SHALE Oil & Gas Business Magazine May/June 2016

SHALE MAY/JUNE 2016

SPURRING ENERGY EDUCATION DAY WITH STEER AND SPURS CONOCOPHILLIPS AND HALLIBURTON COMMUNITY PROGRAMS ENERGY INDEPENDENCE FROM OPEC NATIONS TEXAS RRC WELCOMES A NEW EXECUTIVE DIRECTOR

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INTERNATIONAL BUSINESS ISSUE

A NEW ERA

» INTERNATIONAL TRAVELER’S CHECKLIST

THE HUMANIST: ALEX EPSTEIN | DISPUTE RESOLUTION IN LATIN AMERICA MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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SHALE OIL & GAS BUSINESS MAGAZINE  MAY/JUNE 2016

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Specializing in oilfield supplies and service throughout the Eagle Ford Shale  Oilfield Experts specializes in machine parts and machine work (wireline, coiled tubing, fracturing and gun loading departments).  Providing a full line of automotive and truck parts and accessories (OEM and after-market parts).  We offer a full line of gauges, butterfly valves, complete line of tools (Proto Tools), filters, chemicals, gear oil and synthetic gear oil, silicones, hydraulic hoses and hydraulic fittings, starters, alternators (12 and 24 volt), serpentine and V belts, hydraulic motors, pumps.  We are open and provide hot shot services 7 days a week and 24 hours a day. 

Free delivery service with a quick turn around time.

 Oilfield Experts offers great service with affordable prices for all your oilfield, automotive, and mechanical needs. 

Hydraulic pumps, motors and relief valves

Exclusive Dealer for the Eagle Ford Shale Territory PYRICOAT: is an all-natural soil treatment application designed to inhibit the oxidation process of soil with harmful metals and minerals. By coating the soil with Pyricoat, minerals will be encapsulated, which will stop any liquids from further contamination such as coal mining runoff. This application has increased acidic waters PH levels from 3.4 to 6.5 for over three years now in alpha test in coal mining areas.

FECONTROL: is an all natural product used to binds, encapsulates and creates a carrier for iron sulfites and other damaging microscopic particles from crude oil. When applied to crude oil directly it reduces iron, sulfides and other corrosives by up to 93% when separated. Using this product will save downtime by reducing maintenance days by eliminating the corrosive iron sulfides from the crude before being introduced into the refineries. This application will also augment the existing downstream process of removing iron from crude oil.

RELOAD: is an all natural product use for treating frac and produced water.

This product creates a top layer of hydro Cardons in Frac or produced water.

This application is perfect for recovering oil from the formation fracturing process in the flow back and produced water will help in the recycling of the

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water for reuse in the formation fracturing process. ReLoad is most effective when introduce into holding tanks or holding ponds with a circulating pump.

ReLoad will also help keep out moisture when needed.

ReLoad is used on water for the separation of water and hydro carbons PREMIUM RELOAD: is an all natural product use for treating frac and produced water. This product binds and encapsulates the heavy metals including the damaging iron sulfites and keeps them from the oxidation process. The method reduces iron sulfates by 90% and makes the separation of solids from water more efficient. This product pushes the hydrocarbons to the surface while creating a layer of encapsulated metals. This application is perfect for recovering oil from the formation fracturing process in the flow back and produced water will help in the recycling of the water for reuse in the formation fracturing process. Premium ReLoad is most effective when introduce into holding tanks or holding ponds with a high turbulence application. Premium ReLoad also binds heavy metals in acidic water and helps eliminate corrosive effects.

Premium ReLoad is use on water for inert effect on heavy metals.

Clint Schweers / oilfieldexperts@gmail.com  MAY/JUNE 2016 13611 U.S. Hwy 181 S., San Antonio, Texas 78223 / (210) 471-1923

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AEP Texas: Your Business Partner in Shale Oil & Gas Extensive shale oil/gas reserves are located in and around geographic areas that align with the AEP Texas electric delivery service territory. Let the AEP Texas service team assist you with timely information regarding the location, capacity and availability of AEP Texas facilities.

To request electrical service or gain access to a certificated planning map, please complete the information request form located at www.AEPTexas.com/shaleoilgas Contact: Bradley Lenz 361-881-5455 bhlenz@aep.com

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SHALE OIL & GAS BUSINESS MAGAZINE ď “ MAY/JUNE 2016

John Longoria 361-881-5867 jflongoria@aep.com

www.AEPTexas.com/shaleoilgas @AEPTexasEconDev

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MAY/JUNE 2016

CONTENTS

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FEATURE

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A New Reality: Energy Independence

COVER STORY

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Howard Energy Partners’ two new projects will connect Texas producers to the Mexican market in a revolutionary way.

INDUSTRY

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The Defining, Imminent Moment for Debt-Fueled U.S. Shale Players

POLICY

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COVER AND TABLE OF CONTENTS PHOTOGRAPHY BY: MICHAEL GIORDANO

INDUSTRY

26 Alex Epstein: The Humanist 29 Spurring Energy Education 30 Eagle Ford Transforms Equalizer 32 PESA Concludes Enhanced Foreign

Service Officer Training Program 34 Central Bankers Flying High on Debt Fuel 36 Two Cities, Different Outcomes 38 Breakthrough for Women in International Business

POLICY

42 Oil of Olé: Mexico’s Energy Reforms

BUSINESS

46 Dispute Resolution in Latin America

LIFESTYLE

50 Aromatic Massage Therapy 52 International Traveler’s Checklist

COMMUNITY

56 Supporting the Next Generation of Leaders 58 ConocoPhillips Awards $191,000 in Grants to Eagle Ford-Area Organizations

SCENE

60 March/April Cover Party 61 Oil Barons Ball 62 Spurring Education Energy Day 62 Houston Energy Breakfast

The Railroad Commission of Texas Welcomes a New Executive Director, Kimberly Corley

BUSINESS

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LNG: The Emergence of a New Global Market

LIFESTYLE

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Dorothy Hood (1918–2000): International Artist From Texas

COMMUNITY

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OHH South Texas Chapter to Hold First Fundraiser MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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ADVISORY BOARD

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Omar Garcia Senior Advisor

bradley h. lenz

Thomas Tunstall, Ph.D.

As President and CEO of the South Texas Energy & Economic Roundtable (STEER), Omar Garcia is an expert on business opportunities associated with the Eagle Ford Shale. He works with the oil and gas industry, local officials, community members, regional stakeholders, educational institutions and economic development organizations to ensure that the oil and natural gas industry in South Texas is advancing in a positive way that is beneficial to both the community and the industry. Garcia has more than 12 years of economic development experience, and he spent two years working for Bank of America as Vice President of Business Development for the bank’s treasury management division. He is a certified economic development finance professional through the National Development Council, and he graduated from St. Edward’s University with majors in international business and Spanish. In 2010, Gov. Rick Perry appointed Garcia to the Texas Economic Development Corporation.

Bradley H. Lenz is the Director of Economic and Business Development at AEP Texas. As Director, he oversees the company’s economic and business development operations, including oil and gas operations. This activity extends throughout the AEP Texas service territory. Previously, he was the Operations Support Manager of the Electric Distribution System of AEP Texas.

His responsibilities included resource planning and managing the electric distribution budget, back-office functions and annual storm restoration drill to prepare for hurricanes and other major natural disasters. Prior to operations support, Lenz held several management positions with AEP Texas and the former West Texas Utilities Company. Lenz began his career in 1991 with West Texas Utilities in Abilene as an Engineer in marketing, focusing on commercial customers. Prior to that, Lenz was a cooperative student with TXU Electric. Lenz earned a bachelor of science degree in electrical engineering from Texas A&M University in College Station and has completed the Ohio State University Leadership Development program.

Thomas Tunstall, Ph.D., is the Research Director for the Institute for Economic Development at the University of Texas at San Antonio. Previously, he was a Management Consultant for SME and the Component 1 Team Leader for the Azerbaijan Competitiveness and Trade project. Tunstall also served as an Advisor Relations Executive at ACS and was the founding Co-chair for the Texas chapter of the International Association of Outsourcing Professionals (IAOP).

He has published a business book titled Outsourcing and Management (Palgrave, 2007) and was the technical editor for Outsourcing for Dummies (Wiley, 2008). Tunstall has consulted in both the public and private sectors.

In 2005, he completed a long-term assignment in Afghanistan, where he was Deputy Chief of Party for a central bank modernization project. In 2006, he taught Ph.D. candidates in a business and government seminar at the University of Texas at Dallas.

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LOCATIONS IN TEXAS

1 GOAL - YOUR TOTAL SATISFACTION FLEET SALES AND SERVICE • PICKUP AND DELIVERY ALVIN BAILEY | ABAILEY@KAHLIGAUTO.COM | 830-480-3656 The Kahlig Auto Group are Minority Owner Dealerships MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE 11

PUBLISHER’S NOTE OIL & GAS BUSINESS MAGAZINE VOLUME 3 ISSUE 3 • MAY/JUNE 2016

Welcome to our international business issue!

This issue of SHALE brings you news and coverage on global energy and business issues that affect us all. One thing we must all remember, and I am guilty of this myself, is that we are members of a global community and some issues are greater than Texas and the U.S. There is something happening around us that affects the global community significantly: the current presidential election. The next U.S. president will have a great impact on our energy sector. It’s crucial that an energy-friendly nominee takes office to ensure we continue to grow our industry here and our exporting opportunities and abilities. So, I ask that all our SHALE readers and followers do your research and then vote. Know who you’re voting for and why, and then do it!

On a separate note, I am so proud to announce that SHALE has created and intends to host a new oil and gas advocacy group: Texas Energy Advocates Coalition, or TEAC. This advocacy group will help to support the energy sector through social events, educational programs, petitions and more. We will be holding regular meetings to discuss energy-related topics and to promote networking within our community of energy supporters. And when the legislature decides on bills that affect the petroleum industry, we will be there to voice the opinion of the coalition as energy advocates.

We are currently scheduling our first meeting. Please stay up-to-date with SHALE by following our social media accounts on Twitter (@Shalemag) and Facebook (facebook. com/shalemagazinetexas), and through our semimonthly newsletter, which you can register for at shalemag.com.

KYM BOLADO

CEO / PUBLISHER CHIEF FINANCIAL OFFICER Deana Acosta

EDITOR IN CHIEF Lauren Guerra

ART DIRECTOR Elisa G Creative

COPY EDITORS

Katie Buniak, Maegan Sheppard

VICE PRESIDENT OF SALES Liz Massey Kimmel

ACCOUNT MANAGERS

Susan Brown, Kristy Sommers

ONLINE CONTENT MANAGER Fernando Guerra

SOCIAL MEDIA DIRECTOR Courtney Boedeker

CONTRIBUTING WRITERS

Leslie Shockley Beyer, David Blackmon, Courtney Boedeker, Leigh Ganchan, Omar Garcia, Lauren Guerra, Bill Keffer, Jock Pool, David Porter, Neil Schmeichel, Mike Sizemore, W. Thomas Smith Jr., Charles Tormo, Thomas Tunstall, Sen. Carlos Uresti

STAFF PHOTOGRAPHER Malcolm Perez

KYM BOLADO

CEO/Publisher of SHALE Oil & Gas Business Magazine kym@shalemag.com

CONTRIBUTING PHOTOGRAPHER Michael Giordano

www.shalemag.com For advertising information, please call 210.240.7188 or email kym@shalemag.com.

SHALE OIL & GAS BUSINESS MAGAZINE MISSION STATEMENT:

SHALE Oil & Gas Business Magazine is a statewide publication that showcases the dynamic impact of the Texas energy industry. The mission of SHALE is to promote economic growth and business opportunities and to further the general understanding of how the energy industry contributes to the economic well-being of Texas and the United States as a whole. SHALE’s distribution includes industry leaders and businesses, service workers, entrepreneurs and the public at large.

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For editorial comments and suggestions, please email lauren@shalemag.com.

SHALE MAGAZINE OFFICE: 5600 Broadway Ave., San Antonio, Texas 78209 For general inquiries, call: 210.240.7188 Copyright © 2016 Shale Magazine. All rights reserved. Reproduction without the expressed written permission of the publisher is prohibited.

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 FEATURE

A New Reality: Energy Independence By: David Blackmon

N

one of what I’m about to write in this piece will have any relevance during the remainder of the current administration, as we have a president in office who neither values nor employs the strategic advantages a healthy domestic oil and natural gas industry provides to the United States. But, barring the unlikely election of Democratic candidate Bernie Sanders, it is likely the next president will care about international strategic considerations.

In late March, two headlines dominated the oil and gas-related news. The first, a USA Today article titled “Largest U.S. Refinery Now Belongs to Saudi Arabia,” heralded the deal between Saudi Aramco and Shell that awarded sole ownership of the Motiva Refinery near Port Arthur, Texas, in exchange for other assets and considerations. The refinery had previously been owned jointly by the two companies. Not that big a deal in and of itself for the U.S. government and general public.

But the second headline was more troubling: “Saudi Aramco Aims to Buy More U.S. Refineries,” Reuters reported. This is a headline that the U.S. government should work to prevent from becoming reality.

I’ll tell you why.

For the last 70 years or more, the United States has had a compelling, strategic national interest in ensuring the free flow of oil through the Strait of Hormuz in the Persian Gulf. Our country has

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been unable during that time to meet its domestic oil consumption demands without importing large quantities of crude from foreign sources, including Middle Eastern nations like Saudi Arabia. As we saw in the 1970s, when the Saudis and other OPEC nations twice created artificial disruptions in the flow of their oil to the U.S., a lack of adequate oil supply invariably creates major shocks to our country’s economic health.

Thus, for the better part of the last century, we have remained vulnerable to the whims of the various dictatorial regimes that have ruled over that region of the world. This vulnerability has led in turn to all sorts of inadvisable U.S. involvement in all manner of wars and conflicts that our country would have otherwise stayed out of, all in the interest of protecting the flow of oil through the Strait of Hormuz.

Unfortunately, we had little other choice for many years, as our need for imported oil for many years constituted more than half of our daily consumption, peaking as high as 65 percent from 2006 to 2007.

But then, along came shale.

As our domestic industry’s ability to extract crude oil from gigantic shale formations that underlie much of the country has ramped up, U.S. dependence on imports from other countries has diminished dramatically. So dramatically, in fact, that the U.S. Energy Information Administration (EIA) issued a report in February indicating that imports amounted

SHALE OIL & GAS BUSINESS MAGAZINE  MAY/JUNE 2016

to just 24 percent of U.S. oil consumption during the 2015 calendar year, the lowest level in many decades.

Given that the country’s overall crude consumption hovers at around 20 million barrels per day, this means that the U.S. imported a bit less than 5 million barrels of oil per day last year. This new reality has received scant attention in the mainstream news media, since

We have reached a true paradigmshifting moment in our history — if we are smart enough to take advantage of it the Obama administration has essentially ignored it outside of the EIA report; but this means that the country has crossed a critical new threshold in recent years, thanks to the new abundance that shale oil provides us.

That threshold is this: The United States no longer needs, as a strategic matter, to import crude oil from Middle Eastern nations, like Saudi Arabia. Given the right set of policy decisions in a new presidential administration, this country could easily import 5 million barrels of oil per day from Canada, Mexico, Venezuela, Brazil and other oil-producing countries in the Western Hemisphere. We have reached a

true paradigm-shifting moment in our history — if we are smart enough to take advantage of it.

Again, our current president obviously doesn’t care about this reality — indeed, he seems to relish involving the U.S. in more and more entanglements in the Middle East, as evidenced by his needless and feckless interference in a civil war in Syria.

But a new president will hopefully have the presence of mind and seriousness as a leader to grasp this new reality and take advantage of it.

A new president could begin to take advantage by immediately approving the Keystone XL pipeline, which would enhance our ability to import more crude from Canada. This is a decision that any serious president would have taken long ago.

for the better part of the last century, we have remained vulnerable to the whims of the various dictatorial regimes that have ruled over the middle east A good next step would be to place a hold on the EPA’s onslaught of new regulations and conduct a review of everything it has issued over the last two years, as the bureaucracy there has engaged in a mad dash to cram as much economy-killing regulation as possible through the system before their time runs out. This hold and review should include, but not be limited to the Waters of the United States rule, the new ozone standards and the agency’s insane focus on methane emissions from the upstream segment of the industry, which constitutes no more than a trace element in overall greenhouse gas emissions. It should also include a look at similar kinds of limiting regulations that have been issued by the Department of the Interior in recent years.

Finally, a new administration should immediately undertake a review of whether it is in the U.S. national interest to allow ownership of a growing proportion of this country’s refining capacity by countries, like Saudi Arabia, whose governments regularly perpetrate human rights atrocities on their own people, and whose strategic interests are increasingly misaligned with our own.

It is a form of slow-motion national suicide to allow such countries to gain control of an increasing share of a segment of any industry that plays such a vital role in our national security.

Ownership of Motiva alone gives Saudi Aramco control of about 3.5 percent of overall U.S. refining capacity today. There is no good reason why the government should ever allow that share to increase.

The ability to extract oil from shale has provided the United States with a once-in-a-generation opportunity. Protecting the flow of oil through the Strait of Hormuz, if taken advantage of by a new administration, could mean stopping the unrest back from that part of the world. A serious and thoughtful president would have been taking advantage of this new reality already.

Hopefully, the voters will elect such a president in November.

About the author: David Blackmon has spent 35 years in the oil and natural gas industry, in a variety of roles. He has spent the last 20 years engaged in public policy issues at the state and national levels. Contact David Blackmon at david.blackmon@shalemag.com.

Chemical & Petrochemical Downstream Oil & Gas Upstream MMR Constructors, Inc. (Corpus Christi, TX) 2033 FM 2725 • Ingleside, TX 78362 Phone: (361) 758-4019 • Fax: (361) 758-4020 Randy Pawelek Business Development (361) 877-3577

Specializing in Electrical & Instrumentation

www.mmrgrp.com/contact-us MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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COVER STORY

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AHoward NewEnergy Era: Connects Texas and Mexico Transporting oil and

natural gas in a seamless process By: Courtney Boedeker Photos by: Michael Giordano

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T

he Mexican Oil Expropriation of 1938 is an event as iconic in Mexico’s history as the Boston Tea Party or the Declaration of Independence is for the United States.

It was the declaration by President Lázaro Cárdenas that all mineral and oil reserves found within Mexico belonged to the government, ultimately a response to the culmination of feuds between union workers demanding better wages and work conditions and the oil companies who denied their requests.

As the story goes, Cárdenas took a thorough look at the books of the oil companies and decided that they were well-equipped to cover the financial needs of their workers. So when a compromise couldn’t be reached, Cárdenas played his trump card and sent all foreign oil companies packing. As a result, the Mexican state-owned petroleum company, Pemex (Petróleos Mexicanos), was born.

An international boycott of Mexican products followed, and the United States unleashed an aggressive public relations campaign against Mexico. Mexican finances suffered due to the boycott, but Pemex survived. In fact, international oil exports during World War II kick-started the company. Pemex quickly became one of the world’s largest oil companies, subsequently helping Mexico rank in the top 10 for oil exports in the world.

Today, another energy revolution is occurring in Mexico, this time in the form of the deregulation of Pemex. For the first time since the expropriation, the market is open to foreign companies, and Pemex’s new role is essentially just another oil company on the playing field.

With a rich and complicated history of relations between the U.S. and Mexico — and many differences in business practices, energy regulations and culture — it is not as simple as sitting down at the table to strike up a business deal. It takes a certain amount of respect and knowledge of those differences to forge ahead in the oil fields of Mexico.

BUILDING THE EMPIRE When Mike Howard and Brad Bynum cofounded Howard Energy Partners in 2011, they immediately set out to diversify the company’s assets across several areas of the midstream space, as well as expand across basins. The energy provider recently acquired more than 100 miles of gathering pipeline in Pennsylvania.

However, gathering and processing is only about 50 to 75 percent of the business. The rest involves liquids handling and processing further downstream.

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Howard Energy’s South Texas assets are vast. They include 700 miles of gathering pipeline, the Reveille cryogenic processing plant in Webb County handling 200 million cubic feet of gas per day, a new off-spec liquids stabilizer facility near Three Rivers, an industrial logistics railroad hub in Live Oak County, and more than 500,000 barrels of liquid storage capacity between two terminals in Brownsville.

A South Texas native, Mike Howard has always envisioned working with Mexico. With Mexico facing natural gas shortages during the past couple of years, the business opportunity to meet the supply demand was clear. “What’s good for Mexico is what’s good for South Texas,” he always says. Now, Howard Energy is well-positioned (with assets along the border) to expand into the neighboring country.

The company currently has two major crossborder pipeline projects in the works: one for natural gas and one for liquids. And Howard’s right-hand man for Mexico, Brandon Seale, is leading the way.

NOT YOUR AVERAGE GRINGO Brandon Seale is a bona fide gringo on the surface. To someone on the other end of a business call, he is a highly intelligent and intuitive businessman well-versed in the Spanish language and culture. He is quick to break down cultural barriers and make people feel at ease when talking with him. These important characteristics coupled with 13 solid years of experience working in Mexico landed him the current role of President of Howard Energy México, a wholly owned subsidiary of Howard Energy Partners.

Since his days in law school, Seale has had a fascination with Mexico and the history of oil and gas regulation. One of his proudest accomplishments was co-founding the Texas Journal of Oil, Gas, and Energy Law while at The University of Texas at Austin School of Law. “It’s fascinating to compare the effects of regulation in Texas vs. the effects of regulation in Mexico and the outcomes they have produced,” he says. “It’s almost a perfectly controlled case study because the geology and the terrain [don’t] change, but it’s also an important analysis of how different countries can regulate the same resource toward different ends.”

Seale’s work in Mexico started in 2003 with Lewis Energy Group. Serving as Construction Superintendent for Mexican operations and Director of International Projects, Seale gained his first exposure to making deals with Pemex and learning the Mexican regulatory system. He lived in Monterrey, Mexico, from 2003 to 2004 and even studied at the Monterrey Institute of Technology and Higher Education (Instituto Tecnológico y de Estudios Superiores de Monterrey). After seven years with Lewis Energy Group, Seale embarked on

his own journey as business owner of a small production company, Zaragoza Resources.

He successfully sold his production in 2013 and began working on Mexican projects with Howard Energy.

Moving from the upstream to midstream sector has certainly given Seale a new perspective on energy operations. “Upstream engineering is fascinating because it requires making complicated decisions in the face of immense uncertainty. The variables in midstream projects are much better known, but that allows us to transform the molecule in much more complicated ways. We have found that one of the most effective ways for us to add value is through these processes, and so we are a process-oriented company with a strong chemical engineering focus.”

CREATING VALUE IN THE MIDSTREAM SPACE Seale explains that there are three fundamental ways in which Howard Energy creates value for its customers in the midstream space.

The first is finding a way to improve logistics. “If today you’re going from point A to B to C, let’s figure out how to draw a straight line from A to C,” Seale says.

Second is transforming the molecule, for example, by splitting an unstabilized condensate stream into three separate marketable products: condensate with a Reid vapor pressure of 9–11 pounds per square inch, y-grade natural gas liquids (NGLs) and rich gas at Howard’s condensate stabilizer in Live Oak County. Or by moving rich field production through a cryogenic gas processing plant and stripping out the heavier hydrocarbons, as at Howard’s Reveille cryo plant in Webb County.

The third way of creating value for customers is what Seale is tackling now — creating new markets, like in Mexico. “For example, when we bought the Webb County gathering system here in South Texas,” he explains, “it only had one delivery market. All the producers were delivering to one point, to one customer, so they were captive in a sense.

So to find ways to enter into new markets, interconnect to new systems or create totally new markets like we’re doing in Mexico, you can create more opportunity for your producers, which also means more activity for us as their logistics and midstream provider.”

NUEVA ERA The objective of Nueva Era, the first of two major pipeline projects Howard Energy has announced, is straightforward. Today, Mexico is importing approximately 3.5 billion cubic feet of natural gas per day; and by the time the pipeline goes into service, that number could

SEALE EXPLAINS THAT THERE ARE THREE FUNDAMENTAL WAYS IN WHICH HOWARD ENERGY HAS MADE IMPROVEMENTS IN THE MIDSTREAM SPACE

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PHOTO AND MAPS COURTESY OF HOWARD ENERGY

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PART OF OUR SERVICE IS FINDING A WAY TO MAKE THE REGULATORY REGIMES WORK TOGETHER IN A SEAMLESS FASHION.”

go up to as much as 6 or 7 billion cubic feet, Seale explains. Howard Energy is creating an opportunity for Mexico to directly access field production in Texas for the first time ever.

“You have the most prolific gas-producing county in Texas, Webb County, that produces nearly 2 billion cubic feet per day of natural gas,” Seale explains, “and you have the largest point of consumption of natural gas in northern Mexico, Monterrey, which is probably the most industrialized city in Latin America, not just Mexico 1.5 billion cubic feet of natural gas is consumed or passes through Monterrey each day, and that number is only going up. So going back to that first method of value creation, why can’t we just draw a straight line to connect these?”

The project will have a huge impact on both sides of the border. A few years ago, Mexico was facing severe natural gas shortages. Pemex was importing liquefied natural gas (LNG) to its Pacific Coast and paying as much as $20–$24 per thousand cubic feet (MCF), while producers in South Texas were struggling to get $3 per MCF for their natural gas.

With the Nueva Era pipeline in place, a direct route for Texas producers to send gas to Mexico without routing through Houston and other intermediary pipelines is now available.

It cuts out a huge portion of transportation that producers have to pay for and creates more market options for them.

On the Mexican side, it’s a considerable change in the way business is done in general.

“In the past, gas station operators in Mexico bought their gasoline essentially the same way they bought their Twinkies. You call Hostess for Twinkies to get delivered and you call Pemex when you want your gasoline delivered. But you’re not fundamentally having to worry about underwriting long-term infrastructure and things like that, because Pemex took care of all of that. And Pemex should get a lot of credit for that, too, because it was a

major service and a subsidy that they provided for a long time to a lot of consumers in Mexico. That’s a major change that’s going on right now,” Seale says.

The scope of the Nueva Era project will have a significant impact on jobs as well. Coming down from Howard Energy’s Webb County system, 190 miles of 30-inch pipe will tie into two points in Monterrey. Seale reports, “We have awarded the pipe order to a local company. All of the pipe and steel in Mexico will come from Mexico.” The process was the same for selecting construction contractors. “We’ll use two companies for the Mexican side and one for the U.S. side.” In total, Howard Energy expects to create approximately 200 direct jobs during construction and about a dozen after construction is complete.

In addition to the direct jobs created, Seale notes, “Demand has been artificially suppressed in the Monterrey market for decades because of shortages and the lack of consistency in pricing. Pricing wasn’t based on market pricing, which already has enough volatility baked into it, and it made it difficult for banks to finance any long-term investments. Also, Pemex and Mexico heavily subsidized competing fuels like fuel oil and liquid propane, and now as you’re moving away from subsidies into an open market, we think the actual demand for natural gas is only going to build on itself. In terms of job count, especially for Monterrey, it’s going to make them the most competitive gas market in Mexico, which gives them a competitive advantage from a commercial standpoint, from a manufacturing standpoint, and it yields a whole bunch of indirect jobs that are impossible to quantify.”

Nueva Era received an essential piece of approval, its presidential permit, in May 2015, to construct, operate and maintain border-crossing facilities. Furthermore, in October of 2015, the Comisión Federal de Electricidad (CFE) signed up as the anchor shipper for 25 years, with 504 million cubic feet per day on the pipeline. The one-year construction process is set to begin this summer. By June 2017, the pipeline will be flowing South Texas natural gas to Monterrey.

“It’s a thrilling project,” Seale proudly reports. “As someone who’s spent his whole career in this part of the world, to get to tie it all together like this is a dream come to life.”

DOS ÁGUILAS The second pipeline project, dubbed Dos Águilas, or “two eagles,” after the national symbols of both countries, is a liquids pipeline project due to be in service by the middle of 2018, about one year after Nueva Era. The project will consist of approximately 287 miles of of 12 inch pipeline connecting the refineries in Corpus Christi with markets in Monterrey.

In Corpus Christi, refineries have the capacity to process approximately 800,000 barrels per day. There is a seasonal 75,000 barrel-per-day deficiency, depending on seasonality, for refined products in general for northern Mexico, a market that is only growing. Rather than transport by rail, truck or barge, the most efficient way to meet the demand over the long term is to move it by pipeline. As an added bonus, this method is undoubtedly more environmentally safe.

The idea is to connect the refining system in Corpus Christi with markets close to and across the Mexican border, as well as move three different products (ultra-low sulfur diesel, regular gasoline and premium gasoline) through the pipeline to three different delivery points: Laredo on the U.S. side, Nuevo Laredo across the border and down to Monterrey.  MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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BECAUSE OIL AND GAS HAS SUCH AN OUTSIZED ROLE IN MEXICAN HISTORY AND IN THE MEXICAN ECONOMY, IT MAKES THE STAKES HIGHER.” Liquids pipelines are more heavily regulated in both the U.S. and Mexico, so the project has been a complete immersion in regulatory compliance and dealing with a post-reform system in Mexico. It is innovative in that it is the first attempt to merge the U.S. and Mexican regulatory systems into one process.

It has been an opportunity for Seale and the Howard Energy team to not only apply some of their longtime experience of doing business in Mexico, but also pave the way for how it is going to work moving forward. “Part of our service is finding a way to make the regulatory regimes work together in a seamless fashion.

At the end of the day, that’s the biggest selling point that we have to our customers ... that

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we’re crossing an international border but they’re not going to notice.”

Until May 23, Howard Energy is running a simultaneous U.S. Federal Energy Regulatory Commission (FERC) conforming open season and a Mexican Comisión Reguladora de Energía (CRE) authorized open season. An open season is a regulatory requirement and formal process in which you can start to market your service, and customers can approach you with interest in having capacity on the pipeline. The process allows all interested shippers equal access to the project on non discriminatory terms.

The job impact will be similar to Nueva Era during construction, but it will actually have

more of a long-term impact; at these terminals, you simply need more people. Seale explains that the process is more labor-intensive and hands-on.

A DIFFERENT PERSPECTIVE “Doing business in Mexico is hard,” Seale admits. “It’s a very different system from Texas, even though in many ways northern Mexicans and South Texans are the exact same people: They both wear boots, they both hunt, they both eat copious amounts of beef.

They have all the same vices and virtues, but

they come from very different business and legal traditions.” That is why Howard Energy’s strategy has focused on hiring people with experience, and their team’s many lifetimes of experience working in Mexico is what has driven their success to date. “No matter how well-intentioned or hardworking you are, if you haven’t ever worked in Mexico and don’t know the right people to be talking to, you can get lost. You can go broke very quickly in Mexico having good meetings and not really moving the project along.”

Doubts linger for many U.S. companies as to how welcoming Mexico will be to foreign investments following the 2013 Mexican Energy Reform, but Seale speaks glowingly about his experience working in Mexico. “I’ve always had a great experience working in Mexico, especially with Pemex, and many of the people I dealt with 10 years ago are still the ones I’m dealing with today.”

Seale recently launched a podcast on the history of oil in Mexico. His program, “El Petroleo es Nuestro: A History of Oil in Mexico,” delves into topics such as why oil has such an iconic role in Mexico and how that played out in its own interesting and unique ways (and some not so beneficial ones). “All the perceptions people have come from somewhere. So I set out to try to study that in more detail, to go out and read all the primary sources and some great secondary sources in Mexico.”

Also interesting to Seale is how his experience working in Mexico has made him reflect on his own country. He admires Mexicans’ ability to grasp and appreciate the impact that large infrastructure projects have on their economy. “Because oil and gas has such an outsized role in Mexican history and in the Mexican economy, it makes the stakes higher. Regular people in Mexico care about oil and gas infrastructure projects in a way that even the most well-informed people in the U.S. don’t. A lot of what we do in the energy business gets taken for granted in the U.S. in a way that it doesn’t in Mexico,” he states.

THE OPPORTUNITY AHEAD Even in the wake of a depressed market, Seale sees opportunity for Howard Energy. If anything, he explains, low commodity prices help infrastructure projects like Nueva Era and Dos Águilas because they are driven by demand, whereas the drill bit drives the gathering business. Projects like these, he says, make it easier for consumers to use more — they encourage consumption.

Seale describes the oil industry in the United States as “shockingly efficient.” He explains that it takes a lot of capital to be able to optimize to the degree, for example, that

U.S. refineries have. “It’s a unique virtue of the American energy industry that we have this kind of specialization,” he says. From an infrastructure standpoint, there is a huge opportunity in Mexico. For example, Texas has approximately 250,000 miles of gathering and interstate transportation pipeline, where Mexico falls far behind with less than 25,000 miles in-service.

It isn’t because there is less petroleum in Mexico, though, Seale says. “If you listen to my podcast, some of the most prolific wells ever drilled were in Mexico. Cantarell Field [was] the second-largest [producing] oil field ever discovered, only behind Saudi Arabia’s Ghawar Field. It’s a testament to what a unique opportunity it is to work in Mexico’s oil fields.”

»

For more information on Howard Energy, visit www.howardenergypartners.com.

To learn more about the Nueva Era and Dos Águlias pipeline projects, visit www.pipelinenuevaera.com and www. dosaguilaspipeline.com. Brandon Seale’s podcast, “El Petroleo es Nuestro: A History of Oil in Mexico,” can be found on iTunes at itunes.apple.com/us/ podcast/petroleo-es-nuestro-history/ id1078689026?mt=2.

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INDUSTRY

THE DEFINING, IMMINENT MOMENT FOR DEBT-FUELED U.S. SHALE PLAYERS By: Neil Schmeichel

● At the apex of U.S. shale drilling in October 2014, U.S. producers employed an additional 1,173 oil drilling rigs to realize incremental output that peaked at 4.3 million BOPD, which implies an incremental per rig production of a meager 3,648 BOPD. ● Aggregate U.S. production peaked at 9.8 million BOPD in March 2015, lagging the drilling cycle peak by six months as inventories of previously drilled wells continued to come on stream. This created a veneer that shale production was substantially more resilient than first thought.

A DOWNWARD TREND AND MISLEADING HEADLINES The onslaught of supply lit the fuse on a Saudi Arabian-led price war in June 2014, driving WTI prices as low as $27 a barrel by January 2016.

Shale producers, saddled with debt service requirements equal to 50 percent of operating cash flow when WTI traded at $100, scrambled to reduce costs as prices plummeted.

Drilling and completion contractors capitulated and cut profit margins, but eventually exploration and production companies were forced to slash capital expenditure (capex) and stop drilling. The continued downward trend in crude prices saw producers’ debt service requirements swell to a staggering 83 percent of operating cash flow as oil prices fell through the $40 range according to September 2015 data from the U.S. Energy Information Administration (EIA).

Despite OPEC’s refusal to slow production, global active average rig counts continue to fall:

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A ROCKY FOUNDATION Prior to 2009, when the shale boom was in its infancy, U.S. oil producers employed a fleet of approximately 418 drilling rigs as they struggled to strengthen a long-declining domestic production trend at 5.5 million barrels of oil per day (BOPD). The shale revolution, as it is commonly called, exploited technology that was capable of unlocking previously uneconomic oil reserves trapped in low-permeability shale rock. This was accomplished through a combination of horizontal drilling and multistage hydraulic fracturing techniques.

For many producers, the shale revolution contributed to the exploitation of lenders willing to give them cheap access to a great deal of debt. As a result, a cyclonic pace of drilling activity was funded and the U.S. domestic crude production level skyrocketed to 9.8 million BOPD in just five years.

● Consider that a fleet of 418 oil drilling rigs operating in 2009 maintained a production level of 5.5 million BOPD, which implies a sustainable productivity on a per rig basis of 13,277 BOPD.

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*Baker Hughes Worldwide Rig Count, March 2016

News headlines frequently cite massive crude inventory levels, but this should be viewed in context. Global consumption levels that are at all-time highs warrant inventory levels at all-time highs. Expressed in days of consumption rather than absolute terms, and considering the incentives for refiners to fill storage at historically low prices, inventory levels might be better described as fat, but not obese.

This figure illustrates U.S. crude oil inventory, expressed in days of domestic consumption: PHOTOS COURTESY OF NEIL SCHMEICHEL

he debt-fueled game of musical chairs prevalent within the U.S. shale industry has contributed a significant portion of the additional 4.3 million barrels of crude oil produced per day. And in the very near future, crude oil production is set to experience a dramatic climax.

Producers, many of whom have borrowed three to four times their annual revenues to sustain their production streams, are about to come face-to-face with the laws of physics in the form of massive shale reservoir decline rates.

WAITING OUT THE STORM There is little doubt among the well-informed that the oil price crash has found a bottom. There is also little doubt that a recovery will take some time.

Increases in commodity prices will continue to be restrained by high inventory levels, and sluggish global GDP growth will limit consumption growth to 1.2 million BOPD in 2016. Continued aggressive global capex reduction promises to bring a market marginally oversupplied by 1.5 million barrels back to balance.

Conventional wisdom dictates that prices will rise over time, and the U.S. shale industry will recover. Active U.S. oil drilling rigs have fallen to pre-shale boom levels, and U.S. production is off 825,000 BOPD — 8.4 percent — from the peak in March 2015.

U.S. producers have gone into survival mode to wait out the storm, working vigorously to reissue existing debt with longer maturities, issue new debt or equity to raise cash and, most importantly, eliminate capital spending and service their debt requirements by shuttering drilling programs.

It is at this juncture that over-leveraged players prepare to meet the proverbial “three-headed monster”: 1) The Eagle Ford and Bakken Formation, two of the most prolific U.S. shale deposits, have proven decline profiles that suggest 75 percent of recoverable resources are depleted within the first 12 months of production and a further 50 percent in the second 12 months.

Applying this decline profile to the incremental shale production at the peak of U.S. production, it is apparent that the marginal 8.4 percent decline in U.S. domestic production from the peak in March 2015 is but a harbinger of the onslaught of production declines to follow.

Over the first 12 weeks of 2016, U.S. production decline accelerated to 0.2 percent per week and will gain momentum as production offsets diminish from drilled but uncompleted well inventories.

This figure overlays the Baker Hughes rotary oil drilling rig count with the EIA reported daily U.S. domestic production and extrapolates a decline profile derived from the Eagle Ford Shale.

2) Simultaneously, debt-ridden and cash-starved shale producers are forced to liquidate their production at rock-bottom prices in an effort to meet operational and current debt service requirements.

With no new well completions to bolster future supply, highly leveraged firms face a dire future as their source of cash and debt security depletes at an alarming rate.

3) Lengthening maturity dates on increasingly expensive junk-rated bonds exacerbate the shale industry problems. The ability to repay longer, dated debt continues to be eroded by ever-increasing carrying costs and rapidly diminishing supplies of saleable commodities at higher future prices.

By extension, these same companies’ ability to issue the new debt required to restart the hyper-intensive capex merry-go-round and drill new wells will be impaired when prices eventually rise.

The above figure illustrates junk bond yield by industry category.

WHEN THE MUSIC STOPS AND THERE’S ONLY ONE CHAIR LEFT With no additional drilling, the rate of decline could see the U.S. supply reduce by 2 million BOPD in 2016. This would be bullish news for a beleaguered global oil industry in desperate need of sustainable, highercommodity prices.

The dynamic of an increasingly impaired credit rating for an industry that relies heavily on debt to generate new production undercuts the argument that shale production will come roaring back at the first sign of meaningfully

higher prices. The so-called tap will not be easily turned back on, making a case for a higher than anticipated price ceiling for crude oil in 2016 and 2017.

Given the U.S. commitment to energy independence, it is likely that the turmoil within the U.S. shale industry is little more than a disruptive reset, not unlike the dynamics of the dot-com bubble of 2000 in the sense of a new industry

finding a sustainable path for the long term.

In the short term, a willingness to allow Peter to borrow more and more money to pay Paul will soon have everyone scrambling for the last chair when the music stops, creating new opportunities for firms with strong balance sheets and operating discipline.

For many producers, the shale revolution contributed to the exploitation of lenders willing to give them cheap access to a great deal of debt

About the author: Neil Schmeichel is a leader in coil tubing services for Western Canada’s oil and gas industry.

He is also President and General Manager of Balanced Energy Oilfield Services.

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INDUSTRY

Alex Epstein:

The Humanist It’s human nature to promote the well-being of mankind, isn’t it? Environmentalists don’t agree with transforming nature. They believe nature is perfect the way it is and any alteration by man is damaging. But what if altering nature is for the good of mankind? Is it OK then?

Many of us have become accustomed to modern lifestyles.

Sure, the Amish seem to fare well with no electricity and a horse and buggy for transportation. But for the rest of us who enjoy the leisures of a warm bath, bottled water, cell phones and motor vehicles, life would be infinitely harder and less enjoyable without these conveniences.

Energy is all around us, and the byproducts are used by each of us every day. Traditional energy, green energy, nuclear energy: They all play a role in our daily lives. While some believe there are superior forms of energy, others are led to believe these superior

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energy forms are without flaws. But to be well-informed on energy is to know the whole story, not just the pros of one form and the cons of another.

Alex Epstein, author of The Moral Case for Fossil Fuels, delves into these topics and more in his books, presentations and workshops. As a practical philosopher, Epstein promotes philosophical thinking to solve life’s most important issues.

It’s his philosophical thinking that has many oil and gas companies rallying behind his message: Transforming nature is good for you.

THE HUMANIST

Epstein’s philosophical thinking with regard to energy follows the humanist perspective. A humanist’s underlying goal is to improve and protect all human beings.

“The main idea is always to use philosophical thinking to clarify

KHUNASPIX/BIGSTOCK.COM

By: Lauren Guerra

“I encourage [SHALE] readers, who are likely sympathetic to my thesis, to share the ideas, the book, any form you choose, to people who oppose it, because it will either convince them or it will at least get that discussion going” and improve important areas of life,” Epstein explains. “My basic perspective, which is the humanist perspective, is the perspective that our goal is to maximize human well-being; and in order to achieve that goal, we need to embrace, not reject, our identity as transformers and improvers of nature.”

Transforming our environment to meet our needs for the betterment of humankind is not a foreign way of thinking, but many don’t connect this way of thinking to energy. In fact, the opposite way of thinking, environmentalism, has gained a lot of traction over the past few years.

“The humanist movement is counter to the environmentalist movement, which puts the environment above human beings. The environmentalist’s view is that we should minimize impact and that we have no right to transform nature. The core goal of my organization is to build a humanist movement, and part of that is to embrace our nature as transformers of nature,” Epstein says.

the basic assumptions on which any discussion is based. Now, the environmentalists have set the framework as nature should be prioritized as more important than human beings. That assumption is in almost every discussion unless you challenge it. There are different ways to [challenge that assumption], but the core is by establishing that your goal is to maximize human well-being,” he notes.

Changing the framework, along with a big picture overview of the pros and cons of fossil fuels and energy, will clearly lead to the realization that the energy industry is beneficial to human beings and to minimize our use would be destructive to our way of life, Epstein explains.

Talking confidently about our industry, especially with people who have strong differing opinions, can be challenging. But there are some effective ways to get the conversation going in a humanist direction. One very effective and easy way to get the framework to shift is to say, “Hey, let’s just look carefully at what’s going to benefit human life. Can you agree to do that?” And with just that one line you have set a ground rule with that person and shown that you do not have bad motives.

This advice and much more on how to talk to anyone about energy can be found at www.energychampion.net.

THE MORAL CASE FOR FOSSIL FUELS

It hasn’t always been easy for the author to get support for his book, The Moral Case for Fossil Fuels. But the energy industry and its supporters have responded very positively to the book.

Surprisingly, though, Epstein says what’s lacking most is opposition to the book. Of course, he has received some negative feedback, but not as much as is needed to get the book into the public debate, making it impossible for the anti-fossil fuel crowd to ignore it.

“For the ideas to become truly prevalent, I think there needs to be a significant backlash from the establishment,” Epstein explains. “I encourage [SHALE] readers, who are likely sympathetic to my thesis, to share the ideas, the book, any form you choose, to people who oppose it, because it will either convince them or it will at least get that discussion going.”

Epstein is kindly providing SHALE readers the opportunity to read a short excerpt of The Moral Case for Fossil Fuels. Read it over, purchase his book and share it with your energy-opposing friends.

Let’s get the facts out there to change the framework of the energy discussion in this country. 

CENTER FOR INDUSTRIAL PROGRESS

Epstein and his small team at the Center for Industrial Progress work to educate the public on the benefits of fossil fuels and the positive impact the energy industry has on their lives. The organization strives to create the most convincing and scalable content in the world including articles, books and workshops that can be used to understand the benefit of energy and be shared to inform others.

Working with businesses and speaking with organizations throughout the U.S., the Center for Industrial Progress promotes the untapped potential we have at our disposal through the use of energy and the innovation of technology.

“My work within the businesses is meant to educate the employees on how to talk about energy confidently and educate the public. I’m there to convince them to be champions for their industry and that means engaging other people,” Epstein explains.

Speaking about any topic that evokes so much opposition is going to inherently be challenging and intimidating. But changing the conversation in your favor can be easier than you would think, according to Epstein.

“One thing that I say in almost all of my speeches to industry [employees] is that you think you’re in a battle over facts, but you’re actually in a battle over frameworks. The frameworks are MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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The Hazelnut Energy Problem

An excerpt from the The Moral Case for Fossil Fuels by Alex Epstein

For the last thirty years, governments around the world—particularly European governments like Germany, Spain, and Denmark—have gone out of their way to promote non-fossil forms of energy, such as solar, wind, and biofuels. Nevertheless, fossil fuels have remained the energy source of choice.

Why? Or to put it in reverse, why is so much energy not made from alternatives?

The simple answer is: because it’s a really, really, really hard challenge to produce cheap, plentiful, reliable energy for billions of people—and the fossil fuel industry is the only one, by a mile, that’s figured out a solution.

(Although there’s one source of energy that may well outcompete fossil fuels in three to five decades—stay tuned.) A brilliant illustration of this appeared on, of all places, Saturday Night Live a few years ago. The host of the “Weekend Update” segment at the time, Jimmy Fallon, commented on a plan to use oil derived from hazelnuts to power a car. I have no doubt that this could work technically—vegetable oil and petroleum oil are extremely similar chemically. But I wasn’t excited, and neither was Fallon: New Scientist magazine reported that in the future, cars could be powered by hazelnuts. That’s encouraging, considering an eight ounce jar of hazelnuts costs about nine dollars. Yeah, I’ve got an idea for a car that runs on bald eagle heads and Fabergé eggs.

I thought that was brilliant. But here’s the question I wished Fallon, a member of Artists Against Fracking and thus a public opponent of fossil fuels, had asked: Why are “renewable” hazelnuts so expensive? After all, their energy comes from the sun, which is free, right?

He probably would have responded that while the sun is free, there were other factors in the process of producing hazelnuts that make them expensive.

And there are.

Here’s a key principle for understanding what makes energy, or anything else, cheap and plentiful. For something to be cheap and plentiful, every part of the process to produce it, including every input that goes into it, must be cheap and plentiful. With hazelnuts, not only do you have, as in any process, materials, machines, and manpower, you have a huge limiting factor in that the land needed is far from plentiful. Hazelnuts require land with a unique combination of rainfall or irrigation, mild summer climate and cold winter climate, and fertile soil.

This happens overwhelmingly in one place, Turkey, which dominates the market, and this ideal hazelnut habitat generates only one crop a year.

What we can call the hazelnut problem comes up over and over again with most of the alternatives to fossil fuels. In some cases, they may be cheap and reliable in small quantities—some people use French fry oil to power their cars—but making them cheap and reliable in large quantities, quantities sufficient to power the lives of billions of people, is a major feat.

Just as it’s a mistake to assume that because the sun is free, solar-powered hazelnuts will be cheap, so it is a mistake to assume that solar-powered energy can or will be cheap. Whether that’s true or not depends on all the materials, manpower, and machines involved in the entire process of harnessing the sun’s power.

Every energy process requires taking a form of raw energy—there is no ready-made machine energy—and transforming it into usable form so that it becomes the heat in our homes, the mechanical power of our cars, and the electricity that powers the Internet. This is a process that takes time and resources, and the key is to make it take as little time and as few resources as possible, so that it can be workable (including reliable), cheap, and plentiful.

The fossil fuel industry has come up with the best processes ever devised for producing energy.

To learn more about Alex Epstein, his organization and his book, visit www.industrialprogress.com

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INDUSTRY

Spurring Energy Education SAN ANTONIO SPURS AND STEER PARTNER ON SPURRING EDUCATION ENERGY DAY By: Omar Garcia

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he South Texas Energy & Economic Roundtable (STEER) partnered with the San Antonio Spurs, Holt Cat and SHALE Oil & Gas Business Magazine on April 1 for a one-day oil and gas education program at the AT&T Center in San Antonio. One thousand students from San Antonio and throughout South Texas attended the Spurring Education Energy Day, which showcased the oil and gas industry and career opportunities available upon graduation from high school or college.

Students interested in STEM careers and the oil and gas industry were invited to participate in the event. The day was filled with fun and educational activities to inform the future workforce about the many opportunities that await them upon graduation.

Developing a skilled and educated workforce for the future is integral to the continued advancement of the oil and gas industry, and a top priority for STEER. The organization is committed to partnering with other like-minded community leaders, like the Spurs, to provide students with hands-on lessons about industry processes, including production

PHOTOS COURTESY OF SHALE

Developing a skilled and educated workforce for the future is integral to the continued advancement of the oil and gas industry, and a top priority for STEER engineering, chemical engineering, mechanical engineering, health, safety and environment, land management and a host of other professions.

The Spurring Education Energy Day provided students with an explanation of the process of drilling and producing oil and gas, offered interactive quizzes and games, and demonstrated the ways that oil and gas are vital to our everyday lives. Students were informed of the various careers related to science, technology, engineering and math, as well as the many opportunities that are available beyond STEM fields.

“We are grateful to STEER and Spurs Sports & Entertainment for providing our students with this unique and educational experience,” says Nancy Dunn Thompson, Ph.D., Director of Community Outreach and Communications for the School of Science and Technology. “Our students walked away with a new understanding of the importance of oil and gas in their everyday lives and an appreciation for the work and processes that bring energy into our homes.”

Companies offering educational opportunities to students at the event include Anadarko, ConocoPhillips, Encana Corporation, EOG Resources, Halliburton, Howard Energy Partners, Marathon Oil, Noble Energy, Pioneer Natural Resources, Schlumberger and Statoil.

For more information about STEER, visit www.steer.com.

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Eagle Ford Transforms Equalizer By: Mike Sizemore

The Eagle Ford transformed the company and exceeded all expectations 50 employees.” As Equalizer’s volume increased exponentially, it’s partnership with the port grew even stronger. “When it came time to expand, the port gave us the red carpet treatment. Port commissioners have always been very receptive to our partnership, and that’s allowed us to diversify and grow the business.”

In addition to frac sand and fertilizer, Equalizer has the capacity of storing 300,000 barrels of oil, with a 1 million barrel capacity upon completion of new oil terminals.

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“Equalizer is a great example of public-private partnerships the port’s made successful,” says Skip Kaup, Executive Director of the Port of Victoria. “We believe in putting together the right business climate to create jobs, economic development and tax base for our community.” Equalizer and the port have worked together on rail expansion and dock improvements to capitalize on business opportunities associated with the Eagle Ford Shale. “We continue to work with existing companies, while also attracting new business to the port.

We’ve expanded rail, liquid cargo and general purpose docks, and have plenty of acreage available for development,” notes Kaup.

While the port has a business-friendly environment, it offers other advantages as well. In addition to the waterway, the Port of Victoria has rail access from Union Pacific and BNSF Railway railroads, and four-lane divided highways in every direction for truck transport. The inland waterway port has one other advantage over other Gulf Coast ports. “Being 30 miles inland offers protection from storms,” says Stevens. Boats and barges often use the inland canal when hurricanes or tropical storms approach, protecting shipping and cargo.

Expanded infrastructure, world-class material handlers, stevedoring services for multiple commodities and diversification of intermodal transport options have led to success at the port. Equalizer and the Port of Victoria’s partnership has resulted in an overwhelming economic impact on the region’s economy, with even more future opportunities being planned.

To learn more about Equalizer and its services, visit www.equalizerinc.com.

PHOTOS COURTESY OF EQUALIZER

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housands of barges travel down the Victoria Barge Canal each year. On a normal day, you can see tugboats pushing more than a dozen barges heading to the Port of Victoria. The intracoastal waterway is the cheapest, safest, most environmentally friendly method to transport large volumes of petrochemicals, fertilizer, agriculture commodities, heavy cargo, sand and gravel. Equalizer’s Doug Stevens should know, he’s been doing it for more than two decades.

One of the Port of Victoria’s oldest customers, Stevens describes it as “the best kept secret on the Texas Gulf Coast.” The CEO and owner of Equalizer says the cheaper cost and location make Victoria more viable than any other location on the Texas coast. For years the company used the port to import and export fertilizer on shallow draft barges down the Barge Canal to the intracoastal waterway.

The business changed when the Eagle Ford Shale play began and frac sand quickly became the “cash cow and profit center” for the business, according to Stevens.

Equalizer had explored other products including urea, corn and milo, but nothing compared to the surprise growth of frac sand when the Eagle Ford took off. More than 2 million tons of frac sand have been brought through the port on barges and railcars by Equalizer. The Eagle Ford transformed the company and exceeded all expectations.

“Frac sand allowed us to grow our business substantially,” says Stevens. “We went from an 8 to 5 operation to 24/7, expanding five times to

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PESA Concludes Enhanced Foreign Service Officer Training Program

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he Petroleum Equipment & Services Association (PESA) Foreign Service Officer (FSO) Industry Training course is a collaborative effort designed to familiarize foreign and civil service officers with an overview of the energy industry. It is designed to drive stronger collaboration with industry operations in-country and influence informed energy policy decisions at officers’ respective international posts.

Developed 23 years ago, the program educates global energy influencers on technological innovations and business dynamics in the oil and gas industry, allowing for stronger relationships between industry and U.S. interests abroad and promoting better informed decisions at embassy posts around the world. Like other PESA training programs, the FSO Industry Training course addresses advanced technologies that drive our industry, as well as the dynamic geopolitical and economic landscape in which we operate.

For the first time in 2016, PESA’s newly created International Programs Committee directed development of the FSO course and delegated company participation for individual training sessions. Committee members include Jock Pool, Oceaneering; Phil Avocato, Chevron; Clent Rawlinson, DistributionNOW; John Harrington,

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For the first time in 2016, PESA’s newly created International Programs Committee directed development of the FSO course and delegated company participation for individual training sessions ExxonMobil; Jon Landes, FMC Technologies; Mike Bowie, GE Oil & Gas; Bob Moran, Halliburton; David Hutchison, National Oilwell Varco; Dan Domeracki, Schlumberger; and Steve Green, Weatherford International.

This committee of both PESA members and its operator partners focuses the FSO training course curriculum on specializing technical content and promoting industry achievements in efficiency, sustainability, global poverty reduction and local content development.

February 8–11, PESA hosted its annual Oil and Gas Industry Training Program for 25 U.S. foreign and civil service officers. Throughout

the week, the group heard from industry and subject-matter experts at Chevron, Citi, ExxonMobil, FMC Technologies, Halliburton, National Oilwell Varco, Oceaneering, Rice University’s Baker Institute for Public Policy, Schlumberger and WesternGeco. FSOs also had the unique opportunity to meet with Ambassador Craig Kelly, Senior Director for the Americas, International Government Relations, at ExxonMobil. Ambassador Kelly, who previously served as Executive Assistant to U.S. Secretary of State Colin Powell and spent 26 years with the U.S. Foreign Service, shared his government and industry expertise on international policy and the global energy market. Enrollment included officers who are at post in 20 countries around the world, including Kuwait, Norway, Argentina and Australia.

PESA’s Board of Directors and Advisory Board also met with the FSOs for an industry dinner on the first evening of the course.

Concluding the course, PESA members and guests also attended a membership luncheon with the FSOs at Schlumberger.

Keynote speaker Sarah Ladislaw, Director and Senior Fellow of the Energy and National Security Program at the Center for Strategic and International Studies (CSIS), discussed current U.S. energy policy and the global energy industry at the luncheon. As the world’s energy market continues to evolve, developing strategic relationships to facilitate communication between the foreign and civil service officers and members of the service and supply sector remains crucial. To meet the growing interest from the U.S. Department of State Foreign Service Institute, PESA now conducts FSO training twice a year.

For more information on PESA’s foreign service officer training program, visit www.pesa.org.

PHOTOS COURTESY OF PESA

By: Jock Pool, Director of Compliance, Oceaneering, and Chairman, PESA International Programs Committee

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INDUSTRY

Central Bankers Flying High on Debt Fuel By: Thomas Tunstall, Ph.D.

T

he effect of the drop in oil prices over the past year and a half continues to ripple through the economy. The full extent of the carnage will not be known for months or years, but recent developments are posing important questions for economic planners. Last February, Federal Reserve Chair Janet Yellen faced some blistering yet well-deserved questions regarding the central bank’s use of unconventional monetary policy and what its role should be going forward.

Record level unconventional oil and gas production was enabled to a significant extent by Federal Reserve lending policies that lowered interest rates to essentially zero for seven years in the attempt to restart or stimulate economic activity. This made taking on debt attractive, and many companies did so.

The Fed’s dual charter consists of maintaining full employment and keeping a lid on inflation. While unemployment has been falling in the wake of Fed measures, unfortunately so has the labor force participation rate, which is at its lowest level in 38 years. That aside, the Federal Reserve has indeed been closely monitoring consumer price inflation to ensure that it does not rise above its target of 2 percent.

At the same time, the Fed appears unconcerned about the asset price inflation that it has also engineered as a result of keeping interest rates so low for so long. Of course, the Fed has not been alone.

Artificially lowering interest rates is apparently such a good idea that central banks in other developed countries have done the same since 2008. Even more astonishing is that Denmark, Sweden, Switzerland, the European Central Bank and Japan now sport negative interest rates. The Fed is making its own similar calculations — Yellen indicated that adopting negative interest rates in the U.S. is an option.

Perhaps most interesting is that the problems associated with the oil and gas industry’s high debt levels may turn out to be just the first shoe to drop. For example, oil is not alone in terms of commodities that have plummeted in price since late 2014. Others include corn, steel and copper. However, at least one key asset class has not yet been particularly impacted: U.S. equities in the stock market.

By lowering interest rates and making credit readily available to large borrowers, the Fed accelerated a trend that started in 1982, when the SEC allowed stock repurchases by issuing companies. Since then, corporations have used a large portion of earnings to buy back their own shares and pay dividends, often at the expense of investing in long-term capital projects. In addition, the Fed easing has made it possible to borrow cheaply and use that cash as well for share repurchases. The corresponding lack of investment in longer-term

Perhaps most interesting is that the problems associated with the oil and gas industry’s high debt levels may turn out to be just the first shoe to drop capital projects hinders economic growth and erodes prospects for wage earners.

Central banks have essentially tried to assuage the impacts of the Great Recession by bringing consumption forward. This appears to have been successful, as evidenced by increased housing prices and car sales spurred by low interest rate financing. Yet, by way of analogy, the Fed is simply doing what many companies do at the end of the month or the end of the quarter: booking sales to dress up income or earnings statements. But bringing forward revenues doesn’t increase overall sales — it just changes the timing of when they are recognized.

Ironically, due to current Fed policies that maintain low interest rates, we get perverse stock market reactions, where not only good news is good news, but bad news is good news too. For example, bad news such as falling earnings or low job growth then implies that the Fed will keep interest rates low and juice the economy (or at least the stock market) further. Somewhere along the line, the house of cards has to fall apart, and it is beginning to look like the Fed has pulled most of the policy levers it can.

If, in fact, Fed-induced lending policies artificially drove up commodity prices, as well as energy company shares, it begins to call into question the appropriateness and effectiveness of the role it has taken on as a central planner. Counterfactual scenarios are always dicey, but based on Yellen’s grilling by Congress on February 10 — and perhaps also the recent strong showing by highly unconventional presidential candidates — many people clearly believe that the Fed’s debt-fueled strategy has taken us down a dangerous, unsustainable path.

About the Author: Thomas Tunstall, Ph.D., is the Research Director at the Institute for Economic Development at the University of Texas at San Antonio. He was the principal investigator for the Economic Impact of the Eagle Ford Shale studies released in May 2012, March 2013 and September 2014, as well as the West Texas Energy Consortium Shale Study. He has published peer-reviewed articles on shale oil and gas, and has written op-ed articles for The Wall Street Journal. Dr. Tunstall has spent a significant portion of his career on overseas workforce and economic development assignments in such locations as Azerbaijan, Afghanistan, Kenya and Zambia. He holds a Ph.D. in economics and public policy and an M.B.A. from the University of Texas at Dallas, as well as a B.B.A. from the University of Texas at Austin.

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INDUSTRY

Two Cities, Different Outcomes By: W. Thomas Smith Jr.

F

rom his law office in Camden, South Carolina, Tom Mullikin describes the cities of Denton, Texas, and Stillwater, Oklahoma, as remarkably similar, yet dramatically different communities. Denton and Stillwater are both windswept college towns (Denton is home to the University of North Texas and Texas Woman’s University; and Stillwater is the home of Oklahoma State University). The cities are located just 229 miles from one another. Both have similar voting demographics and sit atop huge subterranean reserves of shale energy.

Denton and Stillwater are vastly different, however, in their approaches to what Mullikin — an environmental expert and attorney — has deemed to be “the appropriate regulatory approach to shale energy-related challenges,” specifically energy production utilizing hydraulic fracturing (or fracing) techniques, according to his article for the Canada Free Press, “A Tale of Two Cities: Denton Versus Stillwater — An Issue Too Important to Lose.”

According to Mullikin, these “distinctly different approaches produced very different results.” In Denton, a sustained campaign of strong, highly vocal activist efforts ultimately led to a ban on hydraulic fracturing. Mullikin notes that hydraulic fracturing, and thus all economically viable shale-energy production, was “eliminated in Denton through a 2014 petition initiative to ban hydraulic fracturing within city limits. The petition followed a campaign organized and

funded by, among others, the Frack Free Denton organization.”

Mullikin explains that the activist message was often driven by a powerful social media presence, a handful of bansupporting journalists, friendly affiliates in print and broadcast media, and unfounded fears sometimes based on pseudoscience.

In one of the better known instances of bad science informing the public debate, he notes that a landowner in nearby Parker County, Texas, “‘attach(ed) a garden hose to a gas vent — not to a waterline — in order to ‘light and burn the gas from the end of the nozzle of the hose.

The demonstration was not done for scientific study but to provide local and national news media a deceptive video, calculated to alarm the public into believing the water was burning.’” The incident, as reported in a July 2013 Forbes article, was ruled as fraudulent in a 2012 Texas District Court proceeding, but it still made the final cut of HBO’s Gasland Part II several months later as a seemingly legitimate problem resulting from fracing. Unfortunately, spurious anecdotes such as this pervaded the local debate in Denton.

The struggle in Stillwater was not without similar challenges. The city survived its own well-organized local and regional activist campaign promoted by groups intending to thwart shale energy production (and who received training from activists in Denton). The difference for Stillwater was its approach to educating and listening to the public.

Soon after the Denton ban, supporters of American energy production and those friendly to safe shale oil extraction in Stillwater

hired Mullikin and his team, who quickly developed a strategy to inform and protect the public as well as the energy industry.

Having traveled the earth on exploratory expeditions aimed at understanding the world’s fragile ecosystems and man’s impact on them, Mullikin realizes the importance of balance. He built his strategy for Stillwater around the all-important balance between community and industry interests. “It worked,” says Mullikin, adding, “Yes, there was a shale energy ordinance ultimately passed by Stillwater. But it was a fair compromise that had everyone’s interests at heart, and it was far more balanced than the initial ordinance” proposed by anti-shale energy activists.

Mullikin followed his Collaboration Compact Model process, which focuses on four elements:

1) Assessment of host community interests and determination of where they coincide with those of the industry; identification of each stakeholder’s objective and priorities;

2) Alignment of those needs to reflect the mutual interests of stakeholders;

3) Concurrence as to what constitutes a mutually acceptable outcome and creation of a win-win result for all stakeholders; and

4) Development of a comprehensive plan to secure the desired outcomes and unite the interests of all parties.

“The spirit of the model proved effective, and it can be used throughout the U.S.,” says Mullikin. “It is a means by which all viewpoints and all parties, regardless of politics, are respected and given a voice. In the case of Stillwater, our goals were to provide relevant factual information and avoid adversarial debates consisting of incomplete and misleading talking points. This issue is simply too important to be left to the latest slick political gimmicks. Proper education of stakeholders and local leaders, then striking a balance that is fair to all parties is what wins in the end. Stillwater proved it can be done.

Yes, we can have environmental sustainability that is economically sustainable.”

It’s crucial that other cities in similar circumstances use a model like Mullikin’s to compromise so that everyone’s needs are considered. This method garners much better results than the alternative.

About the author: W. Thomas Smith Jr. has written and edited several books, primarily military titles. He is the editor of the New York Times bestselling book Quiet Hero: Secrets From My Father’s Past. Smith has taught writing and reporting at the University of South Carolina’s School of Journalism and Mass Communications. He serves as media consultant for Global Eco Adventures, a nonprofit aimed at creating awareness of environmental sustainability through education and public information.

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INDUSTRY

Breakthroughs for Women in International Business By: Leigh Ganchan

I

nternational business offers much in the way of access to a global talent pool and innovation. Still, there are regulatory differences that make doing business abroad challenging.

While it is tempting to initially view differences as burdensome, some changes fill important gaps in human rights and others provide alternative legal frameworks within which your company can control business risks.

A particularly positive paradigm shift is occurring in the expansion of women’s rights and roles in the workplace throughout the world. A report by the World Bank Group titled Women, Business and the Law 2016: Getting to Equal confirms that “Over the past two years, 65 economies achieved 94 reforms increasing women’s economic opportunities.”

Employers can best position themselves by understanding these changes and using them strategically.

A particularly positive paradigm shift is occurring in the expansion of women’s rights and roles in the workplace throughout the world

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International businesses are seeing many laws being brought into alignment with what employers are accustomed to in the U.S. The Supreme Court of Japan recognized rights against “maternity harassment” and increased employers’ impact reporting requirement if they change a pregnant employee’s job duties, even with her consent. Similarly, India passed a sexual harassment law in response to frequent reports of workplace violence. India’s law requires employers with more than 10 employees to create a committee to investigate allegations of harassment and broadly covers all women who may be subjected to workplace sexual harassment, including trainees, temporary workers and even contractors’ employees, whether remunerated or not. Karen Murray, Director of Human Resources, North America for Yokogawa Corporation of America notes that “more countries are committed to increasing protection against harassment of female workers. This makes international assignments more attractive to female executives.”

WOMEN ON CORPORATE BOARDS

Policy makers in a variety of countries are legislatively increasing the number of women who serve on corporate boards. Belgium, France, Germany, Iceland, India, Israel, Italy, Norway and Spain have laws that require representation of both genders on corporate boards. Quotas range from 20 percent in France to 40 percent in Iceland, Norway and Spain. In Israel and India, publicly listed companies must have at least one woman on their boards. The European Union encourages member states to increase women’s representation on corporate boards to

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PROTECTION OF WOMEN

40 percent. Nathalie Mangeot-Gehin, Chief Operating Officer at Air Liquide Oil and Gas Services, observes that the French law “has definitely raised awareness and the level of expertise and professionalism among boards. It has also created a dynamic of new training opportunities and executive search platforms to identify leading women in the professional world.”

FLEXIBLE RETURN TO WORK AFTER MATERNITY LEAVE

Recently, the UK remodeled its existing maternity and paternity leave framework. Female employees continue to be entitled to 52 weeks of maternity leave with up to 39 weeks paid leave, but now up to 50 weeks of leave and 37 weeks of pay can be shared between the two parents (after the expiration of a two-week compulsory maternity leave period). Parents can take this leave at the same time, or consecutively, but not more than the total amount of shared parental leave available. Parents must apply for shared parental leave under strict procedures, and employers may refuse any request if parents fail to give proper notice. This requires employers in the UK to introduce a clear shared parental leave policy outlining an employee’s entitlement and the notices and documents that need to be completed. Diana J. Nehro, Deputy to the Chair of the Ogletree Deakins International Practice Group, points out that “while the pro-family policy can have the effect of reducing the mother’s overall leave time, it also provides a flexible way for [her] to return to work and stay in the game.”

Employers are witnessing increasing global changes to female employees’ ability to get into the workforce, stay there and rise. As the global shift toward expansion of women’s rights continues, females will be drawn to opportunities abroad leading to a more diverse spread of talent.

WTxEC Business & Industry Involvement Please tune in to KWEL 1070 AM every Saturday from 1-2 p.m.

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About the author: Leigh Ganchan is the Women’s Energy Network’s Director of Community Initiatives. She is a Shareholder at Ogletree Deakins and provides business immigration advice to employers in a variety of industries; but she has devoted the majority of her 20-year career to the energy industry.

Ganchan is certified in immigration and nationality law by the Texas Board of Legal Specialization. Ganchan is listed as a notable practitioner in Chambers USA rankings and was recently named one of Houston’s top lawyers by Houstonia magazine. One of the founding officers of the State Bar of Texas Immigration Law section, Ganchan currently serves as an AILA Latin American and Caribbean District Chapter Executive. Although she represents clients from around the world, her work frequently takes her to Mexico and South America.

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POLICY

The Railroad Commission of Texas Welcomes a New Executive Director, Kimberly Corley By: David Porter

Texas Railroad Commission Chairman

As the Executive Director, she is deeply committed to carrying out the Commission’s top priorities; protecting public safety and the state’s natural resources, while maintaining a fair, stable regulatory environment for the energy industry

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and technically skilled workforce.

“One of the most impressive things I’ve found since joining the Commission is the commitment and dedication of the staff to serving this state. We’ve got more than

administration from Sam Houston State University and a master’s degree in liberal studies with a concentration in environmental science and policy from Rice University. She has served on

Corley brings more than 30 years of diverse and expansive experience to the RRC, having served in numerous leadership roles within the oil and gas industry 700 of the most dedicated public servants in Texas who come to work every day to make sure our citizens are safe and our environment is protected,” Corley says. “Our employees are critically important to this agency and to the state.

Enhancing our employee value proposition is essential to ensuring we are able to retain and attract the most qualified, highly skilled workforce that Texans deserve.”

Also at the top of her priorities is to help guide the RRC through our third Texas Sunset Commission review in less than eight years. On a larger scale, her long-term goals include continuing modernization of the agency’s IT capabilities and enhancing public outreach and transparency.

The native Texan earned a bachelor’s degree in business

several professional boards, as Chair of the North American Carbon Capture & Storage Association, The National Center for Construction Education and Research (NCCER), the Texas Oil & Gas Association and The Wharton School of the University of Pennsylvania’s Initiative for Global Environmental Leadership.

I’m sure I speak for all of us at the RRC when I say that we welcome Corley’s focused and collaborative leadership and her decades of industry expertise. She is quickly proving to be a valuable asset and will help carry forward the RRC’s legacy of reasonable, sciencebased regulation and environmental stewardship, while also making her mark and continuing to improve upon the Railroad Commission’s 125 years of service to the great state of Texas. Welcome, Kim!

About the author: David J. Porter was elected statewide to serve a six-year term as Railroad Commissioner in November 2010. For more information about the Railroad Commission of Texas, visit www.rrc.state.tx.us.

HEADSHOT PHOTO BY MICHAEL GIORDANO

I

n December 2015, the Railroad Commission of Texas (RRC) announced the appointment of its new Executive Director, Kimberly Corley. As the Chairman of the Commission, I am very excited to have the knowledgeable, well-respected industry veteran join our team.

Corley brings more than 30 years of diverse and expansive experience to the RRC, having served in numerous leadership roles within the oil and gas industry. Most recently, she was the Business Development Manager for Gas Monetization and General Manager of Construction Risk Mitigation and Workforce Development for Shell Upstream Americas, where she also held various other prominent positions.

Prior to her time at Shell, she gained vast experience in an array of executive management roles at Kinder Morgan, El Paso Corporation and Tenneco Energy. “I worked for basically two or three companies, but I’ve had probably 15 different jobs,” Corley says. At Tenneco, for example, she worked for a time in the pipeline division initially in transmission rates, and later in transportation and exchange contracts. This was followed by management roles at Tenneco in marketing, business development and gas trading. After El Paso Corporation acquired Tenneco’s energy company, she continued to serve in leadership positions with oversight of major capital expenditures, strategy and business development.

It is obvious that Corley is not one to shy away from trying something new or venturing outside her comfort zone — quite the opposite, in fact. “I love a challenge — to come in, learn from scratch and make it better,” she says. Although she had just recently retired, Corley’s interest was quickly piqued by the opportunity to put her years of experience and expertise in the energy industry to work for the people of Texas.

As the Executive Director, she is deeply committed to carrying out the Commission’s top priorities; protecting public safety and the state’s natural resources, while maintaining a fair, stable regulatory environment for the energy industry. Corley believes that key to the Commission’s success in meeting those priorities is our staff, so she is working to build up and build out the RRC’s highly professional

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POLICY

Oil of Olé: Mexico’s Energy Reforms By: Bill Keffer

I

The sense of national pride and vindication felt within Mexico after these events was so deep that schoolchildren have, in fact, been taught about the importance of March 18, 1938 — the day of “Expropiación Petrolera” (Oil Expropriation) for all of these years 42

SHALE OIL & GAS BUSINESS MAGAZINE  MAY/JUNE 2016

of “Expropiación Petrolera” (Oil Expropriation) for all of these years.

My former boss at ARCO attended grade school in Mexico City in the 1960s and remembers being taught about these events, much like Texas schoolchildren learn about the Alamo. So let’s just say that Mexico has felt strongly about nationalizing its oil industry for a very long time.

Something else happened, however, along the way — the economic realities of the marketplace. Decades without

competition or accountability eventually resulted in inefficiencies, waste, fraud, abuse and corruption.

More money was being spent with increasingly less to show for it. Despite the national pride that Mexicans felt in having complete control over their oil, more and more of the country’s leaders — in both major political parties — had to confront the realization that something needed to change.

President Peña Nieto was elected in 2012 on a platform that included

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s it possible that there will come a time when schoolchildren in Mexico will study December 20, 2013, as the day that their country started down a new road toward greater wealth and independence by changing the way they manage their oil and gas industry? That is the date when President Enrique Peña Nieto signed historic reforms to the Mexican constitution relating to the rules for developing the country’s oil and gas reserves, reversing 75 years of practice that had been premised on prohibiting all foreign involvement and vesting exclusive authority with the national oil company, Pemex (Petróleos Mexicano).

Reverting 75 years of any national government policy is historic in and of itself; but overturning Mexico’s long-standing, insular energy policy was borderline revolutionary — and, fortunately, without any of the violence that almost necessarily accompanies any revolution. On March 18, 1938, Mexican President Lázaro Cárdenas abruptly signed into law the declaration that all domestic oil and gas assets now belonged to the Mexican government, meaning that vast operations throughout the country that had been developed by American, British and Dutch companies were lost with the stroke of Cárdenas’ pen. There was widespread celebration in the streets

by Mexican citizens who felt that foreign companies had been exploiting Mexico’s natural resources, paying slave wages to Mexican workers and exporting Mexico’s oil to other countries.

The foreign companies whose operations and assets had been expropriated were not of the same mind, and there were hard feelings for many years to follow; with even the uncomfortable consequence of our neighbor to the south selling its oil to Nazi Germany for a brief period of time.

The sense of national pride and vindication felt within Mexico after these events was so deep that schoolchildren have, in fact, been taught about the importance of March 18, 1938 — the day

making radical changes to how the country had been running its oil industry. He delivered on December 20, 2013. The Mexican Senate agreed by a vote of 95 to 28, and the Mexican House of Representatives agreed by a vote of 345 to 134. Mexico’s political leaders were finally ready to change.

These dramatic reforms include: 1) allowing foreign companies to take ownership of the oil once extracted; 2) creating four types of contracts with foreign companies for exploration and production of oil — service contracts, profit-sharing contracts, productionsharing contracts and licenses; 3) opening refining, transportation, storage, processing and petrochemicals to private investment; and

4) ending Pemex’s monopoly on retail gasoline and diesel sales this year.

Mexico began accepting bids on properties in three rounds of auctioning during 2015 with varying degrees of success, primarily due to the collapse in crude prices. Although the fourth auction of deepwater properties in the Gulf of Mexico has been delayed in 2016 because of continuing depressed crude prices, President Peña Nieto has made it clear that he intends to move forward. Price fluctuations are cyclical, but these reforms are for the long term.

And, after all, it is perfectly understandable that he and all of Mexico are intent on making these reforms a success. As recently as 1995, Mexico was the world’s sixth-largest producer of crude oil. In North and South America, only the U.S. produced more oil than Mexico. But the economic handwriting was already on the wall. Starting in 1998, Pemex was so topheavy and inefficient that it operated at a loss and has continued to do so every year since then. Mexico’s domestic refining capacity has remained so limited that, although it is an exporter of crude oil, it is an importer of refined products, including almost 25 percent of its gasoline. Mexico’s oil production has steadily decreased since 2005. Crude oil production in 2014 was at its lowest level since 1986.

Despite having both substantial conventional and unconventional natural gas reserves, Mexico continues to be a net importer of natural gas because Pemex has been unable to muster the talent and resources to develop these domestic reserves.

Just passing reforms, however, does not magically rescue a country from decades of policies destined for failure. Much more will be required before Mexico is able to realize the economic health and success that it should enjoy, given its substantial natural resources.

Just like every other oil and gas company, Pemex must confront the current down market in prices. Pemex’s Director General, José Antonio González Anaya, announced in February that the company will be cutting $5.52 billion from its budget to adjust to the significant decline in its revenue. More than likely, these reforms will lead to even more streamlining within Pemex.

If Mexico really wants meaningful participation by foreign companies, its leaders will finally have to deal with the rampant crime problem. Thieves drilled almost 2,500 illegal taps into state-owned pipelines and stole some 7.5 million barrels in 2014 alone; and then there are the kidnappings, murders, etc.

Foreign company personnel might still be a little reluctant to sign up.

Mexico’s political leaders have taken a dramatic first step that most believed would never occur. What happens next could go a long way toward bringing about North American energy independence — or just another mañana.

About the author: Bill Keffer is a contributing columnist to SHALE Magazine. He teaches at the Texas Tech University School of Law and continues to consult. He served in the Texas Legislature from 2003 to 2007.

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BUSINESS

LNG: The Emergence of a New Global Market

W

hile just a few years ago we were troubled with America’s dependence on foreign energy, we are now looking at a future where the U.S. will be one of the world’s largest suppliers of natural gas. My Senate district contains parts of the Eagle Ford Shale and the Permian Basin, and I serve on Texas’ Finance and Natural Resources & Economic Development Committees where I’ve led efforts to bring state resources to help quell the growing pains associated with increased oil and gas activity.

While the boom in drilling has subsided for now, the role of Texas and the United States in reshaping where the world gets its energy is just getting started.

In recent years, new extraction techniques have flooded the domestic energy market with cheap natural gas. In fact, the price of 1 million BTUs of natural gas has fallen from a high of $12.69 in 2008 to just $2.28 today. This has led to a drop in energy prices for consumers and has accelerated the decline of coal.

With such a vast oversupply of natural gas, it seems the most prudent course would be to expand exports — yet this is much more complicated than one might expect. Natural gas is too voluminous to export in its usual form, thus it must be squeezed and cooled into liquid form and then loaded into giant tankers. When the tanker arrives at its destination, the reverse process returns the liquefied natural gas (LNG) to a gaseous state. New infrastructure projects are needed to make exporting

In Texas, we find ourselves in a position to strategically utilize this abundant resource to the benefit of our manufacturing and transportation sectors

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By: Sen. Carlos Uresti

America’s very first LNG exports left the Gulf Coast in February and our country is on track to become a major energy exporter in the coming decades

LNG possible. Currently, several export terminals are under construction in Texas and Louisiana — with even more in the planning phase. America’s very first LNG exports left the Gulf Coast in February and our country is on track to become a major energy exporter in the coming decades.

Establishing the appropriate infrastructure in the U.S. is not necessarily enough to fuel our rise as a major exporter.

The terminals may compress gas into a liquid, but bringing liquidity into the market is a different challenge entirely. Worldwide, energy markets tend to be fractured, heavily regulated, and politicized. There are several different methods of pricing natural gas worldwide, and international futures markets for natural gas are still in their infancy. Natural gas markets often behave according to broader geopolitical issues rather than the principles of supply and demand. For example, many Eastern European nations are dependent on Russian natural gas for electricity and home heating — and Russia has strong incentives to keep these markets closed to competition from American LNG. Exporting

American LNG to places like Ukraine is thus more than just an economic decision for the U.S. government, as it could help control Russian expansionism by weakening the role of Russian gas.

Adjustments are coming, albeit slowly.

Singapore is positioning itself as a global trading hub of natural gas, and Asia is using natural gas as a way to move away from coal and nuclear energy. Currently, China is building LNG import terminals at the same pace that the U.S. is building export terminals. In sum, the U.S. is just at the beginning of our participation in global gas markets, but we’re in a good position to take advantage of high demand from Europe and Asia.

In Texas, we find ourselves in a position to strategically utilize this abundant resource to the benefit of our manufacturing and transportation sectors. As the market continues to internationalize, we can expect more and more gas from Texas that isn’t consumed here at home to be sold all over the globe, benefiting Texas, the United States and our foreign allies.

About the Author: Sen. Carlos Uresti represents District 19, which covers more than 35,000 square miles and contains all or part of 17 counties with more than 23,000 producing oil and gas wells. He is the only Senator who represents both the Eagle Ford Shale and Permian Basin. Uresti serves on the Finance and Natural Resources & Economic Development Committees, and is the first Senator from San Antonio to serve on the Legislative Budget Board.

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BUSINESS

Dispute Resolution in Latin America WHEN CROSS-BORDER OIL AND GAS DEALS GO SOUTH By: Charles Tormo

T

There is unquestionably a window of opportunity, but cross-border oil and gas deals present unique challenges, the foremost of which is protecting the investment 1938 expropriation and nationalization of foreign oil are old examples.

More recent high-profile expropriations in Venezuela, Ecuador and Argentina highlight the challenges faced by foreign direct investors.

Argentina’s nationalization of Repsol’s shares in Yacimentos Petrolíferos Fiscales (YPF) in 2012, after the Spanish company had made big discoveries of shale gas at Vaca Muerta, was unforeseen.

About the Author: Charles Tormo is a Senior Director of Accumyn Consulting with over 25 years of experience focusing on dispute damages analysis, valuation, finance and forensic accounting. As an expert-witness economist and CPA, and current Director of Operations of Accumyn, Tormo leads a team of seasoned professionals that works full time in assisting clients in litigation matters.

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BUDASTOCK/BIGSTOCK.COM

he stoics of ancient Greece practiced hindsight in advance. In the current commodity price environment, one would be wise to heed their example. Despite the current drop in energy commodity prices, it will come to pass that the shale oil and gas revolution will eventually spill over into distinct international markets in a big way, as is already happening in Latin America. U.S. companies with the vision and wherewithal to capitalize on these opportunities will be amply rewarded for their foreign investments. There is unquestionably a window of opportunity, but cross-border oil and gas deals present unique challenges, the foremost of which is protecting the investment.

Litigating a breach of contract claim in a foreign jurisdiction can be arduous and very different than in the United States. There is also the endemic risk that the investment, in any of its forms, is expropriated by the state. With this risk in mind, and beyond the contractual provisions of the deal, a foreign investor should carefully consider the foreign country’s participation in international treaties that offer investment protection and the ability to resolve a potential dispute in an international forum through arbitration.

Even if the host country does not have a bilateral investment treaty (BIT) or free trade agreement with the U.S. (e.g., Cuba), investments can be structured through third-country treaties if the ownership structure qualifies (Cuba has BITs with many countries).

The U.S. has free trade agreements offering protection of investments with Mexico, several Central American countries, Colombia, Peru and Chile, as well as BITs with a number of Central American countries and Argentina. Bolivia has rescinded its BIT with the U.S., and Venezuela and Brazil currently have no agreements with the U.S. History reminds us that political shifts in Latin American countries have sometimes resulted in catastrophic losses to foreign investors. The radical expropriations after the Cuban revolution in 1959 and Mexico’s

Vaca Muerta holds one of the world’s most promising shale oil and gas formations.

After pursuing its case at the World Bank’s arbitration tribunal, the International Centre for Settlement of Investment Disputes (ICSID), Repsol agreed to settle the claim for $5 billion.

Currently, ExxonMobil, Chevron and the late shale pioneer Aubrey McClendon’s American Energy Partners LP are pursuing investments with Argentina’s YPF in Vaca Muerta.

In 2015, based on a decision by the ICSID, Ecuador agreed to pay $1.06 billion to Occidental Petroleum Corporation for seizing the company’s assets in 2006. Ecuador currently has 12 international arbitrations pending.

In 2014, after 76 years of nationalized petroleum, Mexico opened its energy sector and enacted a new Hydrocarbons Law with foreign investment provisions. This has created a lot of excitement in the U.S. investment community, given the opportunities. However, as disappointing results of recent bidding rounds for productionsharing contracts indicate, investors may have trepidations over the mechanics of potential international dispute resolution given administrative rescission powers held by Mexican courts.

When a dispute centers on a breached contract or protection under a foreign investment treaty, the international claimant usually has the option of pursuing the case in the local jurisdiction or under international arbitration. The choice is generally mutually exclusive.

Given the number of uncertainties, the international claimant will often opt for international arbitration through one of the recognized international arbitration centers, such as the International Chamber of Commerce (ICC) or the ICSID. In terms of potential damages in an international arbitration dispute involving expropriation, trade agreements and BITs typically provide for recovery of the fair market value of the investment as opposed to book value.

International oil and gas disputes often arise after swings in prices, when long-term contracts that form the basis for projects or concessions with state-owned entities/agents are priced out of the market. These disputes present unique challenges in that damages typically revolve around proven/probable volumes of the commodities in question and historical/projected commodity prices.

As such, damages are usually quantified under an income valuation approach. The economic expert will consider the choice of currency and timing of currency conversions. The valuation date or dates may be far apart in time from the date of arbitration given the protracted nature of the proceedings. Given the valuation date and hindsight information, both information known and not known as of the date of the dispute is available for consideration. The economic expert will also consider political risk in discount rates in addition to the time value of money and cost of capital. Taxes and prejudgment interest are also key considerations in international arbitrations.

Given the complexities involved in protecting foreign investments in Latin America, careful planning under the advice of competent legal counsel is crucial. Planning should also include a rigorous assessment of economic and political risk under a range of scenarios, including potential damage scenarios in the event of the deal going sour. With the assistance of international and local expertise, the wise investor should not be deterred.

International oil and gas disputes often arise after swings in prices, when long-term contracts that form the basis for projects or concessions with state-owned entities/ agents are priced out of the market

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If you are looking to buy or sell a property, call us and say you saw it in SHALE Magazine!

TABITHA KING 210.414.4255

5600 Broadway Avenue • San Antonio, TX 78209 KingRealtors.com tabitha@kingrealtors.com MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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LIFESTYLE

Dorothy Hood (1918–2000): International Artist From Texas Special to SHALE

For more information, contact Karol Stewart at the Art Museum of South Texas located at 1902 N. Shoreline Blvd., Corpus Christi, Texas. The museum is open to the public Tuesday – Saturday 10 a.m.–5 p.m. and Sunday 1–5 p.m. For more details, call 361-825-3500 or visit www.artmuseumofsouthtexas.org.

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PHOTOS COURTESY OF ART MUSEUM OF SOUTH TEXAS

S

he went to Mexico for a short vacation and fell in love with the country for more than 20 years. Before the love affair, Dorothy Hood was born in 1919 in Bryan, Texas, and attended the Rhode Island School of Design on a four-year scholarship in the 1930s. She took further classes at the Art Students League of New York, supporting herself through modeling. A unique sense of fashion and use of color sensory perception are visible in her creations.

During her trip to Mexico in 1941, she found herself surrounded by new international friends. Hood married Bolivian conductor, composer and filmmaker José María Velasco Maidana in 1946. Her career as an artist was met with respect as a female, creating a demand for her Spanish Civil War drawings along with her Mayan and Aztec hieroglyphs. Hood traveled the world, inspired by what she saw, continuing to create magnificent works of art. Please take a moment to enjoy images of Hood’s works shared here in the pages of SHALE — we certainly did.

The Dorothy Hood Retrospective Exhibition — Dorothy Hood (1918–2000) The Color of Being/El Color del Ser will open at the Art Museum of South Texas in September 2016.

The retrospective exhibition will showcase many works from the AMST’s holdings as well as pieces from over 30 museums and private collections.

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Have you been looking for someone to help your company thrive and just need to meet the right people?

Call us today and let us give your company the turning point strategy for success.

210.920.4222 turningpoint@shalemag.com

MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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LIFESTYLE

Aromatic Massage Therapy

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assage is probably the oldest and simplest form of health care. It is depicted in many cultures and mentioned in ancient Indian, Japanese and Chinese texts. It is thought to have originated in the East as a method for unblocking the chi, the vital energy flowing through our bodies that tends to get trapped due to emotional and physical upset.

In many Eastern countries, massage has been the backbone of health and well-being.

We understand that massage is all about sensual healing for the emotions as well as for the body, a simple and effective route to general well-being via our largest sensory organ — our skin.

Skin is equipped with thousands of touch receptors; reacting to external stimuli, they transmit messages and sensations through our nervous systems. There is no mystery to the power of massage. The uncomplicated healing process of kneading, stroking, rolling and

pressing the body is proven to unleash countless therapeutic benefits, from relieving stress and muscle tension to helping reduce high blood pressure to the more specific lymphatic drainage of fluid retention in the joints.

One of the most popular treatments at Organic Spa Houston is the aromatherapeutic massage. Compared to other forms of massages, this holistic treatment utilizes the powerful properties of essential oils extracted from plants (usually the leaves, flowers, roots or berries) through a process of steam distillation.

The sensual experience is elevated to new levels through massage techniques that penetrate the skin, going into the bloodstream and soothing the central nervous system. Different notes of aromas can help eliminate blocks and restore body balance. Aromatic oil blends are best absorbed through the skin or through inhalation to enhance the alluring nature of the various treatments for body, mind and soul.

Organic Spa Houston massage therapists approach each and every massage as a bespoke, individual craft, rather than another body on their daily production line. The spa is located at 5201 Memorial Drive (Penthouse Suite), Houston. For more information, visit www.organicspahouston.com or call 832-589-6221.

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SHALE OIL & GAS BUSINESS MAGAZINE ď “ MAY/JUNE 2016

PHOTO COURTESY OF ORGANIC SPA HOUSTON

Special to SHALE

A room with a view.

Plan your getaway to Corpus Christi, and experience a funfilled stay at the Omni Corpus Christi Hotel. Whatever your reason to escape, you’ll enjoy luxurious accommodations, amazing amenities and fine dining, all within steps from your room. Let us elevate your stay to extraordinary.

361-887-1600 • omnihotels.com/corpuschristi

©2014 Omni Hotels & Resorts

MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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LIFESTYLE WHAT ARE THE SYMPTOMS OF JET LAG?

Each individual may experience jet lag differently. The most common symptoms include:        

General fatigue Sleepiness during the day Difficulty with normal sleeping patterns Impaired mental ability and memory Irritability Headaches Gastrointestinal discomforts, including stomach cramps, diarrhea or constipation Reduced physical activity

The symptoms of jet lag may resemble other conditions or medical problems.

Consult a doctor for diagnosis.

Before you travel, prepare for a safe and healthy trip with the following checklist:

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Schedule an appointment with your doctor well in advance of your trip.

Receive necessary immunizations for your destination.

Check insurance coverage for travel abroad.

Have your insurance information cards and claims forms with you.

Request and receive a letter from your doctor regarding your health history, medications, allergies and immunization records.

Have an emergency release form.

Complete the inside page of your passport with important identification and emergency contact information.

Have an ample supply of medication. Keep all prescription and over-the-counter medicines in original, labeled containers. Do not use pill cases or other unlabeled containers.

Carry along extra prescriptions, as well as a letter from your doctor explaining your need for the drug, as some countries have strict laws regarding narcotics.

Carry along the generic names of your medications as pharmaceutical companies overseas may use different names from those in the United States.

If you wear glasses, take an extra pair with you.

As an extra precaution, pack extra glasses and medication in carry-on luggage in case your checked baggage is lost.

Consider wearing a medical alert bracelet if you have allergies or reactions to medications, insect bites or certain foods, or other unique medical problems.

Pack a traveler’s first aid kit for on-the-road emergencies. Visit the Centers for Disease Control and Prevention (CDC) website for a complete list of what to include.

Discuss with your doctor how you will take medication as you cross time zones.

Pack an epinephrine auto-injector (EpiPen) and antihistamines if you have severe allergies.

They should always be kept within close reach.

Check with the American Embassy or Consulate about the types of medications allowed into the country you will be visiting.

SHALE OIL & GAS BUSINESS MAGAZINE  MAY/JUNE 2016

There is nothing that eliminates jet lag entirely. The following tips will, however, help to minimize its effects and help you to recover more quickly: 

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Drink plenty of beverages to keep yourself well-hydrated during your flight.

Avoid alcoholic and caffeinated beverages.

Eat smaller meals that are high in protein and low in fat before, during and just after your flight.

Try going to bed earlier than usual for a few days before an eastbound flight; if flying westbound, stay up later than usual.

Set your watch or phone to your destination during your flight to begin making the psychological adjustment to your new time zone.

If arriving early in the morning at your destination, sleep as much as you can during the flight, then try to make it through the day and go to bed early that evening. If arriving at your destination in the evening, plan to go to bed shortly after you arrive.

There are prescription medications available that may help you sleep. Talk with your doctor about the use of a sleep aid.

COREPICS/BIGSTOCK.COM, KASTO/BIGSTOCK.COM

International Traveler’s Checklist

IS THERE ANY WAY TO PREVENT JET LAG?

INTERNATIONAL TRAVELER’S FIRST AID KIT

The American College of Emergency Physicians and the CDC encourage travelers to pack a first aid kit or a travel health kit so that common medical emergencies can be properly handled if they occur. Pack the following items in your carry-on bag and keep them with you, just in case: 

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Acetaminophen, ibuprofen and/or aspirin to relieve headaches, pain, fever and simple sprains or strains Antihistamines to relieve allergies Antacids Antinausea or motion sickness medication (also consider including medication for altitude sickness if traveling to high altitudes) Antibacterial hand wipes or an alcohol-based hand cleaner (should contain 60 percent alcohol or more) Bandages of assorted sizes to cover minor cuts and scrapes Bandage closures, such as butterfly bandages, to tape edges of minor cuts together Triangular bandage to wrap injuries and make an arm sling Elastic wraps to wrap wrist, ankle, knee and elbow injuries Gauze in rolls, as well as 2-inch and 4-inch pads to dress larger cuts and scrapes Adhesive tape to keep gauze in place Scissors with rounded tips to cut tape, gauze or clothes, if necessary (Note that they may not be allowed in your carry-on bag if traveling by air.)

Safety pins to fasten splints and bandages Antiseptic wipes to disinfect wounds or clean hands, tweezers, scissors or other utensils Antibiotic ointment to prevent infection in cuts, scrapes and burns Hydrogen peroxide to clean and disinfect wounds Disposable, instant-activating cold packs to cool injuries and burns, as well as for treating strains and sprains Tweezers to remove small splinters, foreign objects, bee stingers and ticks from the skin (Note that this may not be allowed in your carry-on bag if traveling by air.)

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Disposable rubber gloves to protect hands and reduce risk of infection when treating wounds Thermometer to take temperatures in case of illness Calamine lotion to relieve itching and irritation from insect bites and poison ivy Hydrocortisone cream to relieve irritation from rashes Sunscreen of SPF 15 or higher Aloe gel for sunburns Insect repellent (Those appropriate for use on children should contain no more than 10–15 percent DEET, and 30–50 percent DEET or up to 15 percent picaridin for adults, as the chemical can cause harm when absorbed through the skin.)

Over-the-counter medicine for diarrhea. (Talk to your doctor about a prescription for an antibiotic you can take in case of diarrhea.)

Cough and cold medicines Epinephrine auto-injector (EpiPen) for individuals with severe allergies List of prescription medications and generic names Latex condoms Water purification tablets Extra pair of contact lenses or prescription glasses

Be sure to follow the same precautions with the medicines in your first aid kit as you do with all medications, and use only as recommended by your doctor. Make sure children cannot get into the first aid bag; use child safety caps whenever possible. Also be aware of volume limits in carry-on bags. Some of these items may need to be packed in your checked luggage while flying. Check expiration dates and discard medication that is out-of-date. If someone has a life-threatening allergy, carry the appropriate medication with you at all times.

HEALTHY CONSIDERATIONS DURING AIR TRAVEL

Air travel has become so commonplace that many people think of it being as routine as taking the bus was in years past. However, particularly on longer flights, air travel may pose some discomforts you should be aware of. The following tips are especially useful for those traveling internationally, who may be on airplanes for long periods of time or crossing multiple time zones.

MAKING AIR TRAVEL MORE COMFORTABLE AND SAFE 

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Carry medications in your carry-on luggage and keep all medicines in their original bottles. Before you leave, discuss with your doctor whether you should change medication dosages, particularly if you will be crossing time zones and your eating and sleeping schedules will change when you reach your destination. Be sure to bring enough medications that will last longer than the planned trip in case you experience any delays along the way.

If you have diabetes, epilepsy or any other chronic condition that could require emergency medical attention, carry a notification and identification card with you. Have the name and phone number of your doctor with you, as well as a list with names and dosages of all your medications. Call the Transportation Security Administration (TSA) at least 72 hours before your flight if you will need special assistance at security screening checkpoints.

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Be sure to drink plenty of nonalcoholic, decaffeinated beverages and water to prevent dehydration. Remember, the air in airplanes is very dry.

Walk as often as it is safe to during the flight to prevent blood clots, and select an aisle seat when possible.

Drink plenty of water.

If you wear contact lenses, apply rewetting solution to your lenses frequently to combat the dryness of the air.

Stretch calf muscles while sitting.

Wear support stockings if you have problems with circulation.

Arrange for special meals ahead of time.

Arrange for a wheelchair, if needed, ahead of time.

For more international travel information and resources, visit baptisthealthsystem.staywellsolutionsonline.com or contact Michele Smith, the Director of Growth & Development for the Baptist Healthy Solutions – Wellness Division at the Baptist Health System, at Michele.Smith1@baptisthealthsystem.com.

MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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COMMUNITY

OHH South Texas Chapter to Hold First Fundraiser Special to SHALE

T

OHH, a nonprofit organization that has given more than $3.3 million to oilfield families in need, established the South Texas chapter in San Antonio in December 2015 surgeries and medical problems. The event was such a huge success that the group decided to create a nonprofit organization to continue its efforts. Since then the organization has established additional chapters in Oklahoma, Acadiana (South Louisiana), the Rocky Mountains (Colorado, Utah and Wyoming), the Permian Basin (West Texas and eastern New Mexico) and, most recently, South Texas.

For more information about Casino Night, or to become a sponsor, donate prizes or become a chapter member, contact SouthTexasOHH@outlook.com. Reservations for the event must be made in advance by calling South Texas Chapter President Stephanie Blankenship at 210-823-4678. To learn more about Oilfield Helping Hands, visit www.oilfieldhelpinghands.org.

MARIAKRAYNOVA/BIGSTOCK.COM

he newly established South Texas chapter of Oilfield Helping Hands (OHH) will host its first fundraiser on June 17. Casino Night will be held at the Plaza Club near the River Walk in San Antonio from 5 p.m. to 10 p.m.

Registration is $50 and includes $500 in chips, soft drinks and heavy appetizers. A cash bar will be available.

Sponsored by Suresh Patel, owner of the Hampton Inn and Holiday Inn in Seguin, Texas, the event will feature blackjack, poker, roulette and slots. Raffle tickets for the main prizes will be available for $25 each, or $250 in chips, and will be sold only at the event. Additional $1 and $5 raffle tickets for other prizes can be purchased prior to and at the event.

OHH, a nonprofit organization that has given more than $3.3 million to oilfield families in need, established the South Texas chapter in San Antonio in December 2015. South Texas is the sixth OHH chapter and covers the Eagle Ford and other South Texas oilfield areas. Based on need, money raised by the organization is given to members of the oilfield family who, through no fault of their own, are in a financial crisis.

OHH was organized in 2003 in Houston, with a small sporting clays tournament to benefit an oilfield services company employee whose savings had been depleted by several serious and expensive

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MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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COMMUNITY

SUPPORTING THE NEXT GENERATION OF LEADERS By: Leslie Shockley Beyer, President of PESA

The MOLU is a traveling exhibit that features six self-contained, kiosk-style learning centers

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science and technology concepts through the oil and gas industry, the students gain a greater understanding of our industry.

The unit is transported via truck/trailer for setup and exhibition in school gymnasiums or other areas. Up to 192 students can participate per MOLU exhibition day, with 48 students rotating through the exhibit every two hours. In that way, a visit by a MOLU offers students a field trip experience without having to leave their school.

The MOLU is unique opportunity to provide students exposure to science, engineering, and technology. Instead of reading about robotics or geology, with the MOLU they can actually see these concepts first hand. The MOLU also highlights the cutting-edge innovation that is taking place within our industry.

We’re proud to support this on behalf of our members in the service and supply sector, and will continue to search out and support these programs that tell the story of our industry to our most important audience – the next generation of leaders.

Learn more about energy education programs supported by PESA at www.pesa.org.

SHALE OIL & GAS BUSINESS MAGAZINE  MAY/JUNE 2016

PHOTOS COURTESY OF PESA

E

nergy Education is one of the most important areas of focus for the Petroleum Equipment & Services Association (PESA), and we are proud to support a range of energy education programs designed to provide children and young adults with a strong foundation in STEM-based disciplines at multiple levels, furthering awareness of the oil and gas industry’s fundamental contributions to global society.

PESA’s Energy Educators Committee oversees these efforts and coordinates member involvement in the following programs: • Offshore Energy Center (OEC) – Mobile Oilfield Learning Units (elementary and middle school level) • IPAA/PESA Energy Education Center – Energy Institute High School and five Petroleum Academies: Multidisciplinary academic learning experience in the concepts needed to pursue careers in engineering, geology, geophysics and global energy management in the oil and natural gas industry. (high school level) • PESA Fellowship – Rice University’s Center for Civic Leadership – Undergraduate internships geared toward the social responsibility, sustainability, safety and environmental efforts of the oil and natural gas industry. (undergraduate level) As part of these programs, PESA member company Halliburton recently supported a Mobile Oilfield Learning Unit (MOLU) visit to schools in the Rio Grande Valley in March. Schools included Sam Rayburn Elementary School in the McAllen ISD and Veteran’s Middle School, W.A. Todd Middle School and D.M. Sauceda Middle School all in the Donna ISD. These schools are working to improve student performance, and the MOLU’s visit exposed approximately 800 students to science, technology, energineering and math concepts in a unique way.

The MOLU is a traveling exhibit consisting of six selfcontained, kiosk-style learning centers. These learning centers feature curriculum-based, hands-on activities about energy and the technologies and sciences involved with the oil and natural gas industry. Instead of reading about these engaging topics from a book or watching a video, the MOLU enables students to experience them firsthand and learn by discovery instead of by lecture.

The MOLU is particularly geared to fifth grade students, since science, including energy, is a focus area for that school year’s TAKS (Texas Assessment of Knowledge and Skills) test. However, the MOLU is also appropriate for other age groups. Curriculum for each of the MOLU’s 24 activities is based on national and Texas state standards. By teaching

Blowout Prevention Training IADC WellSharp Supervisor Level, Surface Stack Drilling End of Course Outcome: Students will have an in-depth knowledge of kick prevention, influx detection, well kill operations and well control risk management.

This Supervisor level drilling course, under the IADC WellSharp program, builds on the Driller level that covers topics such as well kill operations and well control risk management. Additional subjects covered include kick prevention, influx detection, introduction to barrier management, and well monitoring content. Students will do required simulation exercises, be assessed on simulation skills and knowledge.

Prerequisite: For drilling contractors only: successful completion of a driller or supervisor level certification (expiration within previous 12 months)—proof required prior to class date.

Certifications Issued: • IADC WellSharp Drilling Operations, Supervisor, Surface • Global Well Control H2S Safety Awareness Cost: $1,150 per student Victoria College Class Dates: May 10 – 13 June 14 – 17 July 12 – 15 Aug. 9 – 12 Sept. 13 – 16 Oct. 11 – 14 Nov. 8 – 11 Dec. 13 – 16 All classes meet 8 a.m. – 5 p.m. at the VC Emerging Technology Complex 7403 Lone Tree Road, Victoria TX.

For more information: Rachel.Nessel@VictoriaCollege.edu (361) 582-2575 Sherri.Pall@VictoriaCollege.edu (361) 582-2590

MAY/JUNE 2016  SHALE OIL & GAS BUSINESS MAGAZINE

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COMMUNITY

ConocoPhillips Awards $191,000 in Grants to Eagle Ford-Area Organizations Special to SHALE

PHOTOS COURTESY OF CONOCOPHILLIPS

ConocoPhillips presented $191,000 in charitable grants to 38 organizations in the Eagle Ford area at a company-sponsored event in Kenedy, Texas.

“We are pleased to be able to contribute to organizations that play such a vital role in the lives of Eagle Ford residents,” said Eagle Ford Operations Manager Randy Black in a ConocoPhillips press release. “Even though commodity prices are low, we believe it’s important to give back to the local communities where we live and work.”

Each year, ConocoPhillips invests in local communities through charitable giving, employee volunteerism and sponsorships. Its donations support education, health and safety, natural resources, the arts, civic and social services, and disaster relief. This year’s grant recipients include area volunteer fire departments, educational institutions, emergency services and various other civic organizations.

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For more information on ConocoPhillips, visit www.conocophillips.com.

SHALE OIL & GAS BUSINESS MAGAZINE  MAY/JUNE 2016

2016 Grant Recipients

Grant Amount

4-H Council – Karnes County

$1,700

American Cancer Society – Relay for Life of Karnes County, TX

$2,500

Atascosa Health Center Inc.

$5,000

Caesar Kleberg Wildlife Research Institute (South Texas Natives)

$5,000

Chisholm Trail Heritage Museum

$1,000

Christus Spohn Health System Foundation

$1,000

Clovis Ray Scholarship

$1,000

Cuero Volunteer Fire Department

$10,000

Devereux Texas

$1,000

Dobie West Performing Arts Theatre

$2,000

Education Service Center – Region 2

$1,000

George West Education Foundation

$2,000

George West Volunteer Fire Department

$10,000

Karnes City ISD Education Foundation

$5,000

Karnes City Volunteer Fire Department

$10,000

Karnes County EMS

$10,000

Karnes County Historical Society

$2,000

Karnes County Sheriff’s Office

$6,200

Keep Yorktown Beautiful

$1,000

Kenedy Independent School District

$7,800

Kenedy Public Library

$3,500

Kenedy Volunteer Fire Department

$10,000

Live Oak County Child Welfare

$2,500

Nordheim Volunteer Fire Company

$10,000

Nordheim ISD Education Foundation

$4,000

Otto Kaiser Memorial Hospital

$5,000

Pawnee County Fire Volunteer Emergency Service Department

$10,000

Pawnee Independent School District

$5,000

South Texas Children’s Home

$5,000

St. Mary’s Academy Charter School

$1,000

The Auxiliary of Swinney Switch Inc.

$1,500

Warrior’s Weekend

$4,000

Westhoff American Legion Post

$1,300

Westhoff Volunteer Fire Department

$10,000

Whitsett Volunteer Fire Department

$10,000

Yoakum Independent School District – 4-H and FFA

$3,000

Yorktown Volunteer Fire Department

$10,000

Yorktown EMS

$10,000

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SCENE

COVER PARTY

PHOTOS COURTESY OF SHALE

We had another successful cover party honoring our March/April cover, the Port of Victoria’s Robby Burdge. The event took place at the Emerging Technology Complex at Victoria College on April 7. Cocktails and appetizers were served while guests mingled and discussed the growth of the port since the shale boom.

TO SEE MORE PHOTOS FROM THIS EVENT, VISIT WWW.SHALEMAG.COM 60

SHALE OIL & GAS BUSINESS MAGAZINE  MAY/JUNE 2016

OIL BARONS BALL

SHALE Magazine sponsored and attended the Oil Barons Ball presented by the Houston Racquet Club’s Oil & Gas Society on April 29. Cocktails and dinner were enjoyed by guests at the third annual event, which featured a silent auction and music by Empire 6.

TO SEE MORE PHOTOS FROM THESE EVENTS, VISIT WWW. SHALEMAG.COM

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SCENE

SPURRING EDUCATION ENERGY DAY

PHOTOS COURTESY OF SHALE

STEER hosted the Spurring Education Energy Day on April 1 at the San Antonio AT&T Center.

The event was sponsored by the San Antonio Spurs, Holt Cat and SHALE Oil & Gas Business Magazine. Participating companies hosted educational exhibits at the event, teaching 1,000 middle school and high school students about oil and gas topics. Exhibiting companies included Anadarko, ConocoPhillips, Encana Corporation, EOG Resources, Halliburton, Howard Energy Partners, Marathon Oil, Noble Energy, Pioneer Natural Resources, Schlumberger and Statoil.

TO SEE MORE PHOTOS FROM THESE EVENTS, VISIT WWW. SHALEMAG.COM

HOUSTON ENERGY BREAKFAST

PHOTOS COURTESY OF KCA INC.

SHALE Oil & Gas Business Magazine Publisher Kym Bolado attended the March 31 Houston Energy Breakfast, underwritten

by KCA Inc. and sponsored by SHALE. The event hosted over 300 guests and featured a prestigious panel of speakers: Co-Founder, Chairman and CEO of Drillinginfo, Allen Gilmer; Research Director at Wood Mackenzie, R.T. Dukes; Chief Operating Officer of North American Gas at BP Energy Company, Michael Thomas; and President of the Petroleum Equipment & Services Association (PESA), Leslie Shockley Beyer.

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SHALE COVER PARTY E L A SH OIL & GAS BUSINESS MAGAZINE

MAY/JUNE

CELEBRATING MAY/JUNE ISSUE

AZINE

ESS MAG

S BUSIN

OIL & GA

2016

L INTERNATIONSAUE IS S BUSINES

GY G ENER SPURRINION DAY EDUCAT EER AND SPURS WITH ST S OPHILLIP CONOC LLIBURTON A H D N OGRAMS A NITY PR COMMU

A NEW ERA

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