graham answered, “At this point, we consider
ourselves more the latter, in that we are applying
blockchain technologies – distributed ledgers,
smart contracts, articial intelligence and machine
learning – through our Royalty Ledger application
to conventional processes in an established
sector, oil and gas. We believe that applying these
new technologies has the potential to radically
transform these processes.
Here he has dispelled the idea that his company
is another y-by-night crypto company that so
much of the cryptoshpere has become over the
past year.
He continued on about the benets that
blockchain brings to the oil and gas industry:
“This will be done specically by automating
value exchange over our EBX business network
through smart contracts, so that payment is
triggered nearly instantaneously upon fulllment
of contractually-agreed upon terms. It will also
be done through distributed ledgers (specically,
Royalty Ledger), which have the potential to
eliminate traditional causes of frequent and costly
delays due to a) disputes over data and b) differing
interpretations of contractual terms.
GuildOne is a pioneering technology company
that has for more than twenty years provided
advanced data solutions and business intelligence
to oil and gas companies, so they can better
understand and use data to enhance business
performance.
Mark A. Stansberry
Oilman Magazine / November-December 2018 / OilmanMagazine.com
16
Solving the Capacity Crunch in Todays
Petrochemical Supply Chain
By Aaron Kline
OILMAN COLUMN
It has become extremely difcult to optimize
product movements across an increasingly
complex petrochemical supply chain. Chokepoints
at shale oil elds are complicated by capacity
problems further down the logistical stream that
are stimulating the construction and expansion
of oil export terminals. Today’s challenges are
slowing down product transports, increasing costs,
and threatening to prevent oil companies from
realizing the full benets of increased capacity.
To solve these challenges, companies are turning
to Industry 4.0 solutions for liquid storage
terminals that aggregate sensor and planning/
forecasting data into a single shared view while
also delivering valuable analytics and real-time
alerting capabilities. These tools enable operators
to squeeze the highest possible product volumes
through their supply chain and transportation
infrastructure.
A Tough Problem Gets More Challenging
A 2017 report by the ACC (American Chemistry
Council) and PwC (PricewaterhouseCoopers)
predicted that, in the larger U.S. chemical industry,
excess inventories could soon cost $22 billion in
working capital, and capital expenditures (CAPEX)
could increase by $23 billion for the equipment
and infrastructure required to handle increased
congestion and delays. The report also predicted
that logistical inefciencies could result in up to
$29 billion in increased operating costs over a ten-
year period.
Today’s terminal optimization tools offer a
solution, delivering accurate real-time data so
operators can make the best possible decisions
at all stages of the supply chain – from
upstream exploration and petroleum production
through midstream transportation to reneries
for conversion and storage, and on through
downstream processing and the transportation,
marketing, and distribution of rened products by
pipeline, vessels, rail, and trucks.
Terminal optimization platforms have already
played a key role in helping liquid storage terminals
absorb massive growth in crude oil transportation
trafc from onshore shale nds, over the past few
years. Initially deployed at the dock, these web-
based and collaborative process optimization tools
have enabled users to reduce dock delay times an
average of 35 percent within the rst few months
of their adoption, and to complete approximately
15 percent more vessel calls within the rst year.
More recently, these tools have evolved to provide
planning, reporting, forecasting, analytics, and
alerting capabilities across all terminal logistics
operations, thus setting the stage for new ways to
manage multi-modal product movements.
A New Approach
At the core of today’s terminal-optimization
platforms is a combination of real-time and
historical AIS (Automatic Identication System)
data that enables users to improve visibility
into vessel operations and to cut liquid-cargo
transportation costs while enhancing safety and
security. This enhanced visibility vastly improves
processes like demurrage calculation, ensuring
that all parties have the same information about
demurrage costs and who is responsible for
penalties. Everyone can discuss and dispute issues
by using the same information about real-time and
historical vessel movements, and can collaborate to
identify and correct root causes of delays.
In addition to improving visibility, today’s tools
also facilitate collaborative real-time operational
planning and reporting across all terminal product
movements from the dock to tanks, trucks, rail,
and pipelines. Stakeholders can work together on
an extensive range of logistics operations – from
pipeline transfer scheduling, tasking, and line
management functions to historical reporting for
performance tracking, optimization, and trending
analysis. They can also troubleshoot together,
solving scheduling and other problems while
understanding how actions in one part of the
operation affect what is going on elsewhere.
Another benet of today’s tools is more consistent
asset allocation, along with asset-utilization
reporting. The most common problem that
operators report is when multiple products
must go through the same pump and there is an
incoming product that requires special handling
or that needs more time to transport than other
products. Planners can now preempt these
problems, oversights, and associated scheduling
conicts by giving teams the necessary logistics
information about delays and other issues in order
to collectively make complex asset-utilization
decisions (Figure 1).
Figure 1: One of the purposes of delay
dashboards and reports is to correlate information
about inbound pipeline moves and the availability
of docks. Dock delay reports improve how users
schedule vessel arrival times and manage through
any disruptions, while also enabling them to assess
how delays impact productivity and demurrage
expenses.
All event logging activities are automated, and
diverse stakeholders can collaborate anywhere,
anytime. Users can build tank-to-tank lineups on
the y and keep them for future use, and do this
in a consistent fashion to ensure that everyone can
understand throughput for every line and route,
identify bottlenecks, and build business cases for
additional infrastructure. They can also implement
proactive alerting to prevent overll and underll
situations and other scheduling conicts.
Additionally, today’s tools deliver valuable
forecasting and planning capabilities across all
transportation modes and serve as the most
consistently accurate source of information – thus
Oilman Magazine / November-December 2018 / OilmanMagazine.com
17
OILMAN COLUMN
enabling all available information to be obtained
from a single shared source. Operators can
validate capital and outsourcing investments, while
also comparing the effectiveness of third-party
resources, analyzing investments in additional
owned assets, and evaluating a combination of
both approaches.
Leveraging Key Performance Indicators
One of the most transformational capabilities of
today’s terminal-optimization tools is that they
deliver the real-time and historical operational
data that operators need to set and manage
measurable KPIs (Key Performance Indicators).
This capability enables operators to improve
and standardize productivity, alert users when
corrective actions are needed, and keep operations
within desired efciency envelopes. KPIs help
mitigate supply chain risks by enabling all
stakeholders to understand root causes of delays,
and they facilitate the creation of benchmarks
for improving and standardizing best practices
(see Fig. 2). KPIs can also be used to trigger
alerts before deviations from the target KPI
benchmarks exceed accepted thresholds, so users
can collaborate on the best courses of action.
Figure 2: Users can also create delay dashboards
that drill deeper into the root causes of delays,
which facilitates the development and tracking
of KPIs for improving and standardizing best
practices.
KPIs have traditionally been used to plan capital
expenditures on maritime dock expansion projects,
and to validate that existing dock capacities were
being fully utilized. Now, operators are also using
these tools to more effectively plan investments in
new tanks and in other storage and transportation
infrastructure. With these tools, operators can
generate reports on a variety of terminal-wide task
metrics and track measurable KPIs ranging from
how long it takes to complete one task and launch
another, to compliance reports on emissions
regulations.
Today’s collaborative terminal process
optimization tools are quickly becoming logistics
hubs for all product movements – whether
they are tank-to-tank transfers or a variety of
inbound and outbound pipeline, railcar, and
truck movements. These tools are changing how
terminals operate by automating signicantly
more of the supply chain management process.
They are also introducing real-time KPIs and
trending analytics into capital investment decision
making and into the increasingly critical process
of improving and standardizing efciency best
practices and benchmarking.
Aaron has over 15 years
of business development
and project management
experience and has
interfaced with several ports
and terminals along the
Gulf Coast to optimize delivery of project
cargo and facilitate marine logistics projects.
After serving in the U.S. Navy as a submarine
ofcer, Aaron began his career at FMC
Technologies and then joined Chevron as an
Operational Excellence Engineer working
with the onshore drilling and completions
team. He then joined FTO Services as a
business development manager for a subsea
riserless light well intervention service,
before joining Signet Maritime, a marine
logistics company specializing in tug and
barge operations in the Gulf of Mexico.
Aaron has also completed over 20 years
in the U.S. Navy Reserves as a submarine
ofcer. He graduated from the United States
Naval Academy and is also a distinguished
graduate of the University of Houston
with an Executive Masters of Business
Administration degree.
Oilman Magazine / November-December 2018 / OilmanMagazine.com
18
How Runtime Application Self-Protection
(RASP) Can Prevent Cyberattacks in
Oil & Gas Environments
By Joe Saunders
OILMAN COLUMN
Like all sectors of critical infrastructure, the oil
and gas industry has emerged as a top target for
cyberattack, yet most companies are not doing
nearly enough to mitigate the risks.
Demand for business insight and device
monitoring has led many oil and gas companies
to merge OT (Operational Technology), such
as their control systems, with enterprise IT
systems. While the digitization of operational
processes offers cost savings and improved
productivity, the convergence of these two
disparate business units has opened the door to
a variety of risks upstream, downstream, across
pipelines and throughout the supply chain.
Traditionally, oil and gas companies have
implemented cybersecurity measures that focus
on detecting symptoms of attacks. They use
external network and perimeter technologies
such as gateways, rewalls, intrusion prevention
and anti-virus agents, as well as static and
dynamic analysis to try to detect vulnerabilities.
But as threats evolve in frequency and
sophistication, a more proactive set of defenses,
along with an elevated sense of urgency, must
prevail.
Legacy Equipment and Systems Vulnerable
to Attack
Many oil and gas companies still operate with
legacy equipment and systems that were never
designed for connectivity, nor to withstand
today’s attacks. While components that manage
processes like extraction controls, blowout
prevention, and metering systems have been
retrotted with internet-connected features,
most retain vulnerabilities and lack effective
security controls. Furthermore, because eld-
level personnel often make decisions about
industrial control systems (ICS) software,
many oil and gas companies have multiple
solutions, all with varying levels of security. To
make matters worse, many facilities operate on
outdated networks. like Windows XP, or even
OS systems from the ‘90s.
Additionally, as oil and gas networks become
more dependent on sensor data, they also
become more vulnerable to spoong attacks,
denial of service, or social engineering. This can
lead to production shutdown if the signal or
energy source
to an actuator
is interrupted
during a
cyberattack.
Attackers can
also breach a
critical access
point to gain
control of
operations
and weaken
machinery
or cause
overheating.
Malware
attacks can
not only
result in
a loss of
data, but
also interfere with control system operability,
such as interrupting air conditioning or heat,
which could put renery operations out of
commission.
The risks are already well-known. The
Ponemon Institute surveyed 377 U.S. oil and
gas cybersecurity risk managers in 2017, and
nearly 70 percent said their operations have had
at least one security compromise in the past
year.
New Technologies Needed to Protect
Against New Threats
Some oil and gas companies are trying to meet
the threats, but their efforts aren’t enough.
Roughly 60 percent of those surveyed by
Ponemon said they have difculty managing
risks across the supply chain. While there are
effective security technologies available, such
as user behavior analytics, hardened endpoints
and encryption of data in motion, less than
half said they would deploy any of these
technologies in the next twelve months.
Most importantly, traditional cybersecurity
measures arent built to prevent malware
from propagating because they mainly rely
on network and perimeter solutions. In
other words, these tools focus on identifying
underlying symptoms rather than causes.
Detection offers no protection in cases where
the supply chain itself is compromised, such
as in le-less attacks like memory corruption
exploits, stack and heap attacks, zero-day attacks
or ROP (Return Oriented Programming) chain
attacks.
While detection monitoring is important, it isnt
an end-all solution, and it also requires time,
investment and expertise to implement. Re-
engineering code can also help enhance security,
but to do so requires signicant resources,
and can trigger compliance risks, especially
when the software stack can be hundreds of
thousands or millions of lines long.
Hardening Systems with Runtime
Application Self-Protection
One of the latest and most effective means
to reduce risk is to cyberharden systems using
RASP (Runtime Application Self-Protection)
technology, which reduces risk by preventing
exploits from spreading across multiple devices
and networks. RASP hardens software binaries
by using techniques such as binary stirring,
control ow integrity and a priori optimization.
RASP techniques harden software binaries so
that attackers cant calculate in advance how
to successfully execute their code. This can
Photo courtesy of RunSafe
Oilman Magazine / November-December 2018 / OilmanMagazine.com
19
OILMAN COLUMN
prevent an entire class of malware attacks
related to buffer overows.
There have already been several high-prole
incidents in the oil and gas industry where
RASP and randomization could have prevented
the attack. In August 2017, Schneider Electric’s
Triconex SIS (Safety Instrumented Systems)
controllers were infected with Triton malware
at a Saudi Aramco facility in the Middle
East. Attackers gained access to the SIS
engineering workstation to plant rst stage
malware, then downloaded new malicious
code. Some controllers entered a failsafe state
which automatically shut down the industrial
process and prompted the owner to begin an
investigation. In a case like this, cyberhardened
SIS controllers could have completely
prevented the attack, because the malware
would not have been able to replicate.
RASP is easy to implement and requires
no new additional investments, software,
services or hardware and only a one-time
transformation with limited overhead.
No access to source code complier, or
operating systems is needed. Finally, RASP
doesnt require alerts to monitor, and it is
remotely deployable, as binary code can be
cyberhardened via API.
Because of all the benets, RASP adoption
is increasing. According to a report by
MarketsandMarkets, the RASP market is
expected to grow at a compound annual
growth rate of 33 percent to $1.24 billion by
2022.
The cyberthreats against the oil and gas
industry are more complex than ever before.
Moving from traditional security defenses to
cyberhardening binaries can reduce risk by
stopping attacks before they can execute.
Joe Saunders is the founder
and CEO of RunSafe
Security, a pioneer of
cyberhardening technology
for embedded systems
and devices and industrial
control systems. Joe is on a personal mission
to transform cybersecurity by challenging
outdated assumptions and disrupting the
economics that motivate hackers to attack
again, and again and again.
The last few years I have written about the
Market Outlook in the acquisition market
for the coming year. For the most part, these
outlooks are nothing more than reporting
back to the reader the information I hear
every single day. I don’t deal in global politics
or billion dollar deals, so I have no input
on any of those ideals/transactions and
never factor them in to the bottom line of
transactional expectations. With that being
said, there is a strong indication that the price
of oil will continue to rise throughout 2019.
And should oil continue to rise, the exits of
private equity backed or 3
rd
/ 4
th
generation
family owned rms may take the opportunity
to materialize. We expect February NAPE to
be extremely busy. Deals on top of deals busy.
Even prior to NAPE, the deals will be
publicized on a greater scale in 2019. With
social media being such a large part of
everyone’s life, information travels much
quicker than in years past. Reporting sources
(like OILMAN Magazine) have access to
better, more accurate information, and are
able to inform their readers of transactions in
nearly real-time.
We expect a signicant amount of deals that
are under $100 million to close in Q1. Blocked
positional pieces that have been the focus
of ineld drilling will start to work up exit
strategies in Q2 and Q3 (but the exits will be
driven by oil price). Targeted acquisitions will
still be the most prevalent
change in the acquisitions
market. Big data will play a
signicant role in acquisitions
in 2019 (and through 2020).
The Permian market will
have dynamic changes
as midstream companies
continue to build and fund
the growth. The differentials
will only last for so long
before competition within
the midstream sector eliminates
that differential entirely. It will
take time, but being in the eld we have seen
a culture shift, and being in the ofce, we
have seen a view change of investment dollars
into a differential driven world. As those
investment dollars are eliminated, so does that
differential.
Gas continues to rise, and as I’ve previously
written about, that was where the largest
acquisitions and opportunities were in 2018.
The 10-year state land that New Mexico
sold may have made the largest newspaper
headlines, but the biggest splash were the
companies that bought when gas was trading
at just over a dollar.
I’m seeing a number of deals come through
our ofce (about six per day) and that tells
me that 2019 is going to be a very busy year.
Oil and gas companies that are considering
an acquisition strategy are using the days
strip price, rounded to the nearest dollar.
Whereas the average seller’s baseline barrel
price is, on average 26 percent higher than
strip pricing. Unless you are equipped with a
target marketing strategy, you won’t be able
to transact in 2019 using the same economic
projections that everyone else is using. You
have to visit directly with the sellers to
understand this price difference.
Beachwood Marketing, the trusted leader in
target acquisition marketing, is focused on
helping clients acquire off-market oil and
gas assets. Visit www.beachwoodmarketing.
com for more information. Connect with
Beachwood Marketing on Twitter @
beachwoodmg or with Josh Robbins on
LinkedIn www.linkedin.com/in/joshatbmg.
Oil and Gas Acquisition
Market 2019 Outlook
By Josh Robbins
Josh Robbins
Oilman Magazine / November-December 2018 / OilmanMagazine.com
20
OILMAN COLUMN
Advanced Anti-Corrosion Coating Utilized
on Two North Sea Offshore Platforms
By Merrick Alpert
In a collaborative effort designed to improve
vital protection of offshore assets, the OGTC
(Oil & Gas Technology Centre) is successfully
conducting trials of an advanced anti-corrosion
coating on two North Sea offshore platforms.
The mission of the OGTC, which is jointly
funded by the government, is to establish a
culture of innovation and position as a global
hub for oil and gas technology and innovation.
The challenge, however, is that the North Sea
is one of the most brutal climates in the world.
Often ice cold and windswept, the rigs in the
North Sea face a constant corrosive onslaught
of waves and salt spray.
Traditional coatings simply cannot withstand
the environment. The cost of maintenance on a
rig can be up to 100 times as expensive as land
based maintenance because crews and supplies
often have to be helicoptered out to the site.
When coatings fail, it costs the asset owner
enormous amounts of money.
After extensive research, OGTC identied a
spray-applied inorganic coating as a method of
delivering long term protection for the offshore
assets. The anti-corrosive coating represents
a new category of tough, CBPC (Chemically
Bonded Phosphate Ceramics) that can stop
corrosion, ease application, and reduce offshore
platform production downtime even in humid,
storm or monsoon susceptible conditions.
OGTC worked with SPi Performance Coatings
to implement two trial programs. With OGTC’s
vision and sponsorship, SPi applied the coating
to a Total E&P platform and a Nexen platform,
each of which is located in the North Sea.
Total is a global integrated energy producer and
provider, and a leading international oil and gas
company, with operations in more than 130
countries.
Nexen, a wholly-owned subsidiary of CNOOC
Limited, is an upstream oil and gas company
responsibly developing energy resources in the
North Sea, offshore West Africa, the United
States and Western Canada.
Total E&P Trial
SPi applicators were helicoptered to Total’s
Elgin ‘A’ Wellhead platform on December 17,
2017. The coating was applied to areas of the
platform’s lower deck that were suffering from
severe corrosion, and a topcoat was added for
aesthetics.
Surface preparation for the trial was carried
out by Muehlhan, a global provider of
surface protection and industrial services with
operations in shipping, oil and gas, renewables,
and industry/infrastructure segments.
In the trial area, the existing coating system
was completely removed from structural steel
tubulars and at plate. The structure was power
washed and degreased to remove contaminants.
All tubulars were blasted to SA2.5, and at plate
mechanically prepped to ST3.
While rust rashing was visible on areas prior to
spray application of the anti-corrosion coating,
this was deemed acceptable due to its unique
properties. It can be applied to a damp substrate
with rust rashing/ash rusting, and high salt
levels do not degrade the coating, which reduces
surface preparation requirements.
The coating can cure in a single coat 15 minutes
after application, depending on climatic
conditions, which expedites completion,
compared to traditional coatings, which require
extensive drying time between coats.
In contrast to traditional coatings, which only
form a physical barrier to corrosion until
breached, the new coating chemically bonds
with bare substrate surfaces, providing an iron
magnesium phosphate layer that prevents steel
corrosion. This process provides a very thin layer
(about 2 microns) of permanent protection.
The corrosion resistant CBPC coating bonds
through a chemical reaction with the substrate,
and slight surface oxidation actually improves
the reaction. The surface of steel is passivated as
an alloy layer is formed. This makes it impossible
for corrosion promoters like oxygen and
humidity to get behind the coating the way they
can with ordinary paints.
Although traditional polymer coatings
mechanically bond to substrates that have been
extensively prepared, if gouged, moisture and
oxygen will migrate under the coating’s lm
from all sides of the gouge.
By contrast, the same damage to the ceramic
coated substrate will not spread corrosion
because the carbon steel’s surface has been
chemically transformed into an alloy of stable
oxides. Once the steel’s surface is stable (the way
noble metals like gold and silver are stable) it
will no longer react with the environment and
therefore cannot corrode.
Visible in scanning electron microscope
photography, the coating does not leave a gap
between the steel and the coating because
the bond is chemical rather than mechanical.
Since there is no gap, even if moisture was to
get through to the steel due to a gouge, there
is nowhere for the moisture to travel. This
effectively stops atmospheric corrosion and CUI
(Corrosion Under Insulation) on carbon steel
assets.
A second layer – a tough ceramic outer shell –
provides further protection, and also acts as a
reservoir to re-phosphate the steel if needed.
This ensures the alloy layer remains intact, and
allows it to “self heal” if it is ever breached by
mechanical damage.
During this ongoing trial, testing has been done
via cross cuts of about 6-8 inches in length
down to the substrate to provide evidence of the
coating’s self-healing properties.
Nexen Trial
After the early success of the Total E&P trial,
a second offshore trial is now being conducted.
SPi applicators were helicoptered to Nexens
‘Buzzard’ platform on June 18, 2018.
After Stork (a Fluor compan
y and global provid-
er of integrated operations, maintenance, modi-
cation and asset integrity solutions) assisted with
fabric maintenance and surface preparation, SPi
applied the anti-corrosion coating to platform
areas suf
fering from severe corrosion.
While results from this second trial are still under
consideration, they look extremely promising.
As oil and gas E&P companies look to combat
offshore asset corrosion, extend safe produc-
tion and reduce the need for costly maintenance
and downtime, this inorganic coating holds
great promise in the ght against corrosion for
OGTC, Total, Nexen, Muehlhan, Stork and other
platform owner/operators in the North Sea.
Merrick Alpert is President
of EonCoat, LLC., a
coatings company that
developed a chemically
bonded phosphate
ceramic which provides
two layers of protection
to permanently prevent carbon steel from
corroding. Alpert has decades of experience
in the energy industry for such companies as
Pacic Gas & Electric.
How Oil and Gas Companies Can Use AI Technology When Disasters Occur p. 6  U.S. Federal Regulatory Bodies in the Energy Se...
Oilman Magazine / November-December 2018 / OilmanMagazine.com
22
FEATURE
The Missing Piece:
Educating the Oil and Gas Workforce
to Bridge the Skills Gap
By Sarah Skinner
Photo courtesy of Iqoncept – www.123RF.com
There is a missing piece in the oil and gas industry,
a hole, if you will. We’ve all, as a collective group,
come to an impasse in this industry. We knew it
was coming, but as it sneaks up on us, in whatever
group we belong, we are affected by it in some way.
The missing piece is knowledge. Knowledge that
is lost in the abyss called the skills gap. On the job,
hands-on skills and more importantly, experience.
People are the tool that make this industry turn.
People furiously working in ofces across the
country and world, to produce things on paper
that will turn into a successful, thriving product. In
turn, it’s the other half furiously working to literally
and physically bring to life what is on that paper
and make it happen. In oil and gas, it’s the team
of people on both sides that makes the outcome
prosperous. What happens when the knowledge,
the critical piece to this puzzle, threatens to break
apart this perfectly orchestrated team?
The slowly forming hole in this puzzle is the wealth
of knowledge that the baby boomers possess that
they will be taking with them when they retire.
Some of them have already made the transition and
the rest are inevitably on their heels. The Millennials
have the degrees and the jobs, but not the
experience. The other component to this hole is the
fact that the baby boomers that are still working and
Generation X behind them, are somewhat reluctant
to adapt to the new software and IoT (Internet
of Things) that is becoming the norm in the
workplace. These are all generalizations, of course,
but in talking to upper management in various
companies across the industry, this concern seems
to be a trend that is becoming more commonplace.
Bridging the Gap
EKT Interactive
The situation may seem dire, but there is a way to
bridge the gap. Training and continuing education
are crucial to an ever evolving oil market. From
classes you can physically attend to learning
essentially on demand, there are countless options.
Companies like EKT Interactive are crossing the
intersection where oil and gas meet e-learning.
When asked, Marty Stetzer, EKT President,
how he got his start, he said, “I had 30 years in
the upstream and downstream, always a part of
the startup or turnaround where training was
important. In the down turn of 2014, I realized
that I had 30 years of training materials and could
reach those who needed this information.” This
concept allows industry workers to learn around
the way they live and in their own time with audio,
video, e-books or podcasts. EKT stands for Energy
Knowledge Transfer. Ironically, exactly what we’re
visiting here now. When EKT got their start,
their goal was to make e-learning three things:
interesting, memorable and relevant. It also needed
to meet objectives, the main one being knowledge.
One of the obstacles EKT faces, which differs
from other training courses, is that if someone is
not interested, they can click out, as opposed to a
classroom where they’d be much more reluctant to
leave. “Because of this, EKT is constantly striving
to engage their students and eliminate the SOP
(Same old Powerpoint),” says Stetzer. For instance,
one of their packages “Oil 201” is a deep dive into
the knowledge portion of the industry. It is laid out
in e-book format in 10-15 minute increments with a
concept they call “micro learning.
There are many people out there that work in
the oil and gas industry, but are not necessarily a
direct instrument that produces the nal product.
They are the oil and gas support, while not directly
Oilman Magazine / November-December 2018 / OilmanMagazine.com
23
FEATURE
involved, still have the desire and need to be
educated about the industry in which they work. So
while it may not be required for them to necessarily
get a certication, they can still be informed. EKT
has many packages to t the individual client,
whether the focus is awareness or knowledge. To
start, they even have a “three for free” package that
is an introduction to the upstream, downstream and
midstream.
It’s exciting to think of oil and gas education
becoming so progressive. There are many
companies dedicated to this cause and because of
that, some of their methods differ, but the end goal
remains the same.
Technical Toolboxes
Technical Toolboxes is a company that specializes
in software and on-the-job training, primarily
covering the midstream. When asked about
their training classes, Paul Schumann, Technical
Toolboxes’ Training Product Line Manager stated,
“We offer in excess of 20 unique specialized classes
that cover all phases of the pipeline lifecycle from
design, construction, and operations through
integrity. RSTRENG is our most popular class in
terms of classes held per year and it specically
addresses key areas in the integrity phase of the
pipeline lifecycle.
I sat in on one of these training classes to get a feel
for how they are conducted and who constitutes
their primary audience. The class was “RSTRENG
& Defect Assessment,” given in Houston.
RSTRENG is a Technical Toolboxes copyrighted
software that they offer and it is called by name in
192 and 195 Code of Federal Regulations. When
asked what “RSTRENG” stands for, Schumann
stated, “RSTRENG is indeed an acronym for
‘Remaining Strength.’ It is based on research from
PRCI (Pipeline and Research Council International)
in order for pipeline operators to effectively assess
the safe operating pressures in aging pipelines due
to metal loss damage (corrosion) and remaining
life. The class is more centered on RESTRENG+
which includes additional analysis that Technical
Toolboxes includes in software packages.
Technical Toolboxes’ training and instructors are
highly specialized. A gentleman by the name of Joe
Pikas instructed the RSTRENG class. Mr. Pikas
has more than 50 years’ experience in cathodic
protection, above and underground coatings and
corrosion control design and implementation which
includes project engineering management. He is
an expert in pipeline integrity management, risk
management, coating materials selection, cathodic
protection design and testing, and pipeline internal
and external corrosion control. He has been the
recipient of several awards and has contributed
many papers for industry trade magazines, NACE
and SSPC publications and conferences. To say that
he is an expert in this eld, is a vast understatement.
“Joe Pikas brings a unique background that has
provided him the opportunity to participate in the
research of RSTRENG, among other products,
and has subsequently had the opportunity to apply
these learnings in the eld. As a result of his highly
specialized training and practical experiences, he is
able to add training value to the novice through the
experienced pipeline engineers and technicians,”
says Martin Fingerhut, Technical Toolboxes’ Chief
Executive Ofcer.
Technical Toolboxes takes their task of educating
the industry very seriously. “Historically, there was
a focus on associating the Technical Toolboxes’
brand with high quality non-sales oriented technical
training. Today, we continue with the same level
of high quality technical training, largely related
to theory and background knowledge required
to operate a growing inventory of specialized
software products properly,” says Drew Laeur,
Technical Toolboxes’ Chief Operating Ofcer. The
RSTRENG training was over a span of a day and a
half. It was for the certication, training and testing
of individuals seeking technical certication for
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Oilman Magazine / November-December 2018 / OilmanMagazine.com
24
FEATURE
corrosion assessment. In addition, dents, gouges,
weld anomalies and related pipe and vessel
defects were covered for assessment and analysis.
It also covered the following: understanding
and recognizing pipe defects, aw detection,
measurement corrosion features/defects, analysis
of corrosion features and feature identication,
and data features for post processing and
reporting. After the course, students had to
pass a written examination and a practical
examination, where two types of defects were
to be analyzed. Upon successful completion,
students received a trial of RSTRENG software,
course notes on paper and in a ash drive and a
certicate of completion awarding 12 PDHs.
The atmosphere of the class was extremely
informative and engaging. When I walked in to
observe, what I witnessed was the exact solution
that we are exploring here. A man with an
incredible wealth of subject matter knowledge
collected over many years, is passing that along
to mostly people between the ages of 30-40
years old. The students were captivated and full
of questions. Questions that Mr. Pikas did not
hesitate for a second to answer. “We recognize
a generation gap exists in the workforce and
that knowledge is leaving organizations as
the experienced engineers and technicians are
retiring. Our direction in the training space
is to better engage millennials and encourage
further knowledge transfer within industry and
organizations,” says Laeur. Technical Toolboxes
is doing their part to educate the industry,
they have done so for many years and they are
not stopping any time soon. Fingerhut stated,
“Technical Toolboxes specializes in midstream
pipeline solutions in both the software and
training spaces. After 20 years of supporting the
pipeline industry, Technical Toolboxes continues
to advance from calculation to simulation type
products for pipeline operators and engineers
alike, and recognizes that advancements in
software require training methods to address a
diverse workforce.
NExT – A Schlumberger Company
NExT is another training and education
organization doing their part in the industry
to bridge the skills gap. Eighteen years ago,
Schlumberger and three universities that
offer petroleum studies programs, Texas
A&M, University of Oklahoma and Heriot-
Watt University, created a program called
NExT (Network for Excellence in Training).
Schlumberger acquired the commercial rights
of NExT and retained the program’s original
instructors, however, they added petrochemical
experts and industry-recognized consultants
to the NExT staff. Today, NExT has more
than 3,000 expert instructors who train more
than 15,000 technical professionals each year
in 11 core disciplines – from characterization
and exploration through development and
production – and in industry-spanning domains.
NExT offers a full suite of training courses
in upstream oil and gas industry disciplines as
well as surface facility and midstream training
for operators and technicians. Their training
programs consist of classroom, workshop
and eld exposure and on-the-job mentoring.
The training they offer is not exclusive to
Schlumberger employees, the classes they
offer are both private and open to the public.
NExT designs their training programs using a
blended learning approach that encompasses the
following:
Mentoring
Operations Assignment
Expert-led Training
Self-Learning
Research and Technology Center Tours
On-the-job Projects
Field Course
Software Tools and Workows
“In essence, NExT is the largest Petro Technical
Training and Competency Development
provider in the world, helping organizations,
teams and professionals build their technical
skills for the E&P challenges that they face,
Peadar McKkvitt, NExT Schlumberger Global
Resource Manager, stated. “We are now grafting
onto our industry key Digital Technology
capabilities so that E&P PetroTechnical experts
can optimize the discovery, development and
management of their assets. Connecting people
and technology (PetroTechnical and Digital)
we are building a Digital Learning Ecosystem
for the future. Working with our clients and
extended resource network, we are now actively
creating that future together!”
NExT has access to well-equipped, global
Schlumberger training centers and technical
facilities, where participants gain practical, hands-
on experience. The training centers are located in
the following places: Tulsa, OK – Rio de Janeiro,
Brazil – Melun, France – Abu Dhabi, UAE –
Tyumen, Russia. This also goes hand-in-hand
with the geology eld trips that they offer, which
are also global. The whole concept of being
able to learn in such a hands-on environment
is exciting and engaging. Geology can be better
studied in the eld and learning by doing puts
things into their proper scale, context, and
perspective. With a carefully selected portfolio
of practical, high-quality eld trips covering
relevant depositional and tectonic environments,
NExT meets the needs of working geologists
and petroleum engineers and the companies that
rely on them to meet their goals.
The eld trips build expertise and develop
practical interpretation skills by improving
the understanding of geological complexities,
strengthening technical knowledge through
exposure to new and diverse geological environ-
ments, delivering broader perspectives and new
insights through hands-on eld experiences. The
experiences include trips to road cuts, ancient
outcrops, modern sedimentary environments,
core analysis laboratories, and research facilities.
The eld trips broaden understanding with rst-
hand experiences in eld formation evaluation,
log and core analysis, and 3D reservoir model-
ing. Course topics include the following: faults
and fractures, carbonate platforms and reefs,
shallow carbonates and evaporates, uvial-deltaic
and deep-marine clastics, rift zones, turbidites,
and deltaic fan systems. They truly cover all the
bases and provide invaluable knowledge to their
students.
Optimistic Outlook
There is no doubt that the skills gap is a real,
valid issue in the oil and gas industry. However,
there is hope – not all will be lost with the
retirement of the baby boomers. Because of
companies such as EKT, Technical Toolboxes
and NExT, there are options out there to
educate the workforce. Not only educate, but
truly inspire and pass down this extremely
valuable knowledge in the most innovative and
engaging way possible. These companies and
many like them are not stopping here. They are
going further out of the box to keep the wheels
turning. Knowledge is power and when you have
power to offer, it’s a good business to be in.
RSTRENG Training – Photos courtesy of Technical ToolboxesKnowledge Transfer
Oilman Magazine / November-December 2018 / OilmanMagazine.com
25
Interview: Kent Bartley, President, Maviro
By Tonae’ Hamilton
The following is an interview with Kent Bartley,
President, Maviro. The interview text has been left
in tact, with only minor grammatical adjustments.
Tonae’ Hamilton: Can you discuss the rebranding
of Mattawa Industrial Services and Envirosystems
USA as Maviro? What benets will your customers
see with this unication?
Kent Bartley: Both Mattawa and Envirosystems
have a long history of providing clients both in
Canada and the USA with quality specialty services.
We have great people, equipment, and strong safety
records, just to name a few of the areas driving our
success. Unifying these specialty businesses under
one Maviro brand will make it easier for customers
to realize they have an opportunity to bundle the
service offerings. Of course, by combining some
of the overlapping roles and positions we are
becoming more efcient and can pass those savings
on to our clients.
TH: What is the future for Maviro in North
America?
KB: We have very good North American coverage
right now with locations in both the U.S. and
Canada. This allows us to utilize our resources and
expertise to the greatest benet of our clients. We
plan to continue growing in our existing markets,
including the expanding Gulf Coast rening &
petrochemical market, as well focus as strategic
expansion to new markets, both in the US and
Canada, where our unique technologies and
solutions make us the natural choice for the client.
We’ll have more information about our plans
across North America next year. For the moment,
we’ll just say those plans are both ambitious and
achievable.
TH: What are you most excited to share with your
customers about the new Maviro?
KB: We’ve got a huge reveal coming down the
pipelines involving a proven technology we plan
to introduce into the North American market, not
just our decoking service line, so keep an eye out
for that!
A signicant investment in equipment and technol-
ogy, strategic alliances with other service providers,
pulling together the team of motivated people who
are experts in their elds who want to be the best in
business…. That aside, is there anything we’re not
excited to share about Maviro with our customers?
If so, we cant think of it. Our splash into the great-
er North American market has been one of the
most challenging and rewarding things we’ve ever
done. It allows us to provide our brand of service,
safety, and passion to a new segment of customers.
It doesnt get much more exciting than that.
TH: As technology evolves and disrupts the
industrial services space, how is Maviro positioning
itself to capitalize on new methods and tech?
KB: We’re not a huge entity bogged down by
bureaucracy and red tape. We are passionate about
our service lines and are constantly looking into
other business sectors and even other countries for
technology that could have industrial applications.
We pride ourselves on taking a fresh look at the
challenges faced by our customers and coming
up with solutions that are faster, safer and more
efcient. This approach is already bearing fruit.
For instance, we’ve seen signicant improvements
by pairing our eld teams with advanced new
technologies to decrease shutdown timelines and
improve safety performance.
We’ve always been early adopters of new
technologies, so it’s not something we fear. We
look at every piece of new technology from
the standpoint of improving outcomes for our
customers. If there’s a chance a new piece of
equipment will help do that, then you can bet we’re
looking into it.
TH: Maviro offers a wide variety of industrial
services, petro/chemical cleaning, and renery
services. What segment, if any, are you most
focused on? Do you see any segments of your
services shifting in the near future?
KB: All of them. We want to incorporate our full
family of services together under one brand. But
as we move forward, we’ll put signicant energy
into bundling our specialty industrial services like
catalyst services (particularly for the growing tubular
market), pigging & decoking, and commissioning
services.
TH: How does Maviro separate itself from the
competition?
KB: Maviro links specialized services with
proprietary technology together in a way that
nobody else has managed to accomplish. This
unique fusion of talent and technology lets us
deliver superior turnarounds at a faster, more
consistent pace than our competition.
We’re far from being the largest provider out there,
which is just ne with us. We’re big enough to offer
signicant convenience to our customers no matter
where they are in the U.S. or Canada. Yet we’re still
small enough to adapt to changes in the industry
and pivot to new technologies and emerging sectors
if the need arises.
Our solid safety record combined with our unique
technologies and our expert experience keep
clients coming back and new ones looking to try us
out. With our 15 locations we cover all of North
America.
TH: How does Maviro make safety a priority?
KB: We reinforce a culture that
places the safety of our staff and
our customer’s people over any
task, no matter how important it
may be. We will turn down jobs
or walk away from projects if we
cannot staff it with our A team
or if the job compromises any of
our safe work practices.
In addition to that, we provide robust training
programs, continuing education seminars, a
comprehensive benets package with retirement
plans, a hands-on at management style, and a
regular adoption of advanced technologies and
equipment which make all of our lives a whole
lot easier. We’re condent that we have one
of the highest employee retention rates in the
industrial sector, which is notorious for its transient
workforce.
TH: What led to your position at Maviro?
KB: I saw a void in the industry that needed to be
lled. Large public companies are more focused on
P&L’s than safety, pride in equipment, and quality
of work. They’re not customer centric – they dont
value their people as their single biggest asset.
You can stock your warehouses full of the best
and newest gear in the business, but if you don’t
have qualied motivated folks to run it – you have
nothing.
TH: What are the most important decisions you
make as a leader of your organization?
KB: There is never a safety decision taken lightly
in the organization. We thoroughly analyze every
factor going into any decision that impacts the
safety of our people on the job. As an executive, it’s
important to also ensure Maviro is providing the
most value to our customers that we can provide.
Equally important, we simply don’t take every job
that falls into our laps. Some projects are simply
too unsafe to take on or may compromise the
company’s reputation or harm employee morale.
Some of the most important decisions we’ve made
involved ring clients who didn’t share in our
commitment to safety and aboveboard practices.
TH: What does success look like for you?
KB: Success to us means having the highest
employee retention rate in the industry, being
known as the best value service provider – Equally
important is a best-in-class safety record. That
speaks volumes about who we are and how
committed we are to our employees and our
customers.
Lastly, we want to become the rst call supplier
for more of the industry’s leading oil, gas, and
petrochemical facilities.
OILMAN COLUMN
Kent Bartley
Oilman Magazine / November-December 2018 / OilmanMagazine.com
26
Preparing for Digital Downstream
Supply Chain Capabilities
By Kent Landrum
OILMAN COLUMN
Several major downstream companies have
recently embarked upon large-scale digital
transformations with anticipated capital spend
tallying in the tens to hundreds of millions
of dollars. While these initiatives promise
signicant returns, not all small to midsize
rening organizations are prepared to double
down on digital and make investments of this
magnitude.
On the other hand, there are numerous “no
regrets” moves that can be made to start down
a path to increased effectiveness and efciency
in key commercial and logistics process areas.
Relatively low-risk steps such as these will
also lay a foundation in core capability and
technology areas that can be leveraged when the
time is right to make some bigger, bolder bets.
The following ve examples of quick-hit process
and technology investments are concentrated
in the value-creating commercial and logistics
functions that aim to:
1. Streamline deal entry for high-volume, low-
complexity physical trades.
2. Integrate derivatives transaction processing
from order, to conrmation, ll, through
allocation and broker reconciliation.
3. Maximize utilization of electronic trade
conrmation services.
4. Automate market data acquisition.
5. Enhance integration with logistics partners.
In each case, we’ll explore the short-term
benets that a small, focused, rst step can
deliver, as well as get a glimpse of how the
initial investment sets the stage for more
transformational projects in the future.
Streamline Deal Entry for High-Volume,
Low-Complexity Trades
Ask almost any trader that has to input their
own deals into an ETRM (Energy Trading
and Risk Management) application and they’ll
probably tell you exactly how long it takes to
record their deals in the trading system. Some
types of deals, such as international crude
cargoes, are complex and key terms can vary
widely from one trade to the next making trade
capture inherently more arduous. However,
there are many types of trades that are prime
targets for use case optimization that can pay big
dividends by way of improved productivity and
accuracy.
Domestic rened products pipeline trades
around systems such as Colonial, Explorer and
Magellan are great candidates for streamlining.
These kinds of trades benet from standardized
grades, as well as common schedules/cycles,
locations, more straightforward terms and
relatively common pricing so many of the
trade attributes can be pre-populated omitting
them from the user entry screen and ensuring
valid data entry from the outset. Moreover,
these types of transactions work very well as
a stepping stone to wider use of electronic
conrmations and for tighter logistics
integration.
Pre-Digital Opportunity:
Assess your most
common trading scenarios and determine
which can be simplied the most. Develop
a simple trade blotter front end for web or
mobile devices that allow your traders to
rapidly enter 5, 10, or more trades in a grid and
save once. Expose trade entry as a reusable
API (Application Programming Interface) or
web service (if your ETRM doesn’t already)
preparing the architecture to support even more
expedient methods for trade capture.
Digital Extension:
Voice (e.g., digital assistant)
and message scraping from Skype or ICE
(Intercontinental Exchange) Chat become viable
alternatives with this API-based infrastructure
already in place.
Integrate Derivatives Transaction Processing
The previous section explored the opportunities
for efciency and data delity gains surrounding
uniform physical trade scenarios. Exchange-
traded derivatives offer even more in the way
of instrument and transaction standardization
upon which to build integration and automation.
The contract specications are published
and the exchanges (e.g., ICE/CME) offer a
multitude of foundational APIs that can be
used to perform all manner of tasks along
the transaction lifecycle from placing orders,
to receiving conrmations, and acquiring ll
data. In addition, many rms already use trade
execution platforms such as those from Trading
Technologies or Fidessa that offer their own
suite of APIs and web services customers can
use to build, automate and integrate.
Pre-Digital Opportunity:
Dont settle for
manually entering futures or receiving a single
at le from your broker after the market closes.
Utilize the API or web service exposed to your
ETRM system as outlined in the section above
to capture trades along with the ones offered
by the major exchanges, the trade execution
platforms or your broker to process lls directly
as available. Often, there is a requirement
to aggregate lls or preassign certain trade
attributes (e.g., strategy) to make managing the
transactions more straightforward once they are
in the ETRM, and the latest generations of these
systems and APIs make this easier than ever.
Over time the exchanges and major brokers
Photo courtesy of Opportune LLP
Oilman Magazine / November-December 2018 / OilmanMagazine.com
27
OILMAN COLUMN
are making available ever more value-added
services addressing needs in the areas of credit,
risk management and regulatory reporting/
compliance. Consider exploring these libraries
of functions to optimize mid- and back-ofce
processes for even more near-term benet.
Digital Extension:
Enable digital assistant
placement of derivative orders. Provide a key
building block for algorithmic trading.
Utilize Electronic Trade Conrmation
Services
Blockchain is all the rage and offers a number
of signicant long-term benets, especially
as adoption increases among major market
players. Meanwhile, there are already more
than 1,000 market participants that have
been using eConrm for as long as 15 years
to electronically process millions of trades.
The previous two quick hit opportunities
seek to simplify exchange-traded transaction
processing, as well as a portion of the lifecycle
for high-volume, low-complexity physical trades.
eConrm represents a logical, incremental step
in physical trade automation that can bring a
level of efciency paralleling that which is more
commonly available for derivatives.
Counterparts and brokers that elect to submit
and match trade conrmations using eConrm
can take advantage of clear status tracking,
eliminate paper/fax/email and minimize user
error, thus reducing operating costs. eConrm
can be most expeditiously deployed in instances
where grades, schedules, pricing, counterparties
and other primary economic terms are highly
standardized (sound familiar?). Often, one
of the most signicant obstacles to adoption
of eConrm is centered around master
agreements, but getting this work out of the
way can accelerate the adoption of this, as well
as other enabling technologies, later.
Pre-Digital Opportunity:
Step 1 was to develop
and deploy APIs or web services for trade entry.
Step 2 capitalized on that foundation and inte-
gration with the exchange to optimize derivative
transaction processes. In this instance, the op-
portunity is to pass your trade data in conrma-
tion form directly from your trading system
to eConrm to allow for automated matching
with your business associate. Human interven-
tion will only be required on an exception basis
when terms dont match. Blockchain may be
coming, but it will be difcult and expensive to
capture the benets promised without agreed
upon contract terms and a standardized transac-
tion data model combined with an API/web
service infrastructure for third- party transac-
tion processing.
Digital Extension:
Blockchain to enable
efcient, transparent, and secure digital
transaction ledgers between participants across
the transaction lifecycle. To read more about
how this technology is being applied in the
energy industry read “As Energy Markets
Evolve, Blockchain Powers Up” by Shane
Randolph of Opportune LLP.
Automate Market Data Feeds
Many reners already have quite nely tuned
systems for processing a rack BOL (Bill of
Lading), applying a price, generating an invoice,
distributing it to the customer and collecting
funds. The combination of people, process and
technology is all geared to produce an accurate
invoice and collect cash, but there are many
processes well up stream of ticketing or lifting
that could benet greatly from more timely and
reliable availability of market data.
Pre-trade analytics and risk management
both require access to signicant amounts of
price data, but in many cases rely heavily on
spreadsheets, downloads and manual entry
to meet daily objectives. As a result, valuable
quantitative analyst time is spent performing
data cleansing and entry tasks rather than on
assessing market risk and market opportunity.
Most commercial organizations already license
at least one technology and subscribe to some
source for market data whether that means
using GlobalView, Thomson Reuters or
sourcing directly from publishers like Platts. The
major vendors offer desktop (often Excel), API,
historical and streaming data solution options
that can be integrated into existing Enterprise
Resource Planning (“ERP”) and ETRM
systems directly to enable efcient end-of-day
processing, mark-to-market, VaR (i.e., value at
risk) and many other valuable risk analyses.
Pre-Digital Opportunity:
Create an inventory
of the tools and publishers your organization
employs to gather and process market data.
There are likely opportunities to rationalize and
standardize to reduce cost without adversely
affecting the availability of valuable price series
data to the enterprise. Once some consolidation
of source and solution has been performed,
create integration to directly deliver prices and
corrections to the data warehouses, ETRM
and ERP systems that use this information to
support analytics and transaction processing.
Dont forget about the need to include broker
and trader assessments in these technical and
process solutions. For instances where prices
must be entered manually the same type of UI
(User Interface) and API solution framework
used for trade entry can be applied.
Digital Extension:
Machine learning to identify
market opportunities and enable algorithmic
trading.
Enhance Integration with Logistics
Partners
Seemingly innumerable processes are dependent
on timely and accurate information concerning
the movements of products through the
logistics systems exercised by downstream
companies. They run the gamut from risk
control reports, to inventory rundowns, to
month-end accruals and more. All of these
require the best available information on pump
dates, load dates, actual quantities, qualities, etc.
Often, the best available information exists
in the systems of your logistics partners or
service providers, and the best solution is to
interface that data into the IT environments
used for scheduling and ticketing. This type of
integration can also facilitate rapid ticketing
through invoice processing for other MOTs
(Modes of Transport) such as pipeline and rail.
Pre-Digital Opportunity:
Explore the
opportunity to integrate your ERP or ETRM
system with applications like Transport4 to
make available near real-time information
about your company’s nominations, tickets
and inventory moving on the pipeline systems
of afliated carriers. This integration has the
potential to reduce duplicate nomination entry
for schedulers and eliminate manual entry of
pipeline tickets for the back ofce.
For rail movements, Bourque Logistics offers
similar capability through its RAILTRAC
solution. Solutions for cargoes are available
from providers such as Navarik and their
TICithub. Integrating these systems can reduce
manual and duplicate effort for schedulers, loss
control and accounting functions.
Digital Extension:
Combine predictive analytics
and Robotic Process Automation (RPA) to
identify and execute on opportunities for
supply chain system optimization. For more on
predictive analytics take a look at “Optimizing
Your Logistics Network Through Model-Driven
prescriptive Analytics” by Chris Hedge of
Opportune LLP.
Kent Landrum is a
Director with the Process
& Technology group at
Opportune LLP. He has
more than 17 years of
diversied information
technology experience with an emphasis on
solution delivery for the energy industry.
Kent has a proven track record of managing
full life cycle software implementation
projects for downstream and utilities
companies, including ETRM, ERP, BI, MDM
and CRM. Prior to joining Opportune,
he served as a Vice President and Chief
Information Ofcer at CPS Energy. Kent
holds a B.S. degree in Computer Science
and Economics from Trinity University
and a Master’s degree in Organizational
Development from the University of the
Incarnate Word.
Oilman Magazine / November-December 2018 / OilmanMagazine.com
28
OILMAN COLUMN
Fundamentals in the Oil Field Matter
Even More with Big Data
By Shiva Rajagopalan
Today, everyone talks about data like it is a new
idea that has emerged within the digital age, and
that it has come to save time and money in the
oil elds. The fact that we now use “data” to
refer to information in a digital format changes
very little about the fundamentals of data pattern
seeking and trends associated to prioritize
high-value problems for production efciency
in the eld. With the proliferation of SCADA
(Supervisory Control and Data Acquisition)
systems and eld automation, what highly skilled
lease operators already do efciently is now even
more plausible for all eld personnel.
Data becomes valuable when it leads to
intelligent, repeatable patterns that allow the eld
to make better decisions. When eld personnel
examine the vastness of their area, they can look
past an existing route, and can now follow a
more useful task pattern that compares and lines
up large volumes of data to navigate to the most
production-efcient next task based on complex
variables like high-volume wells, upcoming well
inspections, categories of issues, and more.
The objective for success is straightforward for
the oil and gas operations: bring the usefulness
of data out of the ofce and make it all about
the eld. Harness data quality, dene clear
objectives and make data actionable for the
personnel who operate the core of the business.
Data Quality
One of the rst objectives to tackle is the quality
of data. To gain the acceptance of the eld, lease
operators must trust what is in front of them.
Historically, patterns are considered intuitive
and something lease operators pick up over
years of experience. Data is worthless unless it
drives intelligent patterns that they trust from
the beginning. Otherwise, all the automation and
data in the world will not result in action in the
eld.
On the ip side, using bad data to drive
intelligence can create more churn in operations
and be counterproductive. It only takes a series
of inaccurate GPS navigations, miscalculated
lease operator priorities, or misinformed dynamic
pumper routes for the eld to return to paper
and pen. This means that conclusions must
go through thorough investigation, and eld
issues with data must be treated with immediate
responsiveness, especially during implementation.
Think of quality data as the compass guiding oil
and gas rms. Considering the margins for error
in the oil and gas sector, poor data quality is an
expensive oversight. Oil and gas rms need to
ensure their data is trustworthy. To ensure this,
data becomes the ownership of the eld, as
they are in the best position to make data more
usable, trusted, and actionable.
Often, incorrect data is fed from SCADA
systems to the eld. Stuck, missing records
and out of range records often rapidly lose the
trust of lease operators. Capturing and limiting
these issues is critical if we want the eld to
not undermine investments made on the IoT
(Internet of Things).
Dene Clear Objectives to Truly Leverage
Data
Using big data generated throughout operations
is the cornerstone of digital improvements
seen in oil and gas, as with other industries.
The ubiquity of mobile and IoT devices across
departments means that we are now generating
data on everything, which poses a new problem:
clearly dening what we want to achieve with all
that information.
Only by clearly dening objectives can we utilize
big data. In the same way that Uber and Lyft do
not have scheduled routes, but instead, react to
where they’re needed, oil and gas companies can
use trustworthy data to dene where their crews
are most needed. This means lease operators can
see a not-so-distant future without dened route
maps, just data made available to them through a
mobile device highlighting where they’re needed
next based on clearly dened objectives. In the
route-less oil eld, the sequence doesn’t matter.
Work is no longer linear. Crews go where and
when they’re needed based purely on automated
data analysis.
For example, oileld managers need to reduce
well downtime. By drawing real-time, trustworthy
data on all wells, they can prioritize the wells that
need the most attention. Then, by integrating
data on lease operators and foremen, they can
adjust their schedules to reach the priority wells
in the most efcient way possible.
By using data in this holistic way, other benets
also arise, such as minimizing unnecessary
maintenance worker visits by integrating lease
operator route data into maintenance schedules.
This is just one of many data-driven efciency
scenarios for oil and gas operations.
Making Data Actionable
To enable ROI for IoT investments, oil and gas
rms must rst make sure that the data is pulling
from trustworthy machines. Only when trust
is in place can data be used to create actionable
intelligence, the true purpose for collecting data
in the rst place. Thanks to mobility technology,
this real-time data can feed into eld operation
systems in an intelligent way, giving alerts,
reports, calling out exceptions, and provide
operators with the information they need to
make better decisions.
Big data solutions are increasingly being used
in the oil and gas sector because they support
improvements in all areas of the oil and gas
lifecycle, thereby maximizing production and
reducing operating costs. Market research
has identied the growing need to improve
productivity; in fact, it has consistently been
listed as one of the primary growth drivers for
the global big data market in the oil and gas
sector until 2022.
The future of the oil and gas industry is
intelligent, dynamic production efciency
patterns readily available in the hands of the
eld. To get there, companies must understand
that the fundamentals matter now more than
ever — they must create trust in the data quality,
dene clear business objectives, and make that
data actionable. Oil and gas producers must
demand more from their technology vendors
to instill trust in their eld teams, streamline
operations, and gain the efciency needed to
succeed in the rapidly emerging data age.
Shiva Rajagopalan is the
President and CEO of
Seven Lakes Technologies,
a niche analytics and
technology solutions rm,
driven to improve business drivers and
enhance execution of customer business
strategies for the Upstream Oil and Gas
Sector. Rajagopalan founded Seven Lakes
Technologies in 2009 and has overseen
the development of numerous innovative
products. Previously, as a Data Architect at
Chevron Corporation, Rajagopalan created
solutions used to solve a broad range
of oileld challenges, resulting in multi-
million dollar cost savings. Rajagopalan
holds a bachelor’s degree in Mechanical
Engineering from the Indian Institute of
Technology, Bombay. He received four
Chevron Contractor Recognition Awards for
professional and technical excellence.
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Oilman Magazine / November-December 2018 / OilmanMagazine.com
30
OILMAN COLUMN
The ROI of Business Continuity
Can Be Found in the Cloud
By Evan Cox
Hurricane Harvey was a sobering reminder that
producers in Texas, Louisiana and Oklahoma –
no strangers to catastrophic and costly storms
– frequently face the potential for signicant
impacts to their business from weather-related
disasters. Beyond the immediate disruption to
communication infrastructure, roads, and buildings,
producers must brace themselves for revenue
losses due to operational interruptions, as well as
commodity price uctuations.
Next to Hurricane Katrina, Harvey was the
costliest hurricane on record, making up $125
billion of the estimated $306 billion in disaster-
related costs for all of 2017, and its impact is still
being felt in the Houston area.
With reneries along the Texas coast shuttered for
several days during the storm and its aftermath,
crude oil prices climbed to their highest levels
recorded by the Lundberg Survey since 2011.
Alongside it, a consumer-led panic across Texas
and parts of Louisiana was sparked by social media
rumors of fuel shortages. This led to long lines at
the pump, higher prices and price-gouging. While
these price impacts were short-term, they serve
as a reminder that long-term impacts to capacity
can have a signicant impact on consumers and
businesses alike.
Producers have contended with natural disasters for
a long time, and while the intensity of the impact
of a storm, earthquake or re is unpredictable,
there is some sense of what to expect. What can be
incalculable are the impacts of manmade threats.
The rate at which technology advancements
are entering the market is increasing rapidly,
introducing new growth opportunities, but also
new potential risks.
In April, a data network attack on gas-pipeline
operators hit close to home for an industry where
digital capabilities – especially wireless connectivity
– is constantly evolving. Cybersecurity isn’t just
a priority for big retailers and other consumer
brands – producers are vulnerable to impacts on
infrastructure as well as the risk of exposure of
sensitive competitive data, such as trading strategies.
Continuity is critical to long-term success
Beyond the immediate impacts of such disasters is
long-term recovery, which hinges on a solid, state-
of-the-art business continuity plan. According to
FEMA (Federal Emergency Management Agency),
roughly 40 percent of businesses do not reopen
following a major disaster, and 25 percent of all
businesses will fail within one year.
FEMA also reports that large businesses spend
on average 10 days per month on their continuity
plans, which helps shield them from large-scale
impacts in a disaster. While important to a
business’s long-term survival, it comes at a high
opportunity cost by taking staff time away from
day-to-day operations.
The question then becomes, “Do we stay with
an old-school DR (Disaster Recovery) plan in
a physical backup facility, or do we move to the
cloud?”
The cloud offers cost efciency and speed
Many businesses still own or contract out
completely separate, fully redundant physical data
centers that have the capacity to operate business-
as-usual in case of an emergency. While these
options have proven effective for disaster recovery
and backup, they can be very expensive.
To keep a “hot” secondary DR environment ready
at all times in case of an emergency, a business
must consider the cost of maintaining the facility,
paying for the power, and purchasing any number
of additional assets. That doesnt include recovery
time – which, in the energy world, can mean
either saving or losing large sums of money in a
matter of minutes. Cost and the need for speed
in recovery are therefore leading businesses to the
conclusion that a cloud-based DR system is the
most cost-effective and efcient way to minimize
the impacts of a disaster.
The cloud is the future of full business
redundancy
Gartner recently published survey results reporting
that cloud-based recovery is the preferred choice
in recovery location for critical IT infrastructure
services. Additionally, Gartner reports that database
replication and storage-based replication are the
most prevalent data protection methods.
Today’s need for data and analytics means energy
businesses must have cloud-enabled trading
and risk management software for full business
redundancy. Then, the question becomes, “How
do I choose the right software for my business?”
Of course, businesses need a solution that targets
every major IT system within the organization and
provides the ability to perform necessary backups
for possible backtracking. Additionally, businesses
should check the following boxes when choosing a
cloud-based DR solution:
Protects and natively supports different
systems within the same service, with multi-site
availability of traditional, private cloud, and
public cloud capabilities.
Automates recovery plans within a matter of
hours or minutes after a disaster.
Provides services that cover the conguration
of products installed on servers.
Optimizes and improves productivity levels of
demand in the cloud environment.
Offers the ability to scale and speed to scale.
The takeaway: the highest DR ROI can be
found in the cloud
Energy companies seeking the highest
preparedness for unexpected disasters must look
to the cloud for their DR plan. This will ensure
complete visibility into what’s happening in their
organization – from front to back ofces – to not
only be prepared to recover business operations
quickly, but also maximize value.
Many leading oil and gas businesses – including a
large number of Allegro’s energy customers – are
utilizing the cloud for total backup and recovery.
Obviously, they have saved costs by eliminating
physical backup facilities. But what’s great about the
cloud is that it doesnt have to be an emergency-
only tool. With cloud-enabled commodity trading
and risk management capabilities, businesses are
also reaping the daily rewards of greater portfolio
visibility, risk management capabilities, and growth
enablement.
Other benets of the cloud include reduced
time and cost of implementation, faster time to
success through cloud development, and lower
cost of ownership through product families, agile
infrastructure and the smaller teams that will be
required for product support.
Allegro has heavily invested in the cloud capabilities
of our next-generation commodity management
software, Allegro Horizon, to ensure that when
customers are ready to use the cloud, they can.
Many of our customers have moved pieces of their
portfolio management to the cloud in phases; and
most have started with using it for disaster recovery
and backup to ensure full business redundancy. If
your business hasnt taken this rst step in DR and
cloud usage, now is the time to do it.
Mr. Cox has spent more than
20 years in the energy industry
delivering product innovation
with agility and quality. He has
been responsible for guiding
the development of Allegro’s
industry-leading products for the past 15 years.
Most recently, he led an energy technology
startup to successfully launch an enterprise
mobile commodity analytics product that
provides cloud computing and web technology
solutions for the commodity industry.
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Oilman Magazine / November-December 2018 / OilmanMagazine.com
32
Commodity Hedging: Lessons Learned
by Early Adopters of New Hedge
Accounting Rules
By Shane Randolph
OILMAN COLUMN
For public companies with a December 31, 2018
scal year-end, new hedge accounting rules will
become effective on January 1, 2019. The FASB
(Financial Accounting Standards Board) issued
the new hedge accounting guidance on August 28,
2017, through ASU (Accounting Standards Update)
No. 2017-12. The ASU provided the election to
early adopt the new guidance and some companies
made the early election to take advantage of
favorable provisions. The following is a discussion
of lessons learned by commodity hedgers that early
adopted the new guidance.
It has been interesting to note that relatively few
companies early adopted the new hedge account-
ing guidance. Entities maintaining derivatives
can be divided into two groups: those applying
hedge accounting and those that do not apply
hedge accounting. For companies that do not
apply hedge accounting, the new guidance has not
prompted companies to start electing hedge ac-
counting. Those companies have become comfort-
able addressing the earnings volatility associated
with derivative instruments utilizing non-GAAP
measures. For companies applying hedge account-
ing, early adopters mostly included companies that
were starting new hedging programs or companies
that desired to remove ineffectiveness from their
nancial statements. While companies viewed
the new hedge accounting rules favorably, many
companies shied away from early adoption. This
was largely because accounting resources have been
strained adopting other new accounting standards
for revenue recognition and leases.
For commodity hedgers, the largest changes to the
hedge accounting rules under the new guidance
include the following three items:
Ability to perform qualitative effectiveness
assessment testing following designation
inception.
Ability to designate a contractually specied
component.
Elimination of the requirement to separately
measure and report hedge ineffectiveness.
One of the largest struggles for commodity
hedgers to achieve hedge accounting under the
existing guidance was the effort associated with the
ongoing effectiveness assessment tests. Under the
current accounting guidance, a commodity hedger
typically performed effectiveness assessment testing
by performing regression analysis. The challenge
was largely the lack of
available market data
representing the hedged
item required to perform
the on-going regression
analysis. This analysis
was required at inception
and at least quarterly
thereafter. Under the
new hedge accounting
guidance, a company may
perform an inception
quantitative effectiveness
assessment test utilizing
regression and then
perform ongoing effectiveness testing qualitatively.
When an entity performs qualitative assessments of
hedge effectiveness, it must verify and document
that the facts and circumstances related to the
hedging relationship have not changed such that it
can assert qualitatively that the hedging relationship
was and continues to be highly effective. Early
adopters hedging commodity price risk have noted
limited benets with qualitative testing as they
execute hedges on a continuous basis requiring
inception regression testing on an ongoing basis.
In addition, even though the accounting standard
provides for qualitative updates, many auditors are
continuing to request ongoing quantitative support
unless the hedging relationship is highly correlated,
such as instances where the hedging instrument
mirrors a designated contractually specied
component.
Under the current hedge accounting guidance,
a commodity hedger is required to hedge the
cashow risk associated with the entire contractual
cash ow. This was counter to how many
companies utilized derivative instruments to
manage their price risk. The new guidance gives
companies the ability to designate a contractually
specied component, which is a signicant benet
to many commodity hedgers. However, there have
been some challenges for some companies to meet
the criteria of a contractually specied component.
Early adopters have noted three areas of concern
when electing to designate a contractually specied
component:
Finding documents to support the contractually
specied component.
Ability to designate spot purchases.
The interplay with the normal purchases and
normal sales scope exemption.
Finding documents to support the existence
of a contractually specied component can be
challenging for companies in some industries. Some
industries have industry standards that incorporate
contractually specied pricing component language
into the boilerplate purchase and sale agreements.
Agricultural, livestock and many metals are
purchased and sold under market mechanisms that
already include the contractually specied language
required to meet the contractually specied
component designation.
Common Commodity Industry Groups
Power
Oil, Natural Gas, NGLs
Rened Products
(Diesel, Gasoline, Chemicals, etc.)
Precious Metals
Industrial Metals
Agricultural (Dairy, Grains, Fiber, etc.)
and Livestock
Companies that operate in power, crude oil, natural
gas, NGLs, and rened products have mixed results
when seeking to designate a contractually specied
component. The ability to designate a contractually
specied component is relatively limited for
manufacturing or rening companies where the
input into a nished good can have a contractually
specied component; however, once processed or
combined with other items, the ultimate product
sold does not contain a contractually specied
component. For example, crude oil might be a
signicant input for jet fuel, but a sales contract for
the ultimate sale of jet fuel often will not reference
a crude oil index.
Oilman Magazine / November-December 2018 / OilmanMagazine.com
33
OILMAN COLUMN
Many companies purchase and sell product
in a spot market. This can be particularly true
for larger oil and natural gas producers that
market their own production and for trading
organizations. These companies have found
signicant limitations in designating a contractually
specied component under the new hedge
accounting guidance. When a company knows that
they will be buying or selling product at a future
date, they often execute a derivative to hedge
future price variability. However, a contract does
not exist specifying the pricing at delivery of the
physical product. The company will buy or sell the
product at a negotiated price a few weeks prior
to delivery or at delivery. The market convention
to negotiate the ultimate spot price will reference
industry benchmarks, but nothing will be included
in the contract noting the pricing components.
For example, a trucking company operating in
New York and Pennsylvania knows that they will
be purchasing diesel in 12 months and executes
New York Harbor ULSD (Ultralow Sulfur Diesel)
futures contracts to hedge the purchases. The eet
will be purchasing the diesel at the pump under
spot pricing, but this spot price will not meet the
contractually specied component requirements.
In order for a company to qualify for a
contractually specied component designation,
the new accounting guidance requires the
company to designate the hedged item under the
normal purchase and normal sale exemption.
This election often does not create issues for
most companies. However, for companies that
are engaged in trading activities where physical
xed price positions are recorded at fair value to
offset nancial positions, this can be problematic.
A company may enter into a physical agreement
that has an index price and the xed price will be
determined at a later date. The normal purchase
and normal sale exemption is an irrevocable
election, so once the election is made for the
physical agreement before the xed price is
determined, the company cannot record the xed
price agreement at fair value later.
In addition, the normal purchase and normal
sale exemption contains a prohibition against net
settlement. This can be problematic for companies
that have physical purchase and sales with the
same counterparty. Rather than physically deliver
all the purchases and separately deliver all the sales,
they will only deliver the net position, which is not
allowed under the normal purchase and normal
sales exemption. Companies engaged in these
activities are limited in their ability to receive the
benets of a contractually specied component
designation.
While there have been challenges encountered by
early adopters, the FASB (Financial Accounting
Standards Board) changes to the hedge accounting
rules have been largely favorably received by users.
Companies should carefully consider the changes
under the new hedge accounting guidance and
take steps to properly implement any changes.
As a Managing Director at
Opportune, Shane assists
companies and nancial
institutions throughout North
America, South America,
Europe and Asia-Pacic in
their understanding of what is possible as they
deal with the challenges of implementing risk
management programs and highly technical
accounting pronouncements. Shane oversees
the risk management, derivatives, stock-based
compensation and complex securities service
offerings of Opportune. He assists clients with
the entire risk management life cycle, including
strategy, execution, compliance, valuation and
hedge accounting. He has undergraduate and
graduate degrees in accounting from Oklahoma
State University. He is also a member of
the American Institute of Certied Public
Accountants.
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Oilman Magazine / November-December 2018 / OilmanMagazine.com
34
OILMAN COLUMN
In The New Age Of Activism, Minimizing
Political And Reputational Risk Is Key
By Jeff Berkowitz
In surpassing Russia to become the largest
crude oil producer in the world, the United
States is poised to make the most of an
energy revolution that would have seemed
unlikely only a decade ago. The ramications
of this revolution could be profound for
American consumers, economy, and our allies
and partners around the world. However,
although there have been many noteworthy
achievements in 2018 suggesting a strong
tailwind into the coming year for the oil and
gas industry, the trend of increasing energy
activism on multiple fronts portends an
operating environment fraught with political
and reputational risk for the foreseeable
future that will hinder the industry if it does
not adapt.
Certainly, the industry is no stranger to
criticism and scrutiny, yet where most
opposition was once a result of localized
NIMBY-ism, today’s opposition has given
way to NIABY-ism – not in anyone’s
backyard. This has served as a demarcation
into a new age of activism that is increasingly
digitized, professionalized, and globalized.
The risks from such activism are not simply
cosmetic. Energy activism has been effective
in delaying and disrupting industry projects
and interests across North America over
the past few years, with the consequences
being lasting reputational damage resulting in
greater operating costs.
There is no better illustration of the
changing nature of energy activism than
the developments in the midstream
space. Pipeline projects used to be non-
controversial but are now at the forefront
of anti-fossil fuel efforts, as exhibited
by Keystone XL, Dakota Access, and
Trans Mountain. Energy activists have
used increasingly savvy tactics that focus
on strategic chokepoints, including local
regulatory meetings and once-staid
bureaucratic processes, in an effort to stop
infrastructure projects that are critical in
ensuring adequate takeaway capacity to get
fossil fuels out of the ground and brought to
market. If pipelines are not built to alleviate
bottlenecks in production regions central to
America’s shale boom such as the Permian
Basin in Texas and New Mexico, let alone
ensure access to safe, dependable energy
to families during New England’s harshest
winters, then energy activists will get closer
to succeeding in their desire to eradicate
fossil fuel use entirely.
That is why places not traditionally
considered ripe for energy activism are facing
new challenges in today’s environment,
including Texas. Because of its integral
role in America’s energy revolution, the
Permian Basin is seeing an increase in anti-
fossil fuel efforts that are being strategically
coordinated and directed to where they can
make the biggest impact against the oil and
gas industry. As the Permian continues to
grow as a hotspot for oil producers and
midstream operators, activists too are likely
to see it as a battleground to disrupt the
growing U.S. pipeline market. With the
energy of the Dakota Access protests still
owing, future pipelines in the Permian
could become a magnet for activism.
In addition, recent trends in the nancial
sector that serves the oil and gas industry
demonstrate the concrete consequences
of political and reputational risk. Under
pressure from environmentalists, nancial
institutions have divested over $6 trillion in
funds, and divestment commitments could
top $10 trillion by 2020. The insurance
industry appears poised to be the next sector
to face pressure over its ties to oil and gas,
with climate groups having already called
on it to ditch fossil fuels. As tensions rise
between insurers and energy companies due
to the damage caused by earthquakes that
some allege could be a result of fracking,
activists could exacerbate the situation to
further undermine fossil fuel production.
To successfully navigate today’s age of
activism, companies need to be proactive
in anticipating and understanding this new
level of political and reputational risk. Even
companies that are not consumer-facing,
such as midstream rms, need to think about
how their brand is perceived in the public
arena, because if they do not dene their
brand with members of the communities
impacted by their work, they are allowing
activists to dene it on their terms and
timeline. This means being more effective
at engaging community stakeholders in
order to make the case for fossil fuels early
and often. If not, activists will control the
narrative in the public arena and paint the
industry as being comprised of nefarious
actors. Deliberate engagement through
the lens of heightened activism can go a
long way towards protecting a company’s
reputation and gaining the public support
required to build projects and avoid delays
and disruptions.
Companies should also be proactive in
understanding the risks from energy activism
threatening their projects and interests before
they nd themselves reacting in a public
affairs crisis. Now more than ever, companies
and their projects are being put on trial – in
front of regulatory and permitting bodies,
in the court of law, and especially in the
court of public opinion – and having their
businesses impacted by energy activists that
cannot be swayed, satiated, or appeased for
long. An understanding of the landscape
surrounding a particular project or company
allows a company to make more informed
business decisions and mitigate the costs of
heightened political and reputational risks.
America’s energy revolution has thus far been
a boon for consumers, the economy, and
allies and partners looking for a more stable,
secure source of oil and gas. To build on this
success, not to mention continue to advance
technologies that allow for more efcient and
effective production of fossil fuels, the oil
and gas industry must adapt to an operating
environment where scrutiny is higher than
ever before, and political and reputational
risks are only one viral narrative away from
becoming a full-blown crisis.
Jeff Berkowitz is founder
and CEO of Delve,
a Washington-based
competitive intelligence
rm that has worked
on a number of energy
projects. He previously managed research
and messaging operations for The
White House, several major presidential
campaigns, and the U.S. Department of
State.
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Oilman Magazine / November-December 2018 / OilmanMagazine.com
36
Recently the Bakken recorded record crude oil
and natural gas output numbers. The Permian
is red hot too. These shale plays have crews
setting up and tearing down well sites. In the
Bakken, for example, well costs are in the
$7-8M range, quite a reduction from $12M
in 2014.
But there are a few oil elds not receiving
headlines or attention that are making investors
very happy. Magna Bures Oil has been nding
success in the Illinois Basin with a $75K well.
The Illinois Basin is a Paleozoic depositional
and structural basin in the United States,
centered in and underlying most of the state
of Illinois, and extending into southwestern
Indiana and western Kentucky.
Magna Bures Oil now has over 2,500 acres
of land for oil well developments. Founder,
Nicolas Bures believes the Illinois Basin has
big potential for the land owners and investors.
“We are drilling oil wells and having success at
it,” Nicolas Bures said. “For example, there are
three wells in the Hardcastle 2 Well Program
we recently drilled and completed. All pumps
are on time and currently producing crude oil.”
Magna Bures Oil moved into the Illinois Basin
when oil prices dropped several years ago.
“We came down here when the oil prices
dropped because the cost of drilling wasn’t
matching up well with oil prices. Recovery
wasnt as easy as the old days,” Bures said. “In
the old days we used to drill one well and if
we missed, we just drilled another one because
it was $100 oil and it was easy to make your
money back.
Bures added that even at $75 oil, prots can
still be difcult in many of the shale plays.
“It’s not as easy to make money at $75 than
you think it is,” Bures said. “So we are going to
stay in the Illinois Basin for a while. I just dont
see any reason to leave here and take on the
risk of other shale plays.”
Keeping the well cost at $75K is a major
element in Bures’ prot strategy. Besides
the obvious low cost of the well, it creates a
system where resources are being leveraged in
order to keep costs down and prots owing.
“We believe the more we drill the better off we
will be in the long run. We are doing our best
to establish things,” Bures said. “A network of
oil wells throughout the Illinois Basin re-entry
wells and drilling wells.”
Bures said they are able to keep the costs down
due to the geology of the Illinois Basin. Unlike
the Bakken and Permian with horizontal
drilling, Bures is able to drill straight down to
nd oil in the Illinois Basin.
“It’s a simple drill with an air rig and an acid
stimulation,” Bures said. “There’s no platforms
to put up, road structures great so there’s no
building of roads, it runs smooth.
But the Illinois Basin does have its own
idiosyncrasies.
“Down here there’s a lot of red clay which
doesnt allow oil to go from formation to
formation,” Bures said. “These are fault traps
so the red clay doesnt allow the crude oil to
migrate to other traps so you don’t need to
frac.
Bures has been in communications with the
Geology Department at the University of
Kentucky regarding the potential of the Illinois
Basin and the ceiling appears to be pretty high.
“They said there was about a million barrels
maximum in each hole that we drop,”
Bures said. “Now we are not expecting to
get anywhere near that, but these wells do
last between 20-23 years. The longevity of
the wells is one of the main attractions for
investors.
Bures says these wells are not “get rich quick”
wells or a “J.R. Ewing thing”, rather slow
and steady returns over decades. In addition,
the current tax breaks for energy investors
are making the Illinois Basin even more
advantageous.
“People have a hard time grasping that there
could be oil up in and around the Kentucky
Indiana area,” Bures said. “Well there is oil up
here, it’s just not a get-rich-quick thing, it’s a
longevity thing.
OILMAN COLUMN
The 75K Well Drilling Profits
in the Illinois Basin
By Jason Spiess
Magna Bures Oil is nding success in the Illinois Basin. Photos courtesy of Magna Bures Oil
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FM/FMc, ATEX, IECEx, and CE Approvals
Optional RS485 Modbus RTU
Free FT4X View™ Software
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