ISSUE 75 www.ogsmag.com
KANON Loading Equipment BV: Smooth transfers
MEET THE NEW STANDARD KANON LNG MARINE LOADING ARMS
VISIT US AT STOCEXPO - ROTTERDAM Booth H18, March 17-19
TANKWORLD - DUBAI Booth D2, April 14-15
NISTM - ORLANDO Booth 519, April 27-29
✔ NEN-EN 1474-1:2009 CERTIFIED SWIVEL JOINTS AND COUPLERS ✔ EFFICIENT REVOLUTIONARY DESIGN ✔ FLEXIBLE BUNKERING SOLUTIONS ✔ ONSHORE AND SHIP TO SHIP CRYOGENIC EXCELLENCE The new KANON Cryogenic swivel joint design in combination with the field-proven highly reliable symmetric Marine Loading Arms have definitely set a new standard in reliable LNG transfer arms.
ENGINEERED FOR GENERATIONS. WWW.KANON.NL
Editor
The
Martin Ashcroft
Empty vessels I wish politicians would learn something
for this one. Am I getting more cynical about
from PRs. Not their own PRs, obviously, but
politics as I get older, or do politicians really
industry professionals.
have less to say than they used to?
As an editor I receive press releases from all
If the current political leaders have their
kinds of companies asking me to vote with
own opinions, their marketing strategies do
my mouse and include them in the magazine.
their best to disguise them. When you see a
They vary massively in quality and relevance
politician on television, you know you won’t
but they all have one thing in common. They
hear anything about what his or her party
promote the virtues of their own companies
intends to do. If they told you what they were
rather than running down the competition.
planning to do themselves, you can hear them
I can’t remember a single press release that
thinking, it might put people off voting for
criticised a rival company in all my 18 years
them, so all that’s left to talk about are the dire
editing business magazines.
consequences of voting for the other lot.
Contrast this with politicians. I don’t know if
The UK’s party leaders are now squabbling
it’s as bad in your country as it is in the UK, but
about television debates, but even if they
at the time of writing we are six weeks away
happen I’m not holding my breath for anything
from a general election and the sound bites are
interesting to come out of them. I think I’ll
getting more vicious by the day.
turn off the TV and read some press releases
As a veteran voter with ten general elections
instead.
behind me, it’s hard to generate any enthusiasm www.ogsmag.com
3
Contents
ly Month news & s feature
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COVER STORY
KANON Loading Equipment BV: Smooth transfers A leader in liquid and gas transfer systems with an eye for ease of operation and low maintenance
03 06 18 21 21 22
Editors notes: Empty vessels KANON Loading Equipment BV: Smooth transfers Monthly news and features Exports of US petroleum products reach record highs in 2014 SKF selected for ECO remote monitoring programme News in brief
22 25 25 26 26 29
Lubbers Logistics opens operations in Turkey Prior Diesel launches new wireline unit Contract awarded for ÂŁ11.95 million Lerwick Harbour expansion New lock to improve access to Ghent Port High interest in shallow Mexican waters In-house recycling process wins award for Manuplas
32 38 50 56
06
PPE Ltd: Sealing with no flaws
Hess: A community of innovators Redline Communications What $48 oil means for the oil and gas industry’s staff and employers
SKF
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KANON Loading Equipment BV
Smooth transfers
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KANON Loading Equipment
With an eye for ease of operation and low maintenance, KANON Loading Equipment BV has become a global leader in liquid and gas transfer systems
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I
t’s often said that a company is only as good as its supply chain. I can think of no sector where this applies more than oil and gas, where one mistake can be devastating for a company’s reputation, not to mention its workforce, its balance sheet and the environment. The industry can be thankful, therefore, that the Dutch company KANON Loading Equipment BV specialises in the design, manufacture and installation of loading and unloading systems for marine, road and rail tankers from its facilities in Zeewolde in the heart of the Netherlands. KANON’s portfolio of world class products have pride of place in petrochemicals, but the company also provides solutions in the pharmaceutical, food and beverage, chemical and healthcare sectors for a wide range of liquids and gases from cryogenic to high temperature applications, including the most hazardous and corrosive of fluids. From its very beginning in the late 1970s, the company has been dedicated to the development of superior loading equipment and is now a global leader in liquid and gas transfer systems. KANON manufactures and supplies this equipment through its own sales and distribution network, and also offers customers extensive aftercare services including maintenance, engineering, product management and technical support. The guiding principle of all fluid transfer systems is the avoidance of contact between man and the fluid itself. To put it bluntly, many of these liquids are nasty. Even in the food and beverage or healthcare sectors, the liquids being
transported in ships or tankers are in concentrations to which no human being should be exposed, yet human beings are required to operate the equipment that moves them from one place to another. Wherever liquids and gases need to be transferred from ship to shore or tank to truck, KANON’s portfolio includes a product for the purpose, from marine loading arms and 10
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truck loading arms, to folding stairs, safety cages and elevating platforms. KANON has consistently pushed the boundaries of design along with the latest developments in efficiency, safety, operator convenience and ultra-low maintenance. Its status as the world’s only supplier of symmetric marine loading arms bears witness to this.
Marine loading arms
In an industry that tends to stick to traditional designs, KANON takes a more innovative approach, developing equipment with an eye for ease of operation and low maintenance. When loading or unloading a ship, a loading arm has to follow the ship’s horizontal movement to accommodate drift and sway, and its vertical movement to deal with changes in draft, tide and wind. The critical components in achieving the required flexibility are the swivel joints. When marine loading arms became popular some 50 years ago, swivel joints were not as reliable as they are today, so a supporting structure consisting of a separate support frame was essential to carry the weight of
“Wherever liquids and gases need to be transferred from ship to shore or tank to truck, KANON’s portfolio includes a product for the purpose” the piping. Compared to a self-supporting product line design, however, a supporting structure increases complexity and the need for regular maintenance, as well as adding to purchase costs and cost of operation. A self-supporting design has many advantages over a separate support frame, but can only be possible when the swiveling joints are so strong and reliable that no replacement of the swivel joints is needed during the entire lifetime of the loading arm. Renowned for the strength and durability of its swivel joints, KANON has been able to fully standardise its products on the selfsupporting design.
KANON Loading Equipment
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KANON marine loading arms are manufactured in accordance with the latest requirements of OCIMF (Oil Companies International Marine Forum) and major oil companies, and require minimal maintenance as all product seals can be replaced without scaffolding or dismantling of the loading arm itself. All KANON arms, including manually operated models, can be fitted with a virtually non-spill emergency release system which ensures that the liquid and vapour lines are both sealed after disconnection. Once the emergency sequence commences, the arm automatically rises and returns to its parked position, allowing for immediate departure of the tanker if necessary. The MLA260 series is the most efficient range of marine loading arms on the market and can be used with virtually all liquids and gases that are capable of being transferred through pipes. KANON launched its range of marine loading arms with a fully rigid and symmetric design around the turn of this century, and they have proved their reliability over and over again. The recently introduced ‘twin arm’ allows two 12
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independently controlled product lines to be mounted on the same base plate. This use of a unique double inboard arm results in the smallest possible design footprint while ensuring that the loads encountered at the base plate are lower than found with any other type of arm. The symmetric design divides the mechanical forces equally on the swivel joints and within the loading arm structures themselves. Symmetry also reduces the overturning moment (OTM) on the jetty to almost zero. This makes them particularly suited for unusual applications such as oversized dimensions and mounting on moveable carts and floating jetties. Simultaneous connection of two liquid lines from the same marine loading arm assembly not only doubles the capacity of the equipment but has benefits in jetty design, too, enabling new jetty designs to be considerably smaller and existing jetties to be upgraded without major adjustments, an important cost-saving feature in either case. The symmetric design also opens up the possibility of including the integration of large diameter and high
KANON Loading Equipment
pressure vapour return lines, increasingly required by local authorities to minimise the escape of volatile organic compounds (VOCs) to the atmosphere.
Swivel joints
The use of swivel joints in metal loading arms is critical because of the extraordinarily high bending and axial load combination, due to the reach of the loading arm and wind forces. KANON swivel joints are developed to withstand these loads without leaking. In addition, the need for regular maintenance is also avoided because the joints are supplied with long life lubrication. KANON swivel joints are all machined in one piece with ultra-high precision, and no after-treatment whatsoever. No replaceable parts other than balls, seals and O-rings are needed. This design is extremely important to KANON’s customers, since in the harsh conditions in which many of their clients operate, it is vital that the loading arm and its critical components need as little maintenance as possible.
LNG Transfer
For the transfer of liquid natural gas (LNG), KANON has invested heavily in swivel joint research and development for its cryogenic swivel joint to meet the requirements of the latest European EN1474-1:2009 standards by designing them to perform entirely without grease, graphite or other lubrication. The cycle test comprises up to 400,000 cycles under load, simulating 10 years of operation, and was completed successfully. The extremely stringent load test, involving a PCA load of up to 1125 kN, also failed to find any leakage or damage. The KANON cryogenic swivel joint is now so strong that it allows a unique and revolutionary approach for self-supporting marine loading arms for LNG, giving its customers the same benefit enjoyed by users of its noncryogenic marine loading arms. The KANON LNG swivel joint design, in combination with the field-proven highly reliable symmetric marine loading arms, has definitely set a new standard in reliable LNG transfer arms. www.ogsmag.com
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Truck loading arms
It would be quite wrong, however, to imagine that KANON’s capabilities are ‘all at sea’. Liquids are transported by road, too, so it’s no surprise that KANON also produces truck loading arms which deliver a comparable level of performance to their marine counterparts (using the same maintenance free swivel joints as the MLAs). These come in two main types, top loading arms and bottom loading arms, which are suitable for transferring just about any kind of liquid or gas, whether they be toxic, corrosive or at extreme temperatures. Customers making decisions about the design of road and rail tanker loading stations need to consider some basic principles. Top and bottom loading each have their own advantages, which can benefit the installation when correctly applied. In general terms, the basic design data needed for a loading station include the type of fluid and its temperature and pressure; its viscosity in normal and abnormal conditions; the number of different fluid media 14
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at one loading station; the number of loading arms filling simultaneously at one tanker; environmental requirements (ie, vapour return or recovery overspill protection); the required level of operator safety and integration with metering or weighbridge facilities. KANON truck loading arms are perfectly balanced to ensure easy handling by a single operator. Balancing of the arm is achieved by counterweight or by a spring balance cylinder. The company supplies standard models but also offers a bespoke service for customers with specific requirements. Loading arms can be manufactured for any application and after years of experience KANON has developed some widely accepted solutions for filling tankers. Its top loading arms are specially designed to suit both open filling of a wide range of products across all industry sectors and closed filling of the type of highly aggressive liquids associated with the chemical and petrochemical industries. The advantage of bottom loading arms is that they can
KANON Loading Equipment
“The guiding principle of all fluid transfer systems is the avoidance of contact between man and the fluid itself ”
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WE CARE ABOUT LOADING SYSTEMS
Loading equipment for marine, road, and rail tankers
KANON Loading Equipment
be operated at ground level without any need for loading platforms. With a single bottom loading arm, vapour is usually vented through an opening at the top of the tank, preferably one capable of being opened from ground level, avoiding the need for the operator to access the top of the truck. This loading procedure, using a single bottom loading arm, is widely used and is referred to as an ‘open loop’ product transfer. Increasingly, however, a combination of two bottom loading arms is used to provide ‘closed loop’ product transfer. In this configuration, the product is filled through one bottom loading arm while the vapour is recovered through a second, which usually has a smaller diameter than the product arm. This technique is used for low density liquids (such as butane and propane) and fluids with toxic or explosive vapours because it prevents product escaping into the atmosphere and offers the best possible operator safety.
Elevating platform
An elevating platform is used to provide safe and easy access to road and rail tankers of varying heights and lengths, whether to load or sample liquids or to open vents
“In an industry that tends to stick to traditional designs, KANON takes a more innovative approach” for bottom loading. Customer demand led KANON to design and build its own version. Used in conjunction with the KANON range of loading equipment, the system can be designed to meet almost any customer requirement. The platform can be manufactured for any size loading area from 2m to 15m, and even retrofitted to existing platforms. With the company’s emphasis on safety and ease of use, the
entire elevating platform can be adjusted to the slope of the tanker and the platform is raised and lowered by hydraulic power. Manually operated flip-up floor panels allow full access to the top of the tanker so that hatches can be opened whatever their position, and the platform includes many safety features including hand rails and guard rails for the protection of operators and protection bars to prevent damage to trucks. KANON’s product range also includes folding stairs to provide safe and efficient access between a loading platform and road or rail tankers. Built to the latest safety standards, the spring balanced design ensures easy operation by a single operator and as with other KANON products, the stairs require minimal maintenance and are repairable in the field.
Service
As you might expect, KANON has a modern and fully equipped service department specialising in truck loading arms, marine loading arms, safety access equipment and grounding devices. Highly skilled and experienced service engineers are available to install, service and maintain customers’ equipment anywhere in the world. All engineers are fully qualified in hydraulics, pneumatics, mechanics and electronics and carry all necessary tools and spare parts in a fully equipped service van. All service jobs are scheduled and coordinated from the head office in Zeewolde, from where many industrial areas and seaports in the Netherlands, Belgium and Germany can be reached in a two hour drive. If the customer is further away than this, the engineer will fly to the required location. In addition to having a comprehensive standard product range, KANON has built an excellent reputation for developing custom made loading systems. Through years of experience and know how KANON is well placed to offer the very best advice in liquid transfer systems. Ease of handling and safety for the operator and environment, as well as a reliable performance for many years, are the basics for the design of KANON equipment. www.ogsmag.com
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“Towed out to sea” (Geoff Livingston) 18
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Monthly news & features
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Monthly news & features
Exports of US petroleum products reach record highs in 2014 US exports of non-crude petroleum products averaged a record 3.8 million barrels per day in 2014, an increase of 347,000 bbl/d from 2013, according to data from the US Energy Information Administration. In particular, increases in the export of motor gasoline, propane and butane, offset a decline in distillate exports. This makes 2014 the 13th consecutive year to see an increase in the export of US petroleum products. These exports are sent mostly to nearby markets in Central America and South America, followed by exports to Canada and Mexico. US petroleum product exports increased in every region except the Middle East, which declined from 55,000 bbl/d in 2013 to 47,000 bbl/d. Increased US production and capacity to export hydrocarbon gas liquids (HGL), particularly on the US Gulf Coast, allowed exports of propane and butane in 2014 to increase by 121,000 bbl/d (40%) and 44,000 bbl/d (149%), respectively, over 2013 levels. Exports of propane to Asia, particularly Japan and China, where the fuel is used in cooking, heating, transportation, and as a petrochemical feedstock, nearly doubled in 2014 from 2013, increasing by 40,000 bbl/d (95%). Exports of butane grew to 74,000 bbl/d. In 2014, the United States exported 20,000 bbl/d of butane to Africa, making Africa now the largest recipient for US exports of butane.
SKF selected for ECO remote monitoring programme
SKF has been selected to provide a remote monitoring and diagnostics service to enable world class predictive maintenance on a fleet of over 200 vessels for Edison Chouest Offshore (ECO). SKF will provide monitoring and diagnostics of key assets in the main propulsion line, including the thrusters, diesel generators, electric motors, main drive shaft and auxiliary equipment. Continuous monitoring of these assets will enable ECO to optimise maintenance and significantly reduce the risk of unexpected failures and consequential costly downtime. SKF’s solution transmits condition monitoring and asset integrity data
from each vessel in the fleet. The data is automatically collected and transmitted via an online system to the SKF global cloud server. The data will be analysed in detail at SKF’s remote diagnostics centre by certified machine reliability experts and then fed back via customised reports to the technical team at ECO. In the event of excessive wear on the machinery, vessel and fleet operators will then be able to intervene before it fails. “SKF was selected as a partner because of its extensive expertise in rotating equipment, remote diagnostics and specialist knowledge of the marine industry,” commented Mark Duns, project manager for ECO. www.ogsmag.com
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DHI, a global leader in marine, coastal and water science and sustainability, has joined the World Ocean Council. The company is trying to engage more effectively in sustainable development and stewardship of the marine and coastal environment, through collaboration with the diverse international ocean business leadership community formed by the WOC.
Lubbers Logistics opens operations centre in Turkey
* * *
Suretank has acquired majority ownership of Louisiana based manufacturer AmGulf Fabrication LLC, which has immediately been rebranded as Suretank USA. After acquiring a minority shareholding in 2013, Suretank has developed a strong working relationship with AmGulf, offering its full range of DNV 2.7-1 certified offshore tanks and cargo carrying units (CCUs) from the company’s state of the art facility in Houma, Louisiana. * * *
Iraqi oil production grew in 2014
despite the country’s security issues. Figures released by the US Energy Information Administration (EIA) show that Iraq produced an average of 3.4 million barrels per day, 330,000 bbl/d more than in 2013. From August to December, Iraq’s production grew by almost 600,000 bbl/d, with increased output from southern Iraq and the Iraqi Kurdistan Region elevating it to second place behind the United States for annual output growth. * * *
E-marine, the principal provider of submarine cable installation and repair in the Middle East and sub-continent region, has unveiled ambitious plans to expand its fleet of cable ships in 2015, with the first ship beginning dock trials ahead of its maiden voyage this year. The CS Maram, built in Abu Dhabi in the UAE, has been designed to manage the installation and maintenance of all types of submarine cables, including fiber optic telecommunications cables and energy cables. 22
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Lubbers Logistics Group (LLG),
an international logistics specialist in the upstream oil and gas industry, has expanded its network with a new operations centre in Istanbul, Turkey. Istanbul is the historic hub that connects the continents of Europe and Asia, and is an important new location for Lubbers as the group continues its policy of incremental growth. “I am delighted that we have finally opened our new base here in Turkey,” said André Mulder, director sales & marketing CEU. “Lubbers has operated in the region for several years and has established strong links with local contractors, but the time is right to increase our visibility in this very important market.” The new base will allow Lubbers to support its oil and gas clients in the southern Diyarbakir region of
Turkey and also in the Black Sea coastal region. It is also close to the new land supply base being built at the Haydarpasa Port in Istanbul. Lubbers will work in partnership with long-standing collaborator Sertrans Logistics for trucking, handling and facilities to service the growing demand in region. “With exploration activity on-going, Turkey is seen as the next major hotspot for oil and gas,” added Mulder. “By expanding our business into Istanbul we are close to our customers in the region and we are also able to connect well with our existing bases in Romania and elsewhere in Europe. We will also be able to better handle cargoes in the Caspian region and ensure a more integrated, efficient and expanded network for our customers.”
Nigeria has the highest number of vandalised oil pipelines in the world, according to the Minister of Power. The Nigerian National Petroleum Corporation (NNPC) recently reported that pipeline vandalism has complicated the free flow of their petroleum products and crude supply in its pipeline system, leading to a colossal cost of over N174.57 billion within the last 10 years. The Federal Government is investing in the development of digital surveillance cameras to monitor the pipelines.
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Monthly news & features
Prior Diesel launches new wireline unit Prior Diesel has launched a new phase of wireline units, boosting its portfolio of diesel driven power solutions and well service products for the oil and gas, marine and industrial sectors. Advanced cabling technology is used to lower equipment into oil and gas wells and transmit data relating to the conditions of the wellbore. Prior Diesel’s innovative longitudinally mounted drive engine design allows for ease of operation and maintenance. The unit is acoustically enclosed ensuring low cabin noise for the operator. “We work in close collaboration with our customers and are continuously assessing and investing in new and technically advanced equipment,” said Gordon MacLean, joint managing director at Prior Diesel. “There is a huge market for this type of equipment and we’ve been able to use our engineering expertise and experience to develop what we believe is an exceptional piece of kit.” The zone II wireline unit comes with a choice of 700mm or 600mm drums and features an innovative internal trolley beam designed for quick and easy removal and installation of the drums with minimal downtime and reduced manpower. Founded in 1980 in Great Yarmouth, Norfolk, UK, Prior Diesel was acquired by Suretank in January 2015.
Contract awarded for £11.95 million Lerwick Harbour expansion
Plans to expand Lerwick Harbour’s extensive deep-water facilities for the offshore oil and gas industry have taken a step forward with the award of a major contract to extend the quay at Dales Voe South. Lerwick Port Authority has commissioned the Scottish business unit of civil engineering contractor BAM Nuttall as main contractor for an £11.95 million investment to lengthen the quay to 130 metres to support subsea developments and decommissioning. Part of the Dutch construction group Royal BAM, BAM Nuttall specialises in complex marine construction, with a strong track record working around Scotland and on the Western and Northern Isles. Lerwick has been servicing the offshore industry for over 50 years and now also has an established reputation as a location for decommissioning. The extended quay will provide deep-water, versatile berthing and heavy load capacity to take an offshore structure in a single lift, with a substantial, expanded laydown area. “The contract marks an important step in further developing Lerwick’s role as a leading centre of offshore industry operations,” said Captain Calum Grains, Port Authority Deputy Chief Executive and Harbourmaster. “Dales Voe South is another value-added expansion and reflects our confidence in future activity, including ongoing subsea projects, particularly west of Shetland, and the developing decommissioning and offshore renewable markets.” The Scottish Government and the agency, Highlands and Islands Enterprise, are providing £2.39 million in grant for the project, with Bank of Scotland supporting the Port Authority’s investment. Work will begin in April, with completion due in April 2016. At peak, BAM expects up to 40 people to be employed directly in the construction of the new facility, with wider benefits spreading to local suppliers and subcontractors. The contract will extend the quay by around 75 metres, with a load-bearing capacity of 60 tonnes per square metre, making it unique in Scotland. It will have 12.5 metres water depth alongside, like the existing quay, amongst the deepest of its type in Scotland. The sheltered voe, located between oil basins east and west Shetland, has 24-hour access to the North Sea. www.ogsmag.com
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New lock to improve access to Ghent Port The Netherlands and the Belgian province of Flanders have agreed to build a new lock to improve access to the ports of Ghent and Terneuzen. The new lock will provide a smoother passage for inland vessels between the Netherlands, Belgium and France. The Ghent-Terneuzen Canal is 32 kilometres long, 17 kilometres of which are on Dutch territory and 15 kilometres in Flanders. In 2013 about 65,000 ships made use of the locks in Terneuzen. The construction of the new lock is the biggest ever investment in port infrastructure for Ghent Port Company. Roughly as long and as wide as the renewed locks on the Panama Canal, it will be 427 metres long, 55 metres wide and 16.44 metres deep and will be built inside the present lock complex at Terneuzen. The cutting of the first sod is expected in 2017. Construction of the lock is expected to cost €920 million and it should be open for
shipping in 2021. Ghent port is the second most important economic zone in Belgium, accounting for 60,000 jobs. Ghent is a multimodal port at the crossroads of European inland waters, motorways and railway lines. The new lock will help Ghent grow by creating new jobs and attracting investors.
High interest in shallow Mexican waters The Mexican government
has opened its energy sector to international investment for the first time in 70 years but many observers have been worried that the collapse in oil prices would deter potential investors. Juan Carlos Zepeda, head of the National Hydrocarbons Commission in charge of ‘round one’ of Mexico’s energy reforms, has hinted that it will not dramatically affect the shallow water phase of the bidding round, “because of the modest production costs, while a later phase involving more costly production in shale-rock formations will be trimmed back to offer only the most attractive of the socalled unconventional resources.” 26
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Monthly news & features
In-house recycling process wins award for Manuplas Plymouth UK-based Manuplas, a specialist in the
design, engineering and manufacture of polymer solutions for the marine and offshore sectors, has won the regional Environmental Efficiency Award at this year’s EEF/ Aldermore Future Manufacturing Awards for its innovative system of recycling foam. The process shreds waste foam and compacts it to remove air content, producing 300 millimetre square logs that are cut into one-metre lengths. The compacted foam logs do not rot and require no on-going treatment.
opportunities at both Dartmoor and Paignton Zoos.” The donation has saved money for Paignton Zoo, reduced the volume of foam waste going to landfill and saved Manuplas nearly £10,000 a year in transportation costs and disposal fees. Manuplas has successfully recycled approximately 2,000 cubic metres (38 tonnes) of lightweight foam between January 2012 and March 2014. The EEF/Aldermore Environmental Efficiency Award has been developed to recognise companies that have done the
When Manuplas realised what the recycling process was capable of, the company contacted local organisations to ask if they had a use for the logs. Paignton Zoo responded and Manuplas subsequently donated a quantity of logs for landscaping and animal enclosure projects. “The grade of foam used is not recyclable by traditional methods so, with financial support from Business Link, we investigated available recycling options,” explained Manuplas research and development manager David Hamnett. “We also began looking for organisations that could put the recycled material to good use and discovered
most to improve environmental performance in the areas of resources, waste, energy, carbon, water and other emissions and/or more generally improving operational efficiency. The regional award win means Manuplas will now be nominated for a national award, which will be announced at a gala reception being held in London in April. Manuplas has been part of Gloucestershire-based Advanced Insulation since May 2014, a leading manufacturer of technical coatings, including specialised fire protection and thermal insulation materials for the upstream oil and gas industry.
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PPE Ltd: Sealing with no flaws
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A British company specialising in high performance sealing solutions for the global oil and gas sector has opened a new manufacturing facility in Brenham, Texas. Managing director Paul Gillyon tells Martin Ashcroft about it www.ogsmag.com
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British company opening a factory in the United States is not news you read every day, but it is a logical step in the development of Precision Polymer Engineering (PPE) Ltd of Blackburn, Lancashire. Founded in 1975 but part of the IDEX Sealing Solutions (ISS) group since 2010, the company makes high performance O-rings and elastomer mouldings, principally for use in oil and gas, but also for the semiconductor industry, among others. O-rings may sound like a commodity product, and in some applications they are, but not for PPE. “We operate at the high end of the market,” explains managing director Paul Gillyon. “Our products are relatively simple,” he continues, stretching the definition of relativity and simplicity. “We principally make O-rings for use in static sealing, but our business is focused on the most demanding sealing applications, the highest technology materials and the most extreme conditions – very high temperatures, very low temperatures, extreme chemical environments and extremely high pressure.“ PPE’s customers in this sector include the major oil and gas contractors, the likes of Baker Hughes, Weatherford, GE Oil & Gas and Schlumberger, for example. “We tend to focus on the upstream part of oil and gas,” explains Gillyon. “That’s where you get the extreme conditions. That’s where you find extreme downhole conditions with high pressures and aggressive drilling fluids. That’s the sweet spot for us. We’re very good at providing sealing in those very difficult conditions. “We focus on that part of the market where performance is critical,” he continues. “You need to have a high technology material and a very high quality manufacturing process to meet the needs of the application. If you want high quality 34
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products you have to do it in a high quality environment and that’s exactly what we have in Blackburn and now in Brenham, Texas, too.“ PPE has had a sales office in Houston, Texas for several years now, so I wondered what would trigger the decision to build a brand new factory over there. “We have a significant production site in Blackburn with almost 100 presses and 300 people, but we’re getting up to capacity now,” explains Gillyon. “We don’t have any more space in the Blackburn factory.”
“The global epicenter of the oil and gas market is in Texas” The company saw this coming a couple of years ago, he tells me, and although they could have found another site in Blackburn or somewhere else in the UK, they could not resist the opportunity to build a new facility close to one of their key markets. “The oil and gas market is very important to us and the global epicenter of the oil and gas market is in Texas.” The official opening ceremony was held in Brenham on 12 February this year, although the first products were actually shipped out of the factory at the end of November 2014. Brenham is far enough away from Houston to benefit from lower property costs, but close enough to tap into an experienced workforce. The Blackburn factory has been developing best practices for 40 years now, so I wondered how one would go about
PPE Ltd
duplicating the best qualities of a mature manufacturing facility into a new factory with new equipment and a new workforce. The new facility in Brenham has nine presses, including three in a state of the art cleanroom, not nearly as many as in Blackburn, but set up with the same operating processes. “It’s built to achieve the same quality, the same cleanliness, and the same way of dealing with customers,” explains Gillyon. “We had people from Brenham, including production operators, working in Blackburn for up to six weeks in some cases, and we sent some of our supervisors from Blackburn over to Brenham to make sure that everything was set up in the right way.” The PPE business model is built on being responsive to customers, with lead times measured in days rather than weeks, which is why both Blackburn and Brenham have a degree of vertical integration in the shape of their own tool making equipment. “Vertical integration is not universal in the industry,” says Gillyon. “There are others who make their own tooling and there are some who outsource it. We focus on being flexible and providing very fast lead times. We make everything to order. The typical model of a standard O-ring manufacturer would be to manufacture O-rings in very large volumes, put them in a warehouse somewhere and ship them when the customer wants them. “We don’t do that. We make everything to order because we fulfil the needs of a very custom market with very specific requirements. We make about 95 per cent of the tools we need, so that we can be responsive to customers.” That’s the way things have developed in Blackburn, he explains, so the company has replicated that capability in Brenham. “It enables us to respond quickly if a customer requires a particular O-ring. If we don’t have a tool already we can just make one. Tools don’t last forever so we can
remake them also when we need to.” The opening of the Texas facility is not only about oil and gas, however. “Our other big market is in semiconductors,” explains Gillyon. “We supply to the OEMs of semiconductor tools (mainly in California) and also the chip and wafer manufacturers themselves who are predominantly in South East Asia.” PPE also produces seals for use in heavy industry applications including marine diesel engines.
“We focus on that part of the market where performance is critical” Sealing solutions are critical in a variety of industries and each requires a range of high performance seals to conform to increasingly stringent regulations. Any sealing provider must therefore deliver the highest quality solutions in the shortest possible timeframes. Make to order, rapid lead times and customer focus are all attributes associated with lean manufacturing. “We want to run our factory as efficiently as possible,” agrees Gillyon. “We want to run it without tying up large amounts of working capital and our business model fits very well with lean principles. We don’t have any finished goods stock, although we do hold some stock of raw material.” If Brenham can replicate the quality of the Blackburn facility, its proximity to PPE’s crucial markets in Texas and California will be a great advantage in lead time and customer service. www.ogsmag.com
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Founded by Leon Hess is 1933, The Hess Corporation (formerly Amerada Hess) is an American integrated oil company headquartered in New York City. The company explores, produces, transports, and refines crude oil and natural gas. Vertically completing the logistical chain, about 1,360 Hess branded filling stations market gasoline to consumers in 16 states along the East Coast of the United States. Refined petroleum products, as well as natural gas and electricity, are marketed to customers throughout the East Coast of the United States. By blending an entrepreneurial spirit with an understanding of markets it serves, the company has grown steadily to become a major force in the international petroleum industry. The company’s refineries, among the industry’s most sophisticated and efficient, produce quality fuel oils, gasoline and other petroleum products. To move crude oil and refined products, Hess operates a large fleet of tankers and other specialized vessels. It has extensive storage capacity, the largest on the East Coast of the United States, made up of strategically placed terminals distributing Hess products to customers from Boston to Houston and beyond, to both industry and consumers. Hess retail outlets provide both gasoline and convenience store items through the most modern and clean facilities. 38
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Hess Hess Corporation has exploration and production operations in the United States, United Kingdom, Norway, Denmark, Russia, Equatorial Guinea, Algeria, Libya, Gabon, Egypt, Ghana, the Joint Development Area of Malaysia and Thailand, Indonesia, Thailand, Azerbaijan, Australia, Brazil, and St. Lucia. Hess is also active in the financial markets, through the Hess Energy Trading Company (HETCO), its trading arm.
changed its name to Hess Corporation. By 2010 Hess had established a leading position in shale oil and gas exploration and production with two acquisitions that boosted the company’s acreage in North Dakota’s Bakken formation. It followed this with a strategic acreage position in Ohio’s Utica Shale through acquisition and joint venture agreements.
Hess History
The Tubular Bells discovery was made in October 2003. The egg-shaped, deep Miocene discovery is located in blocks of Mississippi Canyon. The discovery well, located in a water depth of about 1,310m, was drilled to a total depth of around 9,488m by Transocean’s Deepwater Horizon semi-submersible offshore oil drilling rig. The exploratory well struck about 58m of net oil pay. An appraisal well was drilled in 2006. It encountered hydrocarbons about eight kilometres from the first well. In order to further determine the Tubular Bells discovery, Diamond Offshore’s Ocean Confidence semisubmersible rig was chartered to drill two sidetrack wells. The first sidetrack was drilled during the first quarter of 2007. The second well was spudded in the last quarter of that year and was completed during the first quarter of 2008.
Leon Hess founded his company in 1933 to supply oil around his hometown in New Jersey, USA. He acquired the company’s first oil terminal site in 1938, followed after the war years by its first oil tanker in 1948, then a refinery and its first gas station by 1960. By 1967 the company had expanded its range of operations outside the United States. It subsequently merged with Amerada Petroleum Corporation, to become Amerada Hess. By May the following year the company drilled its first successful wildcat well in Prudhoe Bay in Alaska’s North Slope. Expansion of its global exploration and production profile continued into the 1970s, adding significant positions in the Gulf of Mexico and the North Sea. In 2001 Amerada Hess purchased Triton Energy Limited, and with it a world-class growth opportunity in Equatorial Guinea and a longterm, long reserve-to-production life asset in the Malaysia/Thailand joint development area. Following on the heels of the Triton purchase, energy prices fell and global economies weakened. Amerada Hess struggled through the following years, but then posted steadily increasing profits from 2003 through 2006, when the company posted US$1.920 billion in net income. In May 2006, Amerada Hess Corporation
Tubular Bells Project
Tubular Bells oil and gas field is estimated to contain recoverable reserves of more than 120 million barrels of oil equivalent. Once operational, the field is expected to produce 40,000 - 45,000 barrels of oil equivalent each day during peak production. In October 2011, Hess announced its field development plan (FDP) for the Tubular Bells project located in the Mississippi Canyon area. The development scheme initially www.ogsmag.com
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called for setting up three subsea production wells and a couple of water injection wells. These were produced from two drill centres tied back to Gulfstar, a sparbased floating production system (FPS) owned by Oklahoma-based Williams Partners. The two drill centres are connected by two production pipelines, which, in turn are connected to the FPS. The twin pipelines are attached to the platform’s hull by employing a steel catenary riser (SCR) method. The first drill centre initially supports two production wells and a water injection well. The second drill centre is set up for one production well and one water injection well. Both the centres are operated via an umbilical and controls distribution system. The FPS is the first facility of its kind to be manufactured entirely in the US. The production platform is designed to process 60,000 barrels of oil a day and 200 million standard cubic feet of natural gas each day. The facility supplies seawater injection services as well. Now the Tubular Bells deepwater project has started crude oil and natural gas production. The field is located 135 miles (217 kilometers) southeast of New Orleans, in approximately 4,300 feet (1,310 meters) of water in the Mississippi Canyon area. Tubular Bells is expected to deliver total production of approximately 50,000 barrels of oil- equivalent per day producing from three wells. The Tubular Bells floating production facility is a classic spar hull with traditional three-level topsides. Stampede Oil and Gas Project Hess Corporation’s Stampede oil and gas project involves the development of the Pony and Knotty Head deepwater fields located in the Gulf of Mexico. 42
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The fields are located at a water depth of approximately 3,500ft and 115 miles south of Fourchon, Louisiana. The front-end engineering and design (FEED) for the project started in the second quarter of 2013 and the final investment decision (FID) was made in October 2014. The project is expected to require an investment of $6bn, and initial production from the deepwater fields is expected in 2018. Hess holds 25% working interest in the project and will operate the field, while Union Oil Company of California, a subsidiary of Chevron, Statoil and Nexen Petroleum Offshore own 25% interest each in the project. The Knotty Head and Pony fields were discovered in 2005 and 2006 respectively. The two fields were earlier conceived to be developed as separate projects by their respective operators, but Hess, the 100% owner of the Pony field, executed a joint operating agreement with Nexen Petroleum and its partners in the Knotty Head field in 2012. Following this, the two projects were merged and named Stampede, and Hess was appointed as the operator. Oil and gas reserves at Stampede are located within the Miocene reservoirs at a depth of approximately 30,000ft. The two fields are estimated to hold combined recoverable reserves of up to 350 million barrels of oil equivalent (mboe). The Knotty Head field was discovered in December 2005 by drilling the Knotty Head No. 1 discovery well. Drilled to a total depth of 34,189ft using the TransOcean Discoverer Spirit drillship, the well encountered approximately 600ft of net pay oil sand. It is the deepest well drilled in the Gulf of Mexico. The drilling of a sidetrack well 4,500ft to the south of the original wellbore was
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Hess Bakken Shale completed in March 2006. The well was drilled to a total depth of 32,986ft and encountered 400ft of net oil pay. Pony field was discovered in July 2006 by drilling the Pony No.1 well to a total depth of 32,448ft. The well encountered 475ft of oil saturated sandstone. Drilling of the Pony No. 1 sidetrack well approximately 2,700ft north-east of the discovery well was completed in December 2006. The well was drilled to a depth of 30,634ft and encountered 280ft of oil saturated sandstones. The drilling of the Pony No. 2 appraisal well, located 1.5 miles north-west of the discovery well, was completed in March 2008. The well was drilled to a total depth of 32,900ft and encountered oil within the targeted sands. In June 2008, Hess completed the drilling of the Pony No. 2 sidetrack well, located approximately 7,400ft north-west of the discovery well. Drilled to a total depth of 33,362ft, the well discovered oil. The Stampede project involves the development of six subsea production wells and four water injection wells from two subsea drill centres. Two rigs are expected to perform the drilling works and the first rig is expected to commence operations in late 2015. The wells will be tied back to a newly built tension leg platform (TLP). The TLP will be designed for a production capacity of 80,000 barrels per day (bpd) of oil, 60,000bpd of water and 120 million standard cubic feet per day (mmscfd) of gas, and will have topsides weighing approximately 11,500t. Hess Corporation has publicised its intention to proceed with the development of the Stampede project despite the current oil price slump.
Hess is driving value through strategic investments in long lived, good margin areas such as the Bakken formation in North Dakota, the premier shale oil play in the United States, and the Utica Shale in Ohio, an emerging shale energy play. The rapid growth of shale production is fundamentally transforming the economics of energy development and helping to reduce fuel costs for consumers. The challenge for Hess and its partners is to produce abundant resources responsibly, prudently and economically. The corporation is meeting that challenge by making a substantial commitment to responsible shale energy development and production while continuously working to improve its operating performance. Hess is one of the most efficient operators in the Bakken, and has reduced drilling and completion costs by more than 40 percent since the beginning of 2012. To unlock shale oil and gas resources that are often found one to two miles below the earth’s surface, Hess employs industry proven horizontal drilling techniques that make it possible for the company to efficiently access more crude oil and natural gas from fewer well sites. Hess also uses hydraulic fracturing, where water is pumped at extremely high pressure, a technique deployed in about 1 million U.S. wells since 1949. Further Opportunities Hess Corporation has focused its resources strategically, defining and prioritising the basins and types of assets it will pursue. Key basins today include West Africa, where Hess has made significant discoveries at the Deepwater Tano/ Cape Three Points license offshore Ghana, as well as the Gulf of Mexico, Asia Pacific and the www.ogsmag.com
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Kurdistan region of northern Iraq. In 2011, in partnership with Petroceltic International PLC, Hess Corporation signed productionsharing contracts (PSCs) with the Kurdistan Regional Government of Iraq for its Dinarta and Shakrok exploration blocks. It is currently completing seismic acquisition in these two blocks in preparation for the drilling of two wells in these blocks. Hess announced in February 2013 that it has completed drilling of its seventh consecutive successful exploratory well on the Deepwater Tano/Cape Three Points block offshore Ghana. The company now plans to submit appraisal plans for the various discoveries to the Ghanaian Government for approval. In parallel, Hess has begun pre-development studies on the block. Hess operates the North Malay Basin - Integrated Gas Development project, located on the offshore Peninsular Malaysia, under a production-sharing contract with PETRONAS. Under an early production system, its Kamelia field started production in October 2013. As members of the Marine Well Containment Company, the Helix Well Control Group and the Clean Gulf Cooperative, Hess Corporation has rapid access to well capping/containment and spill response resources in the Gulf of Mexico. Hess has produced oil and gas at the South Arne field in the Danish North Sea since 1999. Now it is investing $1 billion to extend the productive life of the field and optimize production from the tight chalk reservoir. 46
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About 110 miles off the Louisiana coast in the Gulf of Mexico, Hess optimised production at its longrunning Conger asset. By working cross-functionally and employing new tools and analytics production was increased at Conger by 26 percent in three months in 2012. It is an illustration of Hess’ systematic approach to production that aims to get the most out of what it has safely, reliably and cost effectively. Key To Success For the second consecutive year, Hess Corporation has been recognized among the 2015 Global 100 Most Sustainable Corporations by the Toronto-based media and investment research firm Corporate Knights. Hess is ranked 65th overall, moving up 23 places from last year among the world’s most sustainable corporations. The company is the only U.S. oil and gas producer named to the list. The Global 100 ranking is structured to reward the transparent disclosure of sustainability data and the actual performance of individual companies. According to the 2015 report, published in the latest issue of Corporate Knights magazine, companies go through an intense screening and those that emerge constitute the Global 100 Shortlist. Corporations making the shortlist are then scored on the key performance indicators for their industry. The top overall performers from each sector are named to the final Global 100, subject to the number of slots reserved for each sector. Hess Corporation is building a global position in shale oil and gas, while maximizing production of existing, high impact assets. It produced about 396,000 barrels of oil equivalent per day in 2012 from assets in countries including the U.S., Norway, Denmark, Algeria,
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Libya, Equatorial Guinea and Malaysia. Hess relies on lean production techniques to maximize the success of its shale oil and gas operations in places like North Dakota’s Bakken formation, and is using what it learns there in assets like Ohio’s Utica Shale. In 2010 Hess launched Production Excellence, which helps to get the most out of each of its assets by improving environmental health and safety, integrity, reliability, production optimization and cost management. With ongoing exploration ventures in the Gulf of Mexico, Europe, Africa and offshore Australia, Hess is poised to deliver long-term profitable growth through a strong exploration portfolio. Its exploration strategy is to be a focused basin master in areas such as West Africa, Asia Pacific and the Gulf of Mexico and to continue to look for overlooked and emerging basins to fill its inventory for the future. Hess Corporation’s goal is to focus on fewer geographic areas, manage risk through strategic partnering and continuously strengthen its organizational capabilities. 48
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ONE NETWORK FOR EVERYTHING SECURE RELIABLE WIRELESS NETWORKS FOR ALL OILFIELD OPERATIONS www.rdlcom.com
How a networked intelligent oilfield improves the bottom line
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In the digital oilfield, a high-speed, multipurpose, wide-area communications network is the foundation for increased productivity, and improved efficiency and safety. These benefits apply across the entire upstream operation from drilling to production and, for some, have resulted in an increase of five per cent or more output and a cost saving equal to 10 drilling days per drilling unit per year. Smart drilling at the rig increases productivity Real-time seismic drilling or “smart drilling” involves creating 3-D seismic maps that indicate where to drill, and automation that optimizes drill speed and steering. The increasingly rich data collected from drilling site sensors makes this possible by allowing correlations across the entire suite of hydrocarbon information: surface survey maps, drill-bit sensors, flow rates, pressures, temperatures, chemical analyses, and more. Intelligent automated drilling operations are more efficient at higher speeds than ever before, as they deliver higher rates of penetration and reduce down time. They can also predict dry holes much sooner, thus reducing costs and saving time. To realize the benefits of smart drilling, there must be a high-capacity always-on network to allow data to move to and from sensors at the drill site. Fiber optic networks deliver exceptionally high capacity, but are rarely economical or flexible enough to use at drill sites. While satellite communications have been the default network for oil rig communications, the increasing need for more capacity and more real-time affordable communications is driving the demand for powerful terrestrial wireless networks. Redline Communications networks provide this powerful, versatile, real-time, portable and cost-effective alternative. Operators who have incorporated smart drilling over wide areas using Redline networks have decreased their drilling time by up to 10 days per drill per year, which translates into significant cost savings.
Drill site networks increase worker efficiency and safety One of the most important additional benefits of a multi-purpose network at a drill site is the ability for teams to collaborate and problem-solve regardless of their locations. Voice communications and video cameras on the drill site, the delivery of drill data to remote experts in real time, and universal access to business systems and documents are significant advantages: they help experts see better data; make better decisions faster and allow them to work on multiple drills from a central location. The amount of voice, data and video generated at drilling sites is growing exponentially, driving the requirement for more powerful networks. There is no indication that the amount of data will decrease and, in fact, more applications become apparent as networks are deployed. Remote monitoring of well sites provides ongoing status updates on production to personnel and to systems not on location, bringing visibility and allowing operators to “see” when there is a problem and then schedule a person to attend to it in order to minimize down time. Managing by exception, or only sending people to the site when there is a real and identified problem, will minimize the number of trips, reduce operating costs, increase efficiency, and improve worker safety.
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Redline Communications
When monitoring becomes advanced process control and automation, the richness of well site data available to operators increases, and operators gain the ability to remotely and in real-time change an increasing number of production parameters. Going beyond monitoring to control optimizes the rate of production by tuning various parameters remotely. This can increase production levels without additional costs. The gains associated with automation depend on a robust, reliable, powerful and real-time network. Traditional slow-speed SCADA networks cannot accommodate the transition to increased data and the need for real-time control. High-speed wireless networks such as Redline’s enable this advanced automation and control.
Drilling and production networks increase worker productivity and safety Despite the increasing level of automation in the oilfield, there will always be a need for on-site personnel. The same network that enables automation and control can also be leveraged to improve field worker productivity and safety. With a network in place, field personnel can access the information or people required to be productive, often removing non-productive travel time to a network location. The collaborative work environment enabled by the networked oilfield also gives field crew up-to-date work instructions from the office, and real-time report progress, resulting in faster response and more efficient operations. Network-enabled field workers can also take pictures or videos of a situation, and deliver them to remotely located experts for real-time virtual collaboration and problem-solving. With less time driving and ubiquitous access to information, experts and education can help minimize or prevent accidents that can be costly in terms of lost time, potential liability and impact on safety record. Lastly, and equally important is the fact that workers can stay connected with friends and family while they work remotely – increasing job satisfaction and reducing costly employee turnover.
The bottom line The positive impacts of using technology effectively in the oilfield are easily measured, quantitatively in terms of increased production and improved efficiency, and qualitatively in terms of improved worker safety and well-being. Most of these benefits from technology rely on the availability of a powerful, versatile and reliable network infrastructure. Major operators across the globe depend on Redline Communications to power their digital oilfields, as only Redline can deliver a wireless network solution powerful and flexible enough to power today’s digital oilfield, supported by a team of HSE-certified experts experienced in wireless and oil and gas operations. Multi-purpose and built for the most challenging locations and mission-critical applications, Redline networks are designed and delivered as an end-to-end operating network, specifically tuned to the unique requirements of each oil and gas customer – networks that are powerful, reliable and secure with a measurable return on investment. Redline has delivered the most advanced and fully functional networks to some of the world’s largest oilfields, and to major and super-major oil industry operators. Rugged and reliable enough to operate without fail in the cold of Alaska, in the heat of the Middle East and in the rain of South America, Redline’s multi-purpose wireless networks have become the gold standard for wide-area industrial field communications in the oil and gas industry by enabling digital oilfields and offshore assets across the globe. For more information about wirelessly enabling your digital oilfield, please visit www.rdlcom.co
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Design and manufacture of high integrity fire and blast doors, windows, modular wall systems and escape tunnels. Originally established in 1873 and based in Greater Manchester, United Kingdom, Booth Industries is a wholly owned subsidiary of the Redhall Group plc. Operating globally with over 50 years’ experience in the offshore oil and gas market Booth Industries have built up an excellent reputation as a leading world-class designer and fabricator of performance certified high Integrity fire and blast products and service
Booth Industries Limited, PO Box 50, Nelson Street, Bolton BL3 2AP Telephone: +44 (0)1204 366 333 Fac
Analysis and Design Consultancy Fire and Blast Doors and Windows Prefabricated Modular Fire and Blast Walls Escape Tunnels and Modules Repairs and Maintenance Providing the highest quality of analysis, design, engineering, manufacture and project management expertise. Product certification to the highest of UK, European and International Standards including:
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What $48 oil means for the oil & gas industry’s staff and employers By Tobias Read
O
nly six months ago, engineers were as valuable as the oil they found. A year ago, most pundits were forecasting predictable $100 oil; even the more pessimistic voices were only anticipating a low point of $80. The industry’s employment market remained buoyant and the salaries and contract pay rates of oil & gas workers continued to rise. Having spent years building their talent pool to gain a competitive edge, industry employers do not want to give up such a valuable asset. Lay-offs seem like a logical response to a market downturn, however, as staff costs, both direct and contingent, are a major cost burden; the substantial focus they’re receiving is understandable as profits are squeezed. For employees, rate reductions are always difficult to swallow. The natural inclination to jump ship and look to sustain income with a change of employer is equally understandable. But whether you’re an employer or employee, there are a few things you should consider before you make plans over the next six months.
The situation is highly unpredictable
The market has changed. Today the price of oil stands at $48, and it’s very difficult to anticipate what tomorrow will bring. Even the root cause of low oil prices is unclear. There are too many moving pieces in the industry for politicians to seek to control this market indefinitely. Saudi Arabia, whose actions are always difficult to anticipate, has raised production and helped cause the price drop. They are now suffering as badly as anybody and recently they
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“CEOs must find ways to reduce cost without undoing years of hard work building sustainable workforces�
announced public spending cuts of 18 percent. Given the Saudis could single-handedly reverse production, and likely be better off as a result, the cause of all this may well be geo-political and the ride may be harder and longer than we expect.
When change comes, it may come very quickly
The world consumes 90 million barrels of oil per day and production is at 91 million. With substantial production profitable at over $60, particularly in the newly developed US unconventional onshore fields, we only need a marginal correction in the supply side of the equation and prices will rise again. We just can’t be sure when, given that many recent investments are still coming on-stream. There are extreme possibilities. Three months ago, smart managers were developing contingency plans to accommodate the drop to $80. These plans have now been torn up and re-written many times. Goldman Sachs recently projected a floor at $39. By comparison, the inflation adjusted low of 1999 (just 16 years ago) was $28, and the inflation adjusted price between 1945 and 1973 remained at around $20. Given the structure of the market today, these prices seem fantasy; however, business leaders are now looking at covering all bases.
Upstream & downstream markets are different
Onshore unconventional investment is falling, and the US is losing some 60 rigs per week. In the mid-term this will lead to a softening of demand for people, and employment opportunities will fall unless there is a rapid correction to $60 and market gains confidence that the price will return
to $80 and beyond. By contrast, the downstream and midstream markets are not affected. If anything they are counter cyclical and could benefit. But the decision-making process is too long and the skill sets are not sufficiently compatible to accommodate any substantial downswing in the upstream market. CEOs must find ways to reduce cost without undoing years of hard work building sustainable workforces, or getting caught short should the market return. It would be foolhardy to cut headcount too quickly with a potential rebound around the corner. Smart employers are also looking to rapidly consolidate their supplier base to remove expensive, non-compliant suppliers and to achieve substantial cost reductions. There is fat to be trimmed in their staffing supply chain and employers should look at these options before looking to downsize valuable staff. The workforce will have to accept that market rates will drop this year. While this is not an exciting prospect, we all understand that there are ups and downs. Reductions in contract rates and hiring freezes on internal staff would have been unthinkable only six months ago. Today they are very much a reality. Rates will inevitably undergo some downward adjustment at certain points. My current recommendation to employees, either contract or direct, is to sit tight. Better to have a job than to walk outside without a jacket at the very moment a storm hits. Tobias Read is the CEO of Swift Worldwide Resources, a world leader in oil & gas staffing with thousands of employees across the global industry.
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