Issuu on Google+

SPRING (11) / 2014


PREFACE

c

ertainly each of us has experienced time dragging slowly. It could happen to you during a boring lecture, painstaking work, or in a long queue in a store. This is the moment when the clock’s hand unnaturally slows down, and every second moves as slow as molasses. Completely different thing is the time spent on having fun. It is not a secret that time flies when a person has fun. Then the whole night seems to be a brief, elusive moment. Time is running at a breakneck speed and the day turns into short episodes. This is what you are going to experience soon. Right before us is the 5th edition of the “East meets West” – International Student Petroleum Congress and Career Expo! Some time ago a small group of students met with industry representatives – today it turned into a world conference, which is an important event in the schedule of all the people associated with the oil & gas industry. You can expect the power of knowledge and the interest, which is prepared for you by

the Organizers. I assure you that all participants will feel that the time during the conference runs like the wind and is as intensive as the tropical downpour. Time is passing. Exactly a year ago I assumed the Editor-in-Chief position of “YoungPetro” Magazine. Today I would like to say goodbye. It has been months of hard work, but also a great fun. Valuable experience and great memories will stay with me for life. From this place, I would like to thank the Editors and you – all the Readers for your loyalty and considerable support. I wish you success in personal and professional life. Remember: „Wins only one who has a clearly defined objective and irresistible desire to achieve it!”


EDITOR-IN-CHIEF Michał Turek / m.turek@youngpetro.org

DEPUTY EDITOR-IN-CHIEF Jan Wypijewski / j.wypijewski@youngpetro.org

ART DIRECTOR Marta Tomczak / www.tomczakmarta.pl

SCIENCE ADVISOR Ewa Knapik, Tomasz Włodek

IT Michał Solarz

MARKETING Barbara Pach

LOGISTICS Dawid Wierzbicki Radosław Budzowski

PROOF-READERS Urszula Łyszczarz Aleksandra Piotrowska

EDITORS Izabela Biało Iwona Dereń Hubert Karoń Piotr Lewandowski Edyta Stopyra Gordon Wasilewski Maciej Wawrzkowicz Joanna Wilaszek Kacper Żeromski

AMBASSADORS Tarun Agarwal - India Mostafa Ahmed - Egypt Jin Ali - Russia Manjesh Banawara - Canada Greg Bednarczuk - U.S. North Dakota Rakip Belishaku - Albania Camilo Andres Guerrero - Colombia Aniebiet-gutsy James - Nigeria Filip Krunic - Croatia Moshin Khan - Turkey Mehwish Khanam - Pakistan Yuri Moroz - Ukraine Michail Niarchos - Greece Rohit Pal - UPES, India

ISSN: 2300 - 1259

PUBLISHER Fundacja Wiertnictwo - Nafta - Gaz, Nauka i Tradycje Al. Adama Mickiewicza 30/A4 30 - 059 Kraków, Poland www.nafta.agh.edu.pl

PUBLISHED BY


5 years of a great success! “East meets West” – Anniversary Edition

6

“East meets West” – Beginning

11

Challenge accepted

16

The frackmaster’s view on european shale gas

20

Europe’s largest oil producer

24

The future of natural gas in Poland

28

Mexican Reforma Energetica of 2013 - background, content and meaning of Mexico and global oil markets

32

Hydrocarbon exploration in the Himalayan Region. A tough challenge with a high reward

44

Curbing oil spill as a tool to enhance sustainable development in Nigeria

49

“Keep the business here in Poland!”. The shale gas world in the middle Europe

61

Middle East – place, where we can do something awesome all together! My memories from 7th IPTC in Qatar

63

Promoting a responsible energy future

66

Barbara Pach, Joanna Wilaszek

Sebastian Kroczka, Wiesław Bujok

Anna Ropka, Paweł Wilaszek

Gordon Wasilewski, Jan Wypijewski

Agata Skrzypczyk

Dawid Wierzbicki

Juliusz Kowalczyk

Deepak Kumar, Madan Jyothula, Venkatesh Betha

Dirisu Christian Davison

Maciej Wawrzkowicz

Daria Łuczak

Julien Mathonniere


STREAM

ON

YoungPetro – the organizer of Europe-wide „FrackNation” screenings

Fracking – this topic seems to be a never ending story since the few past years. Mainstream media feed us with lots of news connected with hydraulic fracturing. With that flow of information there is little understanding of the process and even less attention paid to reality of people whose lives are directly affected by natural gas exploration. That creates field for many pros and cons arguments. One of big NO for fracking in 2010 was “Gasland”, American documentary written and directed by Josh Fox. It has created an antifracking movement in the US and also in Europe. “FrackNation”, a documentary created by Irish-Polish trio and funded by Kickstarter is the answer for every accusations and manipulation of facts shown in “Gasland”. The goal of “FrackNation” directors was to make an honest research on fracking in full context: economic, personal, scientific, political and historical. In “FrackNation” an investigative journalist Phelim McAleer travels across the USA and Europe to uncover the science suppressed by environmental activists and ignored by majority of the media. He talks to scientists and ordinary Ameri-

cans who live in fracking areas and who tell him the truth beyond the exaggerations and misrepresentations of anti-fracking activists. What is most important, “FrackNation” explicitly rejected and rejects funding from oil and gas companies or senior executives of such companies. This is a completely independent movie. Together with the Kosciuszko Institute and Claeys & Casteels Publishing, YoungPetro was the co-organizer of two big events: BRUSSELS, 10.02.2014 – Premiere of “FrackNation” in the European Parliament WARSAW, 13.02.2014 – Premiere of “FrackNation” in Kino Muranów “I don’t care about oil and gas companies, I don’t even care about Pennsylvania farmers, whom I’ve shown in the movie. I’m not interested in Polish pensioners. Care is not my job. I’m not a therapist. I’m a journalist and my job is to tell the truth and to be skeptical. When someone looks me in the eyes and says – I’ve got three types of uranium in my water, two of them weapons grade – I have to respond with a normal rational reaction. My duty is to search for evidence of these allegations, not to feel sorry for that person.” said Phelim McAleer during Q&A session. European Premiere Screenings were just the first step of information campaign organized by the Kosciuszko Institute, YoungPetro and Claeys & Casteels. Further plans concern local communities, which “FrackNation” is going to reach through events and nationwide media broadcasts. The Premiere was a Special Side Event of Claeys & Casteels 9th Edition of EU Law & Policy Conference.


spring / 2014


8

5 years of a great success! “East meets West” – Anniversary Edition Barbara Pach, Joanna Wilaszek

From 9th until 11th of April, 2014 AGH University of Science & Technology in Krakow will become the heart of the petroleum world for the 5th time! It will happen because of the anniversary edition of East meets West International Student Petroleum Congress & Career Expo! This conference is, together with YoungPetro Magazine, one of the two biggest projects created by SPE Poland Student Chapter.

What is “East meets West?” The main idea of “East meets West” Congress is to build a bridge between the academic world and the petroleum industry. It is one of a few opportunities to confront the students’ innovative ideas with experienced engineers’ knowledge. The Congress allows free discussion and the exchange of experiences between


9

those two worlds. Since the beginning, “East meets West” has gathered hundreds of students and industry representatives, and has been spreading around the world. Guests from both sides of the globe, from Peru to Siberia have proved the existence of what is called a global society – Society of Petroleum Engineers. The goal is to spread knowledge and to learn from the others. To establish long lasting relations. To allow a flow of wisdom from the greatest minds. To be a part of this great society. “Your chapter has proven itself to be an example for chapters worldwide. I will hold my visit to Krakow as one of the best and most memorable of all my travels with SPE.” Mellisa Schultea, SPE Young Member Programs Manager First edition of “East meets West” took place in 2010 as a small conference, and through next couple of years has been evolving to today’s standard and size. It is a perfect example how inconspicuous idea can be transformed into a huge, professional and multicultural Conference. Today, we can be proud that our Congress is important and must-be event in the world petroleum map of Conferences. “I’m very happy to have the opportunity to participate in “EmW” and find new friends from all around the world. I didn’t expect such an arrangement for a conference organized completely by students.” Adel Mehrabadi, Politecnico di Torino, Italy

Be there with us, let’s create the future together! “East meets West” is a great source of knowledge. Two student contests take place every year: paper contest and

poster session, during which the jury choose the best competitors. Other parts of the Congress are still developing, in different years we had: Technical Session, Career Session, Distinguished Guests Panel, SPE Chapters Presentations and various workshops. Congress is also a great opportunity for students to take part in Recruitment Sessions and Career Expo. “This experience was really wonderful – an intense exchange of ideas between students from Siberia to western Europe, with also very lively social activities. These students fully understood that SPE forms a unique community, without borders.” Alain Labastie, SPE 2011 President One of the most important part of the “East meets West” Congress is networking and integration. That is why the regular point of each edition are evening events, banquets and official dinners. During this events our guests have a chance to spend time in a friendly atmosphere with great people, try Polish treats and get to know each other better. “... it will remain in our memory much longer. Great conference, great experience, great people.” Tudor Precup, Petroleum, Gas University of Ploiesti, Romania After each edition, participants are spellbound by the atmosphere of “East meets West”, the way it is organized, by great people, and beautiful Krakow. A lot of acquaintances turn into real friendships, today some students arrive as representatives of companies. This is the best award for the organizers. “ ‘EmW’ is a great chance for people to set up acquaintances with colleagues from all over the world and open new opportunities for the future.” Yurii Moroz, Ivano-Frankivsk National Technical University of Oil and Gas, Ukraine spring / 2014


0

10

The reach of “East meets West”

Numbers say… COUNTRIES BEING REPRESENTED BY PARTICIPANTS

2010

8

2011

17

2012

23

2013

28

2014 (predicted)

37

5

10

15

20

25

30

35

40


11

STUDENT APPLICATIONS - NUMBER OF ABSTRACTS SENT 2010

28

2011

53

2012

74

2013

88 164

2014

0

50

100

150

200

PARTICIPANTS 2010

200

2011

233

2012

0

362

2013 2014 (predicted)

353 400

50

100

150

200

250

300

350

400

E&P COMPANIES BEING REPRESENTED BY PARTICIPANTS

5

2010

9

2011 2012

12

2013

13

2014 (predicted)

15

3

6

9

12

15 spring / 2014


12

STUDENT PRESENTERS

15

2010

34

2011

40

2012 2013

42 67

2014 (predicted)

10

20

30

40

50

60

70

80


13

“East meets West” – Beginning Sebastian Kroczka, Wiesław Bujok

It is very important to start this great story from the early beginning which reaches year 2009. Together with Wieslaw, we were very close to the board of the SPE Poland Student section in 2008. We were promoting ideas of the younger group and wanted to actively participate in sections life. In 2009, we had a big pleasure to host Regional Director of SPE. Together with Wieslaw, we were nominated to take care of Mr. Serge Rueff. During travelling across beautiful Krakow Mr. Rueff asked what is the plan of SPE Krakow Student Section for year 2010. Our section was active and planned event for 2009 called International Scientific and Technical Conference. Event was successful however, young members of the section decided that the

next step needs to be taken and that next conference will be organized on a higher level. This plan has been presented to Serge Rueff under a work topic “East meets West” in 2010, and met a full support from his side. First ideas were presented to Serge Rueff, including creation of event that will gather students and Industry members from East and West, North and South of Europe in its center-Poland. Furthermore, Serge Rueff officially has taken patronage of the event and promised his help to bring Mr. Alain Labastie who was elected for a SPE International President for 2011. This is how “East Meets West” was born. Having this in mind, together with Wieslaw, we started our hard work on

spring / 2014


14

original, copied in copy machine and distributed in about 100 copies for different university faculties. Second edition was already printed in colours and number of copies increased. Both editions were promoting the event of “East Meets West” conference.

planning the event during Offshore Europe Conference in Aberdeen in September 2009. We have started working from scratch as we wanted to bring a fresh vision of the event which will inspire students, and also will give opportunity for Petroleum Industry to find talents. For this purpose, we started to rebuild section structures. We have increased the board of section up to 8 people and made dozens of meetings on different faculties of AGH University of Science and Technology to attract students to become SPE members. We reached our student colleagues in many abroad SPE Student Sections and also the ones who were looking for guidance how to establish their own SPE. We have received a great response from all our friends, and we launched call for papers for the Student Paper Contest and Student Poster Contest. During the same time a whole group of volunteers at our University have started preparation in terms of logistics, event programme, materials, etc. Meanwhile we were realizing our second great goal – Student Magazine. At first it was called SPE Review. Its name was changed year after to YoungPetro. First editions of SPE Review contained with an introduction to Petroleum Industry by serving many interviews with academic professors and our Young Professionals who recently finished studies. The very first edition was printed in one

Together with our Student Section Board we were working on attracting sponsors. Budget of the section was very limited so we were extremely excited when Halliburton, Weatherford, RWE Dea, Baker Hughes and RAG decided to participate in the event founding. We have reached many graduates from our University who helped us to attract sponsors. Some of them came as event presenters, others as guests. Mr. Nasser Bashar became a student sponsor. We received many kind words from Industry and big support from SPE Poland and Regional Board of SPE. Such members like Stanislaw Bednarz, Maciej Zalubka and Krzysztof Fugiel served with excellent assistance during all time of preparation. Additionally, many of AGH University Professors participated in event creation: Dean Andrzej Gonet, Rafal Wisniowski, Stanislaw Nagy, Dariusz Knez, Slawomir Wysocki, Piotr Kosowski, Marek Capik and many more. We have reached even the Rector of the University who promised to give official patronage for the event and helped to organize event in the brand new conference auditorium of AGH. As a result, we have created big network of people who show great willingness of the event success. This network was created for years and as a former board we are very appreciated that this outstanding relationship exits till now. A special words needs to go to Mr. Serge Rueff. In our opinion he is a great person and was one of the best SPE Directors ever. Serge Rueff helped with his all ideas and guidance. He mentored with his top level expertise. Together with Alain


15

Labastie and Melissa Schultea they gave great support of SPE International for all students by contribution in event organization. As this event was created for students and by students, a big number of volunteers actively participated in all steps of its creation. Mine and Wieslaw’s main idea was to show a path that should be followed in the next years. This way SPE Poland Student Section was supposed to become a leader in the region in terms of activity and organization. Thanks to this approach we were able to attract over 200 registered student members from which around 20–30 were preparing the event and the others were preparing for Call of Papers in AGH labs. We have even created couple of lab-groups focused on different subjects to interest students in science inside of Petroleum Industry. Thanks to this, many of our students were able to show their results in the Paper Contest and Poster Contest. In April 2010, we were ready to start the event. Together with all our noble

Industry guests from many countries, 27 student participants, we have launched the very first edition of “East Meets West” conference. All details were worked out perfectly. Conference was given a logo that became a valuable trademark recognized worldwide. As a result of friendship and good PR, the event gathered students from: Greece, India, Ukraine, Germany, Russia, Cameroon, France and Poland. Two days of conference were attended by around 500 participants from University of Science and Technology, Petroleum Industry representatives from many companies from all around the world and highly experienced Industry Recruiters. Many of participants are still attending the conference year after another. One of the greatest results of “East Meets West” was establishment of SPE Student Section in Ukraine as a part of Polish Section. Alexander Chernov was elected as a President of Student Chapter and was one of the fathers of success of this great effort. During “East Meets West 2010” we had another very important fact which was spring / 2014


16

the international debut of SPE Review Student Magazine. This was already third edition of the magazine but at that time this was a very first which was in a professional booklet format. This was also a first edition that contented technical papers from recently graduated students. Altogether thanks to extremely hard work of all student volunteers and people actively participating in the life of the section, “East Meets West” was a great success that is paying off till now. It helped many students to find a path of their carrier, and most importantly, created new leaders of SPE Poland Student Section who were entrusted with the task of repeating great success of “East Meets West” in the future. As a result of hard work, new leaders managed to achieve even more than the stated aim in the next outstanding editions of “East Meets West”. “East Meets West” became very recognizable Student Conference in the world offering better quality every year and reaching further from South America to Asia, From Africa to United Kingdom

and Scandinavia. SPE Student Section itself became a leader in the region and won a price for the best section. YoungPetro under a wise management became a most important Student Magazine which serves highly technical knowledge presented and invented by students and is distributed to many countries in the world. My and Wieslaw’s dreams to create a way forward for students that will increase their skills, commitment and active participation in SPE came true. We launched all our ideas in time of one year. Thanks to networking and great relationship established during this time, we passed all our dreams to our ambitious and hardworking successors. We are very proud that all principles of “East Meets West” and SPE Review that were raised in our and 2010 board heads survived until now, and serve as a basis for further development of Student Section and all its talented members. This commitment and engagement results till this day in many wonderful careers in Petroleum Industry worldwide.


17

spring / 2014


18

Challenge accepted Anna Ropka, Paweł Wilaszek

It’s demanding. It’s challenging. It’s exciting. The moment when applause silents, the lights go out, the curtain falls – is the moment when the questions arise. What to do now? How to make the next play better, at higher lever, with better quality? In that very moment contradictory feelings mix in your brain, From the one side – is it possible to make it better than it was – on the other side – yes, we can do it. This priceless shiver running across the spine predicts the things to come. We have a work to do! These are the first, emotional thoughts we have at the end of the 1st edition

of “East Meets West”. Together with Sebastian & Wieslaw we have created a magnificent team, which has achieved something, what was appearing as unachievable. And at that very moment – when there are only two aces left at hand out of four – and the expectations are at the top – it starts to be difficult. The goal is not to keep the same level – the goal is to go up. And the key factor is the awareness, that there are more cards in the deck. The very first thing to do, was establishing a new board. A new board that will be able to hold the responsibility, overcome the expectations and face


19

the challenges, that were at the doorstep of the 2nd edition of “East Meets West”. We have had many loyal friends, who already has confirmed the willing of participation in European Student Petroleum Congress “East Meets West”. We already had a well-known & well recognized brand, which “EmW” became itself in April. But the most important thing we had, was the real spirit of “East Meets West” running in our blood. The very simple feeling, that made us 100% sure, that all the people that were about to visit the upcoming Congress, they really deserve our commitment, our engagement & our time. This spirit made us considering our work not as just a work – this a way of spending our time – and after couple of years, we are all sure nobody regret that. Bringing up to live the next edition of“EmW” was a great pleasure & great honor. The reasons are pretty obvious – making new friendships, meeting inspiring people, working in well-balanced team of friends – but the most important part, the one that brought the

biggest smile to everybody’s faces was the fact, that together we made things grow. The idea was getting the shape – and the shape was becoming an emblem – the “East Meets West” emblem. Our dream was to gather people from different parts of the world, from different universities, from different companies in one, common idea – the idea without any barriers – the idea of “East Meets West”. The idea, which considers the Oilfield Industry as one, big family – no matter if you are a student or country manager, no matter if you come from the west or from the east – we are all involved in Oilfield Industry life – and we face the same challenges every single day. This idea managed to convince new supporters. Continued cooperation with Halliburton & newly established partnership with Schlumberger, ENI, Aurelian Oil, Maersk Oil, PGiNG, Cameroon, United Oilfield Services, Orlen Upstream, San Leon Energy & National Oilwell Varco let us improve the event and gather people spring / 2014


20

from all over the world in an international discussion. Discussion, which allowed to exchange minds, knowledge and experiences between both “young adepts” & “old stagers”. “East Meets West” became the “place to be” for students, who were able to present their scientific achievements as well as to make their own first steps in Oilfield world by obtaining attractive internships & careers offered by world leaders of the Industry. “East Meets West” became the “place to be” for the Petroleum Industry as well – a great opportunity to present the newest technologies applied in the field, a chance to meet the most talented students from all over the world – people who in the near future will represent the strength

of their companies. Finally – “East Meets West” became the “place to be” for everyone, who would like to have a closer look into the most exciting, most challenging & most rewarding industry in the world. This is what “East Meets West” really is. As long as the very first idea is going to live in the minds & hearts of you people, every single year in April Krakow is going to be the capital of Petroleum Industry. Now – when the fate has scattered us all over the world – it’s even a bigger pleasure & pride, that this idea, which appeared over 5 years ago in heads of couple of students, now marches all around world. Every single year the Congress gathers more and more people, bringing


21

satisfaction, memories and benefits. Benefits, which value cannot be expressed in Dollars or Euros. The most valuable things we have earned while organizing & attending “East Meets West” are deeply stored in our minds & our hearts. The inspiration, which we have been infected with by different people we met there – their engagement, professionalism and humanity – the way how to achieve a great success and still stay ourselves. The friendships, which has survived time and distance-trial. The conviction, that that our work created many life-time opportunities for many young people. We truly believe that the 5th – anniversary edition of “East Meets West” is go-

ing be as the previous ones – the way better than the predecessor. We have seen the toil, the commitment, the fortitude presented by the organizing committee. We have seen ourselves as we were couple of years ago. We have seen people who wants to believe, that making small steps, we make big changes. This is the way we always considered “East Meets West” – and this is exactly what we would like to wish to all the participants. To consider “East Meets West” as something brings you a lot of joy, something that makes you feel proud, something that proves your own value. You are the most important part of “East Meets West” and we hope you are going to feel it this year in Krakow!

spring / 2014


22 INTERVIEW

The frackmaster’s view on european shale gas Gordon Wasilewski, Jan Wypijewski CHRIS FAULKNER, FOUNDER, PRESIDENT AND CHIEF EXECUTIVE OFFICER BREITLING ENERGY CORPORATION. HE WAS NAMED INDUSTRY LEADER OF THE YEAR IN 2013 BY THE OIL & GAS AWARDS FOR THE SOUTHWEST REGION AND RECOGNIZED IN THE “WHO’S WHO IN ENERGY DALLAS 100” IN 2012 AND 2013. BREITLING WAS AWARDED IN 2013 BY THE OIL & GAS AWARDS FOR EXPLORATION AND PRODUCTION, AND NAMED “BEST NORTH AMERICAN OPERATOR” BY “WORLD FINANCE MAGAZINE” IN 2011 AND 2012. HE STUDIED BIOMEDICAL ENGINEERING AT SOUTHERN METHODIST UNIVERSITY, BUSINESS AND MATHEMATICS AT BAYLOR UNIVERSITY, AND EARNED HIS MASTER OF INFORMATION SCIENCE DEGREE AT THE UNIVERSITY OF NORTH TEXAS. HE RECEIVED AN HONORARY DOCTORATE DEGREE FOR HIS ACHIEVEMENTS IN BUSINESS ADMINISTRATION FROM CONCORDIA COLLEGE. YOUNGPETRO: “Hydrofracking has never had a spokesman as effective as Faulkner.” Please tell us how to become the Frack Master? CHRIS FAULKNER: I’ve got that from the “Oil and Gas Monitor”, which is a magazine in the United States. Someone asked me about this a couple weeks ago, so I’ve spent some time thinking about it. In our industry the year of 2008 was a kind of a tipping point because “Gasland” came out and there was almost nothing done by the industry to counter it or improve awareness. “Gasland”, with all of its rhethoric, theatrics and misinformation sold very well and started this whole anti-fracking media movement. There really wasn’t anyone out there who was speaking up, saying “these are the facts.” So I took it on myself and decided to say “at least go out there, don’t be afraid of these people and don’t be afraid to speak my mind,” because industry at that time had a lot of challenges to face, even with frack fluid disclosure, which in United States isn’t required – it’s voluntary. A lot of operators still consider it

a trade secret, and I think it creates fear among people. More importantly, they’re making ignorant decisions against fracking based on only one side of the story. Over the years, I’ve began putting myself out front, showing the positives of what fracking is doing for the country and also showing that the negatives aren’t as bad as what people have been told. Now, the industry spends a lot of time and resources speaking the gospel of oil and gas. Two weeks ago, I attended Energy Live and gave the keynote, and a gal came up to me from the London School of Economics, where as a student she gave a thesis on anti-fracking. She is a graduate now. She listened to my presentation and she told me she’s no longer against or pro fracking, she’s on the fence because of the additional research and insights I presented. Everything she has read so far hadn’t presented the other side of the story. There are still those who haven’t received the message, but maybe the message is getting clear at last. We can at least put in a proper conversation and have both voices, and then folks can make a decision. That’s my goal. It’s go-


23

the battle locally within the communities trying to support shale gas. There’s going to be a challenge in some places like the UK, but long term, I think it will happen, like it did in America. It can be done, it’s going to take some time. The opponents are not winning enough to stop it completely, they’re winning enough to scare people. That’s the difference. YP: You and your company show an increased interest in shale in Europe. Why Poland? How about the UK?

ing to happen at the grass-roots level, it cannot be bought by a four-color ad or putting an ad on TV. People don’t believe in that on a large scale anymore. YP: Who will win the battle over the shale gas in Europe: green propaganda or reasonable science? CF: I think it’s a bit negative in the near term, environmentalists are winning the argument today. That’s sad. There’s a lot of people in the population who have a mindset that fracking is going to destroy Europe as a whole. The more we can spend time here getting the message out the better, like what Phelim McAleer is doing with his movie “FrackNation”, and with testimonies at parliaments like I gave recently – there is a big undertone of people who are pro-fracking in the British parliament. I know David Cameron is high on it, some think he’s crazy. I think it’s fantastic. He’s leading from the top-down and has to deal with a hardcore environmentalist’s movement. In Poland in 2010 there was this whole debacle at Shale Gas World with protestors chaining themselves to the stage, I was speaking right after that and it screwed everything up. But now I think we’re winning

CF: Number one: Poland has first-mover advantage outside of North America. Number two: Poland has some challenges like government instability in decisions being made, tax incentives, fiscal issues that have to be worked on, but I think there’s a good bedrock here. What 3Legs Resources and Lane Energy have done getting those wells fracked and producing gas shows it can be done. I’m not concerned about ExxonMobil’s leaving because it’s what majors do – shale gas is not their best model. So I think Poland has definite advantages. The UK has spent 18 months on a moratorium getting lots of things in order to put the country back on a global stage for shale gas. That’s why we’re looking on Britain as well. Poland and the UK have first-mover advantage. Excluding Europe, also Australia may very well be the first area outside America that produces commercial quantities of shale gas. YP: Why Marathon concessions? CF: Good concessions, good rocks, good areas. I worked with them some in the past looking at the geology. Our geologists worked with Lane and 3Legs in early days, that’s why we feel good about their assets. YP: Which shale play in Europe do you find the most prospective? spring / 2014


24

CF: Sizewise I would say the Bowland basin in the UK. In Poland obviously it’s the Baltic basin, where all of our work has been done. In Europe as a whole areas in Sussex have tremendous amounts of gas and oil potential, a localized market, good infrastructure and knowledge, equipment and history of O&G development within the North Sea. Overall and by sheer size it’s going to be UK. Poland looks solid as well and can be the gas hub of Europe with a great local market. Getting rid of Gazprom makes a total sense. YP: What is Breitling’s approach to students and graduates? How should it look like in the whole oil industry? CF: There’s an interesting phenomenon happening around the oil industry. This great shift of people leaving the industry because they’ve reached retirement age. It’s interesting to broaden it up because folks are leaving by the boatload. There’s more jobs coming up (by two times) than we have people coming onboard. Two things will happen – a student can’t have the 35 years of experience they want, so that’s going to be a challenge for the industry. A much younger generation of

employees compared to what we have now in engineering. For so long in the 80s and 90s it wasn’t cool to go to school to be in the world of oil and gas. Now they’re getting back into it and people are reaching graduation (it’s very important to understand that this revolution is not a flash in the pan, there’s 30–40 years to come in the United States and the rest of the world is 10–15 years behind us) because it’s the time to get into it – Oil and Gas, Reservoir Engineer and a number of different jobs. We recruit lots of people out of school for on-the-job training, we do plenty of things bringing them on the rigs, trying to get them excited about it. It’s a perfect opportunity for younger people to consider our industry carefully as they decide what career path they want to take. YP: Which traits do you appreciate most among your employees? CF: It’s a hard job, not easy to do what we do. You’ve got to be open for the challenge. Even as an engineer you’re not just sitting in the office doing lots of work, you’re in extreme environments – offshore in the North Sea or in North Dakota where it is below -30 Celsius degrees today (YP: interview in November 2013), South Texas where it is over 40 Celsius degrees, so it’s a very stimulating and hard job. So, employees have to be willing to be challenged and willing to see things through because there’s a big learning curve you can experience only outside of school, there’s hardly anything about it in textbooks. Every one first year running a well would probably be in trouble, it takes a lot of time to learn. But when you do you’ve got your career for life. YP: On what should we focus during our studies? Could you give us a piece of advice? CF: It’s all based on experience. There


25

are lots of ways to get it on the oilfield. You can start understanding how things work from the hands-on experience. For the students in the US we have, mostly in the Texas areas where we are headquartered, internships during the summertime. Working three months in the internship they can learn more than in one year in class. My thought would be get out of the class, get out in the conferences, get out in the field. You become very passionate about this, find it very exciting and thrilling, or you don’t. YP: It was a pleasure to speak with you. Thank you very much! CF: Thank you!

spring / 2014


26

Europe’s largest oil producer Agata Skrzypczyk

According to the International Energy Agency (IEA), NORWAY is the Europe’s largest oil producer, the world’s second largest natural gas exporter after Russia, and is an important supplier of both: oil and  natural gas to other European countries. All of Norway’s oil reservoirs are located offshore on the  Norwegian Continental Shelf (NCS), which is four times bigger than the area of the Norway mainland.

How it began The beginning of the Norwegian petroleum dates back to 1959, when the discovery of large natural gas field in the area of Groningen in Netherlands was made. The finding triggered interest in the North Sea basin and provided suggestions about possible available reservoirs beneath the nearby ocean. Shortly intensive seismic surveys and exploration began. In 1965 the North Sea was officially divided with the  median line between the  United Kingdom, Norway, Germany, Denmark and the Netherlands. First licensing round in Norway was announced on 13  April,  1965 and  22  production licenses were awarded. The first exploration well was drilled in 1966, but turned out to be dry. The  success was achieved in 1969, when Philips Petroleum discovered oil in Chalk of Danian age at Efkofis in Norwegian waters in the central North Sea. Production from the field started on 15  June,  1971. Following years brought next major discoveries, consequently fields like Statfjord, Oseberg, Gullfaks and Troll were established.

The development of the large fields has enabled the formation of massive infrastructure on the NCS and gave power to exploit smaller fields as well. The North Sea with its 40-years exploration history has stolen headlines again in 2010, when giant discovery was made on the Utsira High. It is ranked as one of the Norway`s largest findings ever. It’s size has not been estimated yet but it is believed that the sandstone reservoir of Jurassic age contains 3  billion  barrels of exploitable oil or even more. The first and at the same time successful production test was made in 2011 and the beginning of commercial production is planned to start in 2015. In  2011 on the  Norwegian part of the  North Sea there were 57  production fields. Exploitation of oil and gas in this area is expected to be continued for about 40 more years.

Troll gas field One of the  biggest fields on the  NCS, holding 40% of its total gas reserves and significant quantities of oil, is Troll field. The  field is located around 65  kilometers west of Kollsnes – natural gas processing plant placed near Bergen. The field is divided into two main structures – Troll East with recoverable gas reserves and Troll West where not only gas reservoirs but also thin oil zones are explored. Reservoirs in  both structures consist mainly of shallow marine sandstones belonging to the Sognefjord Formation of Late Jurassic age and  hydrocarbons are trapped in  three


27

eastward-tilted fault blocks. The  reservoir rocks exhibit excellent properties, with porosity up to 35% and permeability in the Darcy range. The  discovery of Troll field took place in 1979 and it came on stream in 1996. Currently gas and  oil from the  field is extracted via three platforms – Troll A, B and C. The principal focus of gas production is Troll A, located in Troll East. This 472 meters high facility with a concrete substructure is among the largest and most complex engineering projects in  history, and  is the  tallest structure that has ever been moved to another position by mankind. It weighs 683,600 tons and is powered electrically from shore.

Not only the North Sea Petroleum activities on the Norwegian continental shelf started in  the  North Sea and  have gradually moved northward. The Norwegian Sea is a less mature petroleum province than the North Sea (mature areas are characterized by  known geology and  well developed or planned infrastructure). There are significant gas reserves in  the  area, and  first production started in  1993 on  Draugen field. Subsequently 13 other fields, like Heidrun, Njord, Norne or  Åsgard have come on stream, the  latest fields are Skarv and Marulk. The Barents Sea is considered as an immature petroleum province. During recent years a high number of small discoveries were made on the Barents Sea but only one field came on stream. In 2007, the  production of Snøhvit field with 1,300 Million Barrels of Oil Equivalents (predominantly gas) started. Additionally this year Goliat field with 240 Million Barrels of Oil Equivalents (mostly oil) starts production.

FIG. 1 Troll A platform

The 10 Oil Commandments When petroleum activities started, the  Standing Committee on Industry submitted in 1971 so called 10 oil commandments. The 10 Oil Commandments represents Norwegian government’s desire to develop an  oil policy which ensures that the  natural resources on the  NCS benefit the  whole community. These simple and well-known principles have shaped Norwegian petroleum policy. The main features of petroleum sector have remained firm till today and management based on it can be consider as a success. 1. National supervision and control must be ensured for all operations on the NCS 2. Petroleum discoveries must be exploited in a way which makes Norway as independent as possible of others for its supplies of crude oil. 3. New industry will be developed on the basis of petroleum. 4. The  development of an  oil industry must take necessary account of existing industrial activities and the protection of nature and the environment. spring / 2014


28

5. Flaring of exploitable gas on the NCS must not be accepted except during brief periods of testing. 6. Petroleum from the  NCS must as a  general rule be landed in  Norway, except in those cases where socio-political considerations dictate a  different solution. 7. The  state must become involved at all appropriate levels and contribute to a  coordination of Norwegian interests in Norway’s petroleum industry as well as the creation of an integrated oil community which sets its sights both nationally and internationally. 8. A  state oil company will be established which can look after the  government’s commercial interests and pursue appropriate collaboration with domestic and foreign oil interests. 9. A pattern of activities must be selected north of the 62nd parallel which reflects the special socio-political conditions prevailing in that part of the country. 10. Large Norwegian petroleum discoveries could present new tasks for Norway’s foreign policy.

The Operator Initially, the  exploration of NCS was dominated by  foreign companies however, in  1972, the  Norwegian State Oil Company was established. Statoil was

created as a  fully state-owned oil company but in 2001 its shares were listed on the Oslo Stock Exchange and the New York Stock Exchange, it became a partly public company and changed its name to Statoil ASA. The Norwegian State owns 67  percent of the  company’s shares. In  2007, Statoil ASA and  Norsk Hydro ASA merged, the new company has both the size and the strength to expand internationally. Statoil is the leader on the NCS, the company holds 60% of its total production and  additionally operates in  41  foreign countries. In 2013, Forbes ranked Statoil as the world`s twentieth largest oil company.

An industry for the future Since the  production started on the  Norwegian continental shelf, petroleum has been produced from a total of 82 fields. In 2011, Norway produced 2  million  barrels per day of petroleum and other fuels, with about 80% of them being crude oil. The  oil production has declined since 2001 and its gradual drop is going to continue, nevertheless gas production is increasing greatly and its peak is expected around 2020. Presently the  petroleum industry contributes about one-fifth of the  total Norwegian value creation and  one-fourth of the State’s revenues. During the  past 40  years, around 40% of Norwegian estimated recoverable resources has been extracted, but there are still large areas of the NCS not opened for activities yet. 60% of resources remain in  the  subsurface, with large amounts of them that are still waiting for being discovered and some of fields are going to be recovered in the future. The  potential on the  Norwegian Shelf is still significant and  it seems that The  Norwegian Government knows exactly how to use it.


29

FIG. 2 Areas on the Norwegian continental shelf

References 1. Alveberg, L.J., Melberg, E.V. ( 2013, March). Facts 2013 The Norwegian Petroleum Sector. Ministry of Petroleum and Energy, Norwegian Petroleum Directorate. 2. Carstens H. (2013). Small is also beautiful. GEO ExPro Magazine, 10 (6), 20–24. 3. Norwegian Ministry of Petroleum and Energy. (2011, June 24). An industry for the future – Norway´s petroleum activities, Meld. St. 28 (2010–2011) Report to the Storting (white paper). 4. Report – Offshore Norway prepared for Offshore Center Denmark. (2009, November 6). Overview of the Norwegian Oil and Gas Industry 5. U.S. Energy Information Administration. (2012, August 28). Countries – Norway. Retrieved February 9, 2014 from http://www.eia.gov/countries/cab.cfm?fips=no

Photos statoil.com, npd.no spring / 2014


30 INTERVIEW

The future of natural gas in Poland Dawid Wierzbicki JAN CHADAM PRESIDENT OF THE MANAGEMENT BOARD OF GAS TRANSMISSION OPERATOR GAZ-SYSTEM S.A. SINCE JULY 2009. DOCTOR OF ECONOMICS, THE LECTURER AT UNIVERSITIES AND THE AUTHOR OF SEVERAL DOMESTIC AND INTERNATIONALLY RECOGNIZED FINANCE AND MANAGEMENT PUBLICATIONS. YOUNGPETRO: Gas Transmission Operator GAZ-SYSTEM S.A company is conducting a strategic investment which is to create the LNG Terminal in Świnoujście. According to you, how does this investment affect the position of Poland in the energy market? JAN CHADAM: First and foremost, we should take a look at this investment from two angles. Firstly, it is an opportunity to provide Polish market with natural gas and a chance to buy natural gas from the global market which means from optional supplier in the world. When it comes to the LNG terminal, we do not have to be connected by gas infrastructure with concrete supplier, thus we do not have any limitations. It gives us a chance to buy natural gas not only from the supplier which at the moment seems to be Qatargas Co., but from optional supplier from North America or Middle America’s country. The second perspective for Poland is to become a transit country. Through using the LNG terminal, there is the possibility to deliver natural gas to Central European countries. Those countries, because of their location, do not have any access to the sea. This means that they cannot build their own LNG terminals. The exploitation of this project is a chance to get profit from delivering natural gas to our neighbors.

YP: How much work has to be done to complete the LNG terminal? JC: The deadline is set for December 2014. There is a lot of work to do, but the most important thing is that the headway in the range of preparation of documentation, which in this kind of projects takes place at the same time as its realization, is finished. All tasks are fulfilled. There are about 1,500 people working on the construction site. We should consider weather conditions, especially during the winter and their influence on work progress. We should be prepared for additional, unforeseen problems, connected with the terminal’s floatation. YP: How can the appearance of the LNG terminal affect the Polish energy structure? Is it possible to change the role of coal as the main source of electrical energy? JC: The LNG terminal will not have a direct influence, but the complex of matters connected with the improvement of gas competitiveness in the market can have essential influence on the structure called energy mix in Poland. This fuel can become competitive in comparison to coal, especially in cogeneration installations producing electricity and heat. It is a relevant support for renew-


31

able energy sources. Specifically it refers to solar installations or wind turbine, which in some situations do not fulfill their function. Furthermore, there is a necessity to deliver energy to the supplier from another sources – in these case natural gas is a good back-up fuel. In a wider perspective, not only of one year, it is obvious that new sources of natural gas delivery and a full liberalization will be a noticeable competition to coal. YP: What investments are planned by the company besides the LNG terminal? JC: At this moment, the LNG terminal is our most recognizable and most important investment, but if we talk about expenditures – this investment is not the biggest. Currently, we realize the investment plan worth about 2.5 billion USD, including the LNG terminal costs – over 800 million USD. Main expenditures, which we have now, are dedicated to national infrastructure upgrade and to cross-border interconnections for better usage of the LNG terminal in the future. We integrate our investments into the North-South Gas Corridor in Central and Eastern Europe. YP: According to you, how does the cooperation between universities and oil & gas companies look like in Poland? JC: There is a lot to do. For me, the cooperation is not only insufficient, but notably below the expected level. As a professor at a university I have a feeling, that in spite of many declarations, there are many differences between the activity of universities and the reality. I have to admit that it is a challenge for everyone, not only for academia, but also for the companies; many things must be improved and changed. In all technical or business universities, where students are being educated in the range of economy

or administration, they also should be in a close relation with hands-on practice. In many areas training determines also science development. For me, if we want to develop faster, we have to take the challenge as soon as possible. YP: Which specializations in your opinion are the most promising in oil and gas industry? JC: In my opinion, all technical fields of study are promising. First and foremost, technical studies are more difficult – personally I have graduated from technical institute. Secondly, these studies give us all – purpose knowledge. Knowledge which can be useful in the United States, Europe, and in other parts of the world as well. I think that it is hard to type one exact specialization and it is not the point. The challenge is to gain certain expertise. In my opinion, there is a place in the developing world for all students, who graduated with good marks and some training. spring / 2014


32

YP: English is conclusively the most important language in the world at present. Which language in your opinion is going to be more and more significant? JC: Spanish definitely. It is absolutely second most important language in the world these days. French, which was known as the language of diplomacy and the number one among languages in the world before the 2nd World War, nowadays, although very important because of the localization of The European Parliament, seems to be on the decline. Actually, it is advised to know a few

languages but if you ask me to choose, I think we should take under consideration language which is used by huge part of Europe, whole Middle and South America – Spanish. Nowadays, also Chinese catches on, but I think despite the dynamics which we have to cope with, this language will not be so important in the near future. YP: Thank you very much for the interview. JC: Thank you.


33

spring / 2014


34

Mexican Reforma Energetica of 2013 - background, content and meaning of Mexico and Global Oil Markets Juliusz Kowalczyk University of Warsaw, Poland | juliusz.kowalczyk@gmail.com

The article presents the reform of Mexican petroleum legal framework which started in December 2013. It is shown that – basing on the example of Mexican oil & gas history – geological and technological aspects are more important than those legal or institutional, as far as reaching for new hydrocarbon reserves is concerned. The dangers of long term inefficiency of an industry may lead to changes, whatever the political obstacles.

Introduction In December 2013, the Mexican Congress passed a series of amendments to the Mexican Constitution of 1917. Most of readers have certainly noticed news of “Mexican oil reform” in the oil & gas and general press, especially North American, and may have remembered the top-trending phrase that Mexico opens up its petroleum business which has been state-monopolized for 75 years. This feature aims to summarize crucial information on legal and economic aspects of “Reforma Energetica”, outline its historical background, present it as an example of approach to resource extraction, which is revolutionary to a specific nation or state, as well as challenge popular simplifications on the matter.

Why is 2013 “Reforma Energetica” so important? In the context of international oil & gas exploration and production, importance of an event means its ability to alter the market and its surroundings significantly – import/export directions, investment en- or discouragement, output, energy prices, resource politics1. Naturally, the bigger the producing country, the easier for minor event to become a game changer for the industry. But this is not the case of “Reforma Energetica” – Mexico is both a globally important oil producer25 (Fig. 1) and the discussed reform is a groundbreaking legal, political and economic change. Apart from its potential to reshape the market in the years to come, “Reforma Energetica” has another, more subtle aspect – it is an interesting example showing hierarchical relations between geology, economy and law. Moreover, as it will be shown below, it is not the first example in the history of Mexico.

Brief history of Mexican petroleum till 1938 To understand how Mexico found itself where it is now, and as a result came


35

40 35,793

million barrels per day

35 30 25 20 15

12,317

10

10,505 4,171

5 OPEC United countries States

Russia Canada

2,904 Mexico

2,680

1,805

1,638

1,030

Brazil Norway Kazakhstan Colombia

FIG. 1 Top oil producers in 2013

the catchphrase about 75 years of state monopoly, we should briefly look at its oil history before 1938 – the year when president Lazaro Cardenas nationalized the industry. Petroleum production in Mexico started in the early 1900s. The beginning of Mexican hydrocarbons production can be associated with Porfirio Díaz, president of Mexico 1876–1911 and one of the most famous dictators of the break of the 19th and 20th century. Díaz decided to attract U.S. entrepreneurs to explore oil in order to provide a cheaper, domestic source of energy to fuel a wider project of industrial progress during pax Porfiriana, socalled period of political stability and economic growth. First commercial oil well was completed in 19042. By 1911, Mexico was the fourth oil producer in the world, and in 1921 it accounted for a quarter of global petroleum output, placing it second. However, it took only nine years for the world production share to plunge to 3%. By 1938, Mexico produced about a fifth of what was streamed up in 1921 (Fig. 2). Many explanations have been proposed to the sudden surge and then dramatic

decrease in Mexican oil production of 1901–1938; there is one important fact to be taken into account: Mexico did not have a national oil company in the discussed period. All the producers were big multinationals. The pioneers (Edward L. Doheny’s Mexican Petroleum Company, Weetman Pearson’s El Aguila) enjoyed strong government support, but no public capital was engaged. El Aguila was later taken over by Royal Dutch-Shell, and one-third of the production was controlled by successors of Standard Oil. The most popular belief is that because of the political turmoil of 1911–1929 (revolution, counter-revolution, then counter-counter revolution6), worsening relationship between labor and business, attempts to levy increasing taxes and finally the expropriation of 1938 – the Big Oil resigned from operating in an unstable and legal environment. This thesis has been credibly challenged9 on the premise that then-recoverable oil deposits were simply depleted and oil companies, in spite of considerable investment in exploration (and skillful evasion of any legal or fiscal “attacks”), were not able to find more oil using then-available spring / 2014


thousand barrels per year

36

194756

200000

150000

100000

50000

1904

1908

1912

1916

1920

1924

1928

1932

1936

Year FIG. 2 Mexico’s oil production 1904-1938 - thousand barrels per year

geological expertise and technology. However, this focus on Mexico’s internal affairs has been criticized18 by claims that the boom-and-bust of 1920s and decline in 1930s is easier to understand from a broader, global oil market perspective. Particularly, it should be noticed that the oil boom of early 1920s was caused by a giant supply gap after World War I, and that in the 1930s more attractive investment locations (especially Venezuela) emerged. Nevertheless, the first thesis has the greatest social and political importance. In almost every article about the discussed energy reform readers could find the nationalization and expropriation of 1938 mentioned. However, the legal route to the state monopoly in oil & gas was not that short – “75 years of state monopoly and prohibition of private upstream business’ is a myth21.

The birth of the Mexican oil & gas regime The Political Constitution of Mexico of 1917 – specifically, the famous Article 27 – made hydrocarbons the property of the nation and mandated labor rights. How-

ever, because of political instability, Mexican leaders were not strong enough to enforce those on foreign companies, e.g. impose new taxes on American oil business9. The election of President Lazaro Cardenas in 1934 was a breakthrough for Mexican socioeconomic reality. Called “the president of the people”, Cardenas started confiscating the companies that did not comply with new rules. The conflict with oil companies started as they had lost a labor dispute in 1938 – stated they could not comply with wage raises demands. At the same time, Mexican assets were not profitable. This in turn caused president Cardenas to announce nationalization on March 18, 1938. In the midst of a propaganda war8, embargos, boycotts, and lengthy negotiations on compensation14 to the U.S. companies, Mexico started to manage its own oil resources by means of Petroleos Mexicanos. However, the goal was to ensure that the Mexican state would benefit from oil production and Mexicans would be given a chance to manage the industry, which would never happen under former conditions. It was not the point to completely resign from foreign capital and knowhow: although Lazaro Cardenas amended Constitution so it prohibited granting


37

period 1904-1917

Porfirio Díaz, Mining Law of 1884 and 1892

1917-1938

The Political Constitution of Mexico, revolution

1938-1941

stronger rights

weaker rights

ownership of resources underneath owned or leased land no minerals ownership; production permits/licenses profit- and production sharing contracts (a share in product ownership)

Lázaro Cárdenas, new Constitution wording, expropriation

1941-1958

Manuel Avila Camacho, 1941 amendment

1958-2008

Adolfo Ruiz Cortinez, Petroleum Law of 1958

2008-2014

Felipe Calderón, energy reform and Pemex Law of 2008

2014-?

Peña Nieto, 2013 energy reform

risk service contracts, minority-partnerships with Pemex pure service contracts for a fixed sum integrated service contracts, possible production bonus exploration and production licenses; no minerals ownership

FIG. 3 Porfirio Díaz, Mining Law of 1884 and 1892

concessions, he allowed for – by means of secondary legislation – contracting exploration and extraction to a private entity, for which it could be pain in cash or in kind, i.e. in a part of product. This means that profit-sharing and production-sharing agreements were legal. In 1941, president Manuel Ávila Camacho permitted – also by means of secondary legislation – extraction by joint-partnerships with a minority ownership by a private company. Apparently not much research has been dedicated to that period, apart from remarks that Pemex was able to take advantage of foreign technology by means of risk contracts19 – which some believe to have been a situation similar to the today’s. What can be called a ban on private oil & gas business started in 1958, when president Adolfo Ruiz Cortines, in search for even greater independency in petro-

leum industry27, enacted the Petroleum Law, which explicitly prohibited any remuneration based on product or results of exploration. Foreign activity was reduced to service contracts. Moreover, in 1960, the Constitution was given its

FIG. 4 Ku-Maloob Zaap offshore platform spring / 2014


38

2500 2500

2000 2000

Cantarell Cantarell Ku-Maloob-

Ku-MaloobZaap Zaap

Thousand barrels per day

thousand barrels per day

2 211,1 2211,1

1500 1500

Poza-Rica Poza RicaAltamira Altamira Samaria-Luna Samaria-Luna

1000 1000

Bellota-Jujo Bellota-Jujo

Abkatún-Pol

Abkatún-Pol Chuc Chuc

500 500

0 1960 1960

1965 1965

1970 1970

1975 1975

1980 1980

1985 1985

Year

1990 1990

1995 1995

2000 2000

2005 2005

2010 2010

Year FIG. 5 Selected key Mexican oil formations output (average thousand barrells per day), 1960-2013

up-till-recently wording, which gave Pemex monopoly over any phase of petroleum industry – from upstream to downstream for the next 53 years. Fig. 3 outlines the changing legal environment for foreign investors in a simplified way.

Slowing upstream, insufficient downstream In the 1960s and early 1970s Mexican oil output was too small to place it among oil exporters. The Second half of 1970s saw a huge increase due to new discoveries, especially Cantarell field discovery. Cantarell, an easily exploitable near-offshore field, which started production in June 19793, soon proved to be one of the biggest fields in the world, estimated to hold up to 20 billion barrels of oil24. Peak Cantarell output reached over 2 million barrels per day in the early 2000s, but has steadily declined since then (below 450,000 bbl/d in 2013)3. Cantarell field success lies not only in its giant reserves, but also its low production cost. However, its easily recoverable

oil has almost been depleted, while other key Mexican oil formations, apart from Ku-Maloob-Zaap (Fig. 4) offshore field, also show declines (Fig. 5). Declining production is not the only economic problem. Another is that Mexican petroleum has been seen to be streaming up north and then streaming down south again3, because refineries – wholly owned by Pemex subsidiaries – has lacked the capacity to process the crude and produce enough fuel for the growing economy1. Yet another is that, as the reader may have noticed, gas has only been mentioned as a part of fixed phrase oil & gas, and not as a recovered fossil fuel. Mexico is a net natural gas importer, mostly from the U.S.24 All the issues above have at least one common explanation: Pemex is constrained with inefficiency, especially its employment-output ratio (almost three times lower than Ecopetrol’s and Statoil’s8), and overwhelming taxation, amounting to the effective rate of at least 55% according to some analysts19, which is prohibitive to R&D investment. At the same time, Mexico not only heavily relies on oil exports, with Pemex revenues


39

accounting for ca. 40% of the Mexican budget, but has also became addicted to cheap energy, which limited investments in efficiency. These facts are easily noticeable in the “Fortune” Global 500 List of 20135. Pemex may be the 36th biggest corporation worldwide (Fig. 6.1), but its profit-to-revenue ratio, along with its

revenue-to-employment ratio (approx. revenue per employee) is disquieting (Fig. 6.2). There are also less obvious burdens on Pemex, namely heavy pension liabilities conceded to the infamous workers union and oil theft by organized crime20.

Name

Rank

Employment

Revenue

Profit

Profit/ Revenue %

Revenue/Employment ($ m per employee)

Petrobras

25

85065

144103,00

11034,00

7,70%

1,69

Pemex

36

151022

125195,00

198,00

0,20%

0,83

Statoil

39

23028

124382,00

11847,00

9,50%

5,40

Lukoil

46

150000

116335,00

11004,00

9,50%

0,78

Petronas

75

46145

94273,00

16001,00

17,00%

2,04

Indian Oil

88

36008

85521,00

818,00

1,00%

2,38

Rosneft

99

166110 

79610,00

10982,00

13,80%

0,48

150000

Revenue

144103 125195

124382

$ million

120000

Profit 116335 94273

90000

85521

79610

60000 30000

11847

11034

11004

16001 818

198 Petrobras

Pemex

Statoil

Lukoil

10982

Petronas Indian Oil Rosneft

FIG. 6.1 7 oil companies from the Global 500 List – Revenue and profit spring / 2014


40

6

5,40

Revenue per employee

5

Profit to revenue (%)

$ milion

4 3 2

2,38

2,04 1,69

1

0,83 7,7% Petrobras

0,78 0,2%

Pemex

9,5% Statoil

9,5% Lukoil

17,0% Petronas

0,48 1,0% Indian Oil

13,8%

Rosneft

FIG. 6.2 7 oil companies from the Global 500 List – Revenue per employee and profit-to-revenue ratio

Reserves - proven, recoverable, Pemexable There are plenty of potentially rich hydrocarbons reservoirs in Mexico, especially deepwater Gulf of Mexico (estimated to contain 30 billion barrels of oil equivalent17), extension of Eagle Ford shale south of Rio Grande (estimated to hold 343 trillion cubic feet of natural gas24), and the Chicontepec formation, along with other unconventional deposits. These are technically recoverable, but not Pemexable – i.e. recoverable by the company itself at the current state of events. At the moment Pemex lacks technological expertise and – due to its regulatory and taxation environment – can neither enter partnerships nor risk so much money to explore such projects alone (it is estimated that a single deepwater project in the Gulf requires at least $7 billion to invest21). Same applies to shale gas exploration and tight oil reserves of Chicontepec, due to complex geological characteristics7. But without

resorting to those challenging treasures Mexican oil & gas output is bound to shrink.

The 2008 reform Problems with operational flexibility, lack of transparency, decisional autonomy and other aspect of Pemex’s business have been addressed in an important reform enacted in October 20081,19. The reform inter alia improved the company’s corporate governance by adding experts to the management board and lightening the union burden and improved financial autonomy (to this point, Pemex budget would be directly accepted by the Treasury). Another important move was to appoint National Hydrocarbons Commission – an independent regulatory body to oversee and rationalize Pemex operations. The reform also entitled Pemex to enter into new type of contracts. PEP Model Contracts, which were meant to improve efficiency and attract foreign expertise by hiring a single contractor to


41

FIG. 7 President Nieto presents Energy Reform Bill, August 2013

explore and exploit a field, differed from regular service contracts in that they allowed bonus payments for production above specific levels. Although the reform is considered beneficial, the legal content of new contracts has been criticized19 and they have not attracted enough know-how and investment. Specifically, a bidding round for three sites of the Chicontepec field was cancelled as no applicant decided to bid finally11. Thus, talks of a need for further reforms lasted until August 12, 2013, when president Peña Nieto presented a much bolder proposal than president Felipe Calderón managed to push through the Congress in 2008 (Fig. 7).

“Reforma Energetica” A.D. 2013 What makes the reform a bold move not comparable to the 2008 changes is that the very root of Mexican natural resources regime was modified – the Article 27 of the Constitution. After a lively political debate including protests, stripping, and barricades

(Fig. 8 and 9)16, on December 12th, the Mexican Congress approved the reform with required 2/3 majority. Because it was a constitutional amendment, it had yet to be accepted by at least 17 out of 31 Mexican states. On December 16th, the state legislatures approved the bill and four days later it was signed by the president. Since then, the Congress will have 120 days to pass secondary laws defining the details of new regime. The reform addresses the vexing issues outlined in this article. First of all, foreign expertise and investment will be encouraged by opening the upstream by means of licenses and contracts granted not only to Pemex, but also to individual companies. This may, in the future, lead to foreign companies carrying out individual projects. Secondly, the reform somehow returns to the exploration contracts regime of Lázaro Cárdenas era, allowing for profit-sharing and production-sharing contracts – as long as it is explicitly stated that the hydrocarbons beneath the ground are the property of the Nation. One of the factors limiting the success of 2008 reform was that foreign companies were not allowed to book reserves, which is very important financial practice worldwide (reflected in e.g. annual reports on oil & gas reserves). This time the SEC was convinced to recognize the IOCs rights as reserves15. The above, combined with new possibilities for fully-private operation, is what makes this reform so grave – a door to huge reserves requiring multinational know-how and wide distribution of risk has been opened. Thirdly, National Hydrocarbons Commission and the Ministry of Energy will serve as license-granting bodies – facilitating potential competitive market – while there will also be a new environmental supervision body: National Agency of Industrial Security and Environmental Protection of the Hydrocarbon spring / 2014


42

Sector, so that Pemex and potential other companies are held responsible for any harm which may arise during new operations in difficult environments (deepwater in particular). The fourth important aspect is a broader change for the energy industry, especially opening the midstream and downstream sector, hitherto under Pemex monopoly, to private investment and competition, subject to concessions granted by another new entity: Energy Regulatory Commission. This may change Mexico’s position as a net refined petroleum products importer and prevent fuel shortages. The fifth significant change addresses the issue of economic addiction to cheap resources and budget funded in onethird by petroleum exports. Revenues generated by the reformed oil & gas sector (with the exception of taxes) will be accumulated in, administered and distributed by the Mexican Petroleum Fund.

FIG. 8 Opposing lawmaker: Pemex not to be sold

It can be said that it is too late to repeat the Norwegian success to this extent (the Fund should have been established when Cantarell was discovered, one may say), but nevertheless this move may prevent the situation of “resource curse”, where oil wealth is not accompanied by social wealth. Specific legal solutions to these five constitutional amendments will be known when secondary legislation is drafted, that is probably in April–May23.

Social reception Why so much time had passed until Mexican politicians finally decided to do what needed to be done? The answer lies in the special place held by petroleum sovereignty in the mentality and tradition of the Mexicans. Called “theology of oil”13, this approach mixes universal idea of resources control being an important aspect of independency (on which there is a general consensus) with a great sense of national pride associated with “repelling” foreign resource companies. Suffice to say March 18 is celebrated in Mexico as Oil Expropriation Day, an anniversary of Lázaro Cárdenas expropriation of 1938. As already mentioned, the reform plans incurred strong protests in December 2013. Although they proved to be ineffective, it is doubtful whether “Reforma Energetica” would be passed if it had been subjected to a referendum. Many protestors raged against the privatization of Pemex, which is naturally mistaken, but nevertheless it shows how strong is the social feeling of Pemex being common treasure. On the other hand, foreign analysts claiming that Pemex should be privatized by means of an IPO12 like its Brazilian counterpart Petrobras was, apparently lack in the understanding of the Mexican point of view.


43

FIG. 9 Mexican MPs protest in the Congress

Outlook While there is still time before secondary legislation comes into force, open bidding rounds start and multi-billion dollar investments starts flowing26, the time for analyses related to how an unbundling of huge Mexican reserves can alter global markets is now. For sure, most activity will relate to Mexican deepwater and shale; there might be less interest in the difficult Chicontepec reserves. The most significant economic impact will be that for the U.S., with a possibility to lose a share in refined petroleum products market, as well as reduce natural gas exports to Mexico. The impact on global oil supply is yet to be calculated.

Conclusion If 2013 “Reforma Energetica” is analyzed synoptically with 1938 oil expropriation, basic finding is that geology

and its economic implications matter much more than law along with its political background. If a resource jurisdiction is not attractive anymore in geological means, its political powers quickly gain bargaining power to limit foreign activity, which took place in 1938. In contrast, a country in economic trouble may resort to once unthinkable means – even understood as compromising its sovereignty – to be able to reach for more reserves. Generally, the Mexican case is uplifting, especially should the energy reform prove beneficial to the public, so that Mexican oil & gas are never considered as a curse for the society again. Also, if Mexican government drafts the secondary law within the constitutional deadline, it should be an example for other countries willing to enable exploration of their resources. Especially for Poland, a supposedly active pursuer of shale gas, whose leaders – after a few years of political hype – were not able to set legal framework since first proposals were presented in October 2012. spring / 2014


44

Acknowledgement The author would like to specially thank Aleksandra Zacheja, fellow Warsaw University student, for the translation of Spanish texts.

References 1. Berain Fuentes, R. & Rico, D. (2010). Oil in Mexico. Pozo de Pasiones: The Energy Reform Debate. Washington D.C.: Mexico Institute, Woodrow Wilson International Centre for Scholars. 2. Brown, J.C. (1993). Oil and Revolution in Mexico. Berkeley, CA: University of California Press. 3. Comisión Nacional de Hidrocarburos. Producción histórica de petróleo mensual por campo. Retrieved December 26, 2013, from http://www.cnh.gob.mx/portal/Default.aspx?id=5100 4. Cunningham, N., & Dym, W. (2013, August). American Security Project. The U.S. TightOil Boom: Geopolitical Winner or Long-Term Distraction? Retrieved February 1, 2014, from http://americansecurityproject.org/featured-items/2013/perspective-the-u-s-tight-oilboom-geopolitical-winner-or-long-term-distraction/ 5. Fortune Global 500 List 2013. Retrieved January 29, 2014, from http://money.cnn. com/magazines/fortune/global500 6. Foster, L.V. (2007). A Brief History of Mexico. New York, NY: Checkmark Books. 7. Getting It Right In Chicontepec – an interview with Edgar R. Germán, Commissioner at Comisión Nacional de Hidrocarburos. Mexico Energy & Sustainability Review. Retrieved January 26, 2014, from http://www.mexicooilandgasreview.com/2012/interviews/interview7_1.html 8. Gonzales, N. (2013, July 17). La nómina de Pemex, el doble de la de Petrobras. Negocios. Retrieved January 26, 2014, from http://www.milenio.com/negocios/nomina-Pemex-doble-Petrobras_0_118188512.html 9. Haber, S., Maurer, N. & Razo, A. (2003). When the Law Does Not Matter: The Rise and Decline of the Mexican Oil Industry. The Journal of Economic History, 63, 1–32. 10. Huesca, R. (1988). The Mexican Oil Expropriation and the Ensuing Propaganda War. Texas Papers on Latin America. 11. Iliff, L. (2013, July 17). Pemex Fails to Attract Strong Interest for Oil Contracts at Chicontepec. Wall Street Journal. Retrieved January 26, 2014, from http://online.wsj. com/article/BT-CO-20130711-710506.html 12. Kingston J. (2013, December 16). A Few Contrary Words on Mexico’s Oil Reform. Retrieved January 26, 2014, from http://blogs.platts.com/2013/12/16/baker-pemex/ 13. Krauze E. (2013, October 31). Mexico’s Theology of Oil. The New York Times. Retrieved January 26, 2014, from http://www.nytimes.com/2013/11/01/opinion/krauze-mexicos-theology-of-oil.html?pagewanted=all&_r=0 14. Maurer, N. (2011). The Empire Struck Back: Sanctions and Compensation in the Mexican Oil Expropriation of 1938. The Journal of Economic History, 71, 590–615. 15. Maurer, N. (2013, December 13). The Mexican oil reform will allow private foreign companies to book ownership of oil reserves. The Power And The Money. Retrieved


45

January 26, 2014, from http://noelmaurer.typepad.com/aab/2013/12/the-mexican-oilreform-will-allow-.html 16. Mexico parliament debate over energy bill halted by MP blockade (2013, December 12). The Australian. Retrieved January 26, 2014, from http://article.wn.com/ view/2013/12/11/Mexico_parliament_debate_over_energy_bill_halted_by_MP_ block/ 17. Petroleos Mexicanos. (2012, April). Pemex Investor Presentation. Retrieved January 26, 2014, from http://www.ri.pemex.com/files/content/Pemex_Outlook_I_120508%20 (one%20on%20one%20meetings).pdf 18. Rubio del Mar, M. (2006). The role of Mexico in the first world oil shortage: 1918– 1922, an international perspective. Revista de Historia Económica, 24, 69–95. 19. Samples, T.R., & Vittor, J.L. (2012). Energy Reform and the Future of Mexico’s Oil Industry: The Pemex Bidding Rounds and Integrated Service Contracts. Texas Journal of Oil, Gas & Energy Law, 7, 215–240. 20. Seelke, C.R., Haggerty, C., Ratner, M., & Angeles Villareal, M. (2013, November 18). Mexico’s oil and gas sector: Background, reform efforts, and implications for the United States. Congressional Research Service. Retrieved December 25, 2013, from https://www.fas.org/sgp/crs/row/R43313.pdf 21. Standard & Poor’s. (2013, August 28). Mexico’s Energy Reform: Reviving Lázaro Cárdenas. Retrieved December 25, 2013, from http://www.standardandpoors.com/ratings/ articles/en/eu/?articleType=HTML&assetID=1245356426129 22. Standing, T. (2006, October 11). Mexico’s Cantarell Field: How Long Will It Last? Energy Bulletin [Peak Oil Review]. Retrieved January 24, 2014 from http://www.resilience. org/stories/2006-10-11/mexicos-cantarell-field-how-long-will-it-last 23. Sweeping Reforms Expected to Revolutionize Mexico’s Energy Sector. (2013, December 19). Mayer Brown Legal Update. Retrieved December 29, 2013, from http://www. mayerbrown.com/files/Publication/27dd8fca-ee74-44a0-85f4-e360b8d9fe46/Presentation/PublicationAttachment/830336d3-7785-4c4d-bd28-0502bc050dd1/Sweeping_Reforms_Expected_to_Revolutionize_Mexico.pdf 24. U.S. Energy Information Administration. (2012, October 17). Country Analysis: Mexico. Retrieved January 23, 2014, from http://www.eia.gov/countries/analysisbriefs/Mexico/Mexico.pdf 25. U.S. Energy Information Administration. (2014, February 1). Short-Term Energy Outlook 2014. Retrieved February 1, 2014, from http://www.eia.gov/forecasts/steo/pdf/ steo_full.pdf 26. Williams A. (2014, January 15). Exxon to Chevron Face Two-Year Wait in Mexico Oil Opening. Bloomberg Sustainability. Retrieved January 25, 2014, from http://www. bloomberg.com/news/2014-01-15/mexico-sees-first-foreign-oil-and-gas-contracts-byend-2015.html 27. Whitehead, L. (2011). Coping with Adversity in the Mexican Oil Industry: Como Pemex no hay dos. The Future of Oil in Mexico Houston, TX: James A Baker III Institute for Public Policy of Rice University.

spring / 2014


46

Hydrocarbon exploration in the Himalayan Region. A tough challenge with a high reward Deepak Kumar, Madan Jyothula, Venkatesh Betha Andhra University, India | dpk42975@gmail.com

Rising of the mighty Himalayan range from the Tethys Sea due to collision of Indian plate with Eurasian plate created a huge subsurface treasure which probably, also includes abundant reserve of hydrocarbon. The present work is based on a classroom studies and group discussions on the reasons of possible high potential of hydrocarbon reserves in

FIG. 2 Highly rugged terrain of Himalayan Region

the Himalayans, the exploration efforts given so far and how the future strategy may be intensified based on the state of the art technology.

Introduction During the major part of Mesozoic Era (251 to 65.5 million years ago) Tethys Sea


47

separated the super continent of Laurasia in the north and Gondwana in the south. Continents had started taking the present shape when Gondwana began to break up in the early Jurassic (about 184 million years ago)1. During the Cenozoic Era, about 50 million years ago, the Indian Plate collided with Eurasian Plate2, buckling the crust and forming the Himalayan Range. The Tethys Sea was dominated by soft shell animals called Ammonites, when those animals died they got buried in the sediments of the Tethys Sea. As the Tethys Sea disappeared, those Ammonites got trapped in the sedimentary layers of shale and transformed into fossils. With passage of time, under the pressure and the temperature those fossils might have got converted into the hydrocarbon. The occurrence of the huge quantity of petroleum in the Middle Eastern countries shows the richness of aquatic animals in the past eras, which died and decomposed to form hydrocarbon in the sediments of Tethys Sea. But the highly rugged terrain and logistics offers a very serious challenge in the exploration program in the Himalayan Region.

Himalayan Basin of India The outer hill ranges or foot hills of the Himalayan Mountain extend over

FIG. 1 Continents and the Tethys Sea in Mesozoic Era

FIG. 3 Location of Himalayan Foreland Basin

a distance of more than 1,500 km from Jammu in the west to Arunachal Pradesh in the east forming the Himalayan Foreland Basin having a NW-SE trend. The northern and the southern limits of the basin are demarcated by two major faults named the Main Boundary Thrust and the Himalayan Frontal Fault. The hill ranges from a series of WNW-ESE trending hills partially covering Valleys. Those hills are mainly constituted of Tertiary rocks, the altitudes vary from 1,800 to 2,700 m. Beyond the southern slope of Himalayan Frontal Fault the area is plain having a cover of Alluvium. The total area of the basin is about 30,300 sq km. The basin is filled up with 5,000 m to 6,000 m thick Mio-Pliocene molasses’ sediments3. At some places the thickness of the sequences are of the order of 10 km. The oldest sequence belongs to the Paleocene-Eocene time. Stratigraphically the area is presented by Tertiary sediments unconformably underlain by Early Cambrian to Precambrian rocks. According to spring / 2014


48

FIG. 4 Logistic management in rugged terrain

the Directorate General of Hydrocarbon (DGH), the prognosticated resources of the basin are 140 MMT (O + OEG)4.

Exploration Status in Himalayan Foreland Basin Exploration work for hydrocarbon has started in the basin of the Petroleum Division of Geological Survey of India, Subsequently Oil and Natural Gas Corporation (ONGC), the national E&P Company of India has been carrying out detailed surveys and investigation since 1956. The work carried out by ONGC in the basin is summarized in the Table 1. The exploration efforts by the ONGC in this basin have been continued with varying intensity3. However, there is no commercial discovery of hydrocarbon till now. During the recent decades ONGC has intensified seismic data acquisition program for sub surface imaging of this complex basin. But due to highly rugged terrain and difficult logistics it is a tough challenge for the seismic crew in areas like those shown in Fig. 2 and Fig. 4. Field logistics are extremely important in these types of areas due to the difficulty in equipment mobilization, complexity

of the field operation and the time needed to finish the acquisition during the winter-spring seasons. With the traditional cable-based recording system it is not possible to cost effectively deploy enough stations for proper imaging. The Right Acquisition Technology for Himalayan Basin Extensive 3D seismic survey covering the entire basin with high station-density for high quality subsurface imaging is necessary to assess the actual hydrocarbon potential of foot Himalayan hills. The job is highly challenging and capital intensive, at the same time may turn out to be highly rewarding. The ideal seismic acquisition system for the Himalayan Foreland Basin should be able to leverage numerous advances in wireless transmissions and advanced data storage facilities. Nowadays, for a standard 3D seismic survey, cables and various ground equipment supporting cable-based data transmission weigh 25 tons or more5. Weight of the equipment contributes directly to the cost and the speed of the survey. To overcome the limitations of cable-based architecture in the hilly terrain Radio transmission architecture with state of the art support of helicopter-dropping equipment and crew members for speedy mobilization, use of dismountable shot hole drilling rig and radio transmission of the acquired

FIG. 5 Radio Acquisition System and Cable System with Radio-based Extension


49

data to the field processing system of the base camp for real time quality control is to be deployed. Receiver layout with Radio Acquisition System and Conventional Cable System with Radio-based Extension, which are suitable for inaccessible hilly terrain region. Depending upon the size of the survey and the logistics, a combination of the above two may be utilized. But for the extreme terrain each receiver station should have an independent bi-directional communication path to the recording unit and there would be no telemetry cables interconnecting stations.

Conclusion Detailed subsurface mapping of the Himalayan Foreland Basin cannot be accomplished by 2D surveys or by conventional 3D surveys on selectively accessible areas. The entire basin needs to be covered with the high-density 3D seismic acquisition to properly image prospective targets at all basin depths and for this, state of the art radio transmission systems are deployed so that the area of extremely rugged terrain also can be covered. A serious well planned effort to explore this basin may bring a very high reward.

Reconnoitre traversing

300 km

Aeromagnetic surveys

45,000 km2

Gravity magnetic surveys 30,079 stations SEISMIC SURVEYS Refraction

3510.29 GLK

Reflection CDP

2578.97 GLK

EXPLORATORY WELL Number of drilled wells

15

Meterage

61,304.35 m

STRUCTURAL WELLS Number of drilled wells

8

Meterage

6,239.25 m

TABLE 1 Exploration Status in Himalayan Basin

Acknowledgements The authors express their sincere thanks and gratitude to Prof. P. Rama Rao, HOD and Faculty Adviser, Department of Geophysics, Andhra University, Vishakhapatnam for his constant encouragement, valuable guidance and also for providing all necessary facilities during the progress of this work. The authors are also grateful to Mr. M. R. S. Sampath Kumar, Associate Professor and Dr. M. Subrahmaniam, Scientist, UGC, Department of Geophysics, Andhra University, Vishakhapatnam, India for valuable discussion, Guidance and constructive criticism of this work.

FIG. 6 3D survey layout with only Radio Transmission (after Hollis et al) spring / 2014


50

References 1. Biswas, S.K. (1994). Status of Exploration for Hydrocarbons in Siwalik Basin of India and Future Trends. Himalayan Geology, 15, 283–300. 2. Gondwana. Retrieved February 1, 2014, from https://en.wikipedia.org/wiki/Gondwana#Breakup 3. Himalayan Foreland. Retrieved February 7, 2014, from http://www.dghindia. org/13.aspx#6 4. Hollis, J., Iseli, J., Williams, M., & Hoenmans, S. (2005, November). Seismic Activity Update. The Future of Land Seismic. Harts E & P, 78(11), 77–81. 5. Klootwijk, C.T., Sharma, M.L., Gergan, J., Tirkey, B., Shah, S.K., & Agarwal, V. (1979, July). The extent of Greater India, II. Palaeomagnetic data from the Ladakh Intrusives at Kargil, northwestern Himalayas. Earth and Planetary Science Letters, 44(1), 47–64.

Endorsed by

7-8 May 2014 | Marrakech www.moroccosummit.com

The Morocco Oil & Gas 2014 Summit, co-organised with the ONHYM, will be a high profile meeting providing exclusive industry insights into the investment, E&P and infrastructure in Morocco. Organised by:

For more information contact: Ben Hillary E: BenH@irn-international.com T: +44 207 111 1615 Entertainment Sponsor:

Gala Dinner Sponsor:

Lunch Break Sponsors:

Deluxe Exhibitor Sponsor:

Supported by:

Exhibitor Sponsors:

Media Partner:


51

Curbing oil spill as a tool to enhance sustainable development in Nigeria Dirisu Christian Davison Abubakar Tafawa Balewa University, Nigeria | dirisu.21691@gmail.com An oil spill is the release of a liquid petroleum hydrocarbon into the environment, especially marine areas, due to human activity, and is a form of pollution. The term is usually applied to marine oil spills, where oil is released into the ocean or coastal waters, but spills may also occur on land. Oil spills may be due to releases of crude oil from tankers, offshore platforms, drilling rigs and wells, as well as refined petroleum products (such as gasoline, diesel) and their by-products, heavier fuels used by large ships such as bunker fuel, or the spill of any oily refuse or waste oil.

This work aims at controlling oil spills in Nigeria which will save costs, reduce land degradation and the impact of government policies, hence boosting Africa’s oil production bringing about sustainable development.

Introduction When we think of oil spills, we usually bear in mind oil tankers spilling their cargo in oceans or seas. However, oil spilled on land often reaches lakes, rivers, and wetlands, where it can also cause damage. Oceans and other salt-

FIG. 1 The Fate of Spilled Oil1 spring / 2014


52

• tanker vessel accidents in seas/oceans of the world • leakages of blowout from pipes an flow lines.

FIG. 2 Oil leaking into Bodo Creek on 26 June 2012

water bodies are referred to as marine environments. Lakes, rivers, and other inland bodies of water are called freshwater environments. The term aquatic refers to both marine and freshwater environments1. When oil is spilled into an aquatic environment, it can harm organisms that live on or around the water surface and those that live under water. Spilled oil can also damage parts of the food chain, including human food resources. The severity of the impact of an oil spill depends on a variety of factors, including characteristics of the oil itself. Natural conditions, such as water temperature and weather, also influence the behavior of oil in aquatic environments. Various types of habitats have different sensitivities to oil spills as well.

Sources of Petroleum Hydrocarbon Pollution

It has been estimated that about 1.47 MM metric tonnes of oil enter the sea each year as a result of transportation losses. Of this quantity, about 0.7 MM metric tonnes is traceable back to cargo residues remaining on board after discharge and referred to as cling age the amount of clingage depends mainly on the wax content and viscosity of the previous cargo. In addition to this, accidental spills from tankers contribute an estimated 400,000 tonnes annually. It mainly occurs due to accidental collisions 2. Offshore Oil Exploration and Production Activities Major pollution incidents, such as blowouts, are rare but contribute roughly to three quarter of 50,000 tonnes lost annually from offshore platforms. The risk is less visible during production than in exploration phase but a blowout can result in large volumes of oil being lost off the well if it is not brought under control quickly. A much larger number of small releases occur as a result of routine operations such as the discharge of formation water and disposal of oil-based drilling mud. Terrestial and Atmospheric Input Terrestial oil inputs are principally from discharge of:

Transportation losses

• process water from coastal from refineries and other industries • waste oil carried to sea in sewage discharge and rivers • urban runoff from road network

• tanker lorry accidents on our roads

To compare, the atmospheric fallout of

Oil pollution may originate from:


53

petroleum hydrocarbons is probably less significant, but the extent is very difficult to estimate accurately on global scale. The main portion of atmospheric pollution can be linked to exhausted fumes from road vehicles, industrial furnace and kilns, power plants etc. Natural Seeps and Erosion Natural inputs are also difficult to quantify and show very patchy distribution. Seeps tend to be associated with tectonic activity in oceanic margins where as erosion of exposed oil rich sediments will take place at terrestrial locations and usually form part of the river runoff 3. Illegal oil bunkering/crude oil theft “Bunkering” or “oil bunkering” is “to replenish or replenishing the ship with fuel”4. Bunker fuel includes Automative Gas Oil (AGO) and Low Pour Fuel Oil (LPFO), which are products of the refining of crude oil or some of the “petroleum products” available in Nigeria. Without bunkers, ships’ engines cannot run and they would have to be shut down or the ships be towed by tugs to give them motive power (which would be more expensive) and the maritime shipment of cargo and passengers by vessels, shipping business which is capital intensive, and the economy would all be adversely affected. So, oil bunkering is essential for maritime shipping within the Nigerian maritime sector, but it becomes “illegal oil bunkering” if inter alia, it is carried out without requisite statutory licences or valid documents, or in violation of the Nigerian maritime laws and the guidelines made by the statutory institutions regulating it, and vice versa5. While crude oil theft is a major menace in Nigerian’s exploration and production (E&P) industry today as it has crippled the country’s GDP and also creating un-

told hardship and severe impoverishment on the people of the Niger Delta region. Several oil spills have been attributed to Operational failure but more has been done to crude oil theft. This paper also aims at counting the cost of crude oil theft which can be used to improve human capital, technology and bring about sustainable development in Nigeria.

Physical properties of oil The term OIL describes a wide range of hydrocarbon-based substances. This includes substances that are commonly thought of as oils, such as crude oil and refined petroleum products, but it also includes animal fats, vegetable oils, and other non-petroleum oils. Each type of oil has distinct physical and chemical properties. These properties affect the way oil will spread and break down, the hazard it may pose to aquatic and human life, and the likelihood that it will pose a threat to natural and man-made resources. The rate at which an oil spill spreads will determine its effect on the environment. Most oils tend to spread horizontally into a smooth and slippery surface, called a slick, on top of the water. Factors which affect the ability of an oil spill to spread include surface tension, specific gravity, and viscosity. • Surface tension is the measure of attraction between the surface molecules of a liquid. The higher the oil’s surface tension, the more likely a spill will remain in its place. If the surface tension of the oil is low, the oil will spread even without help from wind and water currents. Because increased temperatures can reduce a liquid’s surface tension, oil is more likely to spread in warmer waters than in very cold waters.

spring / 2014


54

• Specific gravity is the density of a substance compared to the density of water. Since most oils are lighter than water, they float on top of it. However, the specific gravity of an oil spill can increase if the lighter substances within the oil evaporate. Heavier oils, vegetable oils, and animal fats may sink and form tar balls or may interact with rocks or sediments on the bottom of the water body. • Viscosity is the measure of a liquid’s resistance to flow. The higher the viscosity of the oil, the greater the tendency for it to stay in one place. (Honey is an example of a highly viscous liquid).

The fate of spilled oil Natural actions are always at work in aquatic environments. These can reduce

the severity of an oil spill and accelerate the recovery of an affected area. Some natural actions include weathering, evaporation, oxidation, biodegradation, and emulsification. • Weathering is a series of chemical and physical changes that cause spilled oil to break down and become heavier than water. Wave action may result in natural dispersion, breaking a slick into droplets which are then distributed vertically throughout the water column. These droplets can also form a secondary slick or thin film on the surface of the water. ��� Evaporation occurs when the lighter or more volatile substances within the oil mixture become vapors and leave the surface of the water. This process leaves behind the heavier components of the oil, which may undergo further weathering

FIG. 3 The joint investigation team at the site of the 2012 Bodo Oil Spill, the pipeline has been excavated using a mechanical digger


55

or may sink to the bottom of the ocean floor. Spills of lighter refined products, such as kerosene and gasoline, contain a high proportion of flammable components known as light ends. These may evaporate within a few hours, causing minimal harm to the aquatic environment. Heavier oils, vegetable oils, and animal fats leave a thicker, more viscous residue. These types of oils are less likely to evaporate. • Oxidation occurs when oil contacts the water and oxygen combines with the oil hydrocarbons to produce water-soluble compounds. This process affects oil slicks mostly around their edges. Thick slicks may only partially oxidize, forming tar balls. These dense, sticky black spheres may linger in the environment, washing up on shorelines long after a spill. • Biodegradation occurs when microorganisms, such as bacteria, feed on oil hydrocarbons. A wide range of microorganisms is required for a significant reduction of the oil. To sustain biodegradation, nutrients such as nitrogen and phosphorus are sometimes added to the water to encourage the microorganisms to grow and reproduce. Biodegradation tends to work most efficiently in warm-water environments. • Emulsification is the process that forms emulsions, which are mixtures of small droplets of oil and water. Emulsions are formed by wave action, and they greatly hamper weathering and cleanup processes. Two types of emulsions exist: water-in-oil and oil-in-water. Waterin-oil emulsions are frequently called “chocolate mousse,” and they are formed when strong wave action causes water to become trapped inside viscous oil. Chocolate mousse emulsions may linger in the environment for months or even years. Oil and water emulsions cause oil to sink

FIG. 4 The pipeline after the leak had been stopped (by hammering a stick into the hole), showing apparent corrosion around the leak site

and disappear from the surface, giving the visual illusion that it is gone and the threat to the environment has gone. These natural actions occur differently in freshwater versus marine environments. Freshwater environmental impacts can be more severe because water movement is minimized in these habitats. In standing water bodies, oil tends to pool and can remain in the environment for long periods of time. In flowing streams and rivers, oil tends to collect on plants and grasses growing on the banks. Oil can also interact with the sediment at the bottom of the freshwater bodies, affecting organisms that live in or feed off of sediments.

Effect of oil spill on plants and animals Some toxic substances in an oil spill may evaporate quickly. Therefore, plant, animal, and human exposure to the most toxic substances are reduced with time, and are usually limited to the initial spill spring / 2014


56

FIG. 5 Fishermen on the Bodo Creek in 2011. The fishery has been severely depleted by repeated oil spills

area. Although some organisms may be seriously injured or killed very soon after contact with the oil in a spill, non-lethal toxic effects can be more subtle and often longer lasting. For example, aquatic life on reefs and shorelines is at risk of being smothered by oil that washes ashore. It can also be poisoned slowly by long-term exposure to oil trapped in shallow water or on beaches. Both petroleum and non-petroleum oil can affect the environment surrounding an oil spill. All types of oil share chemical and physical properties that produce similar effects on the environment. In some cases, non-petroleum oil spills can produce more harmful effects than petroleum oil spills.

Sensitivity of Birds and Mammals An oil spill can harm birds and mammals in several ways: direct physical contact, toxic contamination, destruction of food sources and habitats, and reproductive problems. • Physical contact – when fur or feathers come into contact with oil, they get matted down. This matting causes fur and feathers to lose their insulating properties, placing animals at risk of being frozen to death. For birds, the risk of drowning increases, as the complex structure of their feathers that allows them to float or to fly becomes damaged. • Toxic contamination – some species are


57

susceptible to the toxic effects of inhaled oil vapors. Oil vapors can cause damage to the animal’s central nervous system, liver, and lungs. Animals are also at risk due to ingesting oil, which can reduce the animal’s ability to eat or digest its food by damaging cells in the intestinal tract. • Destruction of food resources and habitats – even species which are not directly in contact with oil can be harmed by a spill. Predators that consume contaminated prey can be exposed to oil through ingestion. Because oil contamination gives fish and other animals unpleasant tastes and smells, predators will sometimes refuse to eat their prey and will begin to starve. Sometimes a local population of prey organisms is destroyed, leaving no food resources for predators. Depending on the environmental conditions, the spilled oil may linger in the environment for long periods of time, adding to the detrimental effects. In calm water conditions, oil that interacts with rocks or sediments can remain in the environment indefinitely. • Reproductive problems – oil can be transferred from birds’ plumage to the eggs they are hatching. Oil can smother eggs by sealing pores in the eggs and preventing from gas exchange. Scientists have also observed developmental effects in bird embryos that were exposed to oil. Also, the number of breeding animals and of nesting habitats can be reduced by the spill. Long-term reproductive problems have also been shown in some studies in animals that have been exposed to oil6.

Frequency of oil spillage in Nigeria Oil spills in the Niger Delta have been extensive, difficult to assess and often

under-reported. One uncomplimentary value shared by the bulk of oil companies operating in Nigeria is the deliberate under-reporting of the actual environmental impacts of such oil spills, especially those resulting from equipment failures, in terms of volume of crude oil spilled into the already fragile and overstretched ecosystem. Government and the operating companies maintain their own data on spills but these cannot be considered reliable as both the government and operators seek to limit their legal liability for commensurate claims and compensations from oil spill damage7. In the worst cases, oil spillages in the delta are never reported or merely branded minor without minimum postspill containment, recovery and remediation responses. Records between 1976 and 2001 alone indicate that 6,817 oil spills occurred in Nigeria resulting in the loss of approximately three million barrels of oil (UNDP, 2006). This represents an average of 273 oil spills and 115,000 barrels/year spilled in the Niger Delta during the aforementioned period. However, Petrostar’s report for the period 1990–2007 has it that a total volume of 284,000 barrels of oil were spilled or about 28,000 barrels were spilled/year. In a related report by IUCN/CEESP (2006), it was shown that between 9 and 13 million barrels of oil were spilled into the Niger Delta ecosystem over the past 50 years. Some notable oil spills recorded in Nigeria include Bomu 11 oil well blowout (1970), GOCON’s Escravos spill (1978), Forcados Terminal Spillage (1980), Oyakama pipelines spill (1980), Texaco Funiwa 5 blow out (1980), Abudu Pipeline Spill (1982), Ikata Pipeline Spill (1984), Okoma Pipeline Spillage (1985) and Oshika Pipeline Spill (1993), the massive Oloibiri Well 14 oil spill (2004), and very recently, Bodo oil spills (August 2008 and February 2009) and K. Dere spill (April 2009) amongst others8. spring / 2014


58

Reports on Bodo Oil Spill On 21 June, 2012 a leak was discovered on a Petrostar oil pipeline in the Bodo Creek area of the Niger Delta; this was subsequently stopped on 30 June, 2012. It is unclear how long the leek had been undetected. In August 2012 human rights organization Amnesty International published a report highlighting concerns about how this (and previous) leeks on Petrostar pipelines in the Niger Delta were investigated. Oil spill investigations in Nigeria are (in theory) carried out by a joint team comprising representatives of the regulatory agencies, the oil company involved, the local community and the security forces. If the investigation finds that the spill was the result of sabotage, then the local community is entitled to no compensation. This provides the oil companies with a powerful incentive to establish sabotage as the result of any spills in the country, and there have been numerous allegations from both local and international agencies that oil companies, particularly Petrostar, have sought to use their role as part of the investigatory body (invariably the oil company will be the best funded agency involved) to influence the outcome of investigations in favor of sabotage as an explanation. A preliminary investigation into the oil spill on 30 June concluded that the most likely explanation is sabotage, on the basis that the leak was in the “twelve o’clock position” (i.e. at the top of the pipeline), which Petrostar claims is associated with sabotage. This is despite the fact that the leaking pipeline had to be excavated mechanically, and there being no sign of any previous excavations at the site, and claims by the local population that the pipeline showed clear signs of corrosion. A second investigation took place on 3 July, where Osita Kenneth, an independent engineer with more than

10 years in the pipeline industry, who was appointed by the local community to represent them in the investigation, also concluded that the leak was due to corrosion. Amnesty International has subsequently shared photographs of the pipeline with AccuFacts, a U.S. company with over 40 years experience of inspecting oil infrastructure, who also concluded that the leak was most probably caused by erosion to the pipeline. They also noted that it was not unusual for pipes to develop leaks in the “twelve o’clock position” due to corrosion. Amnesty International also observed that an investigation into a leak at Bodo Creek in August 2008 concluded that only 1,640 barrels of oil were spilled, despite independent estimates that 1,440 to 4,320 barrels of oil were leaking per day, and the leak having lasted for 72 days, for a total of between 103,000 and 311,000 barrels of oil. Amnesty has asked Petrostar for an explanation of this discrepancy, but to date has received no answer. Amnesty also report on a leak at a Petrostar site in Batan in Delta State in 2002. On this occasion Petrostar initially claimed the leak was due to sabotage two days prior to the initial investigation of the site, despite the leak being under 4 m of water. An investigation of the site representatives of the company, the Nigerian military and the regulatory bodies, which included a trained diver, then concluded that the leak was the result of equipment failure, however the explanation for the leak was subsequently changed back to sabotage without explanation. Amnesty International maintain that it is the responsibility of Petrostar both to maintain their pipelines and to protect them against sabotage. The network of pipelines used by the company is extremely old, with almost all of the pipelines in use past their normal expect-


59

ed lifetimes, often by several decades. These pipelines often run close to homes, farms and fisheries, and many people in the Niger Delta have had both their lives and their economic prospects severely blighted by leaks.

The UN reports on oil pollution in Ogoniland The scientists from the United Nations Environment Program spent 14 months in Ogoniland compiling their report (Fig. 6). They examined over 200 locations, 5,000 sets of medical records, dug 142 monitoring wells and 780 boreholes, and talked to over 23,000 people. The UN team found water contaminated by oil and benzine (a highly carcinogenic hydrocarbon compound) in wells, with in one area 8 cm of oil sitting on top of the water. Many areas of mangrove were dead, with roots covered in a bitumen-like substance. These mangroves are an important breeding ground for many fish, which use

the exposed root systems as nurseries for their young. Oil spills often caught fire, creating a crust of ash and tar over the land, through which nothing could grow (Fig. 7). Tidal creeks throughout the region had a surface layer of oil on the water more-or-less permanently, with only the thickness varying. The widespread pollution was causing a huge reduction in the number of fish (a staple of the local diet) available, although contrary to local suspicions the fish were not hazardous to eat, as they will avoid the oil at all costs. The pervasive nature of the pollution is likely to be adversely affecting the health of around a million people. The report also found that artisanal refining, a process by which local people “steal� oil and attempt to refine it themselves, presented a serious threat to lives and was responsible for isolated pollution events. Petrostar have long claimed that this artisanal refining is responsible for all pollution in the Delta. The UN report strongly denied this, and noted that Petrostar consistently failed to follow its own guidelines on environmen-

FIG. 6 Members of the UN team at a field site in Ogoniland, UN reports on Bodo spills spring / 2014


60

FIG. 7 Oil burning after a spill from a Petrostar pipeline in Goi-Bodo in 2004, UN reports on Bodo spills

tal protection. The UN report suggests that some areas of contaminated land could be cleaned within five years, but that heavily impacted areas of mangrove and freshwater swamp will take at least thirty years to clean up. It also notes that this process cannot begin till after all ongoing pollution has ceased. The report also puts a cost of US$1 billion on the first five years of the cleanup, which is likely to prove hard to obtain. The Federal Government as well as local and international oil companies (IOCs) operating in the country lose an estimated $7 billion (N1.05 trillion) to oil theft annually, the International Energy Agency (IEA), an energy policy advisor to the industrialized countries, has said. In a report published Tuesday 13th Nov, 2012, the 28-member agency said Nigeria’s crude oil production had dropped to the lowest level for more than two

years in October 2012, due to the recent flooding in some parts of the country and widespread theft of crude oil. The IEA report noted that Nigeria’s crude oil output fell to 1.95 million barrels per day (mnbpd) in October, after production in recent months ranged between 2 mnbpd and 2.5 mnbpd. According to the report, the drop from September 2012 to October 2012 was around 110,000 barrels per day, with the country’s output falling to “the lowest level in around two-and-a-half years”. The report however stated that by early November, production levels were recovering, with export loading schedules showing increased volumes for December. Though the new production level is enough for Nigeria to retain its influential position as Africa’s top producer ahead of Angola, the drop is coming at a time when the non-passage of the Petroleum Industry Bill (PIB) has stalled new investments with the threat of stagnant production in the future. Heavy flooding, which hit the oil-producing communities, as well as largescale and organised theft by powerful syndicates were cited in the IEA’s report. The report noted that “oil bunkering, or theft, costs the government an estimated $7 billion in lost revenue per year.”9

Counting the Crude Oil Theft Consequential losses to crude oil theft are also high as the cost of quantum of crude lost to the oil thieves. This kind of losses is often incurred by the oil companies in the process of getting around the challenges posed by the oil thieves. The losses include the high cost of providing security for facilities, cost of providing marine vessel as an alternative to delivery by pipeline at Escravos by PPMC, cost of repairs of refineries which are prone


61

to being broken as a result of incessant shutting-down-and coming up due to cuts in crude supply as a result of vandalism of crude pipelines. Consequential losses to crude oil theft also include high cost of clean-up and remediation after spills; cost of providing security for small tankers that discharge crude to Warri Refineries from the mother vessel and high cost of insurance as the Niger Delta is considered high risk, as well as cost of specially laying and burying crude pipes to prevent vandalism. Just like the cost of stolen crude, consequential cost due to crude oil theft also run into billions of dollars. For example, XY spends about N1.009b plus USD 244,668 yearly on 47 community surveillance contracts employing 357 community workers. PPMC said it spent N21b on repairs of facilities damaged by oil thieves between 2006 and 2011. It also said it spent #200m to remediate areas of spills. All these are monies that could otherwise be put to productive ventures by the country. With experts’ estimate that a refinery of between 250,000 barrels per stream day and 500,000 barrels per stream day refining capacity can be constructed with about $5b, it is obvious that money lost to crude oil theft in the last three years is enough to increase Nigeria’s refining capacity two fold. Similarly, the quantum of money lost to crude oil theft could equally make difference in executing development projects of high benefit to Nigerians such as improving the edu-

cation sector, construction of roads and railways, providing job opportunities, social security for non-working class and maintenance of security that has been an issue in recent times amongst others10.

Conclusions In view of the above study on curbing oil spill as a tool to enhance sustainable development in Nigeria, the following points should be noted: • encourage full participation of host communities in project planning, implementation, monitoring and evaluation • maintain communication with all social segments of host communities in order to know and address their needs • conduct community development programme which applies world standards of practice to serve host communities • protect the environment and pursue the goal of harmlessness to people through their activities • consult with all stakeholders and publicly report on performance • promote best practices in the industry • provide basic infrastructures such as roads, electricity, portable drinking water and sanitation • support healthcare by providing drugs supplies, health centres etc. • initiate capacity building programmes, and employ qualified indigenes.

References 1. Amnesty International. (2009, April). Amnesty International Forum Syd and Friends of the Earth. Petroleum and Pollution: How does that impact human rights? Amnesty International, 20(2), 58–60. 2. Behaviour and Effects of Oil spills in Aquatic Environments (1999, December). Understanding oil spills and oil spill Response, EPA, pp. E1, E4. 3. Behaviour and Effects of Oil spill in Aquatic Environments (2001, November 5). Understanding Oil spill and oil Spill Responses, pp. E3, E5. spring / 2014


62

4. Eric Sullivian’s Marine Encyclopedia Dictionary (6th ed.). (2001). Edward G. Hinkelman. 5. FEPA (1991, May). Guidelines and Standards for Environmental Pollution in Nigeria. Federal Environmental Protection Agency, (2), 6–8. 6. FEPA (1999, June). National Policy on the Environment. Federal Environment Protection Agency, (5), 3–5. 7. Igbokwe, M.I. (2004). Oil bunkering within the Nigeria Maritime Sector. Annual Conference of the Nigerian Maritime Law Association, Victoria Island Lagos, Nigeria. May 5–6, 2004. 8. Lamorde, I. (2012, July). Agency Report: Nigeria Loses $7 billion Annually to Oil theft. VANGUARD Newspaper, pp. 4. 9. Nigerian National Petroleum Corporation. (2012, September). Counting the Cost of crude oil Theft. Quarterly Magazine, 9(3), 6–7. 10. Steiner, R. (2008, November). Double standard: Shell Practices in Nigeria Compared with International Standards to Prevent and Control Pipeline Oil Spills and the Deepwater Horizon Oil Spill. Friends of the Earth Netherlands, pp. 42–45.


63 CONFERENCE

“Keep the business here in Poland!”. The shale gas world in the middle Europe Maciej Wawrzkowicz Warsaw, Poland. The town, where the business is spreading all over. Capital city of the potential largest shale gas reserves possessor in Europe. Here, from 27th to 28th of November, 2013 the most important executives of shale gas and oil, government representatives, politicians and company agents met and discussed about the future of shale gas exploration and production in the central Europe. It took place during the annual conference Shale Gas World Europe which has been organized by Terrapinn for four years. YoungPetro was also there as one of the media partners of this splendid event.

Dialog and cooperation Over 700 participants had the opportunity to join 26 elite and exclusive peer to peer roundtable discussions. Each of

the table was called as a name of the country that a discussion was related to. Attendees could choose a conversation group and a subject. Furthermore, conversations were held during coffee and lunch breaks. The “Unconventional beach party” was the best occasion to talk and ask questions, during which even the most recognizable attendees were willing to discuss on various subjects.

Presentations and learning Each of the attendees might learn from the best industry keynote interviews and presentations. Right after an official conference opening, Piotr Woźniak, Chief National Geologist and Deputy Minister of Environment of Poland who encouraged all of the investors to establish and develop shale business in central Europe,

spring / 2014


64

gave a speech. He also underlined that only clear and fair competition connected with simultaneous cooperation is the key to success and a strategic plan realization. Not only Polish politician perceived a need to develop E&P business in Poland. Speakers from companies, currently conducting shale operations in the central Europe, emphasized that technology must be improved. Simultaneously, they debunked myths concerning environmental site of the shale industry. “People come to us and ask our engineers when they will be under that famous noise. Engineers answer: ‘You are still’.” – said Dariusz Łątka from San Leon Energy.

Mutually understanding as a base of shale success During the conference attendees paid a special attention to the relationship between the local community and com-

panies, that are conducting operations in central European countries. They agreed with one consent that only by respecting local society, listening to them, leading discussions based on facts, not opinions, explaining the operational process and priorities of investor, shale business may grow and develop without an unexpected problems and inconveniences.

YoungPetro as a media partner Thanks to the Terrapinn – the event organizer, we had unsurpassed pleasure to attend Shale Gas World Europe. YoungPetro editors provided articles for the Shale Gas Word conference’s blog platform. Moreover, we had an occasion to gain knowledge from experienced professionals about the unconventional world. YoungPetro as one of the media partners of Shale Gas World Europe 2013 wants to congratulate organizers on the felicitous event and wish a great success in the future!


65 CONFERENCE

Middle East – place, where we can do something awesome all together! My memories from 7th IPTC in Qatar Daria Łuczak One of the biggest conferences in Oil & Gas industry, 7th International Petroleum Technology Conference, was held in Doha, Qatar between 18th and 22nd of January, 2014. Traditionally a group of students from all over the world got a chance to meet, learn and cooperate during Education Week. It was not only “pack and go” event. I would say, that the preparations were really long. We started completing necessary documents like sheets with marks, diplomas, certificates and many others papers in December 2012. After that, an Organizing Committee had really tough work to follow. With only one hundred seats available and tons of application forms they received, it took them almost five months to read, analyze, compare and finally select participants. I remember that day very well. It was sunny 23rd of April, 2013. I was attending a course organized by Paradigm and also counting down for upcoming 4th International Geosciences Student Conference in Berlin, Germany. Suddenly my cell phone rang – it was an email from SPE, from Lou Jean Rodriguez (thank you again for all your care!). I was chosen to attend Education Week! Even today, while I am writing these memories, I do not know whether excitement or fear were stronger in my mind. There were so many opportunities and so many concerns. As a great chance I considered fully

sponsored trip to the Middle East (warm country during cold winter…), opportunity to meet new people and insight into current energy problems. But there were also doubts – what if my English will be not sufficient, what if everyone would be smarter than me, what if I get lost in Doha (!)… and so many other things. I decided I must be a tough girl. I wanted to meet the big challenge, I had shown my best to be chosen and so I said YES! That was the beginning, and it did not get any easier. Everyone had his tasks as Education Week is not only an opportunity to listen to the impressive lecturers, attend recruitment sessions and enjoy the exhibition. It is a long-term program based on interpersonal and leadership skills. In October 2013 we were divided into 12 international, multicultural and interdisciplinary groups of 8–10 person each. Every group had their own topic to study. There was a huge variety of issues, from “Serving Society through Industry spring / 2014


66

per Alternative Energy Sources” to “Gender & Diversity in the Energy Industry”. Due to current energy hot topic in my country I chose “Unconventional Natural Gas”. Apart from me, my group was formed by students from Brazil, Ecuador, Egypt, India, Nigeria, Qatar, Russia and a group mentor, Jalal Dashti, young professional from Kuwait Oil Company. After an assignment we got in touch with each other via Internet and started to gather materials for the presentation.

It was not a simple task, but we made a broad research. We were also preparing for the Energy Bee Contest, an activity similar to SPE ATCE PetroBowl. From that moment time has gone quickly and on 17th of January I was sitting in plane flying to Doha. First day after arrival was relaxing – we were encouraged to sightsee the city with focus to National Museum of Islamic Art. It was my first hit into Islamic Culture and to be honest I was really impressed by it. At 7 p.m., when everyone arrived, we were invited to icebreaker dinner. Finally we had an opportunity to saw each other in reality. To speed up integration we were given a group task. Its aim was to build the tower, as high as possible, using only marshmallows and raw spaghetti pasta! This activity gave us a lot of fun and allowed us to involve our technical skills. We faced the moment of truth that cooperation in a group of unknown people was not so simple, and there was a lot to do to improve it. During Education Week we did not have free time at all. There were a lot of pre-


67

sentations and other activities which gave us insight into Oil & Gas Industry. Fortunately, we also had a chance to talk to HR representatives from the supermajor and major companies, such as Exxon Mobil, Maersk Oil, Oxy, Qatar Petroleum, Schlumberger, Shell and Total. The 20th of January was a competition day, the groups of students were invited to participate in Energy Bee. It was a new initiative, so there were a lot of doubts, but our Organizing Committee was always helpful and gave us cheering. Good preparation and cooperation in my group succeed and we won that competition! We were awarded with very fancy and useful prizes – iPads.

expected. Different backgrounds (majority were Petroleum Engineers but there were also Geologists and Geophysicists), level of experience (Bachelors and Master students), sometimes strange English accent and pronunciation – all of these and more were huge problems. Despite everything we continued our work to show the topic as interesting and really important. Although our final presentation was not the best in judges opinion, we were proud of it. We made everything correctly in unexpected way (not as traditional presentation, but as a lecture at school – with teacher and bored pupils on the stage!). We did something great and made friendship for whole life.

The main purpose of Education Week was cooperation between students in their groups. Our aim was to present the assigned topic. It was not so simple, but after a lot of preparations we have decided about final form of our presentation. It was a hard task, which I guess no one

I really advice you to take part in SPE activities such as Education Week. Just try and believe in your success. I promise you – participation in program like that will change your fears and doubts into strength and self-confidence.

spring / 2014


68 CONFERENCE

Promoting a responsible energy future Julien Mathonniere The oil and gas industry loves to ramble about the skills shortage due to the ageing of the workforce, an often used argument to tell that they want more engineers to keep doing business as usual. Sustainability rarely seems to fit into the picture, if only for symbolic but rather unconstructive gestures. High oil prices have consistently conspired with the industry’s frontiersman attitude to unlock new energy resources, allowing energy firms to gain valuable experience and technological advance from yet another Faustian pact with fossil energies. With prices in excess of $100 a barrel, a number of small to medium size companies have found strong incentives to hunt for unconventional oil and squeeze more out of mature fields. But the demand side is also changing, both as the result of increased concerns about global warming and additional conservation efforts. Even if renewable energies are still plagued by high costs, the surge of LNG shipments and the wider availability of alternative energy sources have already shifted power. It is no coincidence if the University of Aberdeen, Scotland is hosting the European Student Energy Summit 2014 the next 19th and 20th June. Malgorzata Olesiewicz, the Chair of the summit, quickly saw the opportunity of making a winning bid to host this event in a European oil and gas capital which is all too prone to complain about the skills gap, but which seems also slow to adapt to the energy challenges lying ahead. “When the industry talks about the “skills gap”, they keep calling for more

petroleum engineers. One of the aims of the conference is to show them that the delicate issue of sustainability should be approached from a broader perspective. Engineers have to understand the concerns of the policy makers and vice-versa. If the industry wants to succeed in its transition to a sustainable future, it will have to adopt this same perspective.” With her right-hand woman and Vicechair Lora Dimitrova, they craftily assembled a 30-strong organisation team with students from across all university’s departments, each an expert in his or her own domain: marketing leads and assistants, event managers, hospitality planners, sponsorship directors, web developers, photographer and cameraman, graphic designer, editor. Beyond sending a positive signal to the industry and showing that tomorrow’s energy leaders have already a strong interest in energy issues, the conference also purports to promote energy literacy and make sure that participants are drawn to hot-button issues such as ma-


69

rine energy, the future of North Sea oil and gas, emissions trading, carbon capture and storage or shale gas. A number of top energy influencers, industry leaders and policy makers are expected to attend, but students will also actively engage in every discussion. The event’s organisers would like them to be a driving force in the debates, to think outside the box and to discuss innovative solutions to the industry’s current difficulties. “Powering the Future” has been aptly chosen as this year’s motto, reflecting the need to address the world’s growing demand for energy without compounding the climate change problem. After all, those very same students will be responsible to meet the emissions targets that today’s policy makers have already set. As geologist and BHP Billiton CEO Andrew Mackenzie said it during the recent Houston-based CERAWeek conference, “you can’t argue with a rock”, suggesting that evidence of climate change was clear and compelling, including the geological signs. “Not only do I believe that it is important to show the industry that we are here and ready to take over, says Ms. Olesiewicz, but also to underline that from our own perspective, the status quo is unacceptable.” It was therefore important for the ESES team to get the oil and gas industry involved, especially in a oil and gas industry hub like Aberdeen. Some big energy players, like Premier Oil and Shell, have already committed to sponsor the event and have a stake in the discussions.

This is an encouraging sign that the summit will be a decisive bridging event between the industry and the next generation of bright energy minds. This will be a unique opportunity to break down barriers between working professionals and those who may succeed them tomorrow outside of the traditional and often dull industry shows or career fairs. Topics will cover markets and regulation, technology and innovation, and global energy dynamics, making sure attendees get maximum exposure to cross-subjects discussions: economists will talk shop with engineers, lawyers will bone up on geology or finance. Challenging common wisdom and debunking “die hard” ideas will certainly be part of the program, with a clear goal in mind: sharing useful knowledge rather than ratcheting up fruitless polemics, and engaging audiences on the road to a sustainable future. Unsurprisingly, ESES organisers expect a maximum of interactions between participants to an event that has already more than 3,500 supporters on its Facebook page. A first energy debate on Scottish independence organised jointly with the University of Aberdeen Debaters, the School of Law and the Aberdeen Institute of Energy has already attracted a roomful of attendees. The team has now little doubt that the conference in June will be sold out. They have now three and half months to fine tune the program and make the most of the recently signed partnerships.

ESES 2014 on Facebook: http://www.facebook.com/StudentEnergyEurope

spring / 2014


IT WORKS

HOW

Maciej Wawrzkowicz

Welcome to “how it works?” Section designed especially for those who are willing to improve the knowledge in a field of technical aspects in the petroleum industry! “Dynamic Positioning System” known also as DP system is a subject of this issue. Did you happen to interest how maritime drilling units like oil rig platforms or drillships conducting mining operations on the sea in spite of being under influence of big water forces consist of ocean’s currents, huge waves or whirlpools, stay in the same position? Taking under consideration that drilling equipment must sometimes span thousands of feet into water before even reaching the sea bed, slight movements above the water’s surface can have drastic effects on the drilling operations. Maintaining floating equipment in a strictly specified position is an important logistical aspect of the overall procedures. These are the reasons why The “Dynamic Positioning System” was created. Dynamic positioning started in the sixties and was designed mainly for offshore drilling. With drilling moving into ever deeper waters, jack-up barges could not be used anymore and anchoring became inefficient. The first usage of DP system took place during the attempt to drill the first Mohorovičić discontinuity well and consisted of four steerable propellers that Drillship Cuss 1 was fitted with. It was possible to keep the ship in position above the well off La Jolla community in California, at a depth of 948 meters, thanks to the system. Whereas the Cuss 1 was kept in a position manually, in the same year but slightly later, Shell company launched the Eureka drilling vessel

which was fitted with an analogue control system interfaced with a taut wire, making it the fi rst true Dynamic Positioned ship. Since then, vast improvements of the system’s technology have been made. Dynamic positioning requires the vessel to be fitted with a number of thrusters or powered propellers throughout the unit. These thrusters should be located in the front and back, as well as in the both sides of the vessel, in order to maintain position from every direction. The computer program contains a mathematical model of the maritime unit and includes information concerning the wind and current drag of the vessel. Th is knowledge, combined with the sensor information, allows the computer to calculate the required steering angle and thruster output for each thruster. Additionally, satellite communication is transmitted to the computer system, further helping it control the movements of the vessel. Using the provided information, the computer automatically engages the thrusters to overcome any changes in the location of the vessel. DP has a lot of advantages like: quickly setting up, non-depending on water depth system or simplicity to change position of the drillship, but it has drawbacks as well. High fuel cost and expensive installation are only few of them. Moreover, “Dynamic Positioning System” is useless when it comes to threatening storms, such as hurricanes and cyclones. This technology is used by majority of the offshore oil industry, for example in the North Sea, Gulf of Mexico, West Africa or off the coast of Brazil.



YoungPetro - 11th Issue - Spring 2014