Friday, October 05, 2018

Mixing it with the ‘crude’ technologists at HUG

As the oil price hit a four-year high, the Oilholic found himself in Madrid, Spain, mixing it with the technologists driving process optimisation, Artificial Intelligence, Industrial Internet of Things (IIoT) and all the rest of it in the oil and gas industry, at the Honeywell Users' Group conference.

The event was the annual jamboree of global software-industrial giant's automation outfit – Honeywell Process Solution (HPS). The 2018 round, held in Madrid, Spain, carried additional significance for more than one reason. It was the event's 30th edition, and while the first one back in 1989 would have been as much about software as it would have been about nuts, bolts and consoles, the latest instalment turned out to be anything but. 

Additionally, it was also recently appointed HPS President John Rudolph's (above left) first meaningful interaction with analysts and media outside of the Americas, having taken over in May from Vimal Kapur, who led the outfit in the oil and gas downturn of 2015, as a bit of an optimisation and efficiencies evangelist in trying times. 

And Rudolph told this blogger the efficiency and throughput gains made by HPS clients under his predecessor (who has moved on internally within Honeywell), are only going to be notched up further. "That applies equally to upgrades of legacy estate, as well as starting from scratch with clients' new builds. Efficiency is a one way street. If you are impacting efficiencies, you are also impacting waste; opportunities are a lot greater than we imagine."

The new HPS boss added the company is just starting out with its connected plant solution (more info here), which as the name suggests, is its plant operating platform predicated on big data and IIoT. That's so true, because as recently as 2010, gatherings of this nature were as much about software as they were about hardware. Now software dominates, to quote Jason Urso, HPS' Chief Technology Officer (below right). 

"We've effectively decoupled software from hardware," Urso added. That means the TDC 3000 – that old industry work-horse of a plant control system Honeywell introduced in the 1990s – can now have its digital twin for oil and gas customers hosted on Honeywell servers with no need for additional physical equipment, enabling applications, controls, displays, upgrades and performance monitoring via digital avenues. 

"The world we are heading for is about software driven automation with infinite industry and outcome focussed upgrades. The TDC 3000 is no exception," Urso told the Oilholic. 

Improved plant control, means digital is proliferating to enhance productivity, in some cases "by as much as 10 times" mitigating unplanned downtime and equipment underutilisation. All sorts of kit, sensors and drones are turning data into knowledge that business analysts can interpret to bring about further improvements.

The most visible example of this was offered at HUG by Honeywell's drone (see below) – a star attraction of the conference's exhibition floor (minus its rotors for health and safety reasons of course). 

The drone is being deployed by oil and gas downstream, midstream players, and utilities to inspect anything ranging from power-lines to pipelines. Not only does it carry out safety inspections and monitoring, the drone also gathers performance data, as programmed by the site manager for fixed inspection distances. 

Additionally, the related sphere of health, safety and training – a billion dollar business by Rudolph's own admission – is benefitting from digital as well via augmented reality and intelligent wearables.

Basically, Honeywell and its peers are bringing immersive competency to industry training via virtual reality into the process, making trainees partake in a procedure virtually before actually doing it, and digitising instruction manuals via "active worker assist solutions" embedded into wearable equipment. Sum it all up, and you can get an idea of the kind process efficiencies we are talking about, not just in the oil and gas sector, but the wider manufacturing complex to be honest. 

Invariably, the key issue of industrial cybersecurity matters, especially as research suggests attacks are on the rise. So Honeywell also used the opportune moment of HUG to announce the launch of its new industrial cybersecurity consulting service, an area of its business where it has been investing millions of dollars to service clients. Here is the Oilholic's full report on the launch for Forbes should it interest you.

Away from HUG, and back to oil futures, the market is turning bullish. In fact, too bullish for this blogger's liking! Brent is currently lurking either side of $85 per barrel. There is, at least in this blogger's eyes, a very real danger of the market overshooting. 

If, as many are only too keen to predict, the oil price hits three figures, then there is a real risk of the level being unsustainable given the hit it would have on global demand. Here's the Oilholic's take from HUG on TRT World. But that's about it from Madrid folks, it's time for the big flying bus home! Keeping reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo 1: John Rudolph, President of Honeywell Process Solutions (HPS) addresses HUG 2018, in Madrid, Spain. Photo 2: Jason Urso, CTO of HPS. Photo 3: Honeywell's Industrial Drone on display at HUG 2018. © Gaurav Sharma 2018.

Tuesday, September 18, 2018

Gulf Intelligence’s EMF 2018 and $80/bbl oil

The Oilholic is back in the UAE for Gulf Intelligence's 2018 Energy Markets Forum with the great and good of the Port of Fujairah and 'crude' shores beyond in attendance. The event, as this blogger has previously noted, continues to grow bigger by the year. 

The latest edition was graced by none other than OPEC Secretary General Mohammed Barkindo who, in a nutshell, told gathered delegates the OPEC and non-OPEC association - that has taken 1.8 million barrels per day of oil production out of the market - was "here to stay."

Of course, most most analysts here in Fujairah reckon the upcoming Algiers meeting would be a testy affair to say the least, and well test the relationship. It would be surprising if Iran versus US President Donald Trump doesn't appear on the agenda, along with the whole kit and caboodle of the Iranian delegation in tow. However, for his part Barkindo said Iran remains an "integral" part of OPEC as a founding partner but ventured to say little beyond a show of solidarity.

Right after the Secretary General's quotes came a regular feature of the event – a spot of poll of delegates on a variety of issues dominating the crude market – hosted this year by yours truly. Gulf Intelligence would be publishing the details shortly.

But to give the readers of this blog a snippet - invariably the direction of the oil price came up. While some kindred souls were in agreement with the Oilholic of an average $70-75 per barrel Brent price over the short-term, EMF 2018 attendees, in the main, sounded incredibly bullish predicting $80+ prices for 2019. 

This blogger's issue is that there are just too many variables to be that bullish – Trumpet politics, US-China tussles, plenty of crude in the global pool, geopolitics, you name it. Not all variables are bullish and are tugging each other. Guess time will tell! But that's all from Fujairah folks! Keep reading, keep it crude!

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© Gaurav Sharma 2018. Photo: OPEC Secretary General Mohammed Barkindo talks to John Defterios of CNN at Gulf Intelligence's 2018 Energy Markets Forum in Fujairah, UAE © Gaurav Sharma, September 2018.

Monday, September 10, 2018

Just boring variation not a crude rally or slump

Week-on-week, the picture remains one of a crude oil market in which benchmark prices are firming up, yet both Brent and WTI futures remain within that very predictable range of $60-80 per barrel (see chart left, click to enlarge). 

A fortnight ago, bolstered largely by the tightening of US sanctions on Iran or rather the perception of tightening, Brent began a two-week climb towards $80 per barrel, as the WTI strengthened above $70. 

Yet again, bullish prophets hit the airwaves suggesting a $90 per barrel Brent price in light of tightening of a crude market with "very little spare capacity." In some market quarters it is being debated that global spare capacity is now less than 1 million barrels per day (bpd). 

The Oilholic thinks the bulls ought to calm down a bit. Agreed, US President Donald Trump's squeeze on Iranian oil exports is making buyers nervous, particularly India and Japan. And in 2019, it would be reasonable to expect Tehran's production to be well below its current 3.6 million bpd+ production mark to around 2.4 million bpd. 

However, Saudi attempts to compensate (or over-compensate) for a decline in Iranian output would not go unnoticed in Moscow. Russia has already indicated that it would like to raise production, and amicable as things might be with OPEC, if they want to, they would increase production. 

The market's problem right now is that it is missing strong breakout factors - both bearish and bullish ones. Bearish threats of global trade wars, direction of emerging markets, and an unraveling of the OPEC and non-OPEC agreement continue to lurk around. Similarly, bullish factors such as the industry under-investing (a very visible concern) and running out of spare capacity to mitigate supply shocks also persist. 

So price positive as well as negative sentiments are still not strong enough to decisively pull oil futures one way or another, with US turning less and less to the global supply pool courtesy of rising domestic production. Therefore smart money says what we've seen over the last two weeks was not a rally and nor has there been any noticeable slump. All that has transpired is variation within a predictable floor and ceiling. That's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Graph: © Gaurav Sharma, September 2018.

Friday, August 10, 2018

Gazing at DJ Basin’s ‘Shale Gale’ with Highlands Natural Resources

Last month, the Oilholic headed stateside to get a 'crude' glimpse of drilling activity in the Denver Julesburg or 'DJ' Basin in Colorado; this blogger's first visit to the region. The basin has been a key hydrocarbon producing region of the US since 1901. Over a century later, it's still going strong courtesy of the state of Colorado's very own 'Shale Gale.' 

Colorado's legislative climate might be a bit onerous compared to Texas, but the basin still remains a relatively benign place for exploration and production, and yes the oil majors are all there poking around the place.

Also, what won't surprise regular readers of this blog one bit is that regional activity is being bolstered by - you guessed it - the independent upstarts, or new-age shale wildcatters as the Oilholic prefers to call them. 

In this august group is London-listed Highlands Natural Resources (HNR), the brainchild of entrepreneur and local oilman Robert Price, and his close-knit group of geologists, engineers, financiers and consultants. The company's simple but effective motto – in Price's own words – is to deliver projects "safely, on time and on budget."

The company has farmed out acreage from ConocoPhillips out in East Denver, is not only trialling Halliburton's cost and process optimising Integrated Asset Management (IAM) suite of techniques to the fullest, but also has a stake in its operations from the global oilfield services company itself; a rather unique scenario. 

HNR's site in the Lowry Bombing Range, East Denver (see above left), visited by this blogger in Price's company, sees just the sort of savvy operations predicated on big data that we often hear about in the popular press. For example, in an area where players are attempting to drill 16 or 24 wells in the same pad, Domingo Mata, HNR's Vice President of Engineering, says his company has opted for 8 wells, as studies have convinced the management that fewer wells will provide a better yield.

"We also keep an eye on the minutiae of the drilling process via a plethora of sensors. That's how we gather data and learn lessons from the drilling process in the case of each well, and bring about a sequential reduction in drilling times by improving upon past processes based on what the data revealed about the last round of works," Mata adds.

In some cases, that drilling time has come down to 10-14 days; and we're talking depths in the range of 17,000 to 19,000 feet. Price says optimised operations are the bedrock of his company and together with his chief geologist Paul Mendell, HNR is "astute and prudent" in managing its exposure to what has been, is, and will always remain, a high risk, high reward business. 

On the East Denver site the Oilholic had a walkabout, HNR now has a 7.5% carried interest in first 8 wells to produce at the project with additional upside potential to own 7.5% interest in up to 24 wells at no extra cost. The arrangement is boosted by a strong working relationship with majority holder True Oil. 

The site carries a potential yield of 5,000 barrels per day (bpd) of one of the sweetest and best crudes (see right) this blogger has seen since a visit to Oman back in 2013. The product is currently being brought to market via tanker trucks, but will soon be hooked up to ConocoPhillips' pipeline infrastructure. 

And HNR has received £2.9 million of income during four months up to 31 March 2018 from just two wells – Powell and Wildhorse – which sit in the top 3% of all horizontal DJ Basin (Niobrara) wells in Colorado. 

Not wanting to sit on its existing plays, the company is now eyeing West Denver prospects. HNR owns a direct 100% working interest in leases covering 2,721 acres in the area, where Price reckons his team, partners, contractors and affiliates can collaboratively drill at least 48 wells.

What's more the surface area is largely free of urban development and consolidated into closely grouped parcels, and may allow HNR to move through Colorado's permitting and development processes quicker relative other statewide plays.  

Price and Mendell have also made it their mission to diversify HNR. The company is looking to market and monetise its DT Ultravert technology for enhanced oil recovery, which it claims will help the wider industry achieve at least a 15% increase in production. 

It has been proven to prevent 'well bashing' in horizontal and vertical wells. If the monetisation of DT Ultravert takes off, it could be a game-changer for the company, which is incidentally also in the business of Helium and Nitrogen plays.

All things considered, could Team HNR be described as 'Shale Gale' mavericks? "I think prudent, efficient, low-risk operators would be what I'd humbly describe us as," says Price. Well there you have it folks! It was a pleasure exchanging views with Team HNR (above) and seeing what they are up to.

Depending on whom you rely on, ranging from the US Energy Information Administration's projections to estimates by the likes of Anadarko Petroleum, the DJ basin could hold up to 4.5-5 billion barrels of oil equivalent for viable extraction (including natural gas liquids). 

That suggests there's plenty going around for the likes of HNR to continue tapping away at the reserves in their own cost optimised way. So here's to ingenuity and the spirit of private enterprise that has come to symbolise the shale revolution. That's all for the moment; keep reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Photo I: Highlands Natural Resources' East Denver drilling site. Photo II: Glimpse of Denver light sweet crude produced by Highlands Natural Resources. Photo III: (Left to Right) Gaurav Sharma with Robert Price, CEO & Chairman, Highlands Natural Resources, and Domingo Mata, Vice President of Engineering, Highlands Natural Resources © Gaurav Sharma, 2018.

Friday, July 13, 2018

What to make of Chevron’s North Sea pullback?

What was widely rumoured is now official – oil major Chevron has commenced the divestment of a number of its oil and gas fields in North Sea.

For some in the UK, the San Ramon, California-based US company's retreat from the mature hydrocarbon exploration prospect is the end of an era. Chevron has had a presence in the region for decades and that about says it all, as the North Sea has been in decline since production peaked in 1998.

The company is by no means alone. Both BP and Royal Dutch Shell have sold assets in the North Sea in recent years, as has Chevron's US rival ConocoPhillips. But scale of the Chevron's assets up for sale is sizeable. In fact, the company has confirmed it would encompass "all of its UK Central North Sea assets."

That includes its Britannia platform and allied infrastructure, along with the Alba, Alder, Captain, Elgin/Franklin, Erskine, and Jade fields as well as the Britannia platform and its satellites. The assets collectively contributed 50,000 barrels per day (bpd) of oil and 155 million cubic feet of natural gas to its headline output. 

Company won't vanish from the North Sea just yet. It is currently considering the development of the Rosebank field west of the Shetland Islands. However, the oil major is now focussed on growing its shale production in the Permian basin in Texas as well as the giant Tengiz field in Kazakhstan.

All things considered, Chevron's moves points to a strategic move away from mature prospects by IOCs to those with a more viable higher production prospect. In the process, they are leaving these mature prospects behind to independent upstarts, or state operators who can maximise the asset's end of life potential. 

Take for instance, BP’s business in the North Sea, which is now centred around its major interests West of Shetland and in the Central North Sea. The company sold its Forties Pipeline system to billionaire Jim Ratcliffe's Ineos last year. 

The move put the 235-mile pipeline system, built in 1975, that links 85 North Sea oil and gas assets, belonging to 21 companies, to the UK mainland and Grangemouth refinery, which Ratcliffe bought from BP in 2005. 

In volume terms, the pipeline's average daily throughput was 445,000 bpd and around 3,500 tonnes of raw gas a day in 2016. The system has a capacity of 575,000 bpd.

The acquisition also made Ineos the only UK player with refinery and petrochemical assets directly integrated into the North Sea.

It is highly likely independents will queue up for Chevron's assets, and of course so will the state operators contingent upon pricing. Nexen, a subsidiary of China's CNOOC, and TAQA already have sizable operations in the North Sea and will be keeping an eye on proceedings. Expect more of the same! That's all for the moment folks! Keep reading, keep it crude! 

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© Gaurav Sharma 2018. Photo: Oil rig in the North Sea © Cairn Energy.

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