MAR.

5, 2018 | USD 20

International Petroleum News and Technology | www.ogj.com

CAPITAL SPENDING
UPDATE
REFINING
TRENDS
US
OLEFINS

SOUTH EAST ASIA SHALE POTENTIAL

NCS PRODUCTION TO CLIMB IN 2022
LNG-CHAIN CARBON FOOTPRINT
DRA DEGRADATION

180305OGJ_C1 1 2/27/18 3:32 PM

 explore our
opportunities

Saudi Aramco is seeking a wide variety of experienced professionals

from engineering and research and development to finance and
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In addition to an expatriate lifestyle, Saudi Aramco offers the

chance to make meaningful contributions to world-scale projects
and operations.

To apply for an open position, visit www.aramco.jobs/ogj

180305OGJ_C2 2 2/27/18 3:32 PM

 CONTENTS
Mar. 5, 2018 Volume 116.3

GENERAL INTEREST SPECIAL REPORT SPECIAL REPORT

CAPITAL SPENDING UPDATE REFINING TRENDS
BP Energy Outlook: Oklahoma state
Crude products continue regulators update US oil, gas industry Rising octane demand
transportation-fuel quake-related well capital spending to offers opportunity
dominance completion protocol increase in 2018 for US refiners
Nick Snow Paula Dittrick Conglin Xu Sandy Fielden
26 29
20 56
Shell: LNG outlook Total, Nova, and Borealis
points to potential advance proposed Hydroprocessing
global supply shortage USGC petchem combine remains attractive
27 Robert Brelsford option for global refiners
30 Robert Brelsford
Alberta, CAPP
address slumping Cabot plans 85 60
oil and gas investment wells in Marcellus
27 shale in 2018
Mikaila Adams SPECIAL REPORT
Colorado commission 31 US OLEFINS
approves oil, gas flowline
requirements Improved infrastructure Uncertainty looms
Nick Snow key to US energy for US olefins industry
28 dominance, Senate Dan Lippe
panel told
Time has come to Nick Snow 64
overhaul RINs, Cruz 31
tells Philadelphia
refinery workers Woodside to buy out
Nick Snow ExxonMobil’s share
29 of Scarborough field REGULAR FEATURES
Rick Wilkinson
32 NEWSLETTER 6
LETTERS/CALENDAR 14 MARCH 2018
OGPE.COM
VOL 64; NO. 4

JOURNALLY SPEAKING 16 OIL, GAS

&petrochemequipment
¨

EDITORIAL 18
COVER
W H AT ’ S N E W F O R O N S H O R E & O F F S H O R E : U P S T R E A M , M I D S T R E A M , D O W N S T R E A M O P E R AT I O N S

Managed-pressure-drilling choke valve actuator

ServoChoke SVC electric choke valve actuator is designed to deliver

SERVICES/SUPPLIERS 85
flexibility, reliability, and high speed for managed pressure drilling, setpoint
control, or choke-and-kill.
It combines an integrated servo motor, planetary roller screws, plus
industrial-automation-grade components into an all-steel body — engi-

The ExxonMobil Baytown Complex is one of

neered to continuously, accurately, and precisely modulate in harsh
environments.

STATISTICS 88
Models operate over -40° to +60°C. and are sealed to meet IP67 stan-
dards. They are designed and tested for 100% duty cycle and available in
7,000 lb or 15,000 lb thrust — for continuous 24-hr, long-term, mainte-
nance-free operation.

the largest integrated and most technologi- ServoChoke is globally certified with five individual certifications for

MARKET CONNECTION 91
ATEX, IECEx, and Class I. Div. 1 — all on one assembly.
Tolomatic Incorporated: Hamel MN
For FREE Information, select #1 at ogpe.hotims.com

cally advanced refining and petrochemical Image recognition, spectral profiling, rapid data

ADVERTISERS INDEX 94
processing service monitors/manages global oil storage
New TankWatch monitoring service is announced to significantly man-
age and monitor global oil storage.

complexes in the world. The complex spans To report on critical global oil storage terminal locations and deliver
time-sensitive insight into global inventories and storage levels — Tank-
Watch employs image recognition and spectral profiling combined with

EDITOR’S PERSPECTIVE/
rapid data processing plus cloud-penetrating radar imagery together with
other very high-resolution satellite-gathered information.

across 3,400 acres along the Houston Ship Geospatial Insight Limited: Coleshill, Birmingham United Kingdom
For FREE Information, select #2 at ogpe.hotims.com

WATCHING GOVERNMENT 95
Real-time industrial worker personal gas safety monitoring

Channel, about 25 miles east of Houston.
Honeywell Connected Plant Skills Insight Personal Gas Safety is announced for
real-time plant and remote operation worker safety monitoring.
Wearable detectors monitor gas, radiation, and dust. They are tightly integrated
with Experion Process Knowledge distributed control system. In case of harmful
exposures, man-down, or panic alarms — accurate, automated alarms alert control

It is comprised of four manufacturing sites,
room operators in real time. Safety teams can also take advantage of powerful Experion
PKS-embedded tools to provide detailed gas detectors trending, reporting, and data
analysis.
Personal Gas Safety provides critical alarm reporting, sensor and calibration status,
plus worker identification and location data from the wearable gas detectors.

including one in nearby Mont Belvieu, and Honeywell Process Solutions: Houston
For FREE Information, select #3 at ogpe.hotims.com

OG&PE
a global technology center. Photo from
ExxonMobil.

P1

180305OGJ_1 1 3/1/18 11:05 AM

 WATER TECHNOLOGIES

180305OGJ_2 2 2/27/18 3:25 PM

 MALAYSIA SEDIMENTARY BASINS FIG. 1
OCTANE PREMIUMS FIG. 1
THAILAND VIETNAM PHILIPPINES 4.0

3.5
Malay basin NE Sabah
basin 3.0
Sabah basin
Premium unleaded
Sabah
2.5

$/gal
PENINSULAR Sarawan basin 2.0
St

MALAYSIA
Penyu basin
rai

SE Sabah
ts

basin 1.5 Regular unleaded

of
Ma

Kuala Lumpur Sarawak

lac

Tarakan
ca

SUMATRA KALIMANTAN 1.0

MALAYSIA basin
Singapore
0 124 Miles
Sedimentary thickness, m
0.5 Octane premium
0 200 Km
1,000-4,000
0.0
>4,000 2000 2002 2004 2006 2008 2010 2012 2014 2016
200 km maritime boundary 34 56
January-
October

TECHNOLOGY...

EXPLORATION & DEVELOPMENT DRILLING & PRODUCTION PROCESSING TRANSPORTATION

South East Asia contains Norway’s Johan Sverdrup Rising octane demand Qatar study allows
abundant, untapped shale to increase NCS offers opportunity for US carbon footprint
reservoirs production refiners estimates of particular
Ahmed ElSakka Paula Dittrick Sandy Fielden LNG sources
Ghareb M. Hamada 48 56 Eric Johnson
Eswaran Padmanabhan 72
Ahmed M. Salim RPSEA suggests future Hydroprocessing remains
34 US oil and gas research attractive option for Commercial field testing
themes global refiners improves understanding
Review suggests draft Paula Dittrick Robert Brelsford of DRA degradation
SPE PRMS 2017 unfit for 52 60 Chen Yang
public resource reporting Li Changjun
Bob Harrison Uncertainty looms for US A.M. Nechval
Patrick Quinn olefins industry Yang Peng
46 Dan Lippe A. Yu. Zhukov
64 78

NORWEGIAN CONTINENTAL SHELF PRODUCTION FIG. 1

300
5

250 Gas
NGL 4
Condensate
200
MMscmoe/year

Oil
MMboe/d

3
150

2
100

50 1

0
48
0

180305OGJ_3 3 3/1/18 11:05 AM

 Expand Your OGJ ®

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180305OGJ_4 4 3/1/18 11:05 AM

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OGJ ®
Newsletter International News
for oil and gas professionals
GENERAL INTEREST Q U IC K TA K E S
Canadian province seeks oil and gas growth
The government of Newfoundland and Labrador has published
a plan for oil and gas industry growth that envisions the drill-
ing of more than 100 exploration wells and a doubling of oil
and gas production by 2030.
An industry-government group called the Oil & Gas Indus-
try Development Council developed the plan, Advance 2030.
The document targets oil and gas production of more than
650,000 boe/d by 2030. Current oil production, from four off-
shore fields, is about 210,000 b/d.
Stressing collaboration and innovation, the plan identifies
these “focus areas”:
• Immediate (within 24 months): Drive exploration, modern-
ize the governance structure, ensure global competitiveness,
enhance local supply chain, accelerate development, support
innovation, increase industry promotion, and “workforce of to-
morrow.”
• Midterm (2022): Develop basin-specific plans, expand in-
tegrated operations, develop a natural gas development plan,
and supply and service diversification.
• Long term (2030): Commercial natural gas production,
sustained energy production, exploitation of value-added op-
portunities, supply and service industry growth, and “world-
class energy cluster.”
Novatek, Aramco seek gas collaboration
Novatek, Moscow, and Saudi Aramco have signed a memoran-
dum of understanding to collaborate on natural gas projects.
Subjects include LNG supplies, development of LNG mar-
kets, gas exploration and production, and research and tech-
nology development.
Novatek produces gas and condensate in Russia’s Yamal-
Nenets Autonomous Region. Last December, it started up the
first of three planned LNG trains, with capacities of 5.5 million
tonnes/year each, at its Yamal LNG plant in the Russian Arctic.
“Novatek’s strategy envisages rapidly growing our LNG
production and attracting international partners,” said Leonid
Mikhelson, chairman of the company’s management board in a
statement announcing the MOU.
Officials of the Russian and Saudi governments have been
6 Oil & Gas Journal
180305OGJ_6 6
Mar. 5, 2018
For up-to-the-minute news,
visit www.ogjonline.com
discussing cooperative investment as their countries lead ef-
forts by the Organization of Petroleum Exporting Countries
and a group of 10 cooperating nonmembers to limit oil produc-
tion in support of crude oil prices.
OMV selling upstream interests in Pakistan
OMV has agreed to sell its exploration and production interests
in Pakistan to Dragon Prime Hong Kong Ltd., Hong Kong, for
€157 million, subject to adjustments.
OMV Pakistan holds interests in five development and pro-
duction leases and operates the productive Sawan, Miano, La-
tif, Gambat, and Mehar blocks. Gross production is about 170
MMscfd of natural gas and 1,450 b/d of condensate.
The company also holds interests in five exploration blocks
and operates four of them.
Excluded from the deal is OMV’s 10% interest in Parco, a
joint venture between Pakistan and Abu Dhabi.
Australia, East Timor reach deal maritime boundary deal
Australia and East Timor have reached a treaty agreement over
their disputed maritime border as well as “a pathway” to de-
velop the Greater Sunrise offshore gas fields in the Timor Sea,
according to the Permanent Court of Arbitration in The Hague.
A statement released following talks in Kuala Lumpur last
week said that under the agreement, the share of revenue from
the offshore gas fields will differ depending on downstream
benefits that arise from different development concepts.
The agreement will establish, for the first time, a single mar-
itime boundary in the Timor Sea between the two countries.
The statement added that representatives of the two govern-
ments will meet Mar. 6 at the United Nations headquarters in
New York to sign the new treaty.
The arrangement was set up last year following arbitration
hearings in The Hague after which the court announced that
agreement had been reached “on the central elements of a mari-
time boundary delimitation between them in the Timor Sea,”
but that the details would remain confidential until the deal
was finalized.
The Woodside Petroleum Ltd.-led Sunrise joint venture said
it hopes the commission’s conclusions and the signing of the
treaty will provide fiscal and regulatory certainty needed to de-
velop the fields for the benefit of all parties.
3/1/18 11:05 AM
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180305OGJ_7 7 2/27/18 3:25 PM

 ICE BRENT / NYMEX LIGHT SWEET CRUDE US INDUSTRY SCOREBOARD — 3/5
$/bbl
67.00
66.00 4 wk. 4 wk. avg. Change, YTD YTD avg. Change,
65.00 Latest week 2/16 average year ago1 % average1 year ago1 %
64.00
Product supplied, 1,000 b/d
63.00
62.00 Motor gasoline 9,054 8,587 5.4 8,920 8,416 6.0
61.00 Distillate 4,139 3,966 4.4 4,143 3,856 7.4
60.00 Jet fuel 1,636 1,533 6.7 1,661 1,564 6.2
Feb. 21 Feb. 22 Feb. 23 Feb. 26 Feb. 27
Residual 309 482 (35.9) 285 463 (38.4)
Other products 5,508 5,218 5.6 5,660 5,327 6.3
TOTAL PRODUCT SUPPLIED 20,646 19,786 4.3 20,669 19,626 5.3
WTI CUSHING / BRENT SPOT Supply, 1,000 b/d
$/bbl Crude production 10,178 8,968 13.5 10,007 8,961 11.7
67.00 NGL production2 4,033 3,584 12.5 4,007 3,566 12.4
66.00 Crude imports 7,808 8,360 (6.6) 7,852 8,354 (6.0)
Product imports 2,237 2,186 2.3 2,113 2,231 (5.3)
65.00
Other supply2 3 2,374 2,386 (0.5) 2,273 2,427 (6.3)
64.00 TOTAL SUPPLY 26,630 25,484 4.5 26,252 25,539 2.8
63.00 Net product imports (2,508) (2,643) — (2,729) (2,624) —
62.00
61.00 Refining, 1,000 b/d
60.00
Feb. 21 Feb. 22 Feb. 23 Feb. 26 Feb. 27 Crude runs to stills 16,201 15,204 6.6 16,498 16,180 2.0
Input to crude stills 16,594 16,093 3.1 16,862 16,493 2.2
% utilization 0.9 86.5 — 0.9 89.4 —

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB Latest Previous Same week Change,
Latest week 2/16 week week1 Change year ago1 Change %
$/MMbtu
Stocks, 1,000 bbl
2.675
2.655 Crude oil 420,479 422,095 (1,616) 518,683 (98,204) (18.9)
2.635 Motor gasoline 249,334 249,073 261 256,435 (7,101) (2.8)
2.615 Distillate 138,945 141,367 (2,422) 165,133 (26,188) (15.9)
2.595 Jet fuel–kerosine 43,029 43,415 (386) 44,282 (1,253) (2.8)
Residual 31,284 31,182 102 37,811 (6,527) (17.3)
2.575
2.555 Stock cover (days)4 Change, % Change, %
2.535
Feb. 21 Feb. 22 Feb. 23 Feb. 26 Feb. 27
Crude 26.0 25.8 0.8 33.2 (21.7)
Motor gasoline 27.5 27.7 (0.7) 29.9 (8.0)
Distillate 33.6 35.0 (4.0) 41.6 (19.2)
ICE GAS OIL / NYMEX HEATING OIL Propane
Futures prices5 2/23
25.6 26.7 (4.1)
Change
35.6 (28.1)
Change Change,%
¢/gal
201.00
198.00 Light sweet crude ($/bbl) 62.48 60.42 2.06 53.20 9.28 17.4
195.00 Natural gas, $/MMbtu 2.63 2.57 0.06 2.89 (0.26) (8.9)
192.00
188.00 1
Based on revised figures. 2OGJ estimates. 3Includes other liquids, refinery processing gain, and unaccounted for crude oil. 4Stocks
185.00 divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices.
182.00 Source: Energy Information Administration, Wall Street Journal
179.00
Feb. 21 Feb. 22 Feb. 23 Feb. 26 Feb. 27

BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE
2,400
PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU 2,100
2,175
¢/gal 1,960
115.00 1,800
110.00
1,500
105.00
100.00 1,200
95.00
90.00 300
215
85.00 0
80.00 Jan. 17 Feb. 17 Mar. 17 Apr. 17 May 17 Jun. 17 Jul. 17 Aug. 17 Sept. 17 Oct. 17 Nov. 17 Dec. 17 Jan. 18
Feb. 21 Feb. 22 Feb. 23 Feb. 26 Feb. 27
Note: Monthly average count

BAKER HUGHES RIG COUNT: US / CANADA

NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3 1,000
978
¢/gal 900
187.00 800 754
185.00 700
183.00 600
181.00 500
179.00 400 341 306
177.00 300
175.00 200
173.00 100
Feb. 21 Feb. 22 Feb. 23 Feb. 26 Feb. 27 0
1Not 12/9/16 12/23/16 1/6/17 1/20/17 2/3/17 2/17/17 12/8/17 12/22/17 1/5/18 1/19/18 2/2/18 2/16/18
available 2Reformulated gasoline blendstock for oxygen blending
3Nonoxygenated 12/16/16 12/30/16 1/13/17 1/27/17 2/10/17 2/24/17 12/15/17 12/29/17 1/12/18 1/26/18 2/9/18 2/23/18
regular unleaded
Note: End of week average count

8 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_8 8 3/1/18 11:05 AM

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180305OGJ_9 9 2/27/18 3:25 PM

 EXPLORATION & DEVELOPMENT Q U IC K TA K E S
UK seismic dispute headed for court
Ineos Shale has received permission to pursue in court its dis-
puted application for a seismic survey to assess shale-gas poten-
tial in Nottinghamshire, England.
The Oil and Gas Authority (OGA) referred the issue to the
High Court after the National Trust, a conservation group that
administers protected land, rejected the planned 250-sq-km
3D survey over Clumber Park.
The trust said it opposed any activity that might lead to pro-
duction of fossil fuels.
Ineos Shale said the OGA “noted the UK government’s sup-
port for a shale industry in the UK and that the geophysical
survey is required to explore for resources in its licensed area.”
Commercial Director Lynn Calder said the company consid-
ered legal action “the last resort.”
It said the trust “wouldn’t even have discussions with us in
this case owing to a political objection to shale gas.”
Ineos Shale recently encountered county-level opposition to
a vertical core test it wants to drill near the village of Marsh
Lane (OGJ Online, Feb. 7, 2018).
ONGC launches Bokaro coalbed methane development
India’s Oil & Natural Gas Corp. (ONGC) is targeting 2 mil-
lion cu m/day from three coalbed methane blocks in Jharkhand
state. The operator spudded the BE No. 95 development well
on Feb. 25, launching a field development plan to drill 30 wells
within the following year. The operator reported 22 of these
would be vertical with 8 planned is inclined, all with a depth
ranging 400-1,400 m.
In conjunction with its drilling program, ONGC has also
broke ground for a gas collecting station to be constructed by
Tata Projects in Khudgara village in Gomia, Bokaro district.
The GCS will process 800,000 cu m/day once completed in
June 2019. The operator also is installing two early production
systems, each handling 50,000 cu m/day, that will be complet-
ed by December.
ONGC’s Bokaro field development plan calls for 141 devel-
opment wells with an estimated peak production of 750,000 cu
m/day. Early monetization is planned for first-quarter 2019. In
total, the entire CBM project will encompass 350 wells within
three blocks in Jharkhand: Bokaro, Jharia, and North Karan-
pura, with an estimated cost of 6,500 crore.
Petronas farms into FAR’s Gambia offshore blocks
FAR Ltd., Perth, has signed a farmout agreement with Malay-
sia’s Petronas in which the state firm will take a 40% interest
in each of FAR’s offshore Gambia permits—Blocks A2 and A5.
Petronas will fund 80% of the costs, up to a $45-million
cap, of the forthcoming Samo-1 wildcat to be drilled on the
A2 block later this year. Based on the deal’s completion date
of Mar. 31, FAR is to be paid an estimated $13.5 million for
reimbursement of back costs as well as a cash consideration.
10
180305OGJ_10 10
Petronas also will fund FAR’s share of non-well costs up to a
maximum of $1.5 million.
FAR will retain a 40% interest in each permit and will re-
main operator through the exploration phase of the A2 and A5
licenses, including the drilling of Samo-1. Petronas has the right
to become operator of any resulting development program.
Samo-1 will be the first exploration well drilled offshore
Gambia since 1979. FAR says the prospect has the capacity to
hold resources of 825 million bbl of oil. It has two target inter-
vals and is on trend with FAR’s SNE oil field in neighboring
Senegal waters immediately to the north.
The farmout deal is subject to ministerial approval for the
Gambian government along with joint venture consents.
FAR entered Gambia offshore permits in 2017, itself farm-
ing into 80% of the A2 and A5 blocks from African-American
company Erin Energy Corp. for $5.18 million and the promise
of funding Erin’s costs of the Samo well up to $8 million.
DRILLING & PRODUCTION Q U IC K TA K E S
ExxonMobil shuts Hides gas plant after PNG quake
ExxonMobil Corp., operator of the PNG-LNG project, has shut
its Hides gas-conditioning plant in the wake of a powerful 7.5
magnitude earthquake that shook the Papua New Guinea high-
lands region in the early hours of Feb. 26.
The initial quake was followed by more than a dozen af-
tershocks, each with a magnitude of 5.0 or more, the latest on
Feb. 27.
The epicenter was about 100 km southwest of Mendi, the
capital of the Southern Highlands.
ExxonMobil said it believed that Hides plant administra-
tion buildings, living quarters, and a mess hall had been dam-
aged, prompting the company to put plans in place to evacuate
nonessential staff. The company added that it had suspended
flights into the nearby Komo airfield until the runway could
be surveyed.
Joint venture partner Oil Search Ltd. released a statement
on Feb. 27 saying that all its staff and contractors, located at the
company’s more than 20 operating sites, have been accounted
for and there have been no reports of any serious injuries.
Inpex gets 10% of concession off Abu Dhabi
Inpex Corp., Tokyo, has received a 10% interest in the Lower
Zakum concession offshore Abu Dhabi under an agreement
with Abu Dhabi National Oil Co.
Inpex paid a participation fee of $600 million. ADNOC ear-
lier awarded a 10% interest in the concession, which has a 40-
year term, to a group of state-owned Indian companies led by
ONGC Videsh Ltd. (OGJ Online, Feb. 12, 2018).
Production of Lower Zakum field, now about 400,000 b/d,
is to increase to 450,000 b/d.
ADNOC Offshore operates the concession with a 60% interest.
Inpex also paid $250 million to extend its interests in the
Satah and Umm Al Dalkh concession for 25 years.
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:05 AM
 It maintains its 40% stake in Satah oil field and increases its
interest in Umm Al Dalkh oil field to 40% from 12%. ADNOC
and Inpex plan to raise production capacities to 25,000 b/d at
Satah and to 20,000 b/d at Umm Al Dalkh.
ADNOC continues negotiations for the remaining 20% of
the Lower Zakum concession available to foreign companies.
Inpex held an interest in what is now the Lower Zakum con-
cession through its wholly owned subsidiary JODCO, a partner
in the now-divided Abu Dhabi Marine Areas concession.
EOG-operated Uinta basin gas well producing
The Stagecoach 111-20H well in the Uinta basin in Utah, oper-
ated by EOG Resources Inc., is producing natural gas in com-
mercial quantities, said Foothills Exploration Inc., Denver, fol-
lowing drilling, completion, and flow testing.
The well was spudded on Sept. 15, 2017, and Foothills Ex-
ploration acquired a 21% working interest in the well in Octo-
ber 2017. The well has been online for 30 days and production
tubing is expected to be set in the near term, the company said.
The well was classified as confidential with the State of Utah
Division of Oil, Gas & Mining by EOG Resources, and only
limited data can be provided.
Bapex picks JV for three Bangladeshi wells
Bangladesh Exploration & Production Co. Ltd. (Bapex) has
selected a joint venture drilling and services contractor from
Azerbaijan to drill two exploration wells and one appraisal well.
Socar AQS will drill onshore wells in Bangladesh designated
Semutang Dakkhin 1, Begumganj 4, and Modarganj 1.
State Oil Co. of the Azerbaijan Republic holds 51% of Socar
AQS. Absheron Qazma, a unit of Noble Oil Services of Baku,
holds 49%. Bapex and Socar AQS also signed a memorandum
of understanding covering cooperation on oil and gas projects
in Bangladesh beyond the new drilling contract.
OVL, GeoPark form Latin American venture
ONGC Videsh Ltd. (OVL) of India and GeoPark, Santiago,
Chile, have formed a partnership to jointly acquire oil and gas
exploration and production projects in Latin America.
A statement said the objective is “building a large-scale, eco-
nomically profitable and risk-balanced portfolio of assets and
operations across Latin America,” which it called “one of the
most attractive regions in the world for oil and gas investments.”
OVL is a wholly owned international investment subsid-
iary of state-owned Oil & Natural Gas Corp. GeoPark holds
licenses in Argentina, Brazil, Chile, Colombia, and Peru, oper-
ating more than 61,000 boe/d of oil and natural gas production,
33,000 boe/d net to its interests.
PROCESSING Q U IC K TA K E S
CNOOC to cut emissions at Hainan refinery
CNOOC Oil & Petrochemicals Co. Ltd., the refining arm of
China National Offshore Oil Corp. (CNOOC), has commis-
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_11 11
sioned a new wet-gas scrubbing system to minimizes atmo-
spheric emissions of fine particulate and sulfur oxides from a
1.2 million-tonne/year fluid catalytic cracking unit (FCCU) at
subsidiary CNOOC Dongfang Petrochemical Co. Ltd.’s Hainan
refining and petrochemical complex at Dongfang City in south-
ern China’s Hainan Province.
Fitted by Beijing Milestone Technologies under license from
DuPont Clean Technologies, the new Dupont BELCO EDV wet-
gas scrubber comes as part of the refinery’s extensive invest-
ments in technology to reduce emissions and improve quality
of gasoline and diesel production at the site to meet new Chi-
nese national emissions standards, DuPont said.
The system installation at Hainan joins CNOOC’s existing
use of BELCO scrubbers to control emissions from a 4.9 million-
tpy FCCU and 1.2 million-tpy FCCU at subsidiary CNOOC
Huizhou Refining & Chemical Co. Ltd.’s 12 million-tpy inte-
grated refining complex at the Daya Bay Economic & Techno-
logical Development Zone in Huizhou in China’s Guangdong
province, according to the service provider.
Together, MSTN and DuPont have licensed and supplied
over 60 new BELCO EDV wet-scrubbing systems for FCCUs
in China, preventing over 200,000 tpy of air pollutants from
sulfur oxides and fine particulate emissions to the atmosphere.
SCOOP-STACK-Merge play due gas gathering system
Cardinal Midstream LLC, Dallas, has started construction on
Cardinal Midstream III LLC’s Iron Horse natural gas gathering
and processing system that will span Oklahoma’s Canadian,
Grady, Caddo, and McClain counties to serve producers in the
SCOOP-STACK-Merge play of the Anadarko basin.
Construction is under way on the development’s first phase,
which includes a gathering system that will consist of more
than 100 miles of high and low-pressure natural gas gathering
pipeline and multiple compressor stations, the operator said.
First-phase development also will include construction of a
proprietary UOP Russell 200-MMcfd modular cryogenic natu-
ral gas processing plant in Grady county that will be designed
and fabricated to meet Cardinal’s requirements for increased
NGL recoveries from the area’s gas stream.
Scheduled for startup in this year’s third quarter, the Iron
Horse gas plant is designed to accommodate additional expan-
sions to bring total processing capacity to 600 MMcfd to serve
future production growth, Cardinal said.
While the Iron Horse system already is anchored by a long-
term acreage dedication from Austin-based Travis Peak Re-
sources LLC, Cardinal III also is in discussions with other pro-
ducers in the area to bring gas onto the system.
Supported by a capital commitment of $250 million from
EnCap Flatrock Midstream, San Antonio, Cardinal III is the
third company the Cardinal management team has formed in
partnership with EnCap Flatrock, following the previous suc-
cesses of Cardinal Midstream I LLC and Cardinal Midstream
II LLC.
11
3/1/18 11:05 AM
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180305OGJ_12 12 2/27/18 3:25 PM

 Gazprom Neft lets contract for Omsk delayed coker
PJSC Gazprom Neft has let a contract to Maire Tecnimont SPA
subsidiaries for work related to a project designed to expand
delayed coking capacity at its 21.4 million-tonne/year Omsk re-
finery in Western Siberia as part of the operator’s ongoing mod-
ernization program to reduce environmental impacts and im-
prove processing capacities, conversion rates, energy efficiency,
and production qualities at the site (OGJ Online, Dec. 9, 2013).
Tecnimont SPA and Tecnimont Russia LLC will deliver engi-
neering, procurement, and construction management (EPCm)
services for implementation of a new delayed coking complex with
a feed capacity of 2 million tpy, Maire Tecnimont said on Feb. 15.
With an overall value of about $215 million on a multicur-
rency basis, the EPCm contract was awarded under a lump-
sum scheme for the EP phase and a reimbursable scheme for
the Cm phase, according to the service provider.
Maire Tecnimont plans to complete its scope of work on the
project within a tight schedule of 29 months from the contract-
signing date due to availability of most long-lead items, which
Gazprom Neft previously purchased and installed at the site
(OGJ Online, July 26, 2017).
South Africa’s Enref refinery undergoing upgrade
Engen Petroleum Ltd. has shut down its 125,000-b/d Enref re-
finery in Durban, South Africa, for 45 days of routine planned
maintenance.
Initiated on Feb. 5 and scheduled to run until Mar. 30, the
turnaround comes as part of the refinery’s ongoing mainte-
nance program designed to ensure safe, reliable operations at
the plant, Engen said.
While it did not disclose specific units involved in the
scheduled outage, the firm said current turnaround activities
will include works focused on essential plant maintenance and
inspection activities as well as process-regeneration activities.
Regarding operations during the maintenance outage, Jehan
Zaib, the refinery’s general manager, said the operator has im-
plemented detailed planning schedules to mitigate any poten-
tial capacity issues to keep disruptions to a minimum.
Majority owned by Malaysia’s Petroleum Nasional Bhd.’s (Petro-
nas) 80%, Engen produces about 17% of South Africa’s refined
products at the Enref refinery, the country second largest.
TRANSPORTATION Q U IC K TA K E S
Crude line planned for Powder River basin
Tallgrass Energy Partners, Leawood, Kan., and Silver Creek
Midstream LLC, Irving, Tex., will jointly develop a crude oil
pipeline for Powder River basin production in Wyoming.
The 80-mile, 16-in. Iron Horse Pipeline will connect a gath-
ering system and terminal in Converse County with a terminal
Tallgrass is building at Guernsey in Platte County.
About half the pipeline will be new. The other half will be
converted gas pipeline.
Tallgrass has agreed to contribute the gas-conversion seg-
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_13 13
ment, between Labonte and Guernsey, now owned by Tallgrass
Interstate Gas Transmission LLC.
It operates a crude line connect to the Guernsey terminal,
Pony Express.
In conjunction with formation of the joint venture, Tallgrass
has agreed to sell its 50-mile Powder River basin gathering sys-
tem to Silver Creek, which plans further construction.
The acquired and expanded gathering system will feed the
Silver Creek Midway Terminal, which will deliver crude into
Iron Horse.
The pipeline will have initial capacity of 100,000 b/d of
crude and can be expanded. Tallgrass will operate and own
75% of the system. Silver Creek will own the remainder.
Anadarko further advances Mozambique LNG project
Anadarko Petroleum Corp. reported that Mozambique LNG1
Co. Pte. Ltd.—the jointly owned sales entity of the Mozam-
bique Area 1 Lda. coventurers—has entered into a long-term
LNG sale and purchase agreement with Electricite de France SA
(EDF). The offtake agreement calls for the supply of 1.2 million
tonnes/year of LNG to EDF over 15 years.
Anadarko is developing Mozambique’s first onshore LNG
plant consisting of two initial LNG trains with a total capacity
of 12.88 million tpy to support Golfinho-Atum field located
entirely within Offshore Area 1, where the firm and its partners
have discovered 75 tcf of recoverable natural gas resources.
Anadarko operates Offshore Area 1 (26.5% working inter-
est). Partners are ENH Rovuma Area Um SA 15%, Mitsui E&P
Mozambique Area1 Ltd. 20%, ONGC Videsh Ltd. 10%, Beas
Rovuma Energy Mozambique Ltd. 10%, BPRL Ventures Mo-
zambique BV 10%, and PTTEP Mozambique Area 1 Ltd. 8.5%.
Last year Anadarko finalized two agreements with the gov-
ernment of Mozambique that would allow the firm to design,
build, and operate marine facilities for the LNG project in the
northern part of the country (OGJ Online, July 31, 2017).
OVL reported to drop LNG from Farzad B plan
State-owned ONGC Videsh Ltd. of India is reported to have
dropped plans for a gas-liquefaction project in Iran in an appar-
ent effort to advance development of Farzad B gas field.
OVL operates a group that discovered the offshore field un-
der an exploration service contract with National Iranian Oil
Co. that expired in 2009, after the field was declared commer-
cial.
The group, which also includes state-owned Indian Oil
Corp. Ltd. and Oil India Ltd., has been unable to win develop-
ment rights. Last year, it proposed investment of $11 billion to
develop the field and related export facilities.
According to press reports in India and Iran, OVL has agreed
to concentrate on field development and leave export planning
to Iranian authorities.
OVL is reported to want to drill an appraisal well to reassess
cost, one of the items of disagreement in development negotia-
tions.
13
3/1/18 11:05 AM
 2018-2019 EVENT CALENDAR
Denotes new listing or Mozambique Assem- index.html 13-15.
a change in previously bly, Maputo, web site:
published information. oilandgascouncil.com/ Australasian Oil & Gas
event/Mozambique- (AOG) Exhibition &
assembly 12-13. Conference, Perth, web
site: aogexpo.com.au/
MARCH 2018 SPE Canada Heavy 14-16.
Oil Technical Confer-
GEO 2018—Middle ence, Calgary, web East Africa Oil & Gas
East Geosciences site: www.spe.org/ Summit & Exhibition,
Conference & Exhibi- events/en/2018/ Nairobi, web site:
tion, Manama, web site: conference/18choc/ 10times.com/the-east-
https://geo2018.com/ homepage.html 13-14. africa-oil-and-gas-
5-8. summit 14-16.
SPE Canada Uncon-
CERAWeek by IHS ventional Resources Energy Symposium
Markit, Houston, web Conference, Calgary, 2018, Oklahoma City,
site: https://ceraweek. web site: www.spe. web site: www.ou.edu/
com/ 5-9. org/events/en/2018/ price/energyinstitute/
conference/18choc/ energysymposium.
IADC/SPE Drill- homepage.html 13-14. html 15.
ing Conference &
Exhibition, Fort Worth, Subsea Tieback Fo- Papua New Guinea Pe-
web site: www.spe. rum & Exhibition (SSTB troleum & Energy Sum-
org/events/en/2018/ 2018), Galveston, Tex., mit, Port Moresby, web
conference/18dc/ web site: www.sub- site: www.pngsummit.
homepage.html 6-8. seatiebackforum.com/ com/ 19-21.

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180305OGJ_14 14 3/1/18 11:05 AM

 Offshore Technology Conference, Welling- Conference & Exhibi- Upstream West Africa Oil & Gas Investment 3rd World Congress
Conference Asia, Kuala ton, web site: www. tion, The Woodlands, Summit 2018, Dakar, Symposium (OGIS), & Expo on Oil, Gas &
Lumpur, web site: 2018. petroleumconference. Tex., web site: www. web site: www.up- New York, web site: Petroleum Engineering
otcasia.org/ 20-23. nz/ 26-28. spe.org/events/en/2018/ streamwestafrica.com/ www.ipaa.org/events/ 2018, Dubai, web site:
conference/18ctwi/ 28-30. ogis-new-york-2018/ scientificfederation.com/
Pennsylvania Inde- Oil & Gas West Asia home.html 27-28. 9-11. petroleum-engineer-
pendent Oil & Gas As- Exhibition & Conference Oil & Gas in EastMed ing-2018/ 16-17.
(OGWA), Muscat, web China International
sociation (PIOGA) Spring Forum (OGE), Beirut, Global Oil & Gas Atyrau
Meeting, Pittsburgh, site: www.ogwaexpo. Offshore Oil & Gas Ex- web site: www.iktis- Exhibition 2018, SPE International Con-
web site: https://www. com/ 26-28. hibition (CIOOE 2018), sadevents.com/events/ Atyrau, Kazakhstan, ference & Exhibition on
pioga.org/event/pioga- Beijing, web site: https:// OGE/1 29-30. web site: https://oil-gas. Health, Safety, Security,
2018-spring-meeting/ SPE EOR Conference www.clocate.com/ kz/en/ 10-12. Environment & Social
21. at OGWA, Muscat, conference/18th-China- APRIL 2018 Responsibility, Abu
web site: www.spe. International-Offshore- Mexico Gas Summit, Dhabi, web site: www.
North Africa Petroleum org/events/en/2018/ Oil-and-Gas-Exhibition- National Oil Companies San Antonio, web site: spe.org/events/en/2018/
Exhibition & Confer- conference/18ogwa/ CIOOE-2018/43329/ Assembly, Abu Dhabi, https://www.mexi- conference/18hse/
ence, Oran, Algeria, homepage.html 26-28. 27-29. web site: oilandgas- cogassummit.com/ homepage.html 16-18.
web site: www.napec- council.com/event/ mexico-gas-summit-
dz.com/NewDefault. Crisis & Risk Manage- China International noc 9. energy-forum 11-12. SPE/IADC Managed
aspx?lg=en 25-28. ment Summit, Kuwait Petroleum & Petro- Pressure Drilling
City, web site: https://cri- chemical Technology & Operational Excel- SPE Improved Oil & Underbalanced
OpEx MENA 2018— sisandriskmanagement. Equipment Exhibition lence in Refining & Recovery Conference, Operations Confer-
Operational Excellence iqpc.ae/?utm_medium_ (CIPPE 2018), Beijing, Petrochemicals Summit, Tulsa, web site: www. ence & Exhibition,
in Oil, Gas & Petro- portal&mac=OGIQ_ web site: www.cippe. Houston, web site: speior.org/ 14-18. New Orleans, web site:
chemicals, Manama, Events_Learn_ com.cn/en/ 27-29. https://opexinrefinin- www.iadc.org/event/
web site: europ- Listing#ct100_page_ gandpetrochem.iqpc. Kuwait Oil & Gas Sum- speiadc-managed-
etro.com/event/opex_ content 26-29. GSF 2018—Gulf Safety com/?utm_medium_ mit, Kuwait City, web pressure-drilling-under-
mena2018/0 26-27. Forum, Manama, web portal&mac=OGIQ_ site: www.cwckuwait. balanced-operations-
SPE/ICoTA Coiled Tub- site: europetro.com/ Events_Learn_Listing com/ 16-17. conference-exhibition/
New Zealand Petroleum ing & Well Intervention event/67/0 28-29. 9-11. 17-18.

Oil & Gas Journal | Mar. 5, 2018 15

180305OGJ_15 15 3/1/18 11:05 AM

 JOURNALLY SPEAKING
The digitalized workforce
Digitalization is one of the biggest key trends shap-
ing the energy workforce today. In fact, it is “revital-
izing” the energy industry, according to the recently
released Global Energy Talent Index (GETI) report.
“Digitalization isn’t just reshaping how the en-
ergy industry functions—it is causing companies
to think differently about how they form their
STEVEN PORUBAN
workforce,” the GETI report states.
Managing Editor-News The report, which was the second edition in the
GETI series produced by energy job board Energy
Jobline and workforce solutions provider Airswift,
looked at the rise of automated technology and its
impact on the future energy workplace. Based on a
38-question survey of 20,826 workers and hiring
managers from 163 countries over a 6-week period
closing in October 2017, the in-depth report also
provided a global and regional analysis of salaries
and remuneration, hiring rates, job opportunities,
and the movement of people.
It cast a wide net over the entire energy industry
spectrum, from oil and gas and petrochemicals to
power, renewables, and nuclear. The results for the
petroleum industry were among the most telling.
Addressing perceptions
One of the biggest hurdles for the oil and gas indus-
try in attracting future talent, the report says, is ad-
dressing the perception that it lags other industries
when it comes to technology. This is particularly
true currently, as the oil and gas business comes
through several difficult financial years and as the
price of oil swings back upwards; it is now that this
focus on attracting highly skilled talent becomes
paramount.
The report finds, “Because technology talent is
increasingly at a premium, sectors are having to
adapt their recruitment approaches in an effort to
enhance their appeal.”
Companies are leaning on digitalization for
16
180305OGJ_16 16
“creative solutions to the skills gap.” One such ex-
ample—flexible working—uses technology “to en-
able a more-relaxed working setup” to “enhance a
company’s appeal at a lower total cost than wage
hikes,” the report says.
The report continues, “In transforming the en-
ergy industry, technology will also bring some par-
ity across the individual sectors. Anyone with an
eye on predictive analytics, robotics, or artificial in-
telligence can find a project to pique their interest.
Individuals seeking a chance to work with innova-
tive technologies will no longer feel limited to the
renewables sector.”
Encouraging mobility, youth
Salaries in the oil and gas business, the report finds,
continue to be the highest in the energy industry.
And yet, new jobs continue to outpace the avail-
ability of talent. “As technology becomes more
complex, finding people with the adequate skills is
increasingly difficult,” the report notes.
Also, “Hiring managers will need to get creative
in understanding how skills from another sector
can translate over,” the report finds. “Mobility is
high because individuals are intrigued by what’s
next,” it said, adding, “People are more likely to
move for development opportunities than job se-
curity.”
Companies will have to continue to appeal to
younger workers, focusing on graduate and univer-
sity outreach programs. “Showcasing the innova-
tive projects taking place—and the opportunities
available—can promote energy as a viable and ex-
citing career path,” the report states.
Overall, the energy industry would appear to be
set for a “bright future” as it continues on the path
to digitalization.
Details on the report are available by e-mailing
enquiries@getireport.com.
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:05 AM
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180305OGJ_17 17 2/27/18 3:25 PM

 EDITORIAL
Welfare for farmers
So the US Renewable Fuel Standard is, after all, a
welfare program for farmers. The agricultural lobby
admits it.
Citing declines in farm income, the leaders of
six agricultural trade associations wrote President
Donald Trump on Feb. 26 to declare, “The heart of
America is being left behind when it comes to eco-
nomic growth and opportunity.” Apparently, sur-
vival depends on the RFS, which the leaders called
“a strong engine driving the rural economy.”
The RFS also happens to be deplorable energy
policy.
Focus on jobs
The trade-group chiefs didn’t bother to express one
of the two main arguments originally advanced for
the RFS: that it extends fuel supply. That claim was
somewhat persuasive when US reliance on foreign
oil seemed destined to grow forever. Now, however,
the US is an important net exporter of oil products
and a rapidly shrinking importer of crude.
And the association leaders gave scant attention
to the other former claim about ethanol’s good-
ness, saying only that it improved US air quality.
In fact, fuel ethanol hasn’t lived up to its environ-
mental hype. When everything about ethanol pro-
duction and use is accounted for, the substance
doesn’t reduce emissions of greenhouse gases
much, if at all. It lowers tailpipe emissions of some
pollutants. But it raises evaporative emissions of
ozone precursors and therefore requires a volatil-
ity waiver—a disadvantage supporters wish every-
one would forget.
Since it began in 2005, however, the RFS—
which wasn’t called that until expansion of the
program in 2007—has helped farmers. By requir-
ing that vehicle fuel contain specified amounts of
ethanol and other biofuels, it created a nonfood
increment of demand for farm products, especially
corn and soybeans. The RFS, said the association
chiefs, “created new markets for our farmers, cre-
ated new jobs in rural America, gave consumers
more fuel choices, and improved our nation’s air
quality.”
For ethanol supporters, these are the right
things to tell a president who supports RFS change
only if it protects farm employment. Yet the pro-
gram is fundamentally about energy policy, not
18
180305OGJ_18 18
jobs. It needs to be addressed that way.
Problems with the RFS begin with the dan-
gerous assumption that a government can make
sound choices about energy consumption. Beyond
that, it is hideously complex. And it forces “obli-
gated parties” into a compliance trap. Refiners and
importers must blend more ethanol into gasoline
than the market often can absorb at the standard
concentration of 10 vol %, supply more of some
other types of biofuels than is available, and buy
credits when they can’t perform the impossible.
Many refiners without blending operations thus
pay what amount to penalties for being refiners
without blending operations. This is unjust.
To their discredit, the agricultural leaders con-
trast the struggles of farmers with a supposed
“boom” enjoyed by refiners. Please. The profit-
ability of refining, like that of farming, cycles with
commodity prices. The rich-vs.-poor argument is
opportunistic and silly.
No longer justified by national concerns about
fuel supply or air quality, the RFS is, as the let-
ter signatories have attested, a sector-specific jobs
program sustained by regulatory work-arounds
and the demands of farm-state lawmakers. It im-
poses refining costs ultimately paid by fuel con-
sumers. And it highlights the problems Congress
always creates when it dictates energy use. It must
change.
Possible changes
A compromise change would limit the fuel-ethanol
mandate, which dominates the RFS, to 10% of
gasoline demand. Ethanol backers want to raise the
blending limit to accommodate more of their prod-
uct, ignoring warnings about damage to engines
not designed for higher concentrations of alcohol.
Why can’t 10% be enough for them?
The only other practicable change is outright
repeal of the RFS. That option would highlight a
mistake Congress shouldn’t repeat. But it would
kill many ethanol jobs.
The farm lobby should accept the compromise
and end its demand for statutorily guaranteed
market growth. “Heart of America” or not, farmers
have no constitutional license to pick the pockets
of refiners and fuel consumers.
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:05 AM
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 GENERAL INTEREST
US oil, gas industry capital
spending to increase in 2018
Conglin Xu
Senior Editor-Economics
Oil and gas industry capital spending in the US will increase
15% to $184 billion this year vs. last year, according to OGJ’s
annual capital spending survey.
With commodity prices gaining firmer footing and strong
operational results in various shale plays, capital expendi-
tures for exploration and production firms in the US are set
to increase this year, albeit partly reined in by a strong focus over commodity prices. More focus on production optimiza-
on capital discipline and efficiency gains.
Continued robust demand for refined products should
maintain a stable outlook for refining and marketing. Refin-
ers are developing growth projects integrated with its exist-
ing assets and infrastructure. Maintenance capital also will
increase this year.
Capital spending for the US petrochemical in-
dustry also will continue to surge in 2018, with
major capacity additions and as the industry re-
bounds from disruptions and project delays caused
by Hurricane Harvey.
Pipeline construction in 2018 also gains mo- SPECIAL
mentum, with plans for natural gas systems mak- REPORT
ing up most of the total.
For Canadian operators, this year looks like an-
other sluggish one. Capital investments on oil sands con-
tinue to decline.
Worldwide E&P spending is expected to increase this
year, the first-year gain in 4 years. Flat-to-modest growth is
expected in most regions.
US upstream spending
Capital spending in the US for upstream projects will in-
crease 9% this year, according to OGJ. This growth follows
strong capital spending in 2017, when the industry ramped
up investment by nearly 40% and concentrated on develop-
ing its best oil acreage.
The upstream spending category includes outlays for oil
and gas exploration, drilling, production, and offshore lease
payments to the US Bureau of Ocean Energy Management.
US shale is driving the pickup, as firmer oil prices trigger boosting spending on US shale, especially in the Permian.
a flood of capital into the Permian basin. The US rig count
is forecast to increase steadily throughout 2018 to 945 rigs
20
180305OGJ_20 20
from 900 and average 925 rigs—9% higher than the 2017
average of 850, according to Barclays.
Many companies made their budgets assuming a West
Texas Intermediate oil price of $50-55/bbl and a Henry Hub
natural gas price of above $3/Mcf.
However, dominating 2018 budget decisions is cash flow
tion, data-driven drilling processes, and capital discipline
should help producers reduce finding and development
costs, improve returns, while reining in capital spending
growth.
In the ongoing cash-flow-driven environment, producers
favor lower-cost, short-cycle onshore plays in the
US, and reduce allocation of new capital to long-
cycle offshore or international plays.
One component of US upstream spending is the
total of bonus payments that BOEM collects from
lease sales for tracts on the Outer Continental Shelf.
BOEM has two lease sales scheduled for this
year: 250 and 251. OGJ estimates that a total of
$200 million will be generated by these lease sales.
Firms’ spending plans
ExxonMobil Corp.’s capital budget for 2018 is $25 billion,
according to preliminary data. That’s up from last year’s pro-
jected investment of $22 billion. And by yearend, ExxonMo-
bil plans to have 30 drilling rigs in the Permian basin, up
from 20 there now.
ExxonMobil reported that it would double its holdings in
the Permian by purchasing $5.6 billion in assets in the Del-
aware section of the basin. Longer term, ExxonMobil sees
total unconventional output growth of 20%/year through
2025, with growth in the Permian at about 45% through
2020.
Chevron Corp. capex budget for 2018 is $18.3 billion,
about 4% less than spending plans in 2017 and lower for a
fourth year in a row. However, the company is substantively
For 2018, Chevron’s investment in US shale includes $3.3
billion for the Permian and another $1 billion for other shale
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:03 AM
 and tight rock investments. WHERE FUNDS WILL GO FOR US PROJECTS Table 1
Chevron’s total US upstream capi- 2018 Change 2017 Change 2016
tal and exploratory expenditures are million $ change, % million $ change, % million $

planned at $6.6 billion, and interna- Exploration-production

Drilling-exploration 111,180 9.0 102,000 37.8 74,000
tional upstream investment is at $9.2 Production 21,124 9.0 19,380 37.8 14,060
OCS lease bonus 200 65.3 121 -32.0 178
billion. Chevron also plans to spend –––––––– ––––– –––––––– ––––– ––––––
$2.2 billion on its downstream busi- Subtotal 132,504 9.1 121,501 38 88,238

ness, of which $1.4 billion is ear- Other

Refining and marketing 13,860 5.0 13,200 0.8 13,100
marked for the US downstream. Petrochemicals 8,667 7.0 8,100 5.2 7,700
ConocoPhillips plans an average Crude and products pipelines 2,676 15.0 2,327 -89.5 22,130
Natural gas pipelines 18,751 144.0 7,685 18.7 6,475
annual capital budget of $5.5 billion Other transportation 4,300 19.4 3,600 2.9 3,500
Miscellaneous 3,750 25.0 3,000 25.0 2,400
during 2018-20 based on a flat, real ––––––– ––––– ––––––– ––––– –––––––
Subtotal 52,003 37.2 37,911 -31.5 55,305
WTI price of $50/bbl. The Houston –––––––– ––––– –––––––– ––––– –––––––
independent also intends to reduce its TOTAL 184,507 15.7 159,412 11.1 143,543

debt to $15 billion in 2019. The com-

pany cut capital spending twice in
2017 to $4.5 billion in 2017. CANADIAN SPENDING PLANS Table 2

In 2018, Anadarko Petroleum Corp. 2018 2017 2016

million $ 2018-17 million $ 2017-16 million $
expects to make capital investments (Can.) change, % (Can.) change, % (Can.)
ranging $4.2-4.6 billion. The company Exploration-production
will allocate about 80% of capital to- Drilling-exploration 16,040 5.0 15,277 40.0 10,912
Production 12,625 5.0 12,023 40.0 8,588
ward the Delaware and DJ basins, in- ––––––– –––– –––––– –––– ––––––
Subtotal 28,665 5.0 27,300 40.0 19,500
cluding Anadarko midstream and the
Oil sands* 11,424 -16.0 13,600 -11.7 15,400
deepwater Gulf of Mexico.
Marathon Oil Corp. reported a Other
Refining and marketing 3,045 5.0 2,900 7.4 2,700
$2.3-billion capital budget for 2018. Petrochemicals 994 1.4 980 7.5 912
Pipelines 5,500 -8.4 6,003 144.1 2,460
The company’s capital spending was Other transportation 490 -2.0 500 4.2 480
$2.2 billion in 2017. More than 90% Miscellaneous 550 5.8 520 30.0 400
–––––– ––––– –––––– ––––– ––––––
of the capital will be directed to four Subtotal 10,579 -3.0 10,903 56.0 6,990
–––––– ––––– ––––––– ––––– ––––––
US resource plays, including the Eagle TOTAL 50,668 -2.2 51,803 23.7 41,890
Ford and Bakken areas. *In situ, mining, and upgrading.
Hess Corp.’s 2018 E&P capital and
exploratory budget will be $2.1 bil-
lion, the same as 2017. The 2018 bud-
get allocates increased capital for continuing exploration and Natural gas-focused producer Range Resources Corp.
development activities offshore Guyana and for the Bakken, stipulated a sum of $941 million for the year, less than
which includes increasing the rig count to six rigs from four. the company’s 2017 expenditures of roughly $1.27 billion.
These increases are offset by lower capital allocated to the About 80% of its 2018 budget is allocated in the gas-rich
Gulf of Mexico and Malaysia compared with 2017. Marcellus shale play. Notably, the 2018 capital budget will
Pioneer Natural Resources Co.’s capital budget for 2018 is likely reward Range Resources with 11% production growth
$2.9 billion. The budget includes $2.63 billion for the Perm- from the year-ago period.
ian basin.
Devon Energy Corp.’s upstream capital budget in 2018 US refining outlays
is $2.2-2.4 billion. This disciplined capital program is ex- Scheduled plant outages, turnarounds, and shutdowns in-
pected to be self-funded at a $50/bbl WTI price deck. On a creased by 5% in 2017, with the refining industry seeing the
retained asset basis, Devon’s upstream capital plans are ex- biggest increase. As high demand continues for US products
pected to drive US oil production growth of 14% compared in primary export markets, refiners will increase planned
with 2017. growth and maintenance spend in 2018.
Occidental Petroleum Corp. expects to spend more in Phillips 66 reported its 2018 capital budget of $2.3 bil-
2018, after higher commodity prices and strong operational lion, which includes $1.4 billion of growth capital and $900
results in the Permian basin and Middle East. million of sustaining capital.
Murphy Oil Corp. is planning capital expenditures in The company plans $827 million of capital spending in
2018 to reach $1 billion, slightly higher than its spending refining, with $541 million for reliability, safety, and envi-
in 2017. A third of this total will go towards the US onshore. ronmental projects. Refining growth capital of $286 million

Oil & Gas Journal | Mar. 5, 2018 21

180305OGJ_21 21 3/1/18 11:03 AM

 Static loader

y x

Bearing
Static load
housing

Shaker x Shaker y

Dynamic load

180305OGJ_22 22 2/27/18 3:25 PM

180305OGJ_23 23 2/27/18 3:26 PM
 GENERAL INTEREST
is for small, high-return, quick payout projects primarily to
increase clean product yields. Projects include completion of
the fluid catalytic cracking unit modernization at the Bay-
way refinery in Linden, NJ, and FCC optimization at the
Sweeny refinery in Old Ocean, Tex.
Marathon Petroleum Corp.’s 2018 capital investment plan
includes $2.2 billion of organic growth capital and $190 mil-
lion of maintenance capital.
This robust organic growth plan includes the addition of
eight processing plants representing nearly 1.5 bcfd of incre-
mental processing capacity as well as 100,000 b/d of addi-
tional fractionation capacity in the prolific Marcellus, Utica,
and Permian basin.
Andeavor planned $525 million as refining sustaining
capital, up from $450 million estimated for 2017. Its turn-
around spend will be $575 million in 2018, up from $540
million in 2017.
HollyFrontier Corp.’s 2018 capital budget allocates $375-
425 million to refining and marketing. It has two
turnarounds scheduled for 2018.
Valero Energy Corp.’s 2018 estimated capital ex-
penditures include $1.7 billion as sustaining capi-
tal and $1 billion as growth capital. In 2017, the
company’s sustaining capital was $1.3 billion, and
its growth capital was $1.1 billion.
SPECIAL
Petrochemicals REPORT
With access to cheap and abundant feedstocks, the
US remains one of the largest destinations for glob-
al petrochemical investment. Since 2010, $85 billion worth
of petrochemical projects have been completed or started
construction, according to the American Chemistry Council
(ACC).
OGJ forecasts that US petrochemical capital investment
will increase 7% this year to $8.6 billion, with major ca-
pacity additions and the industry rebounds from Hurricane
Harvey-related disruptions and project delays.
Total SA, Borealis, and Nova announced that affiliates of
the three companies have signed definitive agreements to
form the $1.7-billion ethane steam cracker alongside Total’s
Port Arthur refinery and Total/BASF existing steam cracker.
Indorama is set to restart a long-idled cracker in Lake
Charles, La., and Formosa Plastics is due to complete a
cracker in Point Comfort, Tex. Shin-Etsu Chemical and Sa-
sol will likely complete their ethylene projects in 2019.
Chevron Phillips Chemical’s 2018 capital expenditures
will decrease from 2017 due to completion of the US Gulf
Coast Petrochemicals Project. The new polyethylene units
included in this project started up during third-quarter 2017,
while commissioning of the ethane cracker at the Cedar Bay-
ou facility is expected to begin in this year’s first quarter.
US pipelines
Expenditures are set to climb this year for pipelines in the
24
180305OGJ_24 24
US. According to OGJ’s most recent Worldwide Pipeline
Construction report, plans called for construction of 2,824
miles of gas pipelines and 405 miles of crude and product
lines to be completed in the US this year (OGJ, Feb. 5, 2018,
p. 72). This compares with 1,156 miles of gas pipelines and
350 miles of crude and product lines estimated in 2017.
OGJ forecasts that spending on these gas lines, including
compressor stations, will climb this year to $18.75 billion.
Spending for crude and products lines in the US will total
$2.6 billion.
Spending in Canada
In Canada, capital expenditures this year for conventional
oil and gas exploration, drilling, and production will in-
crease by a modest 5% to $28.6 billion (Can.) following last
year’s 40% jump.
According to the Petroleum Services Association of Cana-
da’s (PSAC) 2018 Canadian Drilling Activity Forecast, a total
of 7,900 wells is to be drilled in Canada in 2018.
For 2017, PSAC’s final revised forecast predicts a
yearly total of 7,550 wells.
Investment in the oil sands has fallen each
year since 2014, as projects have been completed
and brought onstream. According to OGJ, capital
spending in the oil sands will drop to about $11
billion this year as few new projects have been
sanctioned.
Suncor Inc.’s capital program in 2018 is $4.5-
5 billion, a reduction from 2017 of $750 million,
and a year-over-year production increase of more than 10%.
Upstream project spending is expected to be $3.6-4 billion
compared with $5.8 billion in 2017.
With the start of oil production at both Fort Hills and
Hebron expected by yearend, Suncor’s 2018 capital pro-
gram is largely focused on sustaining capital given the major
planned maintenance programs in both oil sands upgrading
operations and downstream refineries including a total plant
turnaround at the Edmonton, Alta., refinery.
Cenovus Energy Inc. plans to invest $1.5-1.7 billion in
2018 compared with $1.6 billion in 2017 and $1 billion in
2016. Most of the 2018 budget is allocated to sustain base
production at the company’s oil sands operations. The re-
maining capital will primarily support continued construc-
tion at the Phase G oil sands expansion at Christina Lake,
where costs are coming in below original expectations, and
a targeted drilling program in the Deep basin.
Husky Energy Inc.’s total capital spending is expected to
be $2.9-3.1 billion in 2018 compared with $2.3 billion in
2017. Upstream project spending is expected to be $2.1-2.3
billion compared with $1.5 billion in 2017. Spending in up-
stream will be largely allocated to growing the Lloyd ther-
mal portfolio, with 60,000 b/d of new production scheduled
to be brought online between 2019 and 2021, and the con-
struction of the West White Rose Project in the Atlantic re-
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:03 AM
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 GENERAL INTEREST
gion with the start of oil production planned in 2022.
Downstream project spending of $710-785 million in-
cludes the Lima crude oil flexibility project, which will add
30,000 b/d of additional heavy oil capacity by 2019, and a
project to increase heavy oil processing capacity at the Supe-
rior, Wisc., refinery.
Canadian Natural Resources Ltd.’s 2018 capital budget is
targeted at $4.3 billion, off $500 million from 2017, excluding amco spending to increase 2% in 2018, following a 5% de-
capital for the Athabasca Oil Sands Project (ASOP) acquisition. cline in 2017. Kuwait Oil Co.’s spending will increase 3% in
Overall crude oil and natural gas liquids production is
targeted to increase from 2017 levels by 23%, rang-
ing 815,000-885,000 b/d in 2018, thanks to the
completion of the Phase 3 expansion at Horizon
Oil Sands Mining and Upgrading and a full year of
production at the AOSP.
Encana Corp. plans to spend $1.8 billion this
year, flat with its 2017 level. Encana would focus
its 2018 capital spending on its core areas—spe- SPECIAL
cifically the Permian basin and the Montney play REPORT
that straddles Alberta and British Columbia.
TransCanada Corp. will spend $9 billion in
2018 on growth projects and maintenance.
International E&Ps
After decreasing 3% in 2017, international E&P capital
spending will increase 4% in 2018, according to the recent
annual Barclays E&P spending survey, released in Decem-
ber 2017.
Spending by national oil companies is expected to be up
modestly in 2018 again, while international oil companies
also increase by mid-single-digits following 15-20% de-
clines each year for the last 3 years.
Flat-to-modest growth is expected in almost every region,
with even Latin American expected to bottom out after 4
years of steep declines.
BP Energy Outlook: Crude products
continue transportation-fuel dominance
Nick Snow
Washington Editor
Crude oil products will continue to dominate global energy
demand for transportation through 2040 despite surprising-
ly strong growth in electric vehicle sales, BP PLC said in its
2018 Energy Outlook. Oil and gas will still play a major role
under each of the forecast’s scenarios, BP Chief Economist
Spencer Dale said on Feb. 26 during the report’s US launch
at the Center for Strategic & International Studies in Wash-
ington, DC.
“Strong growth in tight oil and natural gas production
26
180305OGJ_26 26
Petrobras and YPF have begun to show a willingness to
spend more. Meantime, presalt fields in Brazil, shallow and
deep waters in Mexico, shale deposits in Argentina, and off-
shore areas in Guyana and Suriname are capturing growing
interest from global oil companies.
Middle East spending is to be modestly higher in 2018,
following a 5% decline in 2017. Barclays estimate Saudi Ar-
2018.
Despite production cuts agreed to following
OPEC’s announcement on Nov. 30, 2017, Barclays
expects Russia and the former Soviet Union’s up-
stream spending to increase 6% in 2018, driven by
higher spending by almost every company except
Rosneft.
Spending in Europe in 2018 will decline 2%,
followed by a 5% decline in 2017, driven primar-
ily by Eni SPA and somewhat offset by Statoil AS,
which is expected to show a modest increase.
BP PLC expects its 2018 organic capital expen-
diture to be in the $15-16 billion range. BP’s capital expendi-
ture for full year 2017 was $16.5 billion compared with $16.7
billion for the same periods in 2016.
Royal Dutch Shell PLC, according to its 2017 Manage-
ment Day presentation, expects capital investments between
2018 and 2020 to average $25-30 billion/year. This com-
pares with its 2017 capital spending of $25 billion.
Meantime, offshore spending is poised to fall another
14% in 2018, following estimated declines of 12%, 35%, and
19% in 2015, 2016, and 2017, respectively, according to Bar-
clays. However, 2018 will mark the final year of declines as
the impact of structural cost reductions for offshore proj-
ects could lead to a rebound in project sanctioning in 2018,
which leads to growth in 2019.
will make the US the world’s leading oil and gas producer
by 2040. But it also will remain the leading oil and gas con-
sumer,” Dale stated. “We expect total global energy demand
to grow by about a third between now and 2040.” The report
emphasizes an “evolving transitions” (ET) scenario, which
suggests what might happen if there are not any substantive
disruptions of current trends, he said.
Under the ET scenario, crude accounts for 85% of total
transport fuel demand in 2040, down from 94% currently.
Natural gas, electricity, and other fuels are each projected
to account for 5% of transportation fuel’s total, the report
indicated.
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:03 AM

Gas’s growth could be concentrated in the use of LNG
in long-distance road haulage and marine transportation, it
said. “All of the growth in transport fuel demand comes from
developing economies, with China and India accounting for
over half of the increase,” the report said.
Noncombusted use of fuels as feedstocks for petrochemi-
cals, lubricants, and bitumen will become an increasingly
important component of overall industrial demand for oil
after 2030, reflecting more limited potential efficiency gains
relative to transportation, it noted.
“In the ET scenario, noncombusted use of fuels grows
at almost twice the rate of other industrial uses, with its
share overall industrial demand increasing to nearly 20%
by 2040,” the report indicated. Oil will account for nearly
two thirds of this growth, with gas providing much of the
remainder, it said.
Plateau instead of peak
“Think plateau, not peak, when considering future oil de-
mand,” Dale suggested. “It still will be needed, but demand
won’t grow as quickly. That means the world will have to
continue investing in development and production.” US
producers and members of the Organization of Petroleum
Exporting Countries will satisfy most of the additional de-
mand, assisted by Russia and Brazil, the outlook said.
“The world will need continuing investments in oil, but it
will be increasingly competitive,” Dale said. “Consequently,
the emphasis will be on investing in lower-cost basins, al-
though higher-cost areas will continue to work if there’s al-
ready significant infrastructure available.”
The BP forecast’s renewable energy sources do not include
nuclear or hydropower, he said. Consequently, wind, solar,
and other alternatives are expected to meet practically all the
demand from electric vehicles, Dale said.
“BP, like nearly everyone else, has been surprised by how
fast renewable energy has grown in the last 10 years,” he said.
“Part of this has come from government support, but much has
come from consumers. Under the ET scenario, we assume that
will encourage governments to begin phasing out their renew-
able energy support programs starting in the 2030s.”
Shell: LNG outlook points to
potential global supply shortage
The global LNG market has continued to defy expectations
of many market observers, with demand rising 29 million
tonnes to 293 million tonnes in 2017, according to Royal
Dutch Shell PLC’s annual LNG Outlook.
Strong demand growth, says Shell, is consistent with its
inaugural LNG Outlook, published last year. “Based on cur-
rent demand projections, Shell sees potential for a supply
shortage developing in mid-2020s, unless new LNG produc-
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_27 27
GENERAL INTEREST
tion project commitments are made soon,” the outlook said.
Japan retained its top spot as the world’s largest importer
of LNG in 2017, while China nudged into the No. 2 spot as
Chinese imports surged past those of South Korea.
“Total demand for LNG in China reached 38 million
tonnes, a result of continued economic growth and policies
to reduce local air pollution through coal-to-gas switching,”
Shell’s outlook said.
“We are still seeing significant demand from traditional im-
porters in Asia and Europe, but we are also seeing LNG provide
flexible, reliable, and cleaner energy supply for other countries
around the world,” said Maarten Wetselaar, integrated gas and
new energies director at Shell. “In Asia alone, demand rose
by 17 million tonnes. That’s nearly as much as Indonesia, the
world’s fifth-largest LNG exporter, produced in 2017.”
Over the last few decades, LNG has played an increasing
role in the global energy system, Shell noted. “Since 2000,
the number of countries importing LNG has quadrupled
and the number of countries supplying it has almost dou-
bled. LNG trade increased from 100 million tonnes in 2000
to nearly 300 million tonnes in 2017,” the outlook said.
Shorter, smaller contracts
Shell noted that LNG buyers continued to sign shorter and
smaller contracts. “In 2017, the number of LNG spot car-
goes sold reached 1,100 for the first time, equivalent to three
cargoes delivered every day,” the outlook said. This growth
mostly came from new supply from Australia and the US.
“The mismatch in requirements between buyers and sup-
pliers is growing. Most suppliers still seek long-term LNG
sales to secure financing. But LNG buyers increasingly want
shorter, smaller and more flexible contracts so they can bet-
ter compete in their own downstream power and gas mar-
kets,” the outlook said.
“This mismatch needs to be resolved to enable LNG proj-
ect developers to make final investment decisions that are
needed to ensure there is enough future supply of this clean-
er-burning fuel for the world economy,” Shell said.
Alberta, CAPP address slumping
oil and gas investment
Slumping oil and gas investment in Canada has drawn re-
sponses from Alberta officials and an industry group, the
latter calling for a federal “vision” for oil and natural gas.
The Alberta government has committed to supporting
partial upgrading of bitumen with as much as $1 billion
(Can.) over 8 years beginning in 2019-20.
And the Canadian Association of Petroleum Producers
has released the first in a series of economic reports with a
warning: “Rising government costs, the burden of inefficient
regulations, and the lack of infrastructure to move Canadi-
27
3/1/18 11:03 AM
 GENERAL INTEREST
an energy to growing markets are all undermining investor
confidence in Canada.”
Partial upgrading
Alberta Premier Rachel Notley said support for commercial-
ization of partial-upgrading technologies follows a recom-
mendation of the Energy Diversification Advisory Commit-
tee established in 2016.
The committee explored opportunities “to diversify Al-
berta’s energy sector, create jobs, and stimulate investment
by adding value to our energy resources.” In addition to par-
tial upgrading, the group addressed refining, petrochemi-
cals, and chemicals manufacturing in its final report last
year.
Partial upgrading lowers the viscosity of bitumen pro-
duced from Alberta’s oil sands enough to facilitate pipeline
transport but does not fully process it into synthetic crude
oil, as existing upgraders do.
A University of Calgary study published in January 2017
said partial upgrading can turn bitumen into higher-value
material, lower transportation costs by eliminating the need
for diluent, and make pipeline capacity now used for diluent
available for crude.
Diluted bitumen contains about one-third diluent, much
of which is recycled.
Production growth in Alberta is straining existing pipe-
line capacity, widening the discount between Western Ca-
nadian Select crude and the US price marker, West Texas
Intermediate (OGJ Online, Feb. 26, 2018). Capacity expan-
sion faces political opposition outside Alberta.
The study said more than 10 technologies exist for partial
upgrading, none of them yet commercial.
In a press release, the Alberta government said its finan-
cial support will include loan guarantees and grants, helping
construction of two to five partial upgraders.
Investment down
CAPP’s study estimates capital spending by the Canadian
oil and gas industry last year at $45 billion, down 16% from
a year earlier and 45% from 2014, when crude prices began
to slump.
It notes that the Canadian decline contrasts with recov-
ery under way in US investment and activity and says Cana-
dians are “competing with our biggest customer.”
The study also says the federal and provincial govern-
ments are considering as many as 50 regulations.
“The scope and pace of these changes are creating inves-
tor uncertainty as well as unexpected and unnecessary costs
and delays for industry.”
In a press release announcing the study, CAPP says the
federal government should establish a vision for the oil and
gas industry with these elements:
• Global connection for Canada’s oil and natural gas re-
sources is essential.
28
180305OGJ_28 28
• Globally competitive policies that increase the coun-
try’s ability to attract capital are needed to create jobs and
national prosperity.
• Any climate plan must be comparable to other jurisdic-
tions competing for the same global capital.
• Government policies must spur and accelerate innova-
tion and technology in the oil and natural gas sector.
Colorado commission approves oil,
gas flowline requirements
Nick Snow
Washington Editor
The Colorado Oil & Gas Conservation Commission unani-
mously adopted new regulations covering flowlines and re-
lated oil and gas systems. The Feb. 13 action came following
months of investigations and hearings after an Apr. 17, 2017,
explosion and fire in an abandoned flowline killed two peo-
ple and injured another in the town of Firestone.
“We believe these new rules are another important step
in the aftermath of the Firestone tragedy,” said Gov. John W.
Hickenlooper (D). “State government and local municipali-
ties depend on the commitment that industry is doing ev-
erything to keep our communities safe.”
Anadarko Petroleum Corp., which operated an older
vertical well about 200 ft away from where the house that
caught fire was located, shut in more than 3,000 produc-
ing vertical wells, or a total of 13,000 b/d net equivalent of
production, in northeastern Colorado about a week after the
explosion and fire (OGJ Online, Apr. 27, 2017).
COGCC, which is part of the state’s Department of Natu-
ral Resources, ordered oil and gas operators in the state to
inspect their flowlines and verify that any not in use are fully
abandoned by May 30 (OGJ Online, May 4, 2017). The May
2 order also directed operators to document the location and
integrity of any existing flowline within 1,000 ft of a build-
ing by June 30.
Hickenlooper announced eight policy initiatives in Au-
gust following a 3-month review of oil and gas operations in
Colorado in response to the accident (OGJ Online, Aug. 22,
2017). They included improving COGCC’s flowline regula-
tions and enhancing the 811 “one-call” program.
The rules adopted on Feb. 13 strengthen requirements
for designing, installing, maintaining, testing, tracking,
and abandoning flowlines, which most typically move flu-
ids around specific oil and gas developments from wells to
separators to storage tanks or to larger pipelines, COGCC
officials said.
They said that oversight changes and improvements in-
cluded:
• Requirements for more-detailed tracking, location data,
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:03 AM

and record-keeping for flowlines that carry fluids away from
a specific oil and gas location, such as lines that may travel
from a well to a storage tank not co-located on the same
well pad, or to a gathering line. The rule permits COGCC
to share resulting, more specific geospatial information with
local governments through a confidentiality agreement.
• Requirements that any flowlines not in use, but not
yet abandoned, are locked and marked. All such lines must
continue to undergo integrity testing under the same stan-
dards as active lines until abandonment. Any risers asso-
ciated with abandoned flowlines must be cut below grade.
This rule change makes permanent the post-Firestone order
to eliminate above-ground risers connected to abandoned
flowlines.
• More-detailed requirements for operators to demon-
strate flowline integrity, including updated standards for
integrity-testing lines, more testing options that align with
newer technology, and the elimination of pressure-testing
exemptions for low-pressure lines.
• Requirements for full operator participation in the
Utility Notification Center of Colorado’s “one-call” program
to ensure a centralized home for all data on flowline loca-
tions and access to that information through the established
811 “call-before-you-dig” system.
The Colorado Oil & Gas Association (COGA) called the
new regulations tough but acknowledged that additional
oversight will make an already safe industry even more so.
COGA Pres. Dan Haley said, “Moving forward, all new and
older flowline endpoints will be mapped, and all oil and gas
companies will be required to participate as Tier 1 members
of the 811, one-call system. This is an unprecedented move,
as no other industry in the state is currently required to par-
ticipate at that high a level.”
. solution that doesn’t hurt ethanol producers and helps refin-
Time has come to overhaul
RINs, Cruz tells
Philadelphia refinery workers
Nick Snow
Washington Editor
US Sen. Ted Cruz (R-Tex.) called for a cap on the price of re-
newable identification numbers (RIN) to halt speculation and
preserve jobs at refineries. “We’re here because the jobs, and
the men and women whose livelihoods and families depend
on those jobs, are at risk from a broken government regulation
system that isn’t working, and that we have to fix,” he said a
Feb. 21 rally at Philadelphia Energy Solutions (PES).
PES cited dramatically higher prices for the renewable fuel
credits the Environmental Protection Agency administers
when the refiner declared bankruptcy nearly a month earlier
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_29 29
GENERAL INTEREST
(OGJ Online, Jan. 23, 2018). “In the year 2012, this refinery—
the largest refinery on the East Coast—paid about $10 million
for RINs. Then the RINs market broke. The price skyrocketed
from 1-2¢ each to as high as $1.40 each,” Cruz said.
“This means that last year, in 2017, this refinery spent $218
million buying RINs. That is more than double the payroll of
the men and women sitting here,” Cruz said. “Now, how many
think the refinery should be wasting money on government li-
censes that don’t pay a damned thing rather than paying your
salaries? It doesn’t make any sense. It is nuts.”
Cruz said capping RIN prices at 10¢ each would need
to occur alongside removing barriers so ethanol producers
could sell more, not under a federal government mandate
but in response to growing market demand. “It’s worth un-
derstanding [that] right now in Washington, this is all tied
up in politics of Big Corn and Big Ethanol. A bunch of these
companies don’t want to see any change,” he said.
“Here’s the crazy thing: Of the $218 million [PES] paid for
RINs, do you know how much ended up in the pockets of
Iowa corn farmers? None. The money doesn’t go to the corn
farmers, and it doesn’t go to the ethanol producers. Instead,
billions [of dollars] are being made by Wall Street specula-
tors and giant integrated companies that are earning a wind-
fall on this broken regulatory system,” Cruz said.
Cruz noted that when he brought nine other senators
to meet with President Donald Trump at the White House
to discuss the RINs problem in December, he emphasized
that this isn’t a tradeoff between refineries and corn farmers.
“There is a win-win solution where we can fix RINs, save the
jobs of refinery workers, and also let farmers sell more corn
and get the government out of the way,” he said.
“The role I’m trying to play in the Senate is to help find
that solution,” Cruz said. “In Texas, we have 27 refineries, 22
of which are hurt directly by the high RIN prices. There’s a
eries: getting rid of EPA barriers and letting farmers sell as
much ethanol as the market needs.”
Oklahoma state regulators
update quake-related well
completion protocol
Paula Dittrick
Upstream Technology Editor
Oklahoma state regulators revised protocol developed to re-
duce the chances of a felt earthquake resulting from well
completion activities in Oklahoma’s SCOOP and STACK
plays, which account for most of Oklahoma’s new oil and
gas activity.
In December 2016, the Oklahoma Corporation Commis-
29
3/1/18 11:03 AM
 GENERAL INTEREST
sion’s Oil & Gas Conservation Division (OGCD) and the
Oklahoma Geological Survey (OGS) developed a seismicity
protocol for the two plays.
OGCD Director Tim Baker said industry had fully coop-
erated with the previous protocol, but data gathered since
late 2016 indicated the need for additional regulation.
“The overall induced earthquake rate has decreased over
the past year, but the number of felt earthquakes that may
be linked to well completion activity, including hydraulic
fracturing, in the SCOOP and STACK has increased,” Baker
said. “These events are relatively rare and smaller on average
than those linked to injection activity. Most importantly, the
risk of such events appears to be manageable.”
The updated seismicity protocol calls for:
• All operators in the defined area will be required to
have access to a seismic array that will give real-time seis-
micity readings.
• The minimum level at which the operator must take
action has been lowered from a 2.5 magnitude (M) to 2.0 M.
Generally, the minimum level at which earthquakes can be
felt is about 2.5 M.
• Some operators will have to pause operations for 6 hr
at 2.5 M. Under the previous protocol, the minimum level
requiring a pause was 3.0 M.
Baker said more study needs to be done, but it appears
operators who have their own seismic arrays and took ac-
tions when there were seismic events too small to be felt
decreased the risk of having multiple, stronger earthquakes.
OGS Director Jerry Boak agreed protocol changes were
necessary, adding the chances are only a step in an ongoing
process.
“Ultimately, the goal is to have enough information to
develop plans that will virtually eliminate the risk of a felt
earthquake from a well completion operation in the SCOOP
and STACK,” said Boak.
Monitoring needs
Jake Walter, Oklahoma’s state seismologist, said Oklahoma’s
permanent seismic monitoring network needs to be en-
hanced to control induced seismicity involving both saltwa-
ter injection and fracturing jobs.
He said currently the state’s network can record events
statewide of 2-2.5 M or stronger. But evaluations typically
only happened during normal business hours unless an
event is strong.
Walter suggested real-time evaluations daily would be
worthwhile.
“We could develop a framework that would enable opera-
tors to know before they commence operations just what the
estimated seismicity risk could be, what steps to take before-
hand, and what to do during operations to minimize seismic
hazards,” Walter said.
30
180305OGJ_30 30
Total, Nova, and Borealis advance
proposed USGC petchem combine
Robert Brelsford
Downstream Technology Editor
Affiliates of France’s Total SA, Austria’s Borealis AG, and
Canada’s Nova Chemicals Corp. have signed definitive
agreements to form a joint venture that would combine cer-
tain of the companies’ existing and future petrochemical op-
erations along the US Gulf Coast.
Total will hold a 50% interest in the JV, while Novea-
lis Holdings LLC—an established JV between Borealis and
Nova Chemicals—will own the remaining 50% stake in the
yet-to-be-named entity, the companies said.
As previously announced, partners in the new JV will
jointly own the 1 million-tonne/year ethane steam cracker
under construction at Total’s 178,000-b/d integrated refin-
ing complex in Port Arthur, Tex., Total’s existing 400,000-
tpy polyethylene (PE) production plant in Bayport, Tex., and
the earlier announced 625,000-tpy PE plant based on Bo-
realis’ proprietary Borstar PE process proposed for Total’s
Bayport petrochemical production site (OGJ Online, Mar.
27, 2017).
Last year, Total’s Houston-based subsidiary Total Petro-
chemicals & Refining USA Inc. let a $1.3-billion contract to
CB&I, Houston, to provide engineering, procurement, and
construction services for the long-planned grassroots Port
Arthur steam cracker just a day after Total, Nova Chemicals,
and Borealis announced the preliminary partnership agree-
ment (OGJ Online, Mar. 28, 2017).
At a total investment cost of $1.7 billion, the new ethane
steam cracker at Port Arthur remains on schedule for startup
in 2020.
The three companies, however, have yet to finalize an
EPC contract for the planned Bayport Borstar PE unit, Total
said.
Total previously said, if approved, the Bayport PE unit
also would reach startup in late 2020.
With the companies still are awaiting regulatory ap-
provals before finalizing the new JV, the proposed partner-
ship Intends to help meet growing global demand for PE by
taking advantage of competitively priced ethane feedstock
from US shale production and easy export access to markets
abroad, as well as enable Total, Nova Chemicals, and Bo-
realis to leverage existing synergies to help further integrate
and expand their respective businesses in the Americas, the
operators said.
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:03 AM

Cabot plans 85 wells in Marcellus shale in 2018
Mikaila Adams
Editor-News
Cabot Oil & Gas Corp., Houston, expects to average three
rigs and two completion crews in the Marcellus shale dur-
ing 2018, resulting in 85 net wells drilled and 95 net wells
completed.
Cabot has about 179,000 net acres in the dry gas window
of the Marcellus shale, primarily in Susquehanna County,
Pa., with two rigs running. The average lateral length for
the 2018 Marcellus shale drilling program is 8,300 ft and
the expected average well cost is $8.3 million for drilling,
completion, and facilities.
The company provided updated guidance with its full-
year 2017 and fourth-quarter 2017 financial and operational
results, outlining its focus on its Marcellus assets.
In December 2017, the company announced plans to sell
both operated and non-operated Eagle Ford assets to Venado
Oil & Gas LLC (OGJ Online, Dec. 21, 2017). Commenting
on the deal, Cabot Chairman, Pres., and Chief Executive Of-
ficer Dan O. Dinges said the Eagle Ford assets were “a nice
complement” to the company’s Marcellus shale position,
providing capital allocation optionality in a higher priced
oil environment, but that based on its oil market outlook
Improved infrastructure key to US energy
dominance, Senate panel told
Nick Snow
Washington Editor
The US energy transportation system already is one of the
world’s best, witnesses told the US Senate Energy and Natu-
ral Resources Committee. But it won’t help reach the Trump
administration’s goal of achieving global energy dominance
without more cooperation between state and federal agen-
cies in issuing permits for projects, they warned during a
hearing early last month.
More certainty regarding permits is essential, representa-
tives of both the natural gas and electricity industries agreed.
“Often, this issue is framed as states vs. the federal govern-
ment, when it actually is state vs. state,” Interstate Natural
Gas Association Pres. Donald F. Santa said.
He suggested that the New York State Department of En-
vironmental Protection’s use of authority under the Clean
Water Act’s Section 401 to stop construction of an inter-
state gas pipeline—which the US Federal Energy Regulatory
Commission has approved—actually denies producers in
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_31 31
GENERAL INTEREST
and resulting rates of return compared to its Marcellus re-
turns, there were no plans to allocate capital to assets be-
yond maintenance capital levels.
Cabot has provided first-quarter 2018 net production
guidance of 1,775-1,825 MMcfd for natural gas, 7,500-8,000
b/d for crude oil and condensate, and 700-800 b/d for NGLs.
These numbers assume a Feb. 28, 2018, closing date for the
Eagle Ford divestiture and reflects the impact of an in-ser-
vice delay for two new third-party compressor stations in
the Marcellus.
The company reaffirmed its 2018 production growth
guidance of 10-15% (18-23% on a divestiture-adjusted basis
to reflect the impact of its Eagle Ford, East Texas, and West
Virginia dispositions).
“Our 2018 production growth is weighted toward the sec-
ond half of the year driven by anticipated midyear in-ser-
vice dates for the Moxie Freedom power plant, Lackawanna
Energy Center power plant, and Atlantic Sunrise pipeline,”
Dinges said.
A breakdown of the company’s updated $950-million
2018 capital budget is as follows: Marcellus shale, $800 mil-
lion; exploration areas, $75 million; pipeline investments,
$60 million; and corporate, $15 million.
Pennsylvania a market for their gas in New England.
“I believe some recourse is needed, such as what exists
under the Coastal Zone Management Act for appeals of a
state’s permit denial directly to the US Secretary of Com-
merce instead of having the problem wind up in court,” San-
ta said.
“This affects electric utilities increasingly as more of then
turn to gas to generate power,” added Phillip D. Moeller, ex-
ecutive vice-president for business operations and regulatory
affairs at the Edison Electric Institute. “Our members would
support congressional action to address this problem.” Elec-
tric utilities encounter similar problems when they try to
construct interstate power transmission lines, Moeller said.
“There’s been a lot of private sector investment already to
build infrastructure from both gas and electricity production
sites to US consumers, but more will be needed,” noted Ken-
neth B. Medlock III, who is an energy and resource econom-
ics fellow at Rice University’s James A. Baker Institute for
Public Policy in Houston.
When there’s not enough energy transportation capac-
31
3/1/18 11:03 AM
 GENERAL INTEREST
ity, short-term supply and demand movements can lead
to significant price dislocations, Medlock said. “Notably, if
demand swings due to seasonal factors, this can result in
excessive price volatility as the constraint is realized and
relaxed over and over again,” he said. “However, if we had
delivery capability to the market, the constraint is relaxed,
even at the higher level of demand, and the price falls despite
actual consumption rising.”
He pointed out that several factors contributed to the dra-
matically improved domestic oil and gas outlook since 2008,
including:
• A regulatory and legal apparatus in which producers
can negotiate directly with property owners for access to
mineral rights on privately owned land.
• A market in which hubs, which act as liquid pricing
locations, are easily reached due to liberalized transporta-
tion services with pipeline capacity unbundled from pipe-
line ownership.
• A well-developed pipeline network that can facilitate
production volumes as they are brought online.
• A market in which interstate pipeline development is
relatively seamless due to a well-established governing body
(FERC) and a straightforward regulatory approval process.
• A market in which demand pull is sufficient and can
materialize with minimal regulatory hurdles, to provide the
opportunity for supplies to compete for market share.
• A market where a well-developed service sector already
exists which can facilitate fast-paced drilling activity and
provide rapid responses to demands in the field.
• A service sector which must compete by reducing costs
and improving techniques to gain a competitive advantage.
• A sizeable rig fleet capable of responding to upstream
demands without constraint.
• A deep set of upstream actors including independent
producers who can behave as entrepreneurs, facilitating a flow
of capital toward smaller scale, riskier ventures than those
vertically integrated major oil and gas companies pursue.
“Every one of these bullet points has some relevance to
infrastructure—from permitting to access to market func-
tion to price formation to investment, etc.,” Medlock said.
“If any one of these factors is absent, it presents an effective
market development barrier, usually in the form of higher
costs. Moreover, some of the above sufficient conditions can
co-depend on others, which highlights the notion that well-
designed market institutions and regulatory frameworks can
be self-reinforcing.”
The coexistence of these factors makes the US a unique
environment for upstream shale-directed investments, he
said. “This, in turn, highlights the importance of each in
achieving US energy-related geopolitical and foreign policy
aims. More specifically, the legacy of domestic regulatory
and market institutions engenders significant global influ-
ence, and infrastructure has played a central role in fostering
the current reality.”
32
180305OGJ_32 32
Woodside to buy out ExxonMobil’s
share of Scarborough field
Rick Wilkinson
OGJ Correspondent
Woodside Petroleum Ltd., Perth, has announced a $2.5-bil-
lion (Aus.) equity raising to pay for a number of LNG expan-
sions onshore and offshore Western Australia, including the
acquisition of ExxonMobil Corp.’s 50% interest in offshore
retention lease WA-1-R containing the bulk of the yet-to-be-
developed Scarborough gas field on the Exmouth Plateau.
The fully underwritten share sale also will cover work
for a second LNG production train at the company’s Pluto
plant near Karratha on the Burrup Peninsula, fund Wood-
side’s share of the new oil development at SNE field offshore
Senegal, plus early work on Woodside’s plan to pipe gas from
the offshore Browse basin gas fields—Torosa, Brecknock,
and Calliance—to the North West Shelf JV’s LNG complex
also on the Burrup.
Woodside CEO Peter Coleman said the Scarborough
acquisition will cost as much as $744 million, comprising
$444 million initial payment and a further $300 million
once a final investment decision on development has been
made. The deal will take Woodside’s interest in WA-1-R to
75%, provided there is no preemption from BHP Billiton.
Woodside bought its first 25% of the retention lease from
BHPB in September 2016 for $400 million and BHPB still
retains the remaining 25% interest.
Woodside’s 2016 purchase from BHP also included 50%
interest and operatorship in surrounding leases WA-61-R
(containing the Jupiter field), WA-62-R (containing the
northern tip of Scarborough field) and WA-63-R (containing
the Thebe field).
Thus this deal with ExxonMobil, which should be com-
pleted by the end of March, will mean that Woodside gains
control of the Scarborough, Thebes, and Jupiter fields, en-
abling it establish a low-cost development by piping Scar-
borough region gas to an expansion of the company’s Pluto
LNG processing facilities on the Burrup Peninsula. Further
upside will come with an onshore interconnect pipeline to
be built between the Pluto plant and the nearby North West
Shelf JV’s Karratha plant.
Coleman estimated the cost of Scarborough development,
comprising field facilities and pipeline to shore plus a second
LNG train at Pluto, at about $9.7 billion. Woodside’s share
would potentially be about $7.9 billion. A final investment
decision is targeted for 2020 with an on-stream date of 2025.
Scarborough has 2C contingent resources of 7.3 tcf of dry
gas. Adding Thebe and Jupiter brings the total 2C resourc-
es to 8.7 tcf. Water depth at the fields is 900-1,200 m. The
fields lie 220-250 km northwest of Exmouth on the Western
Australia coast.
Oil & Gas Journal | Mar. 5, 2018
3/1/18 11:03 AM
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180305OGJ_33 33 2/27/18 3:26 PM

 TECHNOLOGY

South East Asia contains abundant,

untapped shale reservoirs
Ahmed ElSakka
Ghareb M. Hamada
Eswaran Padmanabhan
Ahmed M. Salim
University Teknologi Petronas
Seri Iskandar, Malaysia EXPLORATION &
DEVELOPMENT
Shale development is poised to renew interest in
exploring for oil and gas in Southeast Asia. Basins
in Malaysia, China, India, Pakistan, Indonesia,
and Thailand hold prospective formations, but more study
is necessary to unlock these reserves.
China’s prospective 1,115 tcf of shale gas is by far the
largest prospect in the region, followed by India (584 tcf).
Malaysia represents the region’s lowest potential with an es-
timated 8.8 tcf of recoverable shale gas resources.
This article outlines shale gas resources in Southeast Asia
that could transform local energy markets, especially those
relying on crude oil imports, as economies in the region con-
tinue to grow.
Malaysia
Malaysia is the world’s third-largest exporter of liq-
uefied natural gas (LNG), and the second largest oil
and natural gas producer in Southeast Asia.
Malaysian sedimentary basins are heavily fault-
ed with a variety of natural traps, which is encour-
aging for oil and gas development. Six tertiary-age
basins are present in the country, including the
Malay, Penyu, Sarawak, Sabah, Sandakan, and a
portion of the Tarakin basin (Fig. 1).1 To date, shale
gas discoveries have been made in only the Sarawak and
Sabah basins, both of which as part of large accumulations.
The basins are grouped into three larger regions, including
a Peninsular basin, Sarawak, and Sabah. Sabah and Sarawak
comprise 200,000 sq km, or about 60% of the land mass, in
East Malaysia. The oldest Sarawak formation dates to 300
million years. These ancient rocks form part of the West
Borneo basement that makes up the exposed part of Sunda-
land in southwest Borneo, making it related to continental
Southeast Asia. The basement is built up of Paleozoic and

MALAYSIA SEDIMENTARY BASINS FIG. 1

THAILAND VIETNAM PHILIPPINES

Malay basin NE Sabah

basin
Sabah basin

Sabah
PENINSULAR Sarawan basin
St

MALAYSIA
Penyu basin
rai

SE Sabah
ts

basin
of
M

Kuala Lumpur Sarawak

ala

Tarakan
c
ca

SUMATRA KALIMANTAN
MALAYSIA basin
Singapore
0 124 Miles
Sedimentary thickness, m
0 200 Km
1,000-4,000
>4,000
200 km maritime boundary

34 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_34 34 2/27/18 3:28 PM

 Mesozoic rocks. Most of Sarawak is underlain by younger CENTRAL SARAWAK ONSHORE FORMATIONS FIG. 2
Tertiary sedimentary rocks, especially northeast of the Lu-
Epoch Offshore Sibu-Tatau-Bintulu-Miri
par River. cycles
Based on preliminary resource assessment, Malaysia has Quaternary VIII Liang

Plioc.
an estimated 8.8 tcf of shale gas resources. VII

Upper
VI

Sarawak basin V
Miri
Tukau

Middle
The prospective Setap shale formation is composed of in-

Miocene
ner neritic clay-shale and silty clay, occasionally interbed- IV Lambir
ded with sandstone, calcareous sandstone, and moderately III

Lower
thick limestone. Setap has poor-fair organic content in hard Setap shale
Sibuti
and semihard to unconsolidated sandstone, heterolithic coal II
seams, paleosol, and thick mudstone (likely shelf and mar- I Subis

Upper
ginal marine) with total organic carbon (TOC) of 7-8%. Tangap

Oligocene
Sedimentary cycles subdivide the stratigraphy of the Sar- Nyalau
awak Tertiary sequence and have been identified in eight

Middle
separate geological regions, namely the West Baram Delta, Buan
Balingian, Central Luconia, Tinjar, Tatau, West and south- Tatau
west Luconia, and southwest Sarawak Provinces (Fig. 2). The

Upper
sedimentary succession on the Sarawak basin shelf is more Precycle Volcanics

than 12-km thick and also contains the Sibuti formation that
Eocene
is comprised of shale, interbedded siltstone, and limestone.

Sabah basin
The Sabah basin has three sections, with the northwest sec-
tion mostly offshore. The other two sections—northeast and
southeast—are onshore Sabah. The entire basin contains
12-km thick Neogene sediments that were deposited within
the deep marine and progradation shelf slope environment.2
Peninsular basin
Malaysia’s Peninsular region has four main basins, the Malay
basin and the Penyu basin are offshore to the east of the pen-
insula. The Central and North Sumatra basins lie to the west
of the peninsula and are mostly offshore with small portions
lying onshore. The Malay basin contains Neogene sediments
about 12-km thick that were deposited within the non-ma-
rine to shallow marine environment. In the Penyu basin, oil
has been discovered on horst blocks of the Oligocene synrift
play consisting of fluvial sandstone reservoirs.
China shale prospects
Behind US and Canada, China is the third largest in devel-
oping its shale gas resources.
In southern China the Sichuan, Jianghan, and Chuxiong
basins are the most prolific. Ordos, Bohai Bay, and Songliao
basins are prospective in northern China. The Tarim and
Qaidam basins in northwest China and the Qiangtang-Tibet
basin in the south are also target areas for shale gas (Fig. 3).
Most of China’s shale gas (46.8%) is in the southern re-
gion, primarily in the Sichuan basin. The north-northwest
Tarim and Ordos basins contain 43% of China’s estimated
shale resources. The remaining basins account for 10.2% of
total shale gas (Fig. 4).
Middle
Belaga
Prospective formations include both marine and conti-
nental shales and transitional facies. Technically recoverable
gas in China’s Tarim (216 tcf) and Sichuan (626 tcf) basins
are mainly in marine and lacustrine-deposited shales (Fig.
5). The US Energy Information Agency (EIA) estimates that
the Sichuan and Tarim basins contain technically recover-
able reserves of 1,275 tcf if 25% of the shale gas can be pro-
duced.
Sichuan and Tarim basins make up two of China’s largest
organic shale plays and include five minor basins: Songliao,
Bohai, Ordos, Tuha, and Jungar (Fig. 5). Sichuan is the most
promising short-term development opportunity given the
basin’s existing pipeline infrastructure and the region’s ma-
ture gas market.
Sichuan basin
Sichuan basin shale exploration has focused on marine-
deposited, dry-gas mature source rock shales that resemble
other commercially productive shales. The Sichuan basin
covers 190,000 sq km in south-central China. The basin
currently produces about 1.5 bcfd of natural gas from con-
ventional and low-permeability sandstones and carbonates
within the Triassic Xujiahe and Feixianguan formations that
feature complex structural-stratigraphic traps (mainly fault-
ed anticlines) distributed across the basin.
Sichuan basin is in the Changning-Weiyuan area, where
productive formations are in a high degree of thermal evo-

Oil & Gas Journal | Mar. 5, 2018 35

180305OGJ_35 35 2/27/18 3:28 PM

 TECHNOLOGY

CHINA BASINS FIG. 3

2 10 1. Tarim
2. Zhunger
6 3 3. Turpan-Hami
9
4. Qaidam
1
North 5. Qiangtang
Northwest 6. Yanqi
4 11 7. Ordos
7 8. Sichuan
12 9. Eren
5 10. Songliao
Qinghai Tibet 13 11. Bohai Bay
12. Qinmu
13. Southern North China basin
8
14 14. Jianghan
15. Chuxiong
South
15
Basin
Palaeozoic

CHINA SHALE GEOGRAPHIC DISTRIBUTION FIG. 4 dips, and high tectonic stress make
50 optimization difficult. Drilling condi-
46.8 tions may also be hindered by hard
43.0
formations and high levels of H2S and
40
CO2 in specific areas.
Shale gas resources, %

The Sichuan basin has four tectonic

30
20
10 8.9
0
South North
lution with vitrinite reflectance (Ro) ranging 2.0-4.0%, po-
rosity 3.0-4.8%, gas concentration 2.82-3.28 cu m/tonne,
and moderate burial depth of 1,500-4,500 m (Table 1). EIA’s
Shale Report assessment estimates Sichuan shale formations
are at an average depth of 11,000 ft, and technically recover-
able resources are an estimated 18 trillion cu m.3
Despite its multiple shale targets, the Sichuan basin has a
number of geologic challenges. Numerous faults, often steep
zones: the northwest depression, cen-
tral uplift, and the East and South fold
belts. The central uplift, character-
ized by relatively simple structure and
comparatively few faults, is the most
attractive region for shale gas develop-
ment. In contrast, the East and South
1.3 fold belts are structurally more com-
Northwest Qinghai-Tibet plex, with numerous closely spaced
folds and faults.
The four organic-rich shale targets
in the Sichuan basin are the Lower
Cambrian Qiongzhusi, Lower Silurian
Longmaxi, Lower Permian Qixia, and the Upper Permian
Longtan formations (Table 2). The Lower Silurian Longmaxi
formation is possibly the most prospective of these as it con-
tains an average 300 m of organically rich, black, graptolitic-
bearing, siliceous to cherty shale. TOC is mostly low-moder-
ate, reaching 4% and consisting mainly of Type II kerogen.
Thermal maturity is high and increases with depth, rang-

36 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_36 36 2/27/18 3:28 PM

180305OGJ_37 37 2/27/18 3:29 PM
 TECHNOLOGY

TARIM BASIN ASSESSMENT FIG. 5

KAZAKHSTAN Triassic oil

Area Ordovician oil
KAZAKHSTAN
shown CHINA Ordovician gas
Cambrian gas
CHINA
ARI data location

Ku Cross section
luk
ns eta Tarim basin
tai A’ ke
o un sionKuqa up
nM pres lift
sha a de
n Kuq Tabei uplift
KYRGYZSTAN Tia Aksu

t
Keping uplift B’ uplif
an
Awati depression Manjiaer Tan
Bachu depression n
s sio
Tazhong East Tarim pre
Kashi de
uplift uplift st
Southwest ea Nuoqiang
Ku

B uth
depression So
nlu
nM

Maigiati slope A
Tangguzibasi depression
ou
nta

ft
pli
ins

Hotam s t u Minfeng
hwe s
ut tain 0 Miles 75
So M oun
un lun 0 Km 120
PAKISTAN K

Source: Advanced Resources International Inc.

ing from dry gas prone to over mature INDIA SHALE BASINS FIG. 6
(Ro=2.4-3.6%).
The Cambrian Qiongzhusi forma-
AFGHANISTAN Kabul Islamabad
tion, even though deeper than the
CHINA
Longmaxi and mostly separated out by
the 5-km depth, contains high-quali- Northern Indus
ty source rocks that provide stacked basin
New Delhi
PAKISTAN
shale resource potential. The forma-
Rajasthan NEPAL
tion was deposited under shallow ma- Southern BHUTAN Upper
basin
Indus Assam
rine continental shelf conditions and basin basin
Karachi
has an overall thickness of 250-600 m. Vindhyan Damodar basin Dhaka
Cambay basin South Rewa
Tarim basin basin
basin Calcutta MYANMAR
The 600,000 sq km Tarim basin, in BANGLADESH
Mumbai Pranhita
the Xinjiang Autonomous Region, is Godavan
China’s largest onshore sedimentary Arabian Sea basin
basin. It produces 260,000 b/d of oil Bay of Bengal
and 1.6 bcfd of natural gas from con- INDIA Krishna
ventional reservoirs that are sourced Godavari
Prospective basin
Madras basin
from organic-rich Cambrian and Or- Other basin
dovician shales (Fig. 5). Gas pipeline
Cauvery
Tarim basin is subdivided by fault basin
and fold systems into a series of seven 0 Miles 373

distinct structural zones, comprising 0 Km 600

SRI LANKA
three uplifts and four depressions. Pe-
troleum source rocks are found in the Source: ARI

38 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_38 38 2/27/18 3:28 PM

 TECHNOLOGY

PAKISTAN SHALE POTENTIAL FIG. 7

RUSSIA CHINA
Northern Areas
CHINA
AFGHANISTAN
Peshwar Srinagar
INDIA
Rawalpindi
Area Jammu, Kashmir
shown Northern
Indus
basin
Amntsar
Quetta
sin Faisalabad Lahore
Zahedan a
b Central Indus Chandigarh
u s
Ind
basin
IRAN Balochistan
e r
basin
L ow Delhi

Prospective basin
Southern Indus
PAKISTAN
basin
INDIA Other basin

0 Miles 249
Korachi Hyderabad
0 Km 400

Source: ARI

SICHUAN BASIN RESOURCES Table 1

Formation Shale
System Series Formation Depth –––––––––– Thickness, m –––––––– Area, 1,000 sq km Shale gas, trillion cu m

Triassic Upper Xujiahe 1,870-5,000 1,800-5,100 500-1,860 14.0-16.5 8.4-33.5

Silurian Lower Longmaxi 2,300-4,100 200-800 50-500 128.2 4.0-12.4
Ordovician Upper Wufengzu 2,300-4,500 — 2-40 147.3 0.52
Cambrian Lower Qiongzhusi 2,700-3,600 50-500 74-400 184.5 7.14-14.60
Sinian Upper Doushantuo — 25-70 10-40 — —

Cambrian, Ordovician, Carboniferous Triassic, Cretaceous,
and Tertiary. Marine deposited black shales of Cambrian and
Ordovician age are the most important source rocks in the
basin.4 Tarim’s and other northern China marine deposits
often have high organic content with Ro=1.1-2.5%. Organic
matter is mostly Type II-III kerogen, and these deposits are
at average depths of 13,500 ft.
India shale gas
India has prospective shale formations in four major sedi-
mentary basins, including the Cambay, Krishna-Godavari
(KG), Cauvery, and Damodar Valley (Fig. 6). Each of these
are marked by thick shales, TOC of 2-6 wt %, and Ro > 1
(Table 3).5
Other prospective basins include Vinghyan, Upper Assam,
Pranhita-Godovari, and Rajasthan. These basins show ther-
mal immaturity, but do contain measurable thicknesses and
suitable TOC. Despite the country’s vast shale gas resources,
strict government policies and a lack of technology and tech-
nical expertise have left most of these resources untapped.
KG basin
Located on India’s East Coast, KG basin covers a 15,000 sq
km area onshore and another 25,000 sq km offshore. KG
basin’s shales are limited within four grabens or sub-basins
where thermal maturity is sufficiently high for wet-dry gas
generation.6 Estimated risked shale gas in place is 136 tcf
with a risked technically recoverable resource of 27 tcf (Ta-
ble 3).
Cauvery basin
The Cauvery basin covers 25,000 sq km onshore and 30,000
sq km in shallow offshore areas. The basin contains a thick
interval of organic rich source rocks in Lower Cretaceous
Andimadam and Sattapadi shale formations. The oldest
rocks in the Cauvery basin are the shallow marine, late Ju-

Oil & Gas Journal | Mar. 5, 2018 39

180305OGJ_39 39 2/27/18 3:28 PM

 TECHNOLOGY

SICHUAN BASIN PROSPECTIVE FORMATIONS Table 2

Era Period Epoch Formation Age, million yr Thickness, m

Quaternary 0-3 0-380
Cenozoic Upper 3-25 0-300
Tertiary
Lower 25-80 0-800
Cretaceous 80-140 0-2,000
Upper Penglaizhen 650-1,400
Suining 340-500
Jurassic Middle 140-195
Shaximiao 600-2,800
Mesozoic Lower Ziliujing 200-900
Upper Xujiahe 195-205 250-3,000
Middle Leikoupo
Triassic
Jialingjiang 205-230 900-1,700
Lower
Feixianguan
Permian Changxing
Upper Longtan 200-500
230-270
Maokou
Lower 200-500
Qixia-Liangshan
Carboniferous Mississippian Huanglong 270-320 0-500
Paleozoic Upper
Silurian 0-1,500
Lower Longmaxi
Ordovician 0-600
320-570
Upper Xixiangchi
Cambrian Middle Yuxiansi 0-2,500
Lower Qiongzhusi
Sinian Upper Dengying
570-850 200-1,100
Doushantuo
Proterozoic
Lower 0-400
Presinian 850

rassic sediments, and early Cretaceous deposits. Average re-

source is estimated at 43 tcf of risked shale gas in-place, of
which 9 tcf is considered technically recoverable (Table 3).
Damodar Valley basin
The Damodar Valley basin is part of a group of basins collec-
tively named Gondwana.7 The Gondwana encompasses the
Satpura, Pranhita-Godavari, Son-Mahanadi, and Damodar
basins. The Damodar is estimated to contain 33 tcf of risked
shale gas in-place, of which 7 tcf is considered technically
recoverable (Table 3).
Southern Indus basin
The Southern Indus basin, which is primarily in southern
Pakistan, is accessible on India’s northern border. To date,
there have been five commercial oil discoveries and one gas
discovery in conventional Cretaceous-age reservoirs. There
are an additional three gas discoveries and one gas conden-
sate discovery in shallower formations.
Pakistan
Pakistan’s shale gas and oil resources rank ninth largest in
the world, exceeding the total resources available in the rest
of Central Asia (Fig. 7). The Upper, Lower Indus basin, Balo-
chistan, and Pasheen are three of the country’s primary sedi-
mentary basins, totaling 827,365 sq km.
Indus basin
The Precambrian Indus basin consists of an Upper region
that includes two sub-basins: Kohat and Potwar. The Low-
er Indus basin includes the central and southern portion.
The Indus basin covers a combined 271,700 sq km, which is
about 33% of the country’s sedimentary area.8
Indus basin is enriched by thick-sequence shale forma-
tions that have sourced proven petroleum systems. EIA esti-
mates Pakistan’s shale gas resources to be 586 tcf, however,
technically recoverable shale gas is closer to 100-105 tcf (Fig.
8).6 Indus basin shale formations are known to source Paki-
stan’s conventional discoveries, but there has been no shale-
specific exploration publicly reported for the country.
Lower Indus basin
The Sembar and Ranikot formations make up the Lower In-
dus basin’s shale prospects. The Sembar formation has 531
tcf of risked shale gas in place, of which 101 tcf is technically
recoverable. The Ranikot shale has estimated risked shale
gas and oil in place of 55 tcf and 82 billion bbl, respectively.
The Sembar formation consists of clastic rocks, typically
shale with lesser quantities of siltstone and sandstone. The
sand content increases toward the southeast, but the for-
mation is composed of siltstone with marls and shales in
the central basin. Sembar shales are medium hard, pyritic,
moderately indurated, and slightly calcareous with a gross
thickness of >50-800 m. Sembar’s TOC and Ro are consis-

40 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_40 40 2/27/18 3:28 PM

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 TECHNOLOGY

INDIA SHALE BASINS Table 3

Basin Cambay Damodar Valley Krishna-Godavari Cauvery

Gross area, sq mile 20,000 1,410 7,800 9,100
Basic data
Shale formation Cambay Barren Measure Kommugudem Andimadam
Geological age Upper Cretaceous-Tertiary Permian-Triassic Permian Cretaceous
Prospective area, 940 1,080 4,340 1,005
sq mile
Interval 1,600-4,900 0-2,100 3,100-3,500 600-1,200
Organic 1,500 1,050 1,000 800
Physical extent Thickness, ft rich
Net 500 368 300 400
Interval 11,500-16,400 3,280-6,560 6,200-13,900 7,000-13,000
Depth, ft
Average 13,000 4,920 11,500 10,000
Reservoir pressure Moderately overpressured Moderately Normal Normal
overpressured
Reservoir properties TOC, wt. % 3.0 4.5 6.0 2.0
Clay content Medium High High High
GIP concentration, 231 123 156 143
bcf/sq mile
Resource Risked GIP, tcf 78 33 136 43
Risked recover- 20 7 27 9
able, tcf

*Gas in place

tent with exploration targets at around 2% and 1.0-1.6%, re-
spectively.
The Paleocene Ranikot formation is an upper carbonate
unit tailored with fossiliferous limestone interbedded with
dolomitic shale, calcareous sandstone, and abundant bitu-
minous material. The formation’s prospective layer is 1,000-
3,000 ft thick with a net-shale thickness of 200 ft. Ranikot
contains an estimated 4 tcf of wet gas.
Thailand
Nearly 90% of Thailand’s petroleum output comes from off-
shore fields in the Gulf of Thailand, with only limited pro-
duction from small onshore fields. Natural gas supplies 40%
of Thailand’s energy consumption. The country’s most pro-
spective shale gas deposits are Permian and Triassic sources
in Thailand’s largest onshore sedimentary basin, the Kho-
rat. These shales can be locally thick, organic-rich, dry-gas
prone, deeply buried, and overpressured.
In addition to Khorat basin in the northeast, Thailand has
a series of smaller, isolated pull-apart basins in the northern
Intermontane basin with ongoing mining of shale oil (Fig.
8). The country also has potential in the central Plains ba-
sin. Khorat basin has an estimated 5 tcf of risked technically
recoverable shale gas, but no exploration activity has been
reported.
Khorat basin
Thailand’s 35,000 sq km Khorat basin is a structural depres-
sion initiated during Middle Paleozoic with widespread de-
position of clastic and carbonate sedimentary rocks, begin-
ning with the Carboniferous Si That formation.1
Kuchinarai Group averages depths 6,500-7,000 ft. Ther-
mal maturity modeling suggests it reaches the dry gas win-
dow with no liquids potential (Ro > 2.0%). The shallow ma-
rine to basinal Permian Saraburi Group is considered the
basin’s primary source, while the high-TOC fluvial to la-
custrine Triassic Kuchinari and Huai Hin Lat Groups offer
additional source potential (Fig. 9). Permian dolomite and
karsted limestones form the main conventional petroleum
reservoirs.
Indonesia shale gas
Indonesia has marine-deposited shale gas and oil potential,
as well as more extensive shale resources within non-marine
and often coaly shale deposits. Technically recoverable re-
serves are estimated to be 46 tcf out of 303 tcf of risked shale
gas in place.9
Indonesian onshore basins’ petroleum source rocks are
young, mostly Eocene to Pliocene.10
Onshore sedimentary basins with shale gas potential in-
clude Central and South Sumatra basins and Kutei and Tara-
kan basins in Kalimantan. In eastern Indonesia, the Salawa-
ti, Bintuni, and Tomori basins have shale potential, but these
are structurally complex. Most of Indonesia’s remaining ba-
sins are less prospective with low TOC, high clay content,
and excessive levels of CO2.
Many of Indonesia’s organic-rich shales are nonmarine
coaly deposits that may not be brittle enough for develop-

42 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_42 42 2/27/18 3:28 PM

 TECHNOLOGY

ment. Depositional settings range from THAILAND SEDIMENTARY BASINS FIG. 8

deepwater marine in eastern Indonesia
to mostly lacustrine and deltaic envi-
ronments in central and western Indo-
MYANMAR Fang
nesia. LAOS
Northern
Bintuni basin Intermontane
Bintuni basin, in the eastern side of the Vientiane
Bird’s Head region, has the simplest
Khorat plateau
structural conditions and best shale Rangoon
Phitsanulok
prospectivity in eastern Indonesia. The Mae
stratigraphic section resembles that of 501
the Salawati basin, with preserved Pa-
leozoic, Mesozoic, and Tertiary units. Khorat basin
Central
The prospective areas of the Permian Surphan plain
Buri THAILAND
Aifam formation have an estimated
29 tcf of technically recoverable shale
gas resources out of 114 tcf of gas in Bangkok
place.1 The marine-deposited Aifam CAMBODIA
formation could be the best shale gas
target in Indonesia. To date no shale Shale prospect
leasing or exploration activity has been Gas prone
Phnom Penh
reported in eastern Indonesia. Liquids prone
VIETNAM
Sumatra basin
Sumatra has shale oil and gas poten- CHINA
tial in three deep basin complexes: The
INDIA
North, Central, and South Sumatra
basins. The North Sumatra basin pro- Area
duces mainly conventional gas both shown
on- and offshore. Central Sumatra ba-
sin is one of the more prospective for 0 Miles 200
shale gas, with technically recoverable
0 Km 322
resources from the Brown formation
estimated at 3.3 tcf. Source: ARI, 2013

South Sumatra basin produces con-

ventional oil and gas, but it has poten-
tial shale gas and coalbed methane exploration potential.
The basin contains late Eocene to early Oligocene deposits of
clastic sediments in transgressional pull-apart depressions.
The Eocene to Oligocene Talang Akar formation is prospec-
tive within a large 15,490-sq-mile area and estimated to
have a 367-ft thick high-graded zone with an average 5%
TOC and 0.7% Ro. The pressure gradient is normal with a
high clay content. The Talang Akar formation has an esti-
mated 4.1 tcf of technically recoverable shale gas.
References
1. EIA, “Technically Recoverable Shale Oil and Shale Gas
Resources: An Assessment of 137 Shale Formations in 41
Countries Outside the United States,” June 2013, www.eia.
gov.
2. Wang, X., “The Evolving Unconventional Gas in China,”
Society of Petroleum Engineers (SPE) Annual Technical Con-
ference and Exhibition (ATCE), San Antonio, Tex., Oct. 8-10,
2012.
3. Zonggang, L.V., Wang, L., Shea, J., Wang, Q., and
Dumesnill, J., “Search for Unconventional Gas in Asia Pacific
Region: Chinese Cambrian Age Marine Qiongzhusi Shale Gas
Play: Case History, Operation, and Execution,” SPE ATCE, San
Antonio, Tex., Oct. 8-10, 2012.
4. Cai, C.F., Li, K.K., Ma, A.L., Zhang, C.M., Xu, Z.M.,
Worden, R.H., Wu, G.H., Zhang, B.S., and Chen, L.X, “Dis-
tinguishing Cambrian from Lower Ordovician Source Rocks:
Evidence from Sulfur Isotopes and Biomarkers in the Tarim
Basin,” Organic Chemistry, Vol. 40, No. 7, April 2009, pp.
755-768.
5. Sain, K., Rai, M., and Sen, M., “A review on shale gas
prospects in Indian sedimentary basins,” Journal of India’s
Geophysical Union, Vol. 18, No. 2, April 2014, pp. 183-194.
6. Mahto, V., “Shale Gas in India: Status and Challenges,”
Journal of Petroleum Engineering and Technology, Vol. 4, No.

Oil & Gas Journal | Mar. 5, 2018 43

180305OGJ_43 43 2/27/18 3:28 PM

 TECHNOLOGY

KHORAT BASIN PETROLEUM SYSTEMS FIG. 9 The authors

Ahmed-ElSakka (El-
Depositional Hydrocarbon system sakka_@hotmail.
Lithostratigraphy
environment Reservoir Seal Source Maturity
com) earned an MS in
petroleum engineering
Fluvial (2017) from Univer-
Tha Chang
Tertiary

siti Teknologi Petronas,

Himalayan orogeny
Perak, Malaysia. He has
previously worked for Tri-Ocean Energy
Immature
oil as a reservoir engineer. He holds a
Bolian
BS in petroleum engineering from the
Cretaceous

Maha Sarakham Subkha British University in Egypt, Cairo. He is

Poor
a member of the Society of Petroleum
Khok Kruat Engineers (SPE).
Phu Phan
Sao Khua Gharib M. Hamada
Khorat Fluvial, (ghareb.mostafa@utp.
Phra Wihan group alluvial Early edu.my) is an associ-
Jurassic

mature ate professor of petro-

oil
Phu Kradung leum engineering at
the Universiti Teknologi
Nam Phong Petronas. He also served
Triassic

Huai Han Lat group Mid-

Fluvial, Good as faculty at the Future University, Cairo,
mature
Kuchinaral oil Egypt, and has taught at a number
lacustrine
Indonisian orogeny group
of other universities. Hamada holds
Pha Duk Karsted
Permian

Shallow limestone Poor a BS and MS in petroleum engineer-

Hua Na Kham Saraburi
marine- Dolomite ing from Cairo University, Egypt. He
Nam Pha Nok Khao group Late
basinal
Duk Karsted
Good mature also holds a PhD in applied geophysics
limestone
oil from Bordeaux University, France. He
Carboniferous

Shallow
Si That Fm marine Poor is a member of SPE and the Society of
Petrophysicists and Well Log Analysts
(SPWLA).
Basement

Eswaran Padmanabhan
(eswaran_padmanabhan@
utp.edu.my) is director of
1, January 2014, pp. 23-32. the Institute of Hydrocar-
7. Rahmalia, D., “Shale gas potential in Indonesia—‘More’ bon Recovery at Universiti Teknologi Petronas and
to the East,” Indonesian Petroleum Association, 36th Annual an associate professor in the Department of Geo-
Convention and Exhibition, Jakarta, May 23-25, 2012. science. He earned his BS (1988) in geology from
8. Haider, B., Aizad, T., Ayaz, S., and Shoukry, A., “A the University of Malaysia, Kuala Lumpur. He also holds an MS
Comprehensive Shale Gas Exploitation Sequence for Pakistan (1991) from Rijksuniversiteit Ghent, Belgium. He earned his PhD
and Other Emerging Shale Plays,” SPE No. 163123, SPE/Pak- (1995) from the University of Saskatchewan, Saskatoon, Canada.
istan Association of Petroleum Geoscientists (PAPG) Annual
Technical Conference, Islamabad, Pakistan, Dec. 3-5, 2012. Ahmed M. Salim (mohamed.salim@utp.edu.my )
9. Abidin, Z.A., “At an Investment Crossroads: Malaysia is a senior lecturer in the department of geosci-
Versus Indonesia,” No. SPE-176285, SPE/Society of Indonesian ence with the Universiti Teknologi Petronas. He
Petroleum Engineers (IATMI) Asia Pacific Oil and Gas Conference previously worked as faculty at Red Sea Univer-
and Exhibition, Nusa Dua, Bali, Indonesia, Oct. 20-22, 2015. sity, Sudan. He holds a BS in geology from the
10. Rogner, H.H. and Weijermars, R., “The Uncertainty of University of Khartoum, Sudan. He earned an
Future Commercial Shale Gas Availability,” SPE No. 167710, MS and PhD in geophysics from Central South
SPE/European Association of Geoscientists and Engineers University, Changsha, China.
(EAGE) European Unconventional Resources Conference and
Exhibition, Vienna, Austria, Feb. 25-27, 2014.

44 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_44 44 2/27/18 3:29 PM

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 TECHNOLOGY

Review suggests draft SPE PRMS 2017

unfit for public resource reporting
Bob Harrison
Patrick Quinn
Lloyd’s Register
London
After 5 years of effort, the Society of Petroleum En-
EXPLORATION &
gineer’s (SPE) draft Petroleum Resource Manage- DEVELOPMENT
ment System (PRMS) 2017 constitutes a missed
opportunity to eliminate subjectivity and lack of
transparency in the guideline. Without more clari-
ty and prescription, PRMS remains unfit for public reporting
in the financial and governmental sectors. The SPE board
should reject the proposed changes and address the prob-
lems outlined in this article to make PRMS a stronger tool.
Petroleum resource classification
The PRMS was published in 2007 to establish a universal
language to classify petroleum resources based both on their
commercial potential and uncertainty in estimates of their
recoverable resources. The tool is applied to specific projects
to estimate their chances of commerciality and expected re-
covery volumes. Designed to aid in-house management of
exploration asset portfolios, PRMS has been adopted by sev-
eral governments and stock exchanges for resource report-
PROPOSED RESOURCE CLASSIFICATION
ing and disclosure, which are roles that were never
originally intended for it.
In February 2013, the SPE board agreed with
the recommendation of its Oil and Gas Reserves
Committee (OGRC) to proceed with an update to
PRMS. After reviewing public comments on the
draft, SPE plans to issue the new PRMS in 2018.1
PRMS is based on principles rather than rules.
From a resource evaluator’s perspective, its flexibil-
ity, subjective language, and loose definitions have
made it too ambiguous for auditing. This article presents con-
cerns regarding a review of the PRMS draft to gauge its fitness
for the external reporting role it is being expected to fulfill.
Flexibility limitations
The increased use of subjective language in the draft—pre-
ferring recommending terms “may” to mandatory terms
“must”—goes against PRMS goals of defining fundamen-
tal principles and providing a consistent approach to esti-
mating petroleum quantities. The new definitions are even
more flexible and ambiguous than the ones they replace and
would lessen clarity and protection for oil and gas inves-
tors. PRMS application would be more difficult and would
likely result in misalignment between regulators, compa-
nies, investors, and auditors. For ex-
ample, the often misinterpreted and
FIG. 1 misused term “reasonable certainty”
Petroleum production Project maturity subclasses is a probability statement without an
Reserves assigned probability and should have
Commercial

On production
Low Best High been replaced with “high degree of
1P 2P 3P Approved for development confidence.”2
Total petroleum initially in place (PIIP)

Fig. 1 shows the proposed changes to

Discovered PIIP

Proved Probable Possible Justified for development

the PRMS resource classification frame-
Contingent resources
Increasing chance of commerciality

Development pending work with the addition of incremental

Subcommercial

1P
1C 2C
2P 3C
3P deterministic cases for P1, P2, and P3
Development on hold
reserves and C1, C2, and C3 contingent
C1 C2 C3 Development unclarified resources as well as deterministic cases
Development not viable for 1U, 2U, and 3U prospective resourc-
es, where U stands for undiscovered.
Unrecoverable
These changes imply that the re-
Prospective resources Prospect source estimates from the scenario and
Undiscovered

1P
1U 2P
2U 3U
3P incremental deterministic approaches
Lead
PIIP

P90 P50 P10

and probabilistic methods are inter-
Play changeable. This misguided assump-
Unrecoverable tion of compatibility between the
methods is further reinforced by the
Range of technical certainty
draft stating that any of the methods
Source: PRSM 2017, SPE
can be used and that the subsequent

46 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_46 46 2/27/18 3:29 PM


results should be reconcilable, which is nearly impossible
to achieve.3
Contingent resources
PRMS 2017 also redraws the petroleum production box.
There are now four contingent resource subclasses, and the
chance-of-commerciality arrow stops at the interface be-
tween contingent resources and reserves. This implies that
all classes of reserves have a 100% chance of commerciality,
yet the text defines the justified-for-development subclass as
a project that has yet to attain the necessary approvals and
sales contracts for development. The draft also states that
reserves should stay no longer than 5 years in this subclass,
far longer than some regulators would permit.4
The system draft’s distinction between commercial and
economic remains unclear, and parties will continue to use
the words interchangeably despite their different meanings.
The draft introduces text that is contrary to the project-
based principle of PRMS that reserves must be commercial
within a company’s capital cost, as opposed to economically
producible at a 0% discount rate, which is the US Securities
and Exchange Commission’s (SEC) definition.
The flouting of the project principle becomes even more
concerning as a result of new wording implying that, for
reserves and contingent resources, the defined project de-
velopment scenarios for the 1P-1C, 2P-2C, and 3P-3C cases
do not have to be the same; well numbers and facilities can
vary. This interpretation contradicts the PRMS tenet that re-
serves are project-based and require an approved technically
mature development plan under which a well either meets
the reserves’ classification criteria and has a range of techni-
cal 1P, 2P, and 3P outcomes, or it does not meet the criteria
and cannot be classified as reserves.
Similarly, for contingent resources, an area with less de-
velopment certainty must be treated as a separate project
with its own 1C, 2C, and 3C outcomes. Such an area must
be assigned a lower chance of commercial development and
must not be included in the existing project’s 2C estimate
and excluded from the 1C outcome. Varying the project
scope is no better than using split conditions in the classifi-
cation, which is not allowed in PRMS.
Consumption as reserves, decommissioning
PRMS defines reserves as net sales quantities measured at the
reference point. The proposed draft states that fuel gas used
within the project, which never reaches market and was pre-
viously identified as a separate nonsales quantity (honoring
material balance), may now be included in reserves. Booking
resources that are consumed in operations is unwarranted
and should be removed from the 2017 draft entirely.
Savings from on site fuel usage are already incorporated
in the project’s economic model as lower operational expen-
diture, which is used to calculate the economic limit and de-
fine reserves. Hence, booking fuel gas as reserves is double
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_47 47
TECHNOLOGY
counting and would lead to a fictitious increase in quoted
reserves. This methodology also would require mature fields
relying on external fuel sources for continued operations to
be booked with negative gas reserves, further exposing the
lack of equality in counting reserves.
The treatment of decommissioning remains unclear in
the draft.5 Lloyd’s Register solicited an official response from
the OGRC and discovered that PRMS implicitly assumes that
sufficient funds have been set aside for the abandonment of
developed projects. This assumption is not mentioned in the
guidelines.
References
1. Society of Petroleum Engineers (SPE), “Draft PRMS for
Comment,” PRMS (2017), www.spe.org.
2. Harrison, B. and Falcone, G., “Are we reasonably
certain that reasonable certainty adequately defines uncer-
tainty in our reserves estimates?” SPE No. 185496, SPE Latin
America and Caribbean Petroleum Engineering Conference,
May 17-19, 2017, Buenos Aires, Argentina.
3. Cronquist, C. (1991) “Reserves and probabilities: Syn-
ergism or Anachronism?” Journal of Petroleum Technology,
Vol. 43, No. 10, October 1991.
4. Kreft, E., Scheffers, B.C., Godderij, R., “The value add-
ed of five years SPE-PRMS,” SPE No. 170885, SPE Annual
Technical Conference and Exhibition, Oct. 27-29, Amsterdam,
The Netherlands.
5. Harrison, B. and Falcone, G., “Handling decommission-
ing and restoration liabilities within PRMS and their impact on
reported reserves of producing fields approaching abandon-
ment,” SPE No. 185497, SPE Latin America and Caribbean
Petroleum Engineering Conference, May 17-19, 2017, Buenos
Aires, Argentina.
The authors
Bob Harrison (bob.harrison@lr.org) is project
director and subsurface technical authority
with Lloyd’s Register. Before this, he worked for
British Gas and Enterprise Oil, and then as a
freelance consultant. He gained an MS (1982)
in petroleum engineering at Imperial College,
London. He is a certified Competent Person,
past chairman of the Society of Petroleum Evaluation Engineers
(SPEE) Europe Chapter, former member of the SPE OGRC, and
a fellow of the Energy Institute.
Patrick Quinn (patrick.quinn@lr.org) is principal
reservoir engineer and project manager in the
Lloyd’s Register reserves and asset evaluation
team. Before this he held positions with British
Petroleum and Total SA. He gained a BS (1979)
in petroleum engineering at Imperial College,
London. He is a certified Competent Person and
a member of the SPEE Europe Chapter.
47
2/27/18 3:29 PM
 TECHNOLOGY

Johan Sverdrup field, scheduled to come on stream in late 2019, is expected to increase Norway’s oil and gas production. Illustration
of Phase 2 from Statoil.

Norway’s Johan Sverdrup

to increase NCS production
Paula Dittrick
OGJ Upstream Technology
Editor

Oil and natural gas production on the Norwegian Johan Sverdrup is being developed in phases.
Continental Shelf in 2022 is forecast to rival record Phase 1 is expected to start in late 2019 with pro-
2004 production, the Norwegian Petroleum Direc- duction capacity estimated at 440,000 b/d. Phase 2
torate (NPD) said. But production is expected to is expected to start in 2022, with full field produc-
decline until 2020 when Johan Sverdrup field is tion estimated at 660,000 b/d.
scheduled to come on stream. Statoil holds 40% interest. Partners are Lundin
DRILLING &
The North Sea field, discovered in 2010, has es- PRODUCTION Norway with 23% interest, Petoro 17%, Aker BP
timated resources of 2-3 billion boe and is among 12%, and Maersk Oil 8%. Peak production on Jo-
the biggest NCS discoveries, operator Statoil said. han Sverdrup will make up 25% of all Norwegian
Johan Sverdrup reservoirs feature a fault-bounded production, Statoil said.
trap against the Southern Utsira Basement High and overly- Oil accounted for most of Norway’s record 2004 produc-
ing Jurassic shales and Cretaceous Asgard marls. The main tion. Natural gas is expected to account for about half of an-
reservoirs consist of a sequence of Middle and Upper Juras- ticipated 2023 production, said NPD’s January 2018 report,
sic sandstones. “The Shelf in 2017.”

48 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_48 48 2/27/18 3:29 PM

 NCS total production increased NORWEGIAN CONTINENTAL SHELF PRODUCTION FIG. 1
in 2017 for a fourth consecutive year. 300
Preliminary figures show 236.4 mil- 5
lion standard cu m of oil equivalent 250 Gas
(MMscmoe) sold in 2017, 2.7% more NGL 4
than 2016. Fig. 1 shows 2018 total pro- Condensate
200

MMscmoe/year
duction forecast to fall slightly to 233 Oil

MMboe/d
3
MMScmoe.
150
Oil production fell marginally in
2017 to 1.59 million b/d from 1.61 2
100
million b/d in 2016. NPD forecast oil
production will fall to 1.55 million b/d 1
for 2018. 50
Unplanned maintenance on Goliat
field in the Barents Sea caused over- 0 0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
all 2017 NCS oil production to drop.
Source: Norwegian Petroleum Directorate
Operator Eni Norge received authori-
zation from the Norwegian Petroleum
Safety Authority to restore full Goliat
production following required modi- NORWEGIAN GAS SALES FIG. 2
fications stemming from a Septem- 140
ber 2017 audit of the field’s electrical 12
120
safety.
Production initially started in 2016 100 10
from Goliat on Production License
229 in an ice-free area following nu- 80 8

bscfd
bscm

merous delays and cost overruns. Eni

calls Goliat the world’s northernmost 60 6
producing offshore oil field. The cy-
40 4
lindrical floating production, storage,
and offloading vessel stationed at Go-
20 2
liat and built to withstand harsh Arc-
tic conditions, can hold 1 million bbl 0 0
of oil. 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Source: Norwegian Petroleum Directorate

Gas sales climb

Fig. 2 shows Norwegian gas sales
reached a record 124.2 billion stan- PRODUCTION FORECAST FIG. 3
dard cu m (bscm) in 2017, 6.6% higher
Historic Resources in fields
than NPD had forecast a year earlier. Undiscovered resources Reserves
300
“This is due, in part, to consistently 5
Discovered resources NCS production
high demand for gas from Europe,” the 250
report said. 4
Stable gas sales are forecast to slight- 200
MMscmoe/year

ly increase through 2023. But NPD

MMboe/d

3
notes the forecast depends on success- 150
ful drilling, timing of field startups,
2
and actual deliverability of reservoirs. 100
Approved developments account for
50 1
90% of production forecast for 2018-
22. Improved recovery from existing
fields will make up the other 10%. Af- 0 0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
ter 2020, production also is expected Source: Norwegian Petroleum Directorate
to come from discoveries currently

Oil & Gas Journal | Mar. 5, 2018 49

180305OGJ_49 49 2/27/18 3:29 PM

 TECHNOLOGY
awaiting development decisions.
Norwegian fields are producing more than previously an-
ticipated, which NPD attributed to improved drilling and
efficiency.
As of Dec. 31, 2017, NPD reported 85 fields producing on
the NCS, five of which came on stream that year. Companies
submitted plans for development and operation (PDOs) of 10
new projects during 2017.
“If production is to be maintained at a high level also
beyond 2025, more profitable resources must be proven….
Therefore, the Norwegian Petroleum Directorate believes
that exploration activity must be increased from today’s lev-
el, in both mature and frontier areas,” said NPD Director
Gen. Bente Nyland.
Separately, Rystad Energy reports a rebound in offshore
project commitments worldwide with Norway being the
leader.
“Service companies have been squeezed quite tightly for
the past few years, but the developments in 2017 in Norway
and elsewhere show the future is brightening,” said Audun
Martinsen, Rystad Energy vice-president, oil field services
research.
Fig. 3 shows production from as-yet undiscovered re-
sources becoming increasingly important closer to 2030.
NPD reports 34 exploration wells completed in 2017, of
which 17 were in the Barents Sea, 12 in the North Sea, and
5 in the Norwegian Sea.
Uncertainty as to undiscovered resources is greatest in
the Barents Sea where exploration only started in 1980. Ex-
ploration in the North Sea, by contrast, began in the mid-
1960s so more plays have been confirmed there.
In 2017, the NPD increased its estimates for Norway’s un-
discovered resources based on mapping of unopened areas
in the northern Barents Sea. Nyland said nearly two‐thirds
of the undiscovered resources are in the Barents Sea.
NPD believes Barents Sea resources are about 80% higher
than it estimated in 2015. Resource estimates for the North
Sea and Norwegian Sea are unchanged.
Costs decreasing
The average cost per exploration well was $30 million in
2017, about half the 2013-14 well cost. The largest 2017 dis-
covery was Lundin Petroleum’s Filicudi oil and gas discov-
ery in the southern Barents Sea (10-20 MMcmoe). Filicudi
involves Jurassic and Triassic sandstone reservoirs.
Submitted plans for 2018 indicate most NCS exploration
wells will be drilled in the North Sea. Overall NCS explora-
tion and production costs have decreased since 2014 follow-
ing changes in project planning, execution, and operations
that improved efficiency. The changes also simplified and
standardized best operating procedures.
Development project costs have dropped 30-50% since
2014 when oil prices worldwide slumped. Operating costs
are 30% lower since 2013-14, partly as a result of stream-
50
180305OGJ_50 50
lining and supplier discounts. But suppliers are expected to
raise prices as activity increases.
“The projects now being approved generally…can toler-
ate an oil price as low as $30‐40/bbl,” Nyland said.
The NPD forecasts total investment of $15.3 billion in
2018, rising to about $17.6 billion in 2019.
Meanwhile, nine field developments are ongoing. North
Sea developments are Johan Sverdrup, Martin Linge, Utgard,
Oda, and Hanz fields. Norwegian Sea developments are Aas-
ta Hansteen, Dvalin, Bauge, and Trestakk.
Plans for new projects and anticipated projects to be sub-
mitted in 2018-19 have a total estimated investment of about
$30 billion. But NPD said few major new projects are under
consideration.
Manuscripts welcome
Oil & Gas Journal editors are happy to
consider for publication manuscripts about
exploration and development, drilling,
production, pipelines, LNG, and processing
(refining, gas processing, and basic petro-
chemicals). These papers may be highly
technical in nature and appeal or they may
analyze oil and natural gas supply, demand,
and markets. OGJ accepts manuscripts
submitted exclusively to it or those adapted
from oral and poster presentations. An
Author Guide is available at www.ogj.com;
click “Home,” then “Submit an article.”
Or, contact Managing Editor—Technology
(chriss@ogjonline.com; 713/963-6211; or,
fax 713/963-6282), Oil & Gas Journal, 1455
West Loop South, Suite 400, Houston TX
77027 USA.
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:29 PM
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180305OGJ_51 51 2/27/18 3:29 PM

 TECHNOLOGY

RPSEA suggests future US oil

and gas research themes

Apache Corp., a RPSEA member, discovered oil in its Alpine High acreage in the southern portion of the Delaware basin, primarily in
Reeves County, Tex. Analysts said Apline HIgh is a historically underperforming area. Photo from Apache.

Paula Dittrick shore and offshore projects in the coming decade.

OGJ Upstream Technology Editor
Operator engagement, particularly from indepen-
dents, is crucial for future research into increased
production from existing wells, improved recovery,
and prolonged well life, the Research Partnership
to Secure Energy for America (RPSEA) outlined in
a technology roadmap.
The plan, “Keeping it going for the long haul—
the easy stuff is gone,” recently released to federal lawmakers
and others, outlines industry’s research needs for both on-
Independents and small producers are the
most apt to quickly adopt technology, said RPS-
EA, which consulted with more than 1,000 people
through surveys, advisory meetings, and industry
DRILLING &
meetings to write the roadmap.
PRODUCTION The roadmap recommends prioritizing research
investments on key targets, including onshore
shale plays and offshore satellite fields.
It also calls for improving efficiency of onshore
operations while increasing recovery rates. Currently, the
average estimated ultimate recovery from US shale plays is

52 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_52 52 2/27/18 3:29 PM

 TM
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 TECHNOLOGY
RPSEA recommends more research into ultradeepwater well construction. Shell’s Perdido
spar, the world’s deepest spar, helped open Lower Tertiary-Paleogene reserves in the Gulf
of Mexico. Perdido is moored in about 8,000 ft of water. Photo from Shell.
less than 10% for oil and 15% for natural gas.
Marginal wells are a roadmap priority, especially research
into how to prevent wells in unconventional plays from be-
coming prematurely marginal, RPSEA Pres. Tom Williams
said. The plan identified research and development topics for
which funding does not yet exist.
Working with the US Department of Energy National
Energy Technology Laboratory, RPSEA has managed more
than 170 projects, several of which already are commercial.
Roadmap’s onshore themes
RPSEA suggests these near-term to mid-term onshore pro-
gram themes:
• Reduce cost and improve efficacy of well interventions
and drilling. Recompletion of unconventional wells will ex-
tend recovery rates and well life.
• Extend mature fields’ life through developing and dem-
onstrating technologies to improve oil and gas recovery (in-
cluding conventional and unconventional reservoirs).
• Carry out research that will assist operators in regula-
tory compliance.
• Minimize surface disruption associated with shale de-
velopment, including well site construction, air emissions,
noise, visual impact, and surface water.
• Ensure minimum fluid is used in hydraulic fracturing
to completely stimulate the reservoir zone and minimize re-
fracture treatments. This may include waterless fracturing or
developing methods to reduce water use.
• Develop improved approaches for managing waste
streams associated with shale gas development, including
54
180305OGJ_54 54
naturally occurring radioactive ma-
terial and drill cuttings.
Offshore R&D
The deepwater Gulf of Mexico, key
to future US energy supply contribu-
tions, faces growing competition from
deepwater producers worldwide.
The US needs to remain the
technical leader, but increasing re-
search and development (R&D) in-
vestments in the North Sea and Bra-
zil, coupled with decreasing R&D
investments in the US, are causing
the leadership balance to shift.
US Interior Sec. Ryan Zinke re-
cently released a draft proposal for
the Outer Continental Shelf (OCS)
Oil and Gas Leasing Program that
would include areas unavailable to
exploration for decades.
Much environmental, safety, and
technical research will be needed
to explore and develop these areas.
RPSEA’s offshore program advisory committee seeks to iden-
tify and develop technologies, architectures, and methods
that ensure safe, environmentally responsible OCS explora-
tion and production.
RPSEA’s report notes technology improvements in off-
shore technology although reduced drilling activity and low-
er R&D investments since 2014 have meant some research
projects did not receive industry funding. RPSEA lists these
topics as a priority:
• Improve ultradeepwater (UDW) well design and con-
struction. This includes research into the physical and
chemical behavior of cement formulations during setting
and post‐setting, with an emphasis on potential failure path-
way identification.
• Improve subsea UDW measurement and monitor-
ing instrumentation such as remote sensing or surveillance
equipment and vehicles, including continued development
of autonomous underwater vehicles.
• Identify and characterize high-resolution imaging tech-
nologies that can be used to observe subsea installations.
• Develop detailed descriptions and models of UDW
conditions that can result in hydrate formation and blockage
during production.
• Improve the ability to predict hydrate behavior based
on advanced modeling of hydrate plug formation and disso-
ciation in natural gas-dominated systems.
• Use models to predict behavior of two-, three-, and four-
phased systems under a wide range of extreme UDW pres-
sure, temperature, and equipment architecture conditions.
• Develop an improved understanding of complex pres-
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:29 PM

sure‐volume‐temperature relationships for mixtures of wa-
ter, gas, and oil under extreme bottomhole temperatures and
pressures (>19,000 psia and >250° F).
• Study variations in fluid behavior when these fluids
include brine, hydrogen sulfide, or carbon dioxide.
• Conduct experiments to forecast petroleum fluids be-
havior under UDW pressure and temperature, including ex-
treme high pressure–high temperature (HPHT) conditions.
• Develop and validate advanced fluid mixture models
for extreme HPHT well and reservoir conditions.
• Research sensors, instrumentation, command elec-
tronics, and advanced data interpretation technologies, in-
cluding controls for UDW subsea production equipment.
• Address risks associated with installation and opera-
tions of long flowline tie‐backs and develop tools and equip-
ment to reduce or mitigate such risks.
• Develop long flowline tie‐backs that incorporate a
high-integrity pressure protection system with isolation
valves capable of operating with both a failsafe position and
multiple sensors that can use hardware to make shutdown
decisions from topside.
• Verify the limits under which this system can be main-
tained in optimum modes.
• Identify, characterize, and quantify the limits under
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180305OGJ_55 55
TECHNOLOGY
which currently existing subsea electrical connection tech-
nologies can be maintained in optimum operating modes.
• Develop technologies that will improve both the fail-
safe integrity and reliability of electrical connectors and pen-
etrators in UDW architecture and technology.
• Improve reservoir characterization, simulation, and re-
covery methods that result in lower dependence on new field
developments and new wells.
• Improve seismic subsurface imaging to reduce the
need for appraising and characterization through drilling.
• Develop low environmental-impact testing techniques
for characterization.
• Improve reserve recovery methods and technologies
specific to the deepwater GOM.
• Develop technologies to increase recovery from exist-
ing UDW reservoirs.
• Develop safe, reliable dry-tree floating systems capable
of drilling and producing in up to 10,000 ft of water.
• Improve corrosion control technologies for subsurface
and subsea equipment to prolong equipment life and reduce
the possibility of spills.
• Improve methods of providing power and develop step
changes in power efficiency for subsea and subsurface appli-
cations, resulting in more reliable transmission, control, and
measurement.
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 TECHNOLOGY
Rising octane demand offers
opportunity for US refiners
Sandy Fielden
Morningstar Inc.
Chicago
Largely because of tightening Corporate
Average Fuel Efficiency (CAFE) standards
enacted by the US Congress in 1975, and
regulated by the US Department of Trans-
portation to reduce fossil-fuel consump-
tion, annual average premium-gasoline
PROCESSING
sales as a percentage of overall gasoline
supplied to the US market since 2010 have
increased by 10%, or 120,000 b/d. That
trend is expected to continue. Improved
fuel efficiency to meet CAFE standards is best achieved by
higher engine-compression ratios, and auto manufacturers
favor using turbochargers to accomplish this.
Turbochargers, however, raise the risk of fuel combus-
tion before sparkplug ignition, or engine knock—a condi-
tion mitigated by increasing the octane content of gasoline.
Manufacturers of turbocharged vehicles therefore require
use of premium gasoline, which has a higher octane rating
than regular gasoline.
A delayed reaction to this requirement from US refiners
as well as a complex series of tradeoffs in gasoline blending
have caused average octane premiums (the price difference
between premium and regular gasoline) to almost double
since 2010.
This article examines refiners’ options to address growing
octane demand and the consequences of inaction.
Octane premium
For those driving luxury autos, the widening difference at
the pump between premium and regular-gasoline pricing is
perhaps a small price to pay for the privilege of sporting a
marquee badge on the hood. But the population of premi-
um-gas buyers is growing faster than the stable of luxury
cars. By yearend 2016, about 20% of all new vehicles came
equipped with a turbocharger, and the US Energy Informa-
tion Administration projects that share to increase to over
80% of new vehicles by 2025. Increased demand for pre-
mium gasoline has widened price differentials at the pump
in the past few years.
Fig. 1 shows annual average retail prices (excluding taxes)
56
180305OGJ_56 56
paid to refiners for regular and premium
gasoline from 2000 to October 2017 as
well as the octane premium (the price
differential between premium and regu-
lar gasoline grades).
SPECIAL Relatively steady at 17-27¢/gal between
REPORT 2000-11, the octane premium since then
has nearly doubled to an average 51¢/
gal between January-October 2017. The
higher premium reflects rising octane
costs and tighter supplies.
Gasoline blending
Two different methods—research octane number (RON)
and motor octane number (MON)—are used to rate gaso-
line’s octane content, which is a measure of gasoline per-
formance when compressed. US gasoline pumps display an
average of these two methods: (RON+MON)/2.
Regular gasoline is defined as 87 (RON+MON)/2, while
premium gasoline is defined as 91-93 (RON+MON)/2.
Gasoline is a complex mix of components blended to meet
a variety of regulatory requirements that differ throughout
the country.1 Octane is just one measure that refiners need
to juggle, with others such as Reid vapor pressure (RVP,
which varies by season and geographic region) and levels
of sulfur and benzene dictated by federal regulations. Re-
fineries use complex linear programs to optimize gasoline-
blending components produced from primary distillation,
downstream catalytic cracking, coking, naphtha reforming,
and alkylation processes. External-blending components
include corn ethanol added at the distribution terminal to
meet renewable fuel standard (RFS) mandates.
Octane components
The principal components used to boost octane include re-
formate, alkylate, ethanol, and butane, each of which has its
benefits and drawbacks.
• Reformate. Refinery catalytic reforming units convert
naphtha feedstock into high-octane, high-aromatic refor-
mate with byproducts including hydrogen. Octane content
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:29 PM
 is increased at higher temperatures OCTANE PREMIUMS FIG. 1
and with greater catalyst consump-
4.0
tion, but costs rise accordingly. Heavy
naphtha (containing more aromatic 3.5
components such as benzene, toluene, 3.0
and xylene) produces higher-octane Premium unleaded
reformate. Surging US shale crude 2.5

$/gal
production typically produces lighter 2.0
naphtha components less suited to re-
1.5 Regular unleaded
forming.
• Alkylate. Alkylation units pro- 1.0
duce alkylate from isobutane and bu- 0.5 Octane premium
tylene components typically produced
as byproducts of catalytic cracking. 0.0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Alkylation uses sulfuric or hydroflu- January-
oric (HF) acid as a catalyst to produce October
Source: EIA, Morningstar 2017
alkylate, an isoparaffin that has high-
octane and low-sulfur and RVP lev-
els. Alkylation units are expensive to
build, and their use of acid makes per- US GASOLINE SALES FIG. 2

mits for these units difficult to obtain. 10.0

In fact, the board of California’s South
Coast Air Quality Management Dis- 9.5
trict—the regulatory agency respon-
sible for air-pollution control for all of
Million b/d

9.0
Orange County as well as portions of
Los Angeles, Riverside, and San Ber-
nardino counties—is seeking to ban 8.5
alkylation altogether because of the
risk of an acid cloud. 8.0
But alternative approaches to the
alkylation process could provide a 7.5
viable solution for US refiners. Chev- 2000
ron Corp. is converting the existing
4,500-b/d HF alkylation unit at its Source: EIA, Morningstar
53,000-b/d refinery in Salt Lake City,
Utah, into the first-ever alkylation unit
in the US based on ionic liquids (IL) alkylation technology
(OGJ Online, Oct. 4, 2016). Developed by Chevron USA Inc.
and now licensed by Honeywell International Inc.’s UOP
Isoalky technology uses a less-volatile IL catalyst instead of
HF or sulfuric acids as a liquid alkylation catalyst for pro-
duction of high-octane fuels, which could make permitting
for adding alkylation capacity easier if successful.
• Ethanol. Made from US corn supplies, ethanol has a
high-octane rating of 113 (RON+MON)/2, making it an at-
tractive gasoline-blending component. In the US, 10% etha-
nol is already blended into most gasoline to meet RFS man-
dates. Adding more ethanol to gasoline blends is often the
lowest-cost solution to boost octane. Ethanol has a relatively
high-RVP level, however, and auto and logistics constraints
so far have limited its blending to 10% of gasoline by vol-
ume.
Because they don’t produce it themselves, refiners dis-
Gasoline exports
Domestic gasoline sales
2002 2004 2006 2008 2010 2012 2014 2016
January-
October
2017
like ethanol, as it swallows their market share. If they don’t
blend ethanol into gasoline, refiners must purchase renew-
able credits (RINs) to comply with RFS mandates. Perceived
RIN shortages, however, have markedly increased indepen-
dent refiners’ costs in the past few years.2
• Butane. A gas-liquid byproduct from refining or gas
processing, butane is blended into gasoline to boost octane
during the winter months. Butane has a very high-RVP level
and therefore isn’t practical to use during summer months,
when higher temperatures increase evaporation rates.
Gasoline production
As refiners have wrestled with different options to increase
octane during the past 4 years, they’ve also needed to pro-
duce ever-higher volumes of gasoline (Fig. 2). According
to EIA statistics, gasoline output dipped in 2006-12 in re-
sponse to increased ethanol blending under RFS mandates

Oil & Gas Journal | Mar. 5, 2018 57

180305OGJ_57 57 2/27/18 3:29 PM

 TECHNOLOGY
and lower demand following the Great Recession. Since
2012, however, output has increased by more than 1 million
b/d to average nearly 10 million b/d in 2016 and 9.9 million
b/d in January-October 2017 (reduced by impacts to US Gulf
Coast refineries from Hurricane Harvey).
While domestic gasoline demand has increased—par-
ticularly since the oil-price crash in late 2014 began lower-
ing pump prices—much of the growth in US gasoline pro-
duction has been destined for a booming export market.3
Although exports are typically regular-grade gasoline, the
combination of increased output and higher domestic de-
mand for premium grades adds to the overall octane-de-
mand crunch.
Slow response
Despite rising octane demand and attractive octane premi-
ums, US refiners have been slow to respond with investment
in new capacity. EIA annual refinery capacity reports show
that while overall crude processing capacity between 2000-
17 increased 14% to 19.8 million b/d, alkylation capacity
only increased 10% during the same period. And although
refiners increased low-pressure (vs. high-pressure) reform-
ing capability to 71% in 2016 from 59% of capacity in 2000,
overall reforming capacity remained static.
In the past 2 years, however, US refiners have proposed
several alkylation or related projects, some of which are now
in the process of completion. In addition to Chevron’s Salt
Lake City isoalky prototype unit, these projects include a
new 13-million b/d alkylation unit at Valero Energy Corp.’s
235,000-b/d Houston refinery scheduled to be completed
in 2019 and Marathon Petroleum Corp.’s $220-million up-
grade to the fluid catalytic cracking (FCC) and alkylation
units at its 539,000-b/d refinery in Garyville, La., which the
operator began in 2016 (OGJ Online, Jan. 23, 2017). Mara-
thon plans a similar $40-million FCC-alkylation project at
its 132,000-b/d refinery in Detroit, Mich. Earlier this year,
Delek US Holdings Inc. announced a $103-million project to
build a 6,000-b/sd alkylation unit at its 74,000-b/sd Krotz
Springs, La., refinery to add product flexibility and increase
margin potential at the site by 2019 (OGJ Online, Jan. 9,
2018).
A notable exception to recent investment decisions is
Marathon’s 2015 proposal for subsidiary MarkWest Energy
Partners LP to build a standalone alkylation unit in Ohio to
upgrade abundant and low-cost gas liquids from the Appa-
lachian basin into alkylate. While this project is still under
evaluation, it has disappeared from company presentations.
Import alternative
While US refiners do have the option to import octane-
blending components, this isn’t happening outside the East
Coast region, according to EIA data. In January-October
2017, blending-component imports to US East Coast refin-
eries represented a monthly average of 86% of the US total.
58
180305OGJ_58 58
This likely is a result of the US East Coast’s status as a net im-
porter of refined products since production from local refin-
eries meets only about 30% of regional demand.4 Other US
regions import only a fraction of their blending-component
needs, suggesting that overseas supplies are too scarce or
expensive to be a viable alternative to homegrown gasoline-
blending components.
Refiners’ problem
The problem for US refiners is that slow investment in new
octane capacity encourages alternative solutions. Increas-
ing ethanol blends above 10%, for example, could become a
practical necessity to solve the octane gap but would reduce
oil refiners’ share of the gasoline market, potentially increas-
ing the pain of RIN payments. In the longer term, delays in
US refinery investment also likely are to become embroiled
in concerns about peak demand for transportation fuels.
With a lot of attention now paid to electric vehicles, refiners
additionally may find it harder to justify investment in new
gasoline-production units during the next decade.
Given today’s current octane premium, as well as CAFE
standards underwriting higher demand, it makes economic
sense for US refiners to invest in new capacity now rather
than to stand by and watch alternatives grab market share.
References
1. Fielden, S., “Gasoline Prices Spring Higher as Trump
Ponders Deregulation,” Morningstar Inc., Mar. 3, 2017.
2. Fielden, S., “Corn Crush and RINS—Tighter Margins for
Producing and Blending Ethanol,” Morningstar Inc., Sept. 29,
2016.
3. Fielden, S., “Sailing Around the Wall? US Refined Prod-
uct Exports to Mexico,” Morningstar Inc., Nov. 10, 2016.
4. Fielden, S., “East Coast Refineries Recover From Shale
Loss,” Morningstar Inc., July 3, 2017.
The author
Sandy Fielden (sandy.fielden@morningstar.com)
is director of research, commodities, and energy
for Morningstar Inc., Chicago, where he provides
research for commodities and energy custom-
ers with an emphasis on the oil market. Before
joining Morningstar in 2016, he was director of
Energy Analytics for RBN Energy, Houston. He
previously held positions as vice-president for data services at
Allegro Development Corp., vice-president for energy products
and services at LIM (now Morningstar Commodity Data), and
product manager for Saladin. Fielden holds a BA (1981) in
international history from the University of Leeds, UK, and an
MBA (1983) from the University of Bradford. He is a member of
the first graduating class for the Global Association of Risk Pro-
fessionals (GARP) Energy Risk Professional (ERP) qualification.
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:29 PM
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 TECHNOLOGY

Hydroprocessing remains attractive

option for global refiners

HPCL-Mittal Energy Ltd. (HMEL), a joint venture of state-owned Hindustan Petroleum Corp. Ltd. and privately held Mittal Energy
Investment Pte. Ltd., Singapore, is expanding production of Bharat Stage 6-grade fuels (equivalent to Euro 6-quality fuels) at its
9-million tpy Guru Gobind Singh refinery at Village Phullokhari, about 35 km from Bathinda in India’s northern state of Punjab. The
project will add a 1.9-million tonne/year diesel hydrotreating unit and a revamp of the refinery’s existing hydrogen generation unit to
boost hydrogen production by another 22,000 tpy. Photo from HMEL.

Robert Brelsford
Downstream Technology Editor

Rising demand for more environmen-
tally friendly transportation fuels amid
increasingly strict clean-fuel specifica-
tions globally has spurred refiners to add,
expand, and maximize hydroprocessing
capacities at their manufacturing sites as
PROCESSING
they continue to ramp up intake of both
heavier and shale-based crude oil feed-
stocks that—while more economically
attractive—challenge them to deal with
higher levels of contaminants.
New builds
Operators have announced a series of new refinery construc-
tion projects in which hyroprocessing units will play a cru-
cial part.
In the Middle East, Kuwait Petroleum Corp. (KPC) sub-
sidiary Kuwait Petroleum International Ltd. finalized an
agreement with Oman Oil Co. to jointly develop Duqm Re-
finery & Petrochemical Industries Co. LLC’s (DRPIC) grass-
roots 230,000-b/d refinery and petrochemical complex to be
built in the Duqm Special Economic Zone
(SEZAD) in Duqm, Al Wusta Governate,
Oman (OGJ Online, Sept. 18, 2017).
As part of the project, DRPIC let a
47-month, $2.75-billion contract to a
SPECIAL joint venture of Tecnicas Reunidas SA
REPORT (65%) and Daewoo Engineering & Con-
struction Co. Ltd. (35%) to provide engi-
neering, procurement, construction, and
commissioning (EPCC) services for all of
the refinery’s major processing units, including a 74,000-b/
sd hydrocracker, an 83,500-b/sd diesel hydrodesulfuriza-
tion unit, and two 126,500-normal cu m/day hydrogen pro-
duction units.
The project is part of the Omani government’s plan for
industrial development of SEZAD and will also help meet
rising demand for cleaner transportation fuels and petro-
chemicals in Oman and abroad. DRPIC has yet to confirm
a definitive timeframe for when the complex will be fully
commissioned.
Elsewhere in the region, KPC’s newly formed subsidiary

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Kuwait Integrated Petroleum Industries Co. (KIPIC) let a
contract to Honeywell UOP LLC to provide a range of pro-
cess technologies for an already proposed expansion of KIP-
IC’s grassroots 615,000-b/d Al-Zour refinery complex under
construction in southern Kuwait (Nov. 27, 2017).
Honeywell UOP’s scope of work under the contract
covers supply of technology licenses, design services, key
equipment, and proprietary catalysts and adsorbents for a
selection of units designed to produce clean-burning fuels
conforming to Euro 5 standards, including a 74,000-b/d
naphtha hydrotreater to make gasoline blend stock. Initial
refining units at the new complex remain on schedule for
startup in May 2019 (OGJ Online, Jan. 22, 2018).
In India, HPCL Rajasthan Refinery Ltd. (HRRL), a 74-
26% joint venture of Hindustan Petroleum Corp. Ltd.
(HPCL) and the state government of Rajasthan, recently
broke ground on the JV’s project to set up a 9-million tonne/
year (tpy) integrated refinery and petrochemical complex
at Pachpadra Tehsil, Barmer District, Rajasthan, targeted
for startup sometime in 2022 (OGJ Online, Jan. 10, 2018).
Alongside 37,000 tpy of hydrogen-generation capability, the
complex will feature:
• Naphtha hydrotreating, 1.8 million tpy.
• Diesel hydrotreating, 4.1 million tpy.
• Vacuum gas oil hydrotreating, 3.5 million tpy.
• Pyrolysis gasoline hydrotreating, 550,000 tpy.
• Gasoline hydrotreating, 530,000 tpy.
• Sour-water stripping (hydroprocessing), 100 cu m/hr.
In Pakistan, Falcon Oil PLC, a subsidiary of Pakistani
conglomerate Wak Group, Lahore, Punjab, let a $3.58-bil-
lion, 30-month EPC contract to China Energy Engineering
Corp. subsidiary Guangdong Electrical Design Institute to
build a 100,000-b/d grassroots deep-conversion refinery
in Dera Ismail Khan, Khyber Pakhtunkhawa (OGJ Online,
Aug. 23, 2017). A timeline for startup of the refinery—
which will include a naphtha hydrotreater—has yet to be
disclosed.
In the Asia-Pacific, Zhejiang Petrochemical Co. Ltd. let
contracts to Honeywell UOP and Honeywell Process Solu-
tions (HPS) to provide a range of process technologies, engi-
neering design, equipment, and advanced automation con-
trols for a grassroots 40-million tpy integrated refining and
petrochemical complex in Zhoushan, Zhejiang Province,
China (OGJ Online, May 5, 2017). Alongside supply of four
of its proprietary skid-mounted, modular polybed pressure-
swing adsorption (PSA) units, to be controlled by Honey-
well C300 controllers integrated with HPS’s proprietary Ex-
perion distributed control systems for supply of high-purity
hydrogen at the site, Honeywell UOP also will deliver li-
censing, design, key equipment, and all associated catalysts
and adsorbents for a hydrocracking unit based on UOP’s
unicracking process for conversion of vacuum gas oil into
petrochemical feedstock as well as a naphtha hydrotreating
unit based on UOP’s unifining process for sulfur removal.
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_61 61
TECHNOLOGY
To be built in two stages, Phase 1 of the complex is sched-
uled to be commissioned by December 2018, with Phase 2
slated for startup in first-quarter 2021.
In the US, Meridian Energy Group Inc. recently revised its
draft permit-to-construct (PTC) with North Dakota Depart-
ment of Health’s division of air quality for the two-phased
grassroots 49,500-b/sd high-conversion Davis refinery in
Billings County. Sited in the heart of southwestern North
Dakota’s Bakken shale region, the refinery will now include
additional hydroprocessing capacity as part of its Phase 2
development, slated to come on stream sometime in 2020
(OGJ Online, Dec. 6, 2017).
In addition to confirming Meridian’s selection of hydro-
cracking in lieu of fluid catalytic cracking for the refinery’s
second 27,500-b/sd phase, or Davis Full, the PTC amend-
ment outlined the operator’s decision to add vacuum distil-
lation and hydrocracking units during the second phase to
equip the refinery with greater product flexibility, including
an ability to adjust the production ratio of ultralow-sulfur
diesel to naphtha to meet changing market demands, ensure
product quality, and further lower emission levels from the
site.
Once in operation, the Davis refinery will include 18,205
b/sd of naphtha hydrotreating, 19,850 b/sd of distillate hy-
drotreating, and 14,380 b/sd of hydrocracking capacity, as
well as the ability to produce 4-19 MMcfd of hydrogen.
Expanding, streamlining capacities
While grassroots projects will account for a large share of
pending hydroprocessing capacity, the bulk of new capac-
ity will come as part of global refiners’ plans to expand and
modernize existing operations.
In the Middle East, Bahrain Petroleum Co. (Bapco) let
a lump-sum turnkey contract to a consortium of Technip-
FMC PLC, Samsung Engineering Co. Ltd., and Tecnicas Re-
unidas to provide EPCC services for a series of units for the
long-planned expansion and modernization of its 267,000-
b/d refinery at Sitra on Bahrain’s eastern coast (OGJ Online,
Dec. 4, 2017; Oct. 9, 2014). The $4.2-billion project will
include the addition of a residue hydrocracker, diesel hy-
drotreater, vacuum gas oil hydrocracker, hydrodesulfurizer,
and a hydrogen production unit. Scheduled to be completed
in 2022, Bapco’s modernization program at Sitra—alongside
increasing crude processing capacity at the site to 360,000
b/d—also intends to expand the refinery’s capabilities for
bottom-of-the-barrel processing and improve overall energy
efficiency and output of cleaner products that meet stricter
environmental standards.
As part of a national plan for growth through 2021, state-
owned Emirates National Oil Co. of Dubai plans to expand
capacity of its 140,000-b/sd condensate refinery at Jebel Ali
to 210,000 b/sd (OGJ Online, Apr. 11, 2017). In addition
to a new 70,000-b/sd condensate processing train, Technip
Italy SPA, Rome, will deliver EPC for an LPG-naphtha
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2/27/18 3:29 PM
 TECHNOLOGY
hydrotreater, kerosine hydrotreater, and diesel hydrotreater
(OGJ Online, Sept. 19, 2016).
In late 2017, Jordan Petroleum Refinery Co. Ltd. (JPRC),
the sole refining company of Jordan, let a contract to KBR
Inc. to provide basic engineering for a residue hydroprocess-
ing unit to be built as part of the proposed expansion of its
100,000-b/d refinery at Zarqa, 35 km east of Amman (OGJ
Online, Nov. 1, 2017). KBR’s scope of work includes deliv-
ery of the basic design package for the unit, which will be
based on its proprietary Veba combi-cracking slurry phase
hydrocracking technology, to enable the refinery to process
a wider range of feedstocks and produce fuels meeting envi-
ronmental specifications without further upgrading.
JPRC previously let a contract to Honeywell UOP to fa-
cilitate the planned $1.6-billion Zarga expansion, which
alongside expanding crude processing capacity to 120,000
b/d, will allow JPRC to upgrade the quality of its produc-
tion to meet Euro 5 emissions specifications (OGJ Online,
May 8, 2017). As part of its work on the project, Honeywell
UOP will deliver managing licensor services, technology li-
censing, front-end engineering design (FEED) consultancy
services, and basic engineering design. It will also provide
catalyst supplies, process equipment, training, and start-up
services for various units, including delivery of its propri-
etary unicracking and hydrotreating units as well as a po-
lybed PSA unit for purifying hydrogen.
Both Honeywell UOP and KBR are scheduled to complete
basic engineering and design on their scopes of work by ear-
ly 2018, after which JPRC will move into the more detailed
FEED phase.
In India, HPCL-Mittal Energy Ltd. (HMEL), a joint ven-
ture of state-owned HPCL and privately held Mittal Energy
Investment Pte. Ltd., Singapore, let a contract to Haldor Top-
soe AS, Kongens Lyngby, Denmark, for a project designed to
expand production of Bharat Stage (BS) 6-grade fuels (equiv-
alent to Euro 6-quality fuels) at HMEL’s 9-million tpy Guru
Gobind Singh refinery at Village Phullokhari, about 35 km
from Bathinda in India’s northern state of Punjab. As part
of the contract package, Haldor Topsoe will deliver technol-
ogy licensing and equipment for a 1.9-million tpy diesel hy-
drotreating unit as well as a revamp of the refinery’s exist-
ing hydrogen generation unit with an additional capacity of
22,000 tpy.
Topsoe’s scope of delivery for the hydrotreater includes
process technology, the reactor, accompanying internals,
and its proprietary HyBRIM TK-611 ultralow-sulfur diesel
catalyst to improve nitrogen and sulfur-removal activity by
25% and enable longer cycle lengths during processing of
complex feeds.
Following its completion and startup in fourth-quarter
2019, HMEL’s BS 6-fuels project will equip the Guru Gobind
Singh refinery to meet the government of India’s Apr. 1,
2020, nationwide compliance deadline for 100% production
of BS 6-quality fuels (maximum sulfur content, 10 ppmw).
62
180305OGJ_62 62
The 11-billion rupee upgrading project comes alongside
and as part of the public-private partnership’s broader plans
to expand the site’s crude processing capacity to 11.25 mil-
lion tpy from its current 9-million tpy.
Indian Oil Corp. Ltd. (IOC) was recently granted environ-
mental clearance from India’s Ministry of Environment, For-
est, and Climate Change to carry out projects at its 13.7-mil-
lion tpy Koyali refinery at Vadodara in India’s western state
of Gujarat that will enable the refinery to produce BS 4 and
BS 6-grade fuels (OGJ Online, Aug. 8, 2017). Scheduled to
be commissioned between September 2019 and April 2020,
the two projects are designed to bring the refinery’s fuel pro-
duction in line with the Indian government’s decision to
leapfrog directly to BS 6 compliance by Apr. 1, 2020 (OGJ
Online, Apr. 4, 2017).
Already under way, the 9.3-billion rupee BS 4 and
27.7-billion rupee BS 6 projects will involve the following:
• Expand existing 2.20-million tpy diesel hydrotreating
unit to 2.86 million tpy.
• Expand existing 1.77-million tpy diesel hydrodesul-
furization unit to 2.2 million tpy.
• Expand existing 2.1-million tpy vacuum gas oil hy-
drotreating unit to 2.2 million tpy.
• Installation of a 2-million tpy diesel hydrotreating unit.
• Installation of a 72,500-tpy hydrogen generation unit.
As part of a program to expand and modernize its 8.3-mil-
lion tpy Vishakhapatnam (Visakh) refinery in Andhra
Pradesh on India’s southeastern coast, HPCL let a contract
to Larsen & Toubro Ltd. subsidiary L&T Hydrocarbon En-
gineering Ltd. (LTHE) to provide EPCC services for a new
3-million tpy full-conversion vacuum gas oil hydrocracker
to be added as part of the project (OGJ Online, Jan. 5, 2018;
Dec. 8, 2017). Alongside expanding the refinery’s processing
capacity by 6.7 million tpy to 15 million tpy, and boosting
its production of low-sulfur fuels conforming to Euro 4 and
Euro 5 standards, the Visakh refinery modernization project
(VRMP) will add a 2.5-million tpy slurry hydrocracker, a
185-tonne/hr hydroprocessing sour-water stripper, and two
113,000-tpy hydrogen generation units (226,000 tpy total).
According to the latest project information available from
HPCL and general contractor Engineers India Ltd., major
processing unit revamps at the refinery will include:
• A 30% capacity expansion of the naphtha hydrotreater
in the refinery’s motor spirit (MS) block to 1.5 million tpy.
• A 30% capacity expansion of the diesel hydrotreating
unit to 2.86 million tpy.
• An upgrade of the naphtha hydrotreater downstream of
the refinery’s fluid catalytic cracker to enable output of BS 5
and BS 6-grade fuels.
The VRMP is scheduled for mechanical completion in
July 2020.
In the Asia-Pacific, China Petrochemical Corp. (Sinopec)
let a contract to Eni SPA to provide technology licensing
and basic engineering for a grassroots bottom-of-the-barrel
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:29 PM
 TECHNOLOGY

upgrading plant based on its proprietary Eni slurry hydro- of the ongoing modernization and upgrade of its 12.15-mil-
cracking technology (EST) to be built at Sinopec subsidiary lion tpy Moscow refinery (OGJ Online, May 5, 2017).
Maoming Petrochemical Co. Ltd.’s more than 470,000-b/d In nearby Azerbaijan, State Oil Co. of Azerbaijan Repub-
Maoming integrated refining complex in Guangdong Prov- lic (SOCAR), through its joint-venture contractor SOCAR-
ince, China (OGJ Online, Jan. 8, 2018). KBR LLC, let an $800-million lumpsum contract to Tecni-
With a design capacity of 46,000 b/d (310 tonnes/hr) for cas Reunidas subsidiaries Tecnimont SPA and KT-Kinetics
refining heavy residue, the new unit will replace the refin- Technology SPA to deliver EPC services for reconstruction
ery’s existing petcoke production line to produce more envi- and refurbishment of processing and associated plant instal-
ronmentally friendly fuels in compliance with the Interna- lations for modernization and expansion now under way
tional Maritime Organization’s iregulations requiring lower at the Heydar Aliyev refinery at Baku (OGJ Online, Feb. 1,
sulfur content in bunker fuels beginning in 2020 (OGJ, Jan. 2018).
1, 2018, p. 48). The first full-scale commercial use of EST, Designed to lift crude processing at the refinery to about
Maoming’s plant is scheduled to be completed by 2020. 7.5 million tpy from its current 6 million tpy, as well as en-
As part of the first leg of a two-phased Balikpapan Re- able 100% production of Euro 5-quality fuels and high-
fining Development Master Plan project to upgrade and quality raw feedstock for SOCAR subsidiary Azerikimya
modernize its 260,000-b/d refinery in Balikpapan, East Ka- Production Union’s nearby petrochemical plant, the project
limantan, Indonesia, by February 2020, PT Pertamina (Per- will include the addition of a diesel hydrotreater, a hydrogen
sero) let contracts to Honeywell UOP to provide technol- production unit, and two PSA units. The phased project is
ogy licensing and engineering design for an expansion of scheduled to be fully completed by 2021.
an existing 47,000-b/d hydrocracking unit and to Axens SA, Finally, in Europe, Total SA let a contract to Amec Fos-
Rueil-Malmaison, France, to deliver technology licensing for ter Wheeler PLC to deliver FEED studies for a project that
a grassroots proprietary 80,000-b/sd Prime-D middle distil- would add a vacuum gas oil hydrotreater to boost produc-
late hydrotreater (OGJ Online, May 18, 2017; Feb. 2, 2017). tion of cleaner fuels at subsidiary Total Raffinage France’s
Axens also will deliver a new Prime-D 36,000-b/sd distillate 219,000-b/d Donges refinery near Saint Nazaire (OGJ On-
hydrotreater for Pertamina’s 348,000-b/d Cilacap refinery in line, Aug. 7, 2017).
Central Java (OGJ Online, Oct. 6, 2016). Total, which plans to commission the new 40,000-b/d
As part of a residue upgrading complex under construc- hydrotreater sometime in 2019, previously let a contract to
tion at its integrated refining and petrochemical operations Axens SA in late 2015 to deliver technology licensing for the
at Ulsan, South Korea—which includes the 669,000-b/d On- unit (OGJ Online, Oct. 13, 2015).
san refinery—S-Oil Corp., Seoul, said it will add a 63,000-
b/d residue hydrodesulfurization (Hyvahl) unit (OGJ On-
line, June 20, 2017).
In southeastern Russia, construction remains under
way on a grassroots hydrocracking plant at PJSC Rosneft’s
8.8-million tpy refinery at Novokuibyshev, Samara Oblast
(OGJ Online, July 21, 2017). The new hydrocracking plant
comes as part of Rosneft’s site-specific implementation of
upgrades for Novokuibyshev under the company’s broader
modernization plan for its domestic refineries, which spe-
cifically aims to further improve the overall refining depth,
environmental performance, and yield of light-end petro-
leum products
Alongside the hydrocracking plant, Rosneft’s plans at No-
vokuibyshev include construction of a second crude distil-
lation unit, a hydrotreating unit, and reconstruction of the
refinery’s delayed coking unit to expand capacity to 1.5 mil-
lion tpy. A timeframe for startup of the completed expansion
has yet to be confirmed.
In addition to fresh hydrocracking capacity scheduled to
come online with a new 2-million tpy deep refining complex
under construction at its 21.4-million tpy Omsk refinery in
Western Siberia, PJSC Gazprom Neft recently completed in-
stallation of two hydrotreating reactors for the a new 2-mil-
lion tpy diesel Euro+ hydrotreating plant being built as part

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 TECHNOLOGY
Uncertainty looms for US olefins industry
Dan Lippe
Petral Consulting Co.
Houston
In 1859, Charles Dickens wrote A Tale
of Two Cities, drawing on 70-100 years
of historical perspective regarding life
in England and France in the decades
preceding and following the French
Revolution and the insanity of the
French Reign of Terror. With the per-
spective of a historian, Dickens con-
fidently began the best of his novels
with an oft-quoted saying: “It was the
best of times; it was the worst of times.
It was the age of wisdom; it was the age
of foolishness.”
PROCESSING
For the US petrochemical indus-
try, none of us knows how the story
will play out during the next 5 critical
years. Decisions to be made by senior
management in a few global chemical companies will set the
stage for profitability and future expansion projects in the
US for the following 10-20 years. Hence, the theme for the
next several articles in this series, ‘A Tale of Two Futures.’
In one scenario, US ethylene-polyethylene producers use
their cost advantages to greatly expand global market share
in all grades of polyethylene. Petral Consulting Co. sees
polyethylene prices falling 10-15¢/lb if this happens, with
gross margins vs. ethylene spot prices falling to breakeven
levels. As gross margins for polyethylene weaken, gross mar-
gins based on spot ethylene prices also are likely to fall to
0-5¢/lb below cash costs for high-cost feedstocks.
In the other scenario, key US producers adopt strategies
that will come to be known as “minimum market disrup-
tion.” In this case, spot prices for polyethylene remain steady
or decline only a few cents/lb and margins for spot ethylene
vs. costs for high-cost feedstocks remain marginally posi-
tive.
The industry’s journey to this pivotal point in its history
began when US Gulf Coast (USGC) producers first consid-
ered building new world-scale plants for ethylene and poly-
ethylene in 2011-12. For the first time in decades, chemical
company executives viewed 2012 and beyond as the best
of times. Saudi Arabia and other key members of the Or-
ganization of Petroleum Exporting Countries were firmly
in control of oil markets and everyone believed oil prices
would remain above $100/bbl indefinitely. Furthermore, US
oil producers were successfully applying horizontal drilling
64
180305OGJ_64 64
and fracturing techniques to oil-prone
shale plays in North Dakota and Texas.
US OLEFINS
In less than 5 years, US oil produc-
ers had reversed decades of decline
and increased US crude oil and asso-
ciated gas production at accelerating
rates. Midstream companies did what
they always do: They expanded gas
processing capacity using state-of-the-
art technologies. For all practical pur-
poses, each new gas processing plant
increased the industry’s ethane-recov-
ery capability.
The combination of rising asso-
ciated gas production and increas-
ing state-of-the-art gas plant capacity
SPECIAL soon gave USGC ethylene producers
REPORT the other half of their perfect world:
growing ethane supply surpluses and
steady, economically attractive, ethane
pricing.
If two new ethylene plants at 3.3 billion lb/year each are
good, six must be three times as good, and eight even better.
After all, what could go wrong? USGC chemical companies
knew they were moving into the best of times.
New plant startups
After beginning commissioning activities in June 2017,
newly formed DowDupont put its 3.3-billion lb/year LHC
9 ethylene plant in Freeport, Tex., into commercial service
in December as part of Dow Chemical Co.’s previously an-
nounced $6-billion USGC investment program in Texas and
Louisiana on projects to use low-cost and advantaged US
shale gas feedstock (OGJ Online, Sept. 21, 2017). Of the five
new plants scheduled for commissioning during second-half
2017, this was the only plant to reach startup before the end
of December. No new polyethylene plants targeted for start-
up by yearend entered service.
During first-half 2018, however, ChevronPhillips Chemi-
cal Co. LP and ExxonMobil Chemical Co. will commission
new 3.3-billion lb/year ethylene plants at Cedar Bayou, Tex.,
and Baytown, Tex., respectively (OGJ, Sept. 4, 2017, p. 82).
By yearend 2018, Petral Consulting expects total USGC op-
erable ethylene capacity will increase by about 14 billion lb/
year, with an equal volume of new polyethylene capacity to
start during the same period.
Ethylene production
Petral Consulting tracks US ethylene production via a
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 TECHNOLOGY

monthly survey of operating rates and US ETHYLENE PRODUCTION* FIG. 1

feed slates. Results of the monthly 200
survey showed ethylene production Light feeds Heavy feeds Capacity
steadily rising during first-half 2017
from 140-150 million lb/day in 2014

Production, million lb/d

and 150-160 million lb/day in 2015- 150
16. In first-quarter 2017, production
was 166 million lb/day before increas-
ing to 170-175 million lb/day during
the second quarter (Table 1). 100
Hurricane Harvey disrupted area
plant operations, which included 19
units with a combined capacity of 44
billion lb/year. 50
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Most hurricanes do extensive dam- 2015 2016 2017
age to electric power grids and disrupt *Cracker production from fresh feed.
Source: Petral Consulting Co.
production from all ethylene plants
and derivatives units in any given area.
While Harvey did limited damage to
the electric power grid, the storm dumped 25-50 in. of rain ETHYLENE PRODUCTION Table 1
in both Harris and Chambers Counties, Tex., in 3-4 days. 2016-17 Heavy feed Light feed Total
Record rainfall resulted in extensive flooding and damage ––––––––––––––––– Million lb/day ––––––––––––––––

to plants on the Upper Texas Gulf Coast, with Mont Belvieu Q3 10.7 143.0 153.7
Q4 14.7 143.6 158.3
and the surrounding area receiving 50 in. of rain in 3 days. Q1 17.2 144.3 161.5
Q2 13.4 159.3 172.8
Flood damage was asymmetrical. All five ethylene plants Q3 10.9 138.1 149.0
(totaling a combined capacity of 13.1 billion lb/year) located Q4 13.8 138.7 152.5
within the 15-mile radius of Mont Belvieu experienced ma- Source: Petral Consulting estimates

jor downtime in September-October, but not all suffered ex-

tensive damage. Plants in the Beaumont-Port Arthur-Orange
area also experienced extended downtime and production
losses.
The story of second-half 2017 centered on industry ac-
tions before and after Harvey’s landfall. In late 2016, eth-
ylene producers determined that all-out ethylene produc-
tion was necessary in the two quarters preceding planned
startup dates for new polyethylene plants, originally sched-
uled to come on stream before new ethylene plants (OGJ,
Nov. 6, 2017, p. 42). Texas ethylene plants produced 115-125
million lb/day in February-July vs. 110 million lb/day the
previous 6 months. If ethylene production from plants in
the Upper Texas Gulf Coast in September had occurred at
Feedstock coproduct values, and ethylene plant yields determine
ethylene cash production costs. Petral Consulting maintains direct
contact with the olefin industry and tracks historic trends in spot
prices for ethylene and propylene. We use a variety of sources to
track trends in feedstock prices.
Some ethylene plants have the necessary process units to convert
all coproducts to purity streams. Some ethylene plants, however, do
not have the capability to upgrade mixed or crude streams of vari-
ous coproducts and sell some or all their coproducts at discounted
prices. We evaluate ethylene production costs in this article based
on all coproducts valued at spot prices.
March-August rates, the industry would have accumulated
as much as 5 billion lb of supply to use for commissioning
new polyethylene plants. Instead, Texas ethylene production
rates fell sharply in August to 18-40 million lb/day (15-40%)
less than the second-half 2016 average during September-
October. Polyethylene plants, however, didn’t reach startup
as planned. Petral Consulting estimates ethylene production
losses were 2.5-3.0 billion lb (Table 1).
Fig. 1 shows trends in ethylene production.
Ethylene production costs
Ethylene production costs are determined by raw material
costs and coproduct credits. Based on variations in yield pat-
terns for the various feeds, coproduct volumes vary widely
between the three categories of plants (ethane-only, LPG-
only, and multifeed plants). Raw material costs are deter-
mined by each feedstock’s price and its conversion to eth-
ylene. Similarly, coproduct credits are determined by spot
prices and production volumes for each coproduct.
A few ethylene plants can upgrade all coproducts to pu-
rity streams and sell all coproducts at market prices. Most
ethylene plants produce a few purity coproduct streams but
produce most coproducts as mixtures and sell mixtures at
discounted prices. Cash production costs are determined by

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 TECHNOLOGY

ETHYLENE PRICES FIG. 2 ization among NGL traders that time

40 had run out for the seasonal increase
in inventory to reach a reasonable level
ahead of winter 2017.
30 Table 2 shows production costs for
major ethylene feedstocks.
Price, ¢/lb

20 Ethylene pricing, profit margins

Spot prices for ethylene generally fluc-
tuate within a range defined by cash
10 costs for the higher-cost feedstock. The
low end of the range is determined by
Spot Contract Ethane cash cost
the cash cost for high-cost feedstock
0 with margins in a range of -5¢/lb to
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017 +5¢/lb. The high end of the range is
determined by cash cost plus margins
Source: PetroChem Wire, Petral Consulting market research
of 10-15¢lb. During 2012-16, margins
for high-cost feeds exceeded 15¢/lb in
only three quarters (first-quarter 2013,
ETHYLENE PRODUCTION COSTS Table 2 third and fourth-quarters 2014) and were less than zero in
2016-17 Ethane Propane n-Butane Pentane + only one quarter (fourth-quarter 2015).
–––––––––––––––––––––– ¢/lb ––––––––––––––––––––––
While natural gasoline and refinery-sourced light, par-
Q3 10.3 8.6 5.9 18.8 affinic naphtha of similar quality were the high-cost feed-
Q4 12.2 14.5 16.4 24.0
Q1 11.0 13.1 11.6 10.6 stocks in second-quarter 2017, a sharp price jump for pro-
Q2 12.2 13.3 6.6 17.2
Q3 13.0 23.3 16.2 20.8 pane in July consistently left it the highest-cost feedstock
Q4 12.3 29.2 18.9 26.3 during second-half 2017. Cash production costs based on
Source: Petral Consulting estimates propane were 28-30¢/lb during September-December.
According to PetroChem Wire price reports for all fixed-
price trades in Texas and Louisiana, and consistent with his-
toric price-cash cost relationships, spot ethylene prices aver-
simple addition of raw material costs and coproduct credits aged 26.4¢/lb and varied from 19.5¢/lb in July to 28-30¢/lb
(see accompanying box). in September-December. Before propane costs surged, mar-
Prices for most feedstocks moved consistently higher in gins based on propane feed were 14¢/lb in second-quarter
second-half 2017 alongside higher prices for West Texas In- 2017 and collapsed to 1.5¢/lb in the third quarter and -1.3¢/
termediate (WTI) crude. WTI prices were $45/bbl in June and lb in the fourth quarter.
increased every month in second-half 2017 to reach $60/bbl Ethylene producers settled net transaction prices (NTP)
by late December for an average of $58/bbl. Prices for heavy within a range of 29-35¢/lb in second-half 2017, with prices
feedstocks increased steadily in second-half 2017 and were averaging 31.9¢/lb in the third quarter. As production costs
35-40% higher in December vs. June. Spot prices for propyl- based on propane increased, NTP settlements increased to
ene and benzene also increased, but only by 28-30%. 33.75¢/lb during fourth-quarter 2017. Profit margins based
Supply-demand considerations were bullish for both nat- on NTPs and propane production costs were 8.6¢/lb in the
ural gasoline and gas oil in second-half 2017. Feedstock pric- third quarter and 4.5¢/lb in the fourth quarter. By contrast,
ing increased more than coproducts, with production costs profit margins for ethane (consistently the low-cost feed)
for natural gasoline rising by 72% and gas oil by 150%. were 19¢/lb in the third quarter and 21.5¢/lb in the fourth
Production costs for natural gasoline and light naphtha quarter.
of similar quality were 21¢/lb in third-quarter 2017 (up 2¢/ Fig. 2 shows historical trends in ethylene spot prices and
lb vs. third-quarter 2016) before jumping to 26¢/lb in the NTPs.
fourth quarter, 2.3¢/lb higher than the same quarter in 2016.
Propane made a dramatic transition beginning in July. Olefin-plant feed slate trends
In June, production costs were competitive with ethane at Petral Consulting’s monthly survey of plant operating rates
12.7¢/lb. Cash costs increased to 17.4¢/lb in July and con- and feed slates showed industry demand for fresh feed av-
tinued to rise in August and September to 28-30¢/lb, mak- eraged 1.51 million b/d in third and fourth-quarters 2017.
ing propane the highest-cost feedstock for the last 4 months Consistent with widespread downtime in the Upper Texas
of 2017. Propane’s cost surge was driven by a belated real- Gulf Coast in the months following Hurricane Harvey, de-

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 TECHNOLOGY

mand in second-half 2017 was 162,300 POLYETHYLENE EXPORTS FIG. 3

b/d (9.7%) less than in first-half 2017
30
(Table 3).
Ethane demand—typically ac- 25
counting for 70% of total fresh-feed
demand—averaged 1.15 million b/d

Volume, million lb/d

20
in second-half 2017, down 87,300 b/d
from the first half of the year. Ethane 15
demand was 1.24 million b/d in July
before falling to a low of 893,000 b/d 10
in September. By December, demand
for ethane had recovered to 1.3 million 5 HDPE LDPE LLDPE
b/d.
During first-half 2017, propane de- 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
mand was 325,000 b/d before falling 2015 2016 2017
to 252,000 b/d in the last 6 months
Source: US ITC
of the year, averaging only 204,000
b/d in September-October. Demand
for propane during second-half 2017
was weaker than in any previous two-quarter period since ETHYLENE FEED SLATE DEMAND Table 3
the global financial crisis from fourth-quarter 2008 to first- Natural Naphtha,
quarter 2009. 2016-17 Ethane LPG gasoline gas oil
––––––––––––––––– Thousand b/d ––––––––––––––––––
Demand for heavy feeds (naphtha, condensate, and gas
Q3 1,105.8 427.2 33.2 105.1
oil) during first-half 2017 was 187,700 b/d. As various plants Q4 1,159.4 372.9 42.6 138.4
Q1 1,205.4 327.1 63.8 147.8
worked to repair flood damage in second-half 2017, heavy Q2 1,261.6 440.8 43.7 120.2
feed demand fell to 153,900 b/d and accounted for 10.5% Q3 1,097.0 371.9 39.6 100.6
Q4 1,195.3 266.1 47.8 119.8
of fresh feed in first-half 2017 and 9.6% in the second half.
Source: Petral Consulting estimates
Within the heavy feeds category, demand for natural gaso-
line and refinery naphtha was 130,000 b/d in first-half 2017
before falling to 117,000 b/d in the second half. Demand for
refinery gas oil was 57,000 b/d in first-half 2017 and 37,000 export terminals to take advantage of substantial and persis-
b/d in the second half. Gas oil demand in second-half 2017 tent ethane supply surpluses. The increase in LPG terminal
was 20,000 b/d (36.3%) less than first-half demand amid capacity enabled chemical companies to increase exports of
plant downtime and an increase in gas oil’s ethylene produc- propylene monomer beginning in 2015.
tion costs. Until 2017, ethylene monomer exports were sporadic and
small. According to US International Trade Commission
Monomer exports (ITC) statistics, US ethylene monomer exports in 2010-15
The most important markets for ethylene and propylene are never averaged more than 0.8-0.9 million lb/day and were
as raw material feeds for production of polyethylene and only 15,000 lb/day in 2012 and 18,000 lb/day in 2014. In
polypropylene. Historically, US chemical companies focused January and May 2017, exports jumped to almost 2 million
almost exclusively on finding export markets for ethylene lb/day so that ethylene monomer exports averaged 1.29 mil-
and propylene derivatives such as polyethylene, ethylene lion lb/day in first-half 2017.
glycol, PVC, polypropylene, and acrylonitrile. The emphasis Historically, two companies have had joint ownership of
on derivatives exports allowed USGC producers to export the only ethylene-export terminal in the USGC, controlling
minimum volumes of ethylene and propylene monomer. Ex- waterborne-ethylene exports. At least two midstream com-
port terminal capacity was very limited, while transporta- panies, however, are now considering developing new termi-
tion costs were viewed as prohibitive. nals dedicated to ethylene-monomer exports.
Chemical companies may remain reluctant to make capi- During third-quarter 2017, monomer exports fell sharp-
tal investments in export-terminal capacity for ethylene and ly to average 0.44 million lb/day, down 0.86 million lb/day
propylene monomer, but major midstream companies don’t (66%) from first-half 2017. In fourth-quarter 2017, however,
share this reluctance. Enterprise Products Partners LP (EPP), exports surged to 1.39 million lb/day for an average of 0.92
Targa Resources Corp., and Sunoco Logistics Partners LP million lb/day during second-half 2017. For the first time
each expanded LPG export-terminal capacity. EPP and Su- ever, US full-year ethylene exports averaged more than 1.0
noco also separately developed cryogenic waterborne-ethane million lb/day in 2017.

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 TECHNOLOGY

HDPE SPOT PRICING, GROSS MARGINS FIG. 4 consistent with the domestic polyeth-
60 30
ylene balance. Even though Hurricane
Harvey caused extensive downtime for
50 25 polyethylene plants as well as ethylene
plants, US polyethylene producers met
40 20 their contract obligations to domestic

Margin, ¢/lb
Price, ¢/lb

consumers and the nearest export des-

30 15 tinations. Exports to ROW destinations
bore the brunt of the decline in polyeth-
20 10 ylene availability (Fig. 3).
Polyethylene prices and gross mar-
10 5 gins vs. ethylene prices provide insight
HDPE HDPE vs. spot ethylene HDPE vs. NTP
into what may occur in 2018 as new
0 0 capacity comes on stream. Spot prices
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017 for HDPE (free on board, FOB, Hous-
ton) were 45-50¢/lb in first-half 2017
Source: PetroChem Wire, Petral Consulting market research
and 47-52¢/lb in second-half 2017.
Gross margins-based spot HDPE pric-
es and spot ethylene prices were 15-
COPRODUCT PROPYLENE FROM ETHYLENE PLANT Table 4 20¢/lb in first-half 2017 and 22-25¢/lb in second-half 2017.
From light From heavy Production Stronger prices and margins during second-half 2017 result-
2016-17 feeds feeds (est.)
––––––––––––––––– Million lb/day ––––––––––––––– ed from reduced production rates at Upper Texas Gulf Coast
Q3 16.1 5.1 21.1 plants following disruptions caused by Hurricane Harvey
Q4 14.5 6.9 21.3
Q1 12.9 7.9 20.7 (Fig. 4).
Q2 16.9 6.1 23.0
Q3 14.5 5.3 19.8
Q4 11.5 6.3 17.8 Propylene supply
Source: Petral Consulting estimates Olefin-plant coproduct supply. Coproduct propylene supply
depends primarily on the use of propane, normal butane,
naphtha, and other heavy feeds. In second half 2017, the
monthly survey showed demand for LPG feeds (propane and
Polyethylene exports normal butane) was 65,000 b/d (16.9%) less than in first-
According to US ITC statistics, US exports of polyethylene— half 2017. Likewise, demand for heavy feeds was 26,500 b/d
including high-density polyethylene (HDPE), low-density (14.7%) less than in second-half 2017.
polyethylene (LDPE), and linear low-density polyethylene Coproduct supply was about 18.9 million lb/day in sec-
(LLDPE)—rose quarterly between fourth-quarter 2014 and ond-half 2017, down 3.1 million lb/day (14.1%) from first-
second-quarter 2016 for a cumulative increase of almost 9 half 2017. Coproduct supplies from light feeds (ethane, pro-
billion lb. The largest increases occurred in first-half 2015 pane, and normal butane) during second-half 2017 fell 1.9
and fourth-quarter 2015. million lb/day (12.8%) from the previous 6 months to 13
After second-quarter 2016, US polyethylene exports de- million lb/day, while coproduct supply from propane ac-
clined for two consecutive quarters. Exports spiked to 26.7 counted for 58% of supplies from light feeds in second-half
million lb/day in first-quarter 2017 but then declined for the 2017 vs. 64% in first-half 2017 (Table 4).
next three quarters. Polyethylene exports were 18.9 mil- PDH plant supply. Based on PetroChem Wire’s daily re-
lion lb/day in third-quarter 2017, down 7.8 million lb/day ports, Petral estimates propylene production from propane
(29.3%) from the first quarter. In the fourth quarter, exports dehydrogenation (PDH) plants at the USGC. Two plants
were down 9.3 million lb/day (34.9%) from first-quarter with a combined capacity of 8.4 million lb/day were opera-
2017 to 17.4 million lb/day. tional in second-half 2017, with production averaging 5.5
Polyethylene exports to Canada and Mexico were 9.37 million lb/day (65% of nameplate capacity), or 0.54 million
million lb/day in second-half 2017, down 0.54 million lb/ lb/day (10.9%) higher than first-half 2017. While this simple
day (5.7%) from the first 6 months of the year. Exports to comparison indicates PDH plants made a larger contribution
all other destinations (rest of world, ROW) averaged 9.28 to propylene supply in second-half 2017, propylene buyers
million lb/day in second-half 2017, or 4.83 million lb/day were anticipating EPP’s new 1.65-billion lb/year Mont Bel-
(34.2%) lower than first-half 2017. vieu plant would be operating in fourth-quarter 2017, before
The slide from a record high in first-quarter 2017 (26.9 mil- startup was delayed to December. From this perspective,
lion lb/day) to 17 million lb/day in fourth-quarter 2017 was then, propylene supply from PDH plants was 2-3 million

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 TECHNOLOGY

lb/day less than buyers expected it to PROPYLENE PRODUCTION, SALES FIG. 5

be in July-August. While all sources 90
of propylene supply are variable and,
80
to some extent unreliable, PDH plants
seem to be the least reliable of all sup- 70
ply sources.

Volume, million lb/d

60
The future in which ethylene and
50
polyethylene remain in balance is a fu-
ture of less coproduct propylene sup- 40
ply, opportunity for more PDH supply, 30
tighter supply-balances, less mono- 20
mer surplus, and stronger prices for
10 Refinery mechant sales Coproduct supply PDH plants
polymer-grade propylene. The future
in which all ethylene and polyethyl- 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
ene plants operate at full rates means 2015 2016 2017
more coproduct supply, more surplus-
Source: EIA, Petral Consulting estimates
monomer supply, and more monomer
exports.
Refinery supply. Refinery propylene
sales into the merchant market are a function of: REFINERY PROPYLENE PRODUCTION Table 5
• Fluid catalytic cracking unit (FCCU) feed rates (most Texas Gulf South Other
important variable). 2016-17 Coast Louisiana areas Total
––––––––––––––––––– Million lb/day––––––––––––––––––
• FCCU operating severity (important but not directly
Q3 19.3 15.9 14.3 49.5
measurable). Q4 20.6 16.2 13.9 50.7
Q1 20.3 14.7 14.9 49.9
• Economic incentive to sell propylene rather than use it Q2 21.4 16.8 15.7 53.8
as alkylate feed. Q3 17.5 18.5 13.8 49.8
Q4* 20.5 18.5 14.7 53.7
Variations in FCCU feed rates generally are the most im-
*Petral Consulting estimates.
portant parameter determining refinery-grade propylene Source: EIA Petroleum Supply Monthly
supply. Economic factors that may result in changes in oper-
ating severity are generally of secondary importance.
Statistics from the US Energy Information Administration
(EIA) show US refineries operated FCCUs at 5.06 million PDH plant production show total US propylene supply was
b/d in third-quarter 2017, a decrease of 42,300 b/d (0.8%) 69 million lb/day in third-quarter 2017 before increasing to
from second-quarter 2017 rates. Based on EIA monthly sta- 74-75 million lb/day in the fourth quarter. Third-quarter
tistics for October 2017 and weekly statistics for November- production was 3.35 million lb/day lower from third-quarter
December, Petral Consulting estimates FCCU feed rates in 2016, while fourth-quarter production was 1.1 million lb/
fourth-quarter 2017 declined by 20,000-25,000 b/d (0.8%) day less than fourth-quarter 2016.
from the third quarter. If PDH plants had run at 90% of capacity, total supply in
Regionally, EIA statistics showed feed rates for FCCUs in second-half 2017 would have exceeded first-half 2017 pro-
the USGC and Midcontinent were 3.43 million b/d in third- duction by 3-4 million lb/day.
quarter 2017 and 3.49 million b/d in the fourth quarter, ac- Fig. 5 shows trends in coproduct supply, PDH plant pro-
counting for 68-70% of total US fresh feed to FCCUs. duction, and refinery merchant sales of propylene.
Refinery-grade propylene supply from USGC and Mid-
continent refineries was 45.5 million lb/day in third-quarter Propylene economics, pricing
2017 before rebounding to 49.6 million lb/day in the fourth Two factors greatly influence propylene pricing. Refinery-
quarter. Merchant sales in third-quarter 2017 were 0.25 mil- grade propylene supply tracks seasonal variations in refin-
lion lb/day (0.55%) more than in third-quarter 2016. Mer- ery crude runs and FCCU feed rates. Seasonal variations in
chant sales in the fourth quarter were 49.5-49.7 million lb/ refinery crude runs and FCCU feed rates are reasonably pre-
day, or 3.2-3.4 million lb/day (7.3%) more than in fourth- dictable, and propylene supply-demand balances are usually
quarter 2016. Production-feed ratios for USGC and Midcon- tighter in winter than in summer. When tropical storms or
tinent refineries in second-half 2017 were 15.25-15.50 lb/bbl hurricanes in the Gulf of Mexico disrupt refinery operations
and 6.5-6.7 lb/bbl, respectively (Table 5). in Texas and Louisiana, refinery crude runs during the third
US production. EIA statistics for refinery-grade propylene quarter of the year are less than in the second and fourth
and Petral Consulting estimates for coproduct supply and quarters.

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 TECHNOLOGY
Propylene price relationships vs. unleaded regular gaso-
line vary directly with seasonal variations in the propylene
supply-demand balance as well as with seasonal variations in
gasoline prices. More importantly, as long as refinery-grade
propylene prices maintain nominal premiums vs. convention-
al unleaded regular gasoline prices in the USGC and Chicago,
refineries usually will deliver maximum practical volumes of
refinery-grade propylene into the merchant market.
Propylene inventory in reportable USGC storage also
influences refinery-grade propylene prices. Under normal
market conditions, reportable propylene inventory in USGC
storage varies by ±25% of the midrange of long-term historic
inventory levels. When inventory falls below the lower end
of the historic mid-range, spot prices for refinery-grade pro-
pylene tend to strengthen and discounts vs. unleaded regu-
lar gasoline swing to premiums.
On July 1, propylene inventory in reportable USGC stor-
age was 616.6 million lb before increasing to 879.8 million
lb on September 1, according to EIA statistics. As refiner-
ies in the Upper Texas Gulf Coast struggled to recover from
flooding and other damage inflicted by Hurricane Harvey,
inventory fell to 733 million lb on November 1. EIA weekly
statistics and statistics in EIA’s Petroleum Supply Monthly
were in good agreement as to inventory levels during first-
half 2017, with weekly statistics showing 611 million lb on
July 1 but only 415 million lb on September 1 and 675 mil-
lion lb on November 1.
EIA’s weekly statistics in July through September were
less reliable as early indicators for inventory statistics pub-
lished in the Petroleum Supply Monthly 2 months later. EIA
weekly statistics regained reliability in October, however.
Considering all the extraordinary activity in August-Sep-
tember and the number of people directly involved in repair-
ing and rebuilding flood-damaged homes, the divergence
between weekly and monthly statistics in third-quarter 2017
comes as no surprise.
According to PetroChem Wire, spot prices for refinery-
grade propylene averaged 23.8¢/lb in July and were about
1¢/lb less than unleaded regular gasoline prices (¢/lb basis)
in the USGC pipeline market. Spot prices for refinery-grade
propylene increased by 10¢/lb in August-September to aver-
age 34.5¢/lb in September. Propylene premium to unleaded
regular gasoline prices were 6.5¢/lb in August and 8.1¢/lb in
September, consistent with propylene’s bullish fundamen-
tals and economic trends.
Spot prices for refinery-grade propylene were again steady
in October and November, averaging 35¢/lb and increasing
to about 37¢/lb in December. Premiums to unleaded regular
gasoline were 6.0-9.5¢/lb in fourth-quarter 2017.
Monthly contracts for polymer-grade propylene settled
higher in each month of second-half 2017. July’s contract
settled at 39¢/lb, with contract settlements for third-quar-
ter 2017 averaging 41.67¢/lb. Prices increased by 0.5-1.5¢/
lb per month except in September, when contracts settled
70
180305OGJ_70 70
7¢/lb higher at 46.5¢/lb. Polymer-grade contract prices
maintained premiums of 12-15¢/lb in third-quarter 2017
and 13-14¢/lb in the fourth quarter. Late in December, con-
tracts settled at 50¢/lb. Based on persistent spot pricing at
48-49¢/lb, Petral Consulting expected the contract price
to roll unchanged into January 2018; however, PetroChem
Wire reported two of the USGC’s three PDH plants began
experiencing operating problems in December. According to
PetroChem Wire daily reports, spot prices for polymer-grade
propylene jumped to 53¢/lb on the first trading day of the
month and then to 62¢/lb on Jan. 10.
With 8 years of cumulative observations of PDH plant
unreliability and a persistence of operating problems, the
USGC propylene community’s sustained and strong bullish
reaction came as no surprise. By mid-January, spot prices
were almost 70¢/lb, or 22¢/lb (43%) above mid-December
levels. Petral Consulting expects propylene monomer ex-
ports in first-quarter 2018 to fall at least 2 million lb/day
below third-quarter 2017 volumes.
Propylene, polypropylene exports
Before 2014, propylene monomer exports were an insignifi-
cant element of USGC propylene supply-demand balance.
In 2014, however, propylene marketers began using exports
to manage increases in production from PDH plants and re-
sulting jumps in inventory to avoid creating surpluses that
would inevitably cause prices to crash.
Monomer exports increased for three consecutive quar-
ters in 2017, reaching a record high of 3.83 million lb/day in
third-quarter 2017. With the decline in coproduct sales and
refinery merchant sales in September-October, exports fell
to 2.39 million lb/day in fourth-quarter 2017, or 1.48 million
lb/day (38.4%) less than the third quarter.
According to US ITC statistics, US exports of polypropyl-
ene were 9.1-9.3 million lb/day for three quarters (second-
half 2016 through first-quarter 2017) before dropping sharp-
ly in second-quarter 2017 and remaining weak through
yearend. Exports in second-half 2017 were about 6.5 million
lb/day, or 2.7 million lb/day (29%) less than average exports
in second-half 2016 and first-quarter 2017.
First-half 2018
If the ‘Tale of Two Futures’ has not already begun, it will
begin in first-half 2018. The outlook for 2018, however, is
clouded by a few key considerations:
• When will the various new ethylene and polyethylene
plants reach full capacity?
• Will ethylene monomer exports become a significant
element of the USGC ethylene supply-demand balance?
• If polyethylene exports to ROW destinations quadru-
ple as forecasted, how much impact will the surge in exports
have on polyethylene and ethylene prices?
While we should learn answers to the first questions in
first-half 2018, answers to the remaining questions will not
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:31 PM

be forthcoming until second-half 2018 or 2019.
When all new polyethylene plants reach nameplate ca-
pacity rates, and if all existing polyethylene plants continue
to run at capacity rates, US polyethylene exports will in-
crease by 45-49 million lb/day. In fourth-quarter 2017, ex-
ports were 17-18 million lb/day, while exports to destina-
tions other than Canada and Mexico were 9-10 million lb/
day. By yearend 2018, US polyethylene exports will reach
58-62 million lb/day if all plants run at 90-100% of name-
plate capacity.
An alternative scenario is possible. As new ethylene and
polyethylene plants come online, US ethylene producers may
reduce production from existing capacity to offset 25-50% of
new capacity, spreading out the surge in US polyethylene ex-
ports over a period of 5-7 years. This scenario will smooth
the transition and minimize the bearish impact of the surge
in US polyethylene exports on global polyethylene pricing.
The future in which ethylene and polyethylene remain in
balance and grow with global market demand is a future of
less coproduct propylene supply, opportunity for more PDH
supply, tighter supply-balances, less monomer surplus, and
stronger prices for polymer-grade propylene. The future in
which all ethylene and polyethylene plants operate at full
rates means more coproduct supply, more surplus monomer
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180305OGJ_71 71
TECHNOLOGY
supply, more monomer exports, and weaker prices for poly-
mer-grade propylene.
Ultimately, we will all wake up one fine morning in 2021
to realize that one possible future didn’t come to pass while
the other did. The ‘Tale of Two Futures’ will resolve itself
into present day reality as it always has.
The author
Daniel L. Lippe (danlippe@petral.com) is presi-
dent of Petral Consulting Co., which he founded
in 1988. He has expertise in economic analysis
of a broad spectrum of petroleum products
including crude oil and refined products, natural
gas, natural gas liquids, other ethylene feed-
stocks, and primary petrochemicals.
Lippe began his professional career in 1974 with Diamond
Shamrock Chemical Co., moved into professional consulting in
1979, and has served petroleum, midstream, and petrochemi-
cal industry clients since. He holds a BS (1974) in chemical
engineering from Texas A&M University and an MBA (1981)
from Houston Baptist University. He is an active member of the
Gas Processors Suppliers Association.
2/27/18 3:31 PM
 TECHNOLOGY
Qatar study allows carbon footprint
estimates of particular LNG sources
Eric Johnson
Atlantic Consulting
Zurich
Methods like those used to determine the carbon
footprint of crude oil and natural gas from particu-
lar reservoirs can also determine the carbon foot-
print of LNG and LPG from particular sources.
Historically, production-to-combustion footprints
for crude oil, gas, and related LNG and LPG have
been published as an aggregated, single number for TRANSPORTATION
a broadly-defined region. More recently, however,
oil footprints have been differentiated by region
and subregion, resulting in a wide variety of foot-
prints. Gas footprints have been differentiated in a similar
way, albeit in less detail. This article shows the same can be
done for both LNG and LPG.
LNG production has risen since 1970 at a compound rate
of 11% to a 2016 volume of 258 million tonnes. It accounts
for about 10% of the world’s natural gas, which in turn meets
about one-quarter of global energy demand. Strong growth
is expected for at least the next decade; another 600 million
tonnes/year (mtpy) of specific, potential capacity has already
been identified. Most sources of LNG are remote from con-
suming centers. The largest producer is Qatar, with nearly
one-third of output, followed by (western) Australia, Malay-
sia, Nigeria, Indonesia, and Algeria, which account for about
one-half combined.
LPG sources have also become more remote. Since the
1990s, production from the Middle East (including Qatar)
has tripled. Consumption within the area has also soared,
but still the region exports about 40% of its output, making
it the world’s largest LPG exporter. Increasingly, exported
LPG is a co-product of LNG production. For instance, nearly
15 wt % of the hydrocarbon output of the Al Khaleej project
in Qatar—the world’s largest LNG complex—is propane and
butane.
Most of the early studies on LNG’s carbon footprint were
geographically broad, presenting an average for several pro-
ducing countries. Some recent studies have covered specif-
ic countries. Still, none disaggregated the product slate. In
other words, although LNG accounts for only about half of
Al Khaleej’s hydrocarbon output, these studies publish the
footprint as LNG only. In its study, Thinkstep-Nord Stream
72
180305OGJ_72 72
allocates some of the unit processes among its out-
puts, but it is unclear whether all fuels are included,
and footprints for non-LNG fuels are not reported.
This article allocates the footprint of an LNG
plant by unit process and finds footprints for all its
fuel outputs, increasing the overall footprint’s ac-
curacy. In so doing it also seeks to address growing
regulatory concerns regarding LNG’s place among
competing fuel sources.
Regulators in the European Union (EU) and
the US State of California are increasingly interested in the
footprints of energy production from specific geographies or
production technologies. Whereas most footprint data for oil
and gas are very generalized, say, a West European crude oil
mix, regulators realize that specific locations can generate
wildly varying footprints. The European Union and Califor-
nia have built this variance into their regulatory frameworks.
The EU’s Fuel Quality Directive now lists footprints of some
600 types of geographically-specific crude oil. The Califor-
nia Air Resources Board lists about 200 different crudes.
By contrast, neither the EU nor California offer much
differentiation on gas, LNG, or LPG. This article intends to
generate an LNG-LPG footprint specific to Qatar, allocating
this footprint by process to its fuels. This analysis could be
replicated for other producers.
Just as biofuels now report a footprint for each specific
barge- or ship-load, fossil fuels will increasingly be required
to do the same.
Method
The primary objects of this footprint study are LNG and
LPG produced in Qatar and consumed in the UK. The UK
is a major consumer of Qatari LNG and a reasonable proxy
for Western European consumption in general. At various
times, the UK and Western Europe also have been major
consumers of Qatari LPG. Their imports from Qatar vary,
however, and have declined with the rise of shale-gas driven
imports from the US.
The primary reporting unit is grams carbon dioxide
equivalent per megajoule of consumed fuel at higher heat-
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:31 PM
 AL KHALEEJ 2015 OUTPUT Table 1
CH4 C2H6 C3H8 C4H10 C5+ H2S N2 CO2 H2O Total
Output ––––––––––––––––––––––––––––––––––––––––––––––– Million tonnes ––––––––––––––––––––––––––––––––––––––––––––––––––––

LNG 29.7 3.7 2.0 1.8 0.0 0.0 0.2 0.0 0.0 37.5
Sales gas 11.1 1.2 0.8 0.9 0.0 0.0 0.1 0.0 0.0 14.1
Other fuels 0.0 1.0 2.2 1.4 12.1 0.0 0.0 0.0 0.0 17.1
Net output, sales 40.8 5.8 5.0 4.1 12.1 0.5 0.3 0.0 0.0 68.7
Gross output, production 46.2 5.8 5.0 4.1 12.1 0.5 0.3 3.1 0.6 99.8

ing value (CO2e/MJ HHV). The carbon footprints presented
in this article were calculated in accordance with Publicly
Available Standard (PAS) 2050.
The inventory starts with construction of gas wells in the
Persian Gulf, processing of that gas and conversion to LNG at Al
Khaleej in Qatar, and transport to and consumption in the UK.
Production
Qatari exploitation of North field in the Persian Gulf is di-
rected by Qatar Petroleum. LNG production is managed by
two companies, majority-owned by Qatar Petroleum, Qatar-
gas and RasGas, which merged into one subsidiary in early
2018 (OGJ Online, Jan. 4, 2018).
From 2012-16, Qatar produced 77 mtpy of LNG, about
one-third of global output, split almost equally between Qa-
targas and RasGas. In mid-2017, Qatar Petroleum announced
that by 2024 it would increase its LNG output to 100 mtpy.
Based on a RasGas sustainability report, plus other key
sources of Qatari LNG composition data (including the
US Energy Information Adminsitration) and Qatari raw
gas composition data from Attarakih, the author estimat-
ed gross and net output at Al Khaleej in 2015. Gross mi-
nus net equals internal consumption plus waste.
This output provides the framework for the rest of the
carbon footprint estimation. It represents half of Qatar’s ac-
tual LNG production and is a reasonable proxy for the other
half (produced by QatarGas) given the similarity in the two
companies’ operations.
Nearly half of Qatari LNG is exported to the Pacific Rim,
while most of the other half is shipped to Europe and Asia.
Sales gas is sold by pipeline within the United Arab Emir-
ates. Ethane is sold locally as steam-cracker feedstock. Pro-
pane and butane are either cracked or shipped out as LPG,
mainly to Europe and the Pacific Rim. Condensate is sold to
refiners, both regionally and abroad.
LNG-LPG supply chain
Production at Al Khaleej (Table 1) provided the basis for sup-
ply chain mapping, with inputs and outputs from each of 12
processes estimated.
Exploration and well construction in Qatar’s portion of
the Persian Gulf’s North field began in the early 1970s. Di-
rect input-output data on the exploration of the field and the
construction of these wells are not available. Of the four LNG-
footprint studies that specifically cover Qatar, only one of
them, Tagliaferri, explicitly reports covering exploration and
production. To do this, Tagliaferri used data from Ecoinvent,
which rolls exploration and construction together with pro-
duction. This article uses a more recent, detailed source, Na-
tional Energy Technology Laboratory (NETL), that breaks out
exploration and construction separately from production.
Hydrocarbons processed at Al Khaleej are produced in
North field via gas wells connected to above-water plat-
forms. The gas mixture flows by its own pressure to the
surface, but keeping the well in operation generates some
emissions. After the gas comes to the surface, the raw stream
is treated at the platform to remove some of the heavier hy-
drocarbons (C5+, often called field condensate) and water.
The field condensate is pumped in a wet pipeline to shore,
because it would condense in the dry pipeline that trans-
ports the rest of the mixture to shore. The water is removed.
Direct input-output data on production and transport
of hydrocarbons to Al Khaleej are not available. Again, this
article turned to NETL’s most recent detailed data for pro-
duction and transport. Its data cover production operations,
compression and injection to the pipeline, flaring, and de-
hydration. The author has added the relevant footprint data
from Ecoinvent for production of triethylene glycol, used as
a sorbent-desorbent in dehydration.
Gas processing
When the gaseous hydrocarbons come onshore at Al Khaleej,
the heavier hydrocarbons are separated and the lighter ones
are processed to remove carbon dioxide, nitrogen, and es-
pecially sulfurous compounds. LNG has a lower tolerance
than gaseous natural gas of contaminants and hydrocarbons
with freezing points above that of methane’s condensation,
requiring more processing. Water and carbon dioxide, for
instance, will turn to ice in LNG, which can foul pumping,
piping, and processing.
Direct input-output data on processing at Al Khaleej are
not available. Of the four LNG-footprint studies that specifi-
cally cover Qatar, only Tagliaferri explicitly reports process-
ing as disaggregated, but its data source is unclear.
Other sources report general input-output data for pro-
cessing. This article applied an average of these excluding
International Gas Union, data from which was impossible
to interpret accurately. The inputs-outputs include venting
of carbon dioxide.
This article treats sulfur produced from gas processing

Oil & Gas Journal | Mar. 5, 2018 73

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 TECHNOLOGY
AL KHALEEJ 2015 SALES
Product Million tonnes Status in life-cycle system
LNG 37.48 Extraction to combustion
Sales gas 14.05 Exits system after gas processing
Field condensate 10.71 Exits system after coming onshore
Plant condensate 1.36 Exits system after gas processing
Ethane 0.96 Exits system after gas processing
Propane 2.19 Extraction to combustion
Butane 1.37 Extraction to combustion
Helium 0.0037 Backed out of system
Sulphur 0.48 Treated as residue
Total 68.60
(0.48 million tonnes in 2015) as a residue in the footprint
calculations and it is not allocated any of the emissions. It is
not a waste, because it has market value. It is an unavoidable
by-product.
Liquefaction, flaring
Direct input-output data on liquefaction at Al Khaleej are
not available. Several studies report disaggregated figures for
liquefaction. Thinkstep-Nord Stream is specific to Qatar and
the others are more general. This article applied an average
of these. Added to this is a loss rate for LNG plants of 0.05%
reported by DG Energy European Commission.
Energy and material inputs from NETL and footprints
from Ecoinvent for delivered energy and materials allowed
inventory of input and outputs from construction of the liq-
uefaction plant.
Flares run at the offshore production platforms, at on-
shore storage and production sites, and in loading areas.
Their main purpose is to get rid of excess feedstock or boil-
off gas (from LNG) safely. For instance, if the LNG plant goes
down for maintenance, the input gas is flared. Flares also
sometimes are used to dispose of off-specification product,
which for economic reasons are kept to a minimum.
RasGas reports flaring gas in 2015 that emitted 0.93 mil-
lion tonnes CO2. RasGas’s report and a review of other lit-
erature about LNG-related flaring (for instance, documents
from The Global Gas Flaring Reduction Partnership), make
it clear that most Qatari LNG flaring is onshore. The au-
thor estimates 90%. Estimated flaring at production is un-
changed and all other processes through to loading are as-
sessed a flaring total of 90% x 0.93 million tonnes CO2 or
0.84 million tonnes.
According to RasGas, between 2007 and 2015 the acid-
gas injection (AGI) site moved more than 9 million tonnes
of CO2 into a saline aquifer. This works out to approximately
1 mtpy, credited back against the well-to-ship footprint, i.e.
the footprint created in Qatar. The credit has been applied to
all fuels produced at Al Khaleej, allocated by energy content.
RasGas extracts helium from the gas mixture for com-
mercial sale. Production in 2015 was 3,700 tonnes, about
0.01% of RasGas’s annual output. The volume is so insig-
nificant, it has not been considered in process yields. But
the emissions generated to remove it have been backed
74
180305OGJ_74 74
Table 2 out of the well-to-ship total.
Helium is backed out, rather than allocated its negligible
portion of upstream emissions, because it is not a fuel. It also
is not a residue, which is why its extraction is backed out,
rather than allocated to the main products.
After processing and liquefaction, dedicated transpor-
tations systems move LNG and LPG into temporary stor-
age and then load it onto an ocean-going ship. All products
exit the lifecycle footprint system at this point except LNG,
propane, and butane (Table 2). The other products could be
studied from gate-to-stack.
Most LNG footprint studies aggregate storage and loading
together with other processes. Delphi Group reports data for
storage and loading in Australia. Qatargas reports loading
emissions, but does not provide any way to normalize them,
so they are not useful in this context.
This article applies the much more detailed data reported by
Thinkstep-Nord Stream. A particularly important issue in LNG
storage and loading is the boiloff rate of LNG and the fraction
of boiloff gas recaptured and either flared or used as fuel. These
have been accounted for in the Thinkstep-Nord Stream data.
Applying anonymized unpublished data collected by the
author for LPG terminals in six countries in Europe and the
Middle East allowed estimation of the LPG storage and load-
ing footprint. Most of the emissions are from electricity gener-
ation and the carbon emission factor/kWh in Qatar is applied.
Ship transport
LNG travels via ship from Al Khaleej to Milford Haven, one
of the UK’s three LNG-import terminals and a major British
destination for Qatari LNG. The ships return empty to Qatar.
Studies have reported ocean-going transport footprints of
LNG. The footprints vary threefold, ranging from 2.2-6.8 g
CO2e/MJ LNG. Given the large range, this study applied data
from Tagliaferri as the most recent, peer-reviewed, and spe-
cific to Qatar. It is presumed that 2.5% of the loaded LNG is
lost to boil-off during the 14-day voyage.
LPG transport emissions are taken from Ecoinvent, with
the assumption that the product is shipped from Al Khaleej
to Milford Haven, one of the UK’s 15 LPG terminals.
Storage, regasification
Upon arrival in the UK the LNG remains in storage until it is
demanded for redelivery. At that time, it is pumped from the
tanks and subjected to both heat and pressure to return it to
a gaseous state for transportation by pipeline. The heat and
pressure are provided by gasified LNG, quantities of which
are reported by UK Dept. of Energy & Climate Change and
UK Dept. for Environment, Food & Rural Affairs (DEFRA).
These factors have been used to calculate the emissions and
the yield loss.
LPG terminalling applied anonymized, unpublished data
collected by the author for LPG terminals in six countries in
Europe and the Middle East. Most of the emissions are from
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:31 PM
 TECHNOLOGY

electricity generation, with the carbon QATARI LNG-COMPLEX FUEL FOOTPRINTS, BY LIFE-CYCLE STAGE Table 3
emission factor per kWh in the UK ap- Life-cycle stage LNG LPG Sales gas Condensate Ethane
plied. –––––––––––––––––––– g CO2e/MJ HHV ––––––––––––––––––––––

Well-Ship 8.40 4.90 4.90 3.70 4.90

Shipment, Qatar-to-UK 6.10 1.10 — — —
UK transport, distribution Regasification, terminalling; LNG 0.77 — — — —
Determining the footprint of domestic Terminalling, LPG — < 0.01 — — —
UK transport, distribution 1.25 0.80 — — —
UK LNG transport uses recent, peer- Well-to-tank subtotal 16.50 6.80 — — —
Combustion 51.10 60.50 — — —
reviewed data specific to the UK. This Total 67.60 67.20
transport footprint is 6% lower than
a generic one for Europe published
by DG Energy European Commission
and 19% higher than one for Germany WELL-TO-SHIP QATARI LNG-COMPLEX FOOTPRINTS, BY LIFE-CYCLE STAGE Table 4
published by DBI Gas- und Umwelt- Life-cycle stage LNG LPG Sales gas Condensate Ethane
technik GmbH. –––––––––––––––––––– g CO2e/MJ HHV ––––––––––––––––––––––

LPG emissions are taken from ano- Construction, well <0.001 <0.001 <0.001 <0.001 <0.001
Production, well 2.438 2.379 2.379 2.379 2.379
nymized, unpublished data collected Glycol production for dehydro 0.022 0.022 0.022 0.002 0.022
Pipeline transport, well-shore 1.186 1.158 1.158 1.158 1.158
by the author for approximately 50% Sweetening, CO2 venting 2.910 1.312 1.312 0.148 1.312
of LPG distribution in the UK. Construction, LNG plant 0.025 0.000 0.000 0.000 0.000
Liquefaction 1.362 0.000 0.000 0.000 0.000
Flaring 0.264 0.257 0.257 0.257 0.257
Helium extraction -0.001 -0.001 -0.001 -0.001 -0.001
Combustion Storage, loading; pre-shipment LNG 0.443 0.046 0.000 0.000 0.000
End users combust the LNG and LPG CO2 reinjection -0.284 -0.277 -0.277 -0.277 -0.277
Well-to-ship total 8.400 4.900 4.900 3.700 4.900
mainly for heat, but also to some extent
to power transport. Emissions for com-
bustion of LNG and LPG are taken from
the UK government’s official guidance. These have been ap- • It must be liquefied.
plied in this article on a straight higher-heating-value basis, • There is an overall yield loss in LNG across all the sub-
i.e. they have not been adjusted for equipment or vehicle ef- processes.
ficiencies. Condensate has the smallest footprint because it requires
the least processing.
Footprint results
The author calculated footprints well-to-stack for LNG and Comparisons
LPG and well-to-ship for the other fuels (Table 3). LNG’s Table 5 compares the LNG footprints in this article with
well-to-tank (WTT) footprint is more than twice as high as those of similar studies. This study’s WTT footprint of 16.5 g
LPG’s because of higher emissions in gasification, transport, CO2e/MJ HHV is 10-17% more than that of two recent stud-
and regasification. This is almost completely offset by LPG’s ies, but one-third lower than Tagliaferri, a peer-reviewed
higher combustion emissions, resulting in almost identical study specific to Qatar-UK LNG. The biggest difference is
well-to-stack footprints for the two. in the well-to-ship segment, but the data are not detailed
Analysis of the well-to-ship footprints used 11 subpro- enough to allow further explanation.
cesses (Table 4). LNG comes out with the largest footprint This article’s WTT footprint is also lower than that of
for three reasons: the UK Dept. for Business, Energy and Industrial Strategy
• It must be sweetened more than the other fuels because (BEIS), which is specific to UK LNG but not necessarily from
higher-freezing point compounds can turn into ice during Qatar, and that of the European Commission (EC), which
liquefaction, which cannot be tolerated in the subsequent is a generic figure for LNG to Europe. This article’s find-
delivery chain. ings also differ significantly from Tamura’s historic figure for

LNG FOOTPRINT COMPARISON Table 5

Nordstream-
Stage This article Thinkstep NGVA-Thinkstep Tagliaferri UK BEIS EC Tamura RasGas
–––––––––––––––––––––––––––––––––––––––––––––––––––– g CO2e/MJ HHV ––––––––––––––––––––––––––––––––––––––––––––––––––

Well-Ship 8.40 9.70 10.10 13.70 — 12.65 8.00 4.90

Shipping, Qatar-UK 6.10 3.30 3.30 6.80 — 4.39 1.50 —
Regasify 0.77 — — 2.40 — — — —
Transport-Distribution 1.25 1.10 1.40 1.25 — 2.56 — —
WTT 16.50 14.10 14.90 24.20 21.05 19.60 9.50 —
Combustion 51.10 51.10 51.10 — — — 44.70 —
Total 67.60 65.20 66.00 — — — 54.20 —

Oil & Gas Journal | Mar. 5, 2018 75

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 TECHNOLOGY
LPG FOOTPRINT COMPARISON
Gas-based LPG Refinery LPG
Life-cycle phase This study UK BEIS GREET GREET
–––––––––––––––––––––––––– g CO2e/MJ HHV ––––––––––––––––––––––––
Well-Ship 4.900 — 11.20 — —
Shipping, Qatar-to-UK 1.100 — — — —
LPG terminal, UK <0.001 — — — —
Transport-Distribution 0.800 — 0.70 — —
WTT total 6.800 8.040 11.80 13.10-25.10
LNG to Japan, which is understandable given the differing
temporal and regional conditions.
Less understandable is the difference to the footprint re-
ported by RasGas, which is considerably below all others.
The author queried RasGas about this by email in June 2017.
A spokesperson from RasGas acknowledged the query and
promised a reply, but by completion of this article none had
been received.
Imported LPG footprints have no direct comparators, but
those in this article are compared in Table 6 to other LPG
footprints. The UK government’s figure is 18% higher than
this article’s but there is no detail in their estimate to explain
why. The US Dept. of Energy’s Office of Energy Efficiency
and Renewable Energy Argonne’s Greenhouse gases, Regu-
lated Emissions, and Energy use in Transportation (GREET)
figure is 74% higher, but has a different basis: a significant
proportion of the production is from shale gas, which re-
ports much higher emissions (according to GREET) than
LPG produced from conventional gas onshore or offshore.
The refinery LPG footprints from GREET, Tiax LLC, and
Jacobs Consultancy are presented in additional comparison.
The difference in gas and refinery LPG footprints is a worth-
while topic for further analysis.
A logical extension of this work would be to conduct sim-
ilar analyses for other major LNG (and LPG) producers such
as Australia, Malaysia, Nigeria, Indonesia, and Algeria. A
preliminary review of the literature suggests that LNG foot-
prints from some of these locations might be substantially
greater than those of Qatar.
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of Life Cycle Assessment,” Vol. 21, No. 8, August 2016, pp.
1069–1075.
Myhre, G., Shindell, D., Bréon, F.M., Collins, W., Fuglestvedt,
J., Huang, J., Koch, D., Lamarque, J.F., Lee, D., and Mendoza,
B., “Anthropogenic and natural radiative forcing,” Climate
Change 2013: The Physical Science Basis, Contribution of
Working Group I to the Fifth Assessment Report of the Intergov-
ernmental Panel on Climate Change, 2013, pp. 659–740.
Oil & Gas Journal | Mar. 5, 2018
2/27/18 3:31 PM
 TECHNOLOGY

National Energy Technology Laboratory, “NETL Life Cycle US Energy Information Administration, “Liquefied Natural
Inventory Data LNG Liquefaction Plant Construction,” 2013. Gas: Understanding the Basic Facts,” 2005.
National Energy Technology Laboratory, “NETL Life Cycle Worley Parsons, “Greenhouse Gas Emissions Study of Aus-
Inventory Data Natural Gas Well Construction and Installation tralian CSG to LNG,” 2011.
(conventional offshore),” 2010.
National Energy Technology Laboratory, “NETL Life Cycle The author
Inventory Data Extraction of natural gas from a conventional Eric Johnson (ejohnson@ecosite.co.uk) is
offshore well,” 2010. managing director of Atlantic Consulting, editor-
National Energy Technology Laboratory, “NETL Life Cycle in-chief emeritus of ‘Environmental Impact
Inventory Data Natural Gas Sweetening, Amine Process Acid Assessment Review’ and refining-chemicals
Gas Removal,” 2010. editor for ‘Ecoinvent.’ He is based near Zurich,
National Energy Technology Laboratory, “NETL Life Cycle Switzerland, and has worked in and around
Inventory Data LNG Liquefaction, Operation,” 2010. the energy and chemicals industries for 35
Okamura, T., Furukawa, M., and Ishitani, H., “Future fore- years. Switzerland’s federal government has nominated him
cast for life-cycle greenhouse gas emissions of LNG and city as an Intergovernmental Panel on Climate Change assessor of
gas 13A,” Applied Energy, Vol. 84, No. 11, November 2007, greenhouse-gas emission inventories.
pp. 1136–1149.
Pace Global, “LNG and Coal Life Cycle Assessment of
Greenhouse Gas Emissions,” 2015.
Psaraftis, H.N. and Kontovas, C., “CO2 Emissions Statis- Correction
tics for the World Commercial Fleet,” WMU Journal of Mari- Table 1 in the article entitled “Near-term pipeline plans
time Affairs, Vol. 8, No. 1, January 2009, pp. 1–25. nearly double, future slows” by Christopher E. Smith
Qatar Petroleum, “Annual Review 2015,” 2016. (OGJ, Feb. 5, 2018, p. 72) contained erroneous entries.
Qatargas, “Sustainability Report 2015,” 2015. The corrected version of the table appears here.
RasGas, “Sustainability Report 2015,” 2016.
SHV Energy, “SHV Energy Carbon Count 2013,” Hoofd-
dorp, Netherlands, 2013. PIPELINE CONSTRUCTION IN 20181 Table 1
Skone, T.J., Littlefield, J., Marriott, D.J., Cooney, G., Jamie- 4-10 in. 12-20 in. 22-30 in. 32+ in. Total
Area –––––––––––––––––––––– Miles –––––––––––––––––––––
son, M., Hakian, J., and Schivley, G., “Life Cycle Analysis of
GAS PIPELINES
Natural Gas Extraction and Power Generation,” DOE NETL, US 30 70 212 2,512 2,824
2014. Canada 0 0 0 0 0
Latin America 0 0 0 879 879
Tagliaferri, C., Clift, R., Lettieri, P., and Chapman, C., Asia-Pacific2 0 848 652 3,658 5,158
Europe3 0 111 0 1,141 1,252
“Liquefied natural gas for the UK: a life cycle assessment,” Middle East 0 0 16 1,321 1,337
Africa 0 0 465 21 486
International Journal of Life Cycle Assessment, Vol. 22, No. Total gas 30 1,029 1,345 9,532 11,936
12, December 2017, pp. 1944-1956.
Tamura, I., Tanaka, T., and Kagajo, T., “Life cycle CO2 CRUDE PIPELINES
US 65 81 162 0 308
analysis of LNG and city gas,” Applied Energy, Vol. 68, No. 3, Canada 0 59 0 0 59
March 2001, pp. 301–319. Latin America 0 0 0 0 0
Asia-Pacific+ 0 0 1,384 182 1,566
Thinkstep-NGVA, “Greenhouse Gas Intensity of Natural Europe& 0 0 0 175 175
Middle East 0 48 24 0 72
Gas,” 2017. Africa 0 0 0 0 0
Total crude 65 188 1,570 357 2,180
Thinkstep-Nord Stream, “Greenhouse Gas (GHG) Intensity
of Natural Gas Transport,” 2017.
PRODUCT PIPELINES
TIAX, “Comparison of North American and Imported US 34 151 220 0 405
Canada 0 0 0 0 0
Crude Oil Lifecycle GHG Emissions,” Alberta Energy Research Latin America 0 136 0 0 136
Institute, 2009. Asia-Pacific2 0 0 0 0 0
Europe3 0 0 0 0 0
UK DEFRA, “UK Government GHG Conversion Factors for Middle East 0 0 0 0 0
Africa 0 0 0 0 0
Company Reporting,” 2016. Total product 34 287 220 0 541
UK Department of Business Energy & Industrial Strategy,
“2016 Government GHG Conversion Factors for Company WORLD TOTALS
Gas 30 1,029 1,345 9,532 11,936
Reporting: Methodology Paper for Emission Factors,” 2016. Crude 65 188 1,570 357 2,180
Product 34 287 220 0 541
UK Department of Energy & Climate Change, “Energy Total 129 1,504 3,135 9,889 14,657
Trends,” 2014. 1
Projects planned to be completed in 2018. 2Regions east of the Ural
US Department of Energy, “Lower and Higher Heating Mountains and south of the Caucasus Mountains, excluding the Middle East.
3
Regions west of the Ural Mountains and north of the Caucasus Mountains.
Values of Fuels,” 2010.

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 TECHNOLOGY

TRANSPORTATION

Commercial field testing improves

understanding of DRA degradation
Chen Yang their chain scission during shear degradation. These stud-
Li Changjun ies, however, have used short pipes. Even field experiments
Southwest Petroleum University were conducted in a 7.5-km pipe. Polymer degradation is a
Chengdu, China. long process. This article’s study was carried out in a 130-
km commercial refined products pipeline.
A.M. Nechval
Ufa State Petroleum Technology University Experimental procedure
Ufa, Russia All experiments used M-Flowtreat poly alpha olefin (PAO)
(Oil & Gas Journal, May 1, 2017, p. 70). Tables 1 and 2 show
Yang Peng the physical properties of the diesel and DRA respectively.
Southwest Branch Co. of Sinopec The 130-km pipeline had 20-in. OD and relative roughness,
Chengdu ε, = 8.92 × 10-5. Experiments used 5.82-15.96 ppm DRA,
inducing 28-55% drag reduction.
A. Yu. Zhukov To exclude the pump’s shear action on additives, the field
Kazan Federal University experiment occurred between two stations, adding DRA af-
Kazan, Russia ter the first pump, with pressure measurement done at the

Formulating drag reducing agents’ (DRA) average concentra-

tion and corresponding drag reduction efficiency can show DIESEL CHARACTERISTICS, 20° C. Table 1
that mechanical degradation of DRA not only occurs after its Kinematic viscosity, sq mm/sec
Density, kg/cu m ν0a ν25a Flash point
dissolution but also while dissolution is underway.
Most studies about polymer degradation in DRA have 826 6.31 3.35 > 62° C.
concentrated on the polymers’ molecular construction and

PIPELINE LINEAR SECTION FIG. 1

OPS-1 OPS-2 OPS-3 OPS-4

M1-1 M1-2 M2-1 M2-2 M3-1 M3-2

B1 B2 B3

L1 L2 L3

M = absolute pressure transducer B = DRA addition point

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 TECHNOLOGY

EQUATIONS
1
= 0.88 In Q A 0 Re m V - 3.745 (1)
m
Where:
m = frictionalresistance coefficient withReynolds number Re
A 0 = non - demensionalcoefficient
A 0 = 28 for pure solution without additives
A Q i V = 0.4338i 3.156 (2)
Where:
i = additive concentration
dP tV 2
dx = 2 m D (3)
Q dP/dL Vi
DR Q i V = #1 - & # 100% (4)
Q dP/dL V0
Where:
L = pipeline length
i Q i, f V
DR Q i V = T 1 - Y # 100% (5)
i (o)
Where:
iQi,f V, iQ0 V = hydraulic gradients of diesel flow in j - section of pipeline withDRA and without DRA
respectively
1 P -P
iQ0 V = L S 0pg n + z n - z 0 X (6)
Where:
P0, Pn = pressures in the beginning and ending points of calculating pipeline L
z n, z 0 = height marks in the beginning and ending point of calculationpipeline
Pj
H j = pg + z j - z 0 (7)
Where:
Pj, z j = average pressure andits height mark within 6 hr in the point of j - sections's pressure
transducer
Hj-1 - Hj
i Q i, j V = lj
(8)
Where:
l j = distance between j - land j - section's pressure transducer
DR Q i 0 x V = A $ e -Bx Q x a < x # L 0 V (9)
Where:
x = distance from the position of adding DRA dividedby pipeID
x a = pipe length while DRA is disolved completely
L 0 = experimentalpipe length
A, B = coefficients depend onDRA adding concentration and exp erimentalcondition (transport
i0
regime, solvent and additive property, temperature, etc.), A = where i 0 is initial
a1 + a i0
2

additive concentration at the adding location where DRA is dissolved completely a 1, a 2 = fitting
coefficients, in the experiment a 1, a 2 = fitting coeffiecients, in the experiment a 1 = 0.1396,
a 2 = 8.88 # 10 -3 with error analysis R - square = 0.9822.

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 TECHNOLOGY

EQUATIONS (CONTINUED)
a 1 $ DR Q i 0, x V
iQ x V = (10)
1 - a 2 $ DR Q i 0, x V
di 2i 2i
dt = 2t + V 2x (11)
2i 2yi 2i d2 i
S S 2t + V 2x X Sv dx = Sk i y 2 - rd{ Q v, d, y, i V (12)
dx
Where:
S = pipe cross sectionalarea Q S = rd 2 /4 V
d = ID
v = average velocity inpipe
y = kinematical viscosity
k i = axial fluctuation coefficient Q m 2 /s V
{ Q v, d, y, i V = polymeric degradationintensity function
di 4 { Q v, d, y, i V
dx = - d $ y (13)
Where:
DRA concentration 0 # i # i 0, and according to dimensionalanalysis the non - dimensional
{ Q v, d, y, i V
expression y canbe replacedby an exponential form ai b, which a, b are empirical
coefficients and dependprocess of polymer degradation.
]Z] dci 01 - b
]] 1 0 # x #
]] #Q 1 - b VS - 4 ax + ci 01 - b X& 1 - b , 4a
[] d dci 01 - b
]] x2
i Q x V = ]]] 4a (14)
0,
\
Where:
c = empiricalcoefficient determinedby field experiment, during diesel transport withDRA b =
0.5, a, c are equal to 7.76 # 10 4, - 1.965; 6.50 #10 4, - 2.82; 5.67 # 10 4, - 3.283 with i 0 =
5.82 ppm, 10.95 ppm,15.96 ppmrespectively, and with error analysis SSE =
0.05754, 0.01843, 0.02519; R - square = 0.964, 0.929, 0.905, respectively.
Z] 1
]] K - 1 i + # 1 - b S - 4 ax + ci 1 - b X& 1 - b
]] Q V 0 Q V d 0
0 # x # x max
]] ,
] 4
1
1-b dci 01 - b
[] #Q 1 - b VS - ax + ci 0 X& , x 1 x #
] d max
4a
i Q x V = ]] (15)
]] 0, dci 01 - b
]] x 2 4a
\
Where:
K = polymer dissolution coefficient, in this field experimentK = 0.66, 0.64, 0.57 with i 0 = 5.82
ppm,10.95 ppm,15.96 ppm, respectively.
x max 2-b

y
2-b
d #Q ci 01 - b V1 - b - S - 4 ax max + ci 01 - b X1 - b & + Q K - 1 Vi 0 x max
idx = (16)
0
4a Q 2 - b V d
L0 2-b

y
2-b
d
S - 4 ax + ci 01 - b X + d
S - 4 aL + ci 01 - b X
1-b
idx = -
1-b
(17)
x max
4a Q 2 - b V d max 4a Q 2 - b V d 0
x max L0

DR average = L # y DR Q i 0, x Vdx + y
1
DR Q i 0, x Vdx& (18)
0
0 x max

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 TECHNOLOGY

PRESSURE MEASUREMENT FIG. 2

OPS-A OPS-B

M4 M5

M0 M1
M2 M3 M6

l3
l1 l2 l4 l5 l6

DRA CHARACTERISTICS Table 2

Appearance, 20° C. Density, 20° C. Coagulation point Dynamic viscosity, MPa·s Deposit stability, start time of layering Flash point
Suspension with color 840-930 kg/cu m < -50° C. At 23° C., 30,000-40,000; > 72 hr > 61° C.
from white to light- at 40° C., 50,000
brown with layering

beginning and end of pipeline (Fig.

1). Pressure drops on each section of PRESSURE-HEAD DISTRIBUTION FIG. 3

the pipe were measured with absolute- 700

pressure transducers (Fig. 2, Table 3).
The experiment lasted 84 hr in Initial DRA concentration, ppm
600 0.00
steady-state conditions, with an aver-
age flow of Q = 1,231.94 cu m/hr. It 5.82
took 6 hr to administer the DRA (Figs. 500 10.95
3-4). 15.96
Pressure head, m

Fig. 5 shows pressure head distri-

400
bution along the pipeline with differ-
ent additive concentrations and after
pressure correction for measuring er- 300
ror and hydraulic slope.

Results 200

Evaluation of the PAO’s frictional re-

sistance coefficient, λ, used Equation 100
1. With the addition of DRA the value
A0 increases. On the basis of experi-
mental data, Equation 2 expresses A0 0
0 20 40 60 80 100 120 140
by empirical equation θ, with R-square Distance, km
= 0.9931.
Fig. 6 compares the slope incre-
ment obtained through the predicting Definitions
model with the experimental measured data, showing an er- With constant flow Q = idem, Equation 4 can calculate drag
ror <0.5%. Therefore, in pipeline transportation, diesel pres- reduction efficiency. Different heights of experimental pipe
sure drop dP/dx can be expressed as shown in Equation 3. section in this experiment allow confirmation of drag reduc-

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 TECHNOLOGY

PRESSURE TRANSDUCERS Table 3

M0, OPS-A M1 M2 M3 M4 M5 M6, OPS-B

Distance from DRA add, km 0.00 10.00 28.00 30.00 60.00 80.00 130.00
Section length lj, km 0.00 10.00 18.00 2.00 30.00 20.00 29.00
Height mark, zj, m 48.50 45.40 33.90 34.97 93.20 65.58 47.22
Height mark difference, Δzj, m 0.00 -3.10 -11.50 1.07 58.23 -27.62 -47.29

OBTAINED-SLOPE INCREMENT FIG. 4 tion efficiency via Equation 5.

12.0 Equation 6 calculated hydraulic
gradient without DRA while diesel was
11.5
being transported. Average pressure
11.0
was calculated within 6 hr for a given
DRA concentration, θ0, in stationary
10.5 condition. Equation 7 expresses pres-
sure and elevation head in the point of
Measured, ×10-3

10.0 j-section’s pressure transducer, rela-

tive to the head at the beginning of the
9.5 pipeline (M0).
Equation 8 confirms hydraulic gra-
9.0
dient while transporting diesel with
8.5 DRA. Therefore, according to Equation
5, drag reduction efficiency and its as-
8.0 ymptote are shown in Fig. 5.
Jouenne considered there was no
7.5 mechanical degradation for velocities
lower than a certain value regardless
7.0
7 8 9 10 11 12 of the polymer concentration in his
Predicted, ×10-3 experimental range. The field experi-
ment seemed to be incorrect. Jouenne,
however, didn’t account for degrada-
tion due to the short experimental dis-
DRA EFFICIENCY FIG. 5 tance (7.5 km).
60 On a 130-km scale, the drag reduc-
tion process can be divided into two
parts: dissolution and degradation
50 (Fig. 6). Field experiments, however,
indicated that in the process of disso-
lution polymer additive degradation is
40 also happening. Fig. 7 shows that the
Drag reduction, %

curve gradually drops after peak value,

allowing the degradation process to be
30 expressed by Equation 9.
Equation 9, therefore, can easily cal-
culate initial drag reduction efficiency,
20 while Equation 10 shows DRA concen-
Initial DRA concentration, ppm tration, θ, during diesel oil transport at
5.82 distance X from the position of adding
10 the DRA.
10.95
15.96 Fig. 6 shows the change of PAO
concentration by transport distance
0 during the field experiment. In the
0 20 40 60 80 100 120 140
Distance, km
first 20 km of pipe DRA is gradually
dissolving and, after the peak value,

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additive concentration is gradually DRA CONCENTRATION
decreasing, which can be explained 16
by polymer mechanical degradation.
Since the field experiment was carried
14
out at normal temperature, tempera-
ture’s influence on mechanical degra-
Effective DRA concentration, ppm
dation was not considered. 12
Equation 11 expresses the mate-
rial concentration derivative. Ignor- 10
ing the axial fluctuation of polymeric
concentration in the pipe and treating 8 5.82
transportation as a steady flow allows
treating the whole process as one-di-
6 15.96
mensional flow. Under these condi-
tions, Equation 12 confirms in-pipe
DRA concentration. 4
Assuming axial fluctuation of poly-
meric concentration was ignored al- 2
lows simplifying Equation 12 as Equa-
tion 13. Logarithmic non-dimensional 0
form is considered, but the obtained 0 20
θ(x) fits the experimental data poorly.
Applying αθβ to replace Equation 13’s
dimensional expression lets θ(x) be
calculated by Equation 14.
Fig. 6 shows that in the dissolving process additive con-
centration linearly increases with transport distance. There-
fore, in combination with the dissolving process, the whole
transport process with DRA can be expressed by Equation 15.
DRA concentration, efficiency
In accordance with Equation 15, the integration of θ(x) in the
diesel oil pipeline (L0 = 130 km) can be obtained via Equa-
tions 16 and 17. According to Equation 10, DR(ϴ0, x) = ϴ(x)/
a1+a2 ϴ(x)2, therefore average drag reduction efficiency could
be expressed as Equation 18.
Acknowledgent
We would like to acknowledge support from Mirriko Co.
and assistance from the Southwest Branch Co. of Sinopec.
This study was financially supported by the subproject of
the National Science and Technology Major Project of China
(No.2016ZX05028-001-006); the National Natural Science
Foundation of China (No.51474184, No.51504026); Research
Project of the Education Department of Sichuan Province
(No.15ZB0050), and China Scholarship Council.
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The authors
Chen Yang (doctorchenyang@qq.com) is a researcher in State
Key Laboratory of Oil and Gas Reservoir Geology and Exploita-
tion, Southwest Petroleum University, Chengdu, China. She has
also served as a researcher in Ufa State Petroleum Technology
University, Ufa, Russia. She holds PhDs from Southwest Petro-
leum University and Ufa State Petroleum Technology University.
She is a member of Society of Petroleum Engineers (SPE).
Li Changjun (lichangjunemail@sina.com) is the chief of the
Oil-Gas Storage and Transportation Department, Southwest Pe-
troleum University, Chengdu. He holds a PhD from Southwest
Petroleum University. He is a member of Chinese Petroleum
Society (CPS).
A.M. Nechval (a_nechval@mail.ru) is a PhD supervisor in Ufa
State Petroleum Technology University, from which he holds a
PhD.
Yang Peng (doctoryangpeng@qq.com) is a senior engineer of
Southwest Branch Co. of Sinopec, Chengdu. He previously
served as an engineer of Northwest Branch Co. of Sinopec,
Urumqi, China. He holds a PhD from Southwest Petroleum
University. He is a member of Society of Petroleum Engineers
(SPE).
A. Yu. Zhukov (arkadi.ksu@mail.ru) is a senior researcher in
Kazan Federal University, Tartarstan, Russia, from which he
holds a PhD.
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 MARCH 2018 VOL 64; NO. 4
OGPE.COM

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¨

W H AT ’ S N E W F O R O N S H O R E & O F F S H O R E : U P S T R E A M , M I D S T R E A M , D O W N S T R E A M O P E R AT I O N S

Managed-pressure-drilling choke valve actuator

ServoChoke SVC electric choke valve actuator is designed to deliver
flexibility, reliability, and high speed for managed pressure drilling, setpoint
control, or choke-and-kill.
It combines an integrated servo motor, planetary roller screws, plus
industrial-automation-grade components into an all-steel body — engi-
neered to continuously, accurately, and precisely modulate in harsh
environments.
Models operate over -40° to +60°C. and are sealed to meet IP67 stan-
dards. They are designed and tested for 100% duty cycle and available in
7,000 lb or 15,000 lb thrust — for continuous 24-hr, long-term, mainte-
nance-free operation.
ServoChoke is globally certified with five individual certifications for
ATEX, IECEx, and Class I. Div. 1 — all on one assembly.
Tolomatic Incorporated: Hamel MN
For FREE Information, select #1 at ogpe.hotims.com

Image recognition, spectral profiling, rapid data

processing service monitors/manages global oil storage
New TankWatch monitoring service is announced to significantly man-
age and monitor global oil storage.
To report on critical global oil storage terminal locations and deliver
time-sensitive insight into global inventories and storage levels — Tank-
Watch employs image recognition and spectral profiling combined with
rapid data processing plus cloud-penetrating radar imagery together with
other very high-resolution satellite-gathered information.
Geospatial Insight Limited: Coleshill, Birmingham United Kingdom
For FREE Information, select #2 at ogpe.hotims.com

Real-time industrial worker personal gas safety monitoring

Honeywell Connected Plant Skills Insight Personal Gas Safety is announced for
real-time plant and remote operation worker safety monitoring.
Wearable detectors monitor gas, radiation, and dust. They are tightly integrated
with Experion Process Knowledge distributed control system. In case of harmful
exposures, man-down, or panic alarms — accurate, automated alarms alert control
room operators in real time. Safety teams can also take advantage of powerful Experion
PKS-embedded tools to provide detailed gas detectors trending, reporting, and data
analysis.
Personal Gas Safety provides critical alarm reporting, sensor and calibration status,
plus worker identification and location data from the wearable gas detectors.
Honeywell Process Solutions: Houston
For FREE Information, select #3 at ogpe.hotims.com

180305OGJ_P1 1 2/27/18 2:55 PM

 OGPE.com New Products & Services

Application note: Basic

OG&PE
®

power quality methodology

This free four-page application note
offers basic power quality methodol-
Vice President/Group Publisher Paul Westervelt
ogy and presents common culprits. Editor J.B. Avants
It’s made available as power quality Production Director Charlie Cole
importance increases with the prolif- Production Manager Shirley Gamboa
eration of electronic equipment in all Art Director Clark Bell
Digital Audience Development Manager Jim Cowart
electrical systems. The note presents
Social Media Marketing Analyst Anna Alaback
how power quality covers a wide Marketing Manager Myla Lowrance
range of issues — then offers first
steps to troubleshooting PQ problems. These range from utility
source to receptacle and are cited in 16 summaries. EDITORIAL OFFICES
Fluke Corporation: Everett WA Oil, Gas & Petrochem Equipment
For FREE Literature, select #250 at ogpe.hotims.com 1421 S. Sheridan Road, Tulsa OK 74112 • PO Box 1260, Tulsa OK 74101-1260
p 918.832.9351 • f 918.832.9201 • www.OGPE.com

Product line expands with new thermal mass flow

meter introduction
SALES OFFICES
Model FT4X thermal mass
North America Italy
flow meters are launched to 1421 South Sheridan Road, Tulsa OK 74112 Ferruccio & Filippo Silvera
expand this manufacturer’s oil, 201-264-7107 Tel. 39 02 28 46716
Ed Tiscornia info@silvera.it
gas, and process-applicable EdT@PennWell.com
product line. France, Spain, Portugal, Belgium
United Kingdom, Scandinavia, The Netherlands and Southern Switzerland
The new models are espe- and The Middle East Stefania Piciotti Thompson
cially suited to monitor pure Graham Hoyle +33 6 21 23 67 02
+ 44 1934 733871 StefaniaT@PennWell.com
gases, mixed gases, or complex GrahamH@PennWell.com
flare gas compositions. Their Central & South America
Germany, Switzerland, Russia, Austria, and Paul Westervelt
Gas-SelectX feature offers ex- Eastern Europe 713 499 6305
panded selection of gases from three menus, while second- Andreas & Wilhelm Sicking pwestervelt@PennWell.com
49 0 2903-3385-70
generation DDC-Sensor eliminates sensor element vibration WilhelmS@PennWell.com
which can lead to metal fatigue or failure.
Singapore
FT4X’s data logger records flow rate, totals, or other events Michael Yee
and alarms with a variety of features including 40 daily totals +65 9616 8080
Yfyee@singnet.com.sg
plus settable contract time that defines the contract day.
Fox Thermal Instruments Incorporated: Marina CA
For FREE Information, select #6 at ogpe.hotims.com For assistance with marketing strategy or ad creation,
please contact PennWell Marketing Solutions
Vice President Paul Andrews • (240) 595-2352; pandrews@pennwell.com
ATEX / IECEx hazardous-area-applicable proximity
probe holders introduced CORPORATE OFFICERS
ECPHS eddy current probe hold- Chairman Robert F. Biolchini
ers are new from this condition 1939-2017
monitoring specialist for its API Vice Chairman Frank T. Lauinger
670-compliant XPR04 proximity President and Chief Executive Officer Mark C. Wilmoth
probes. Executive Vice President, Jayne A. Gilsinger
As a new option from the Sentu- Corporate Development and Strategy

rion X range, the reverse mount
probes fitted in the holders are used
in machinery protection systems on the most critical of industrial
machines, declares their manufacturer.
They measure turbine, pump, compressor, or gearbox relative
shaft vibration / eccentricity, axial position / thrust pad wear,
shaft speed, and overspeed.
SENSONICS Ltd.: Berkhamsted, Hertfordshire UK
For FREE Information, select #7 at ogpe.hotims.com
Senior Vice President, Brian Conway
Finance and Chief Financial Officer
Need Reprints of your ad or recent editorial?
Contact Jill Kaletha at Mossberg & Co. for a quote:
800 428 3340 x149 / jkaletha@mossbergco.com
Oil, Gas & Petrochem Equipment makes every reasonable effort to verify its content.
However, neither Oil, Gas & Petrochem Equipment nor our parent firm,
PennWell Corporation, assume responsibility for validity of manufacturer
claims or statements made in published items.

P2 March 2018

180305OGJ_P2 2 2/27/18 2:55 PM

 Your Industrial IoT, Simplified

Easy Modbus data acquisition, MQTT support, and

4G LTE routing
Developers that want to get their Industrial IoT applications up and running quickly
should look into Moxa’s UC-8112-ME-T-LX, a highly versatile and programmable
4G LTE Modbus data logger. It is engineered to withstand extreme temperatures
without cooling fans or heaters and supports Moxa’s easy-to-use ThingsPro Suite.
With built-in data compression, data processing, wireless management, MQTT support,
and Modbus data management features, you can save thousands of dollars in
programming and datad plan costs.

See a live demonstration at the 2018 Offshore Technology Conference, Moxa Booth #5325.

For FREE Information, select #401 at ogpe.hotims.com

180305OGJ_P3 3 2/27/18 2:55 PM

 OGPE.com New Products & Services

Deflagrationproof, detonationproof flame arrestors Top seal is stuck pump solution

A new flame arresters line is deflagrationproof and detonation-
proof — tested and approved in both stand-alone and valves-
integrated versions.
They comprise a new, patented con-
struction concept which delivers ben-
efits at 360°. This offers more perfor-
mance in terms of pressure drop which
is drastically reduced, easy assembly/
disassembly without risk of parts dam-
age, easy maintenance with possibility
to clean 100% of dirtiness, compact-
ness, light weight, and added safety.
The flame arresters manufacturer
notes “the best performance is achieved
in the end of line version for endurance burning where the need
of the opening rainproof is disappeared.”
FNC Tank Protection Division,
Fabbrica Nazionale Cilindri S.p.A: Cisalog Italy
For FREE Information, select #9 at ogpe.hotims.com
Full-service-in-place progressive cavity pumps
NEMO FSIP progressive cavity pumps are on the market for
difficult pumping, wear-intensive applications.
Maintenance-friendly full-
service-in-place design pro-
vides full access to all rotating
parts. You can conveniently
open the pump housing, dis-
mantle all rotating parts, and simply re-install them — without
having to remove the pump from the pipe assembly or discon-
nect wiring.
NEMO FSIP is available in six sizes for up to 700 gpm. They
are also offered with up to 90 psi differential pressures (1-stage)
and 180 psi (2-stage). S, L, D, and P geometries are offered.
NETZSCH Pumps North America LLC: Exton PA
For FREE Information, select #10 at ogpe.hotims.com
SandBlaster Top Seal is patent pending and
announced as “a solution to stuck pumps.”
It attaches below the valve rod guide. Viton
fins form a barrier to prevent sand or rust
accumulation in the annular space above the
pump seat.
Designed to work on all insert pumps,
including top anchor types, SandBlaster ad-
vantages include no wet strings, no stripping
rods, no need to seat or unseat the unit, SS
construction, plus 475°-rated Virgin Viton.
Kajon Oil Tools: Houston
For FREE Information, select #11 at ogpe.hotims.com
Sprague pumps, boosters, power units newly
available from HiP
Sprague air-driven power
products are now available
from this manufacturer.
The hydraulic pumps, gas
boosters, and power units de-
liver high-pressure to oil and
gas, process chemical, and
other applications.
Sprague air-driven hydrau-
lic pumps are positive displacement designs that convert air-drive
pressure into hydraulic discharge pressure with output pressures
up to 36,500 psi.
Sprague air-driven gas boosters intensify pre-charge pres-
sures to add efficiency to duties where system or bottle pressures
are limited. They deliver up to 13,500 psi output.
Sprague air-driven power units include packaged power
systems that utilize Sprague hydraulic pumps or gas boosters
to output up to 36,500 psi.
High Pressure Equipment Company (HiP): Erie PA
For FREE Information, select #12 at ogpe.hotims.com

Drillmec, GEOLOG announce continuous circulation system & service global commercial agreement
A global commercial agreement for joint business development and provision of HoD Heart of Drilling service has been an-
nounced by Drillmec SpA, subsidiary of TREVI Finanziaria Industriale SpA and GEOLOG International BV.
The continuous circulation system delivers uninterrupted bottomhole pressure management during connections. Combined
with a high-resolution flow rate monitoring system, HoD gives operators capability to achieve planned total depth in challenging
drilling environments — to reduce operational, HS&E, and financial risk.
During connections, flow-switching sequences are remote controlled using a HMI located in a safe area on the rig floor. Design
characterizing the HoD subs guarantees a double safety barrier always in place both on the rig floor and in the well.
Complete specifics on the global commercial agreement and HoD are available free upon request.
GEOLOG International BV & Drillmec SpA
For FREE Information, select #13 at ogpe.hotims.com

Want Free Information or Literature — Click The Link

P4 March 2018

180305OGJ_P4 4 2/27/18 2:55 PM

 ONE SPARK IS ALL IT TAKES.
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safe test tools.
Have you ever wondered if you’re using the right tool for the right job?
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For FREE Information, select #403 at ogpe.hotims.com ©2018 Fluke Corporation. 2/2018 6010456a

180305OGJ_P5 5 2/27/18 2:55 PM

 OGPE.com New Products & Services
Free case history: Pipeline-drag-reducing meters
How 8-inch BiRotor Plus Meter
B311 improves both linearity and
repeatability of a pipeline’s measure-
ment system is documented, charted,
and illustrated in this free case
history.
In problem/solution format it high-
lights how BiRotor Plus’ twin helical
rotors are retained inside a double
cased meter housing. The rotors and
measuring chamber are machined to
very tight tolerances and have no
metal-to-metal contact. The meter utilizes hardened tungsten
carbide timing gears and has no direct mechanical output —
instead employing a pulse output generated by incorporated
pick-off coils.
Over 3 months of BiRotor Plus usage a significant improve-
ment in both linearity and repeatability of the pipeline’s measure-
ment system was realized. It was proved several times per day
with resulting proving data supporting BiRotor Plus was virtually
unaffected by viscosity or process gravity changes.
Brodie International: Statesboro GA
For FREE Literature, select #252 at ogpe.hotims.com
New superior bottoms upgrading catalyst
Boroflex residuum (resid) oil Fluid Catalytic Cracking cata-
lyst is commercially available “to optimize refiners’ bottoms
upgrading and distillate yields by providing maximum nickel
contamination passivation.”
Based on Boron-Based Technology, it delivers operational
flexibility to maximize profits for refiners using heavy resid feeds
and minimizes hydrogen and coke production.
BASF: Ludwigshafen Germany
For FREE Information, select #15 at ogpe.hotims.com
Pressure-based fracture maps validate stages
This company has validated more than 2,500 hydraulic fractur-
ing stages throughout the US with its fracture maps.
The simple, accurate tech-
nology creates maps in relevant
time to show fracture half-
length, height, and asymmetry
to validate the completion de-
sign on every well — at a frac-
tion of the cost of legacy diag-
nostics technologies.
Maps easily quantify this fracture geometry so operators know
whether a stimulation treatment is producing planned fracture
dimensions. All that is required is a pressure gauge and a bridge
plug on a monitor well. Fracing proceeds in the treatment well
without downhole tools, downtime, or additional crew.
Reveal Energy Services: Houston
For FREE Information, select #16 at ogpe.hotims.com
P6 March 2018
180305OGJ_P6 6
Design integrates synchronization controls,
rotor telemetry to keep motors up and running
WEG Electric Machinery Sync-Rite Plus System provides
the information you need to keep motors operating.
It eliminates the slow and
costly trial-and-error process,
providing telemetry data re-
quired to immediately identify
an issue — so problems are quickly solved and motors put back
into service with minimal downtime. Full details are yours free.
Electric Machinery Company — WEG Group: Minneapolis
For FREE Information, select #17 at ogpe.hotims.com
Real-time adaptive fracing module
StimPredictor desktop module of FracPredictor software
platform and GMXFrac cloud-based web service is new. It
delivers real-time optimization of perforation and fracture treat-
ment design of unconventional and tight reservoir wells. It adapts
to the lithologic and stress variability using surface drilling data.
The frac design and analysis software deploys novel complex
physics to account for current operational realities combined
with advanced algorithms for real-time results. StimPredictor
captures the actual geologic and geomechanical data along each
studied well by leveraging commonly available surface drilling
data instead of constant properties from pilot or nearby wells.
FracGeo LLC: The Woodlands TX
For FREE Information, select #18 at ogpe.hotims.com
Edge Agent, Composer, Fabric, Arundo API
Enterprise suite
Edge Agent enables industrial
connectivity and analytics in
rugged, remote, or discon-
nected environments. It quick-
ly and easily installs on Win-
dows, Linux, or Mac OS
devices and supports highly
distributed architectures with
offline buffering.
Composer allows companies to quickly and easily deploy
desktop-based machine learning models into the Arundo Fabric
cloud environment with a single command. It also enables
companies to create and manage live data stream and integrate
such streams with deployed data models
Fabric cloud-based hub is for deployed machine learning
models, data streams, edge agent management, and quick navi-
gation to extended applications.
Arundo API provides a fully documented, RESTful API to
access and manage data across Fabric. It provides an accelerated
avenue to leveraging Arundo Enterprise to deliver analytics,
develop specific applications and dashboards, or integrate into
existing workflows. Complete Enterprise Suite specifics are free.
Arundo Analytics: Houston, Oslo, Palo Alto
For FREE Information, select #19 at ogpe.hotims.com
2/27/18 2:55 PM

New gas detectors need no tool or controller
ULTIMA X5000 gas detectors are introduced with an advanced
OLED display with touch controls, two sensor intputs, and
patented XCell sensors with new TruCal technology.
This ULTIMA X replacement has
eliminated any need for a tool or con-
troller. It operates via two touch but-
tons on its face or Bluetooth-enabled
smartphone — from up to 23 m.
The gas detector’s maker notes “the
industry standard has always been one
sensor per transmitter but the X5000
can double its coverage by having the
ability to have two sensor inputs into the one transmitter.”
TruCal technology on selected XCell sensors compensates
for sensor drift due to environmental changes. You do not have
to touch or calibrate the detector for up to 1 1/2 years.
MSA: Berlin and Lake Forest CA
For FREE Information, select #20 at ogpe.hotims.com
30% better liquid cold plate fins performance
New liquid cold plates comprise a fin design to perform 30%
better than comparable types.
Models are engineered to
keep instrument and upstream
equipment properly cooled.
They also serve to provide prop-
er thermal management of test
or monitoring equipment, com-
puters, and automated systems, notes the manufacturer.
Liquid cold plate fin design features an optimized aspect ratio
to offer more than 30% improvement in thermal performance
compared to other commercially-available versions.
The liquid cold plates are lightweight, compatible with in-
dustry-accepted coolants, and leak-tested to 100 psi.
ATX: Advanced Thermal Solutions Incorporated: Norwood MA
For FREE Information, select #21 at ogpe.hotims.com
Contactless, accurate radar level transmitters
VEGAPULS 64 contactless radar level
transmitter now has increased accuracy
down to 1 mm as standard.
The 80-GHz designs deliver outstand-
ing repeatability and measurement accu-
racy on ranges up to 30 m.
Combining outstanding sensors proven
focusing, the transmitters deal with build
up to operate even on the smallest mount-
ing connections — as well as through
valves and down long nozzles.
VEGAPULS 64’s manufacturer emphasizes all features of its
level sensor and transmitter — are not at an extra premium.
VEGA Controls Ltd.: West Sussex UK
For FREE Information, select #22 at ogpe.hotims.com
180305OGJ_P7 7
New Products & Services OGPE.com
Non-slam axial nozzle check valves introduced
NOREVA/GOODWIN non-slam axial nozzle check valves
are new, globally patented designs.
On the discharge side of compres-
sors which need a certain amount of
flow to be stable fully open — models
combine single piston, solid disk
plate, centrally guided, single spring
with ring disk, friction-free radial
guiding system, and multiple springs.
Combination of the lightweight
ring disk and minimized friction al-
lows the installation of very soft springs. This provides fully
open valves at very low flow rates without need for size reduc-
tion. Resulting reduced head loss also cuts energy costs.
NOREVA GmbH: Mönchengladbach Germany
For FREE Information, select #23 at ogpe.hotims.com
Rugged HMI panels certified by all major
classification societies
New X2 extreme panels come
in 7, 12, and 15 in. to with-
stand tough environments.
The HMIs are announced as
“certified by all major classifica-
tion societies” for hazardous
areas where gases, vapors, and dust are present — in high vibra-
tion and high-pressure washdowns — over -30° to +70°C.
Standard, high-performance, and fully sealed high-perform-
ance X2 versions are available. The panels comprise CODESYS
PLC functionality for lean automation solutions. The optional
control functionality by CODESYS runs on dedicated CPU cores.
Beijer Electronics Incorporated:
Malmo Sweden and Salt Lake City UT
For FREE Information, select #24 at ogpe.hotims.com
Inspections, destructive NDT material testing
help avoid plant disruptions, downtime
Pressure equipment, valves,
heat exchangers, or containers
as well as steel construction
can avoid costly, lengthy plant
disruptions and downtime
with inspections plus de-
structive and nondestructive material testing offered by this
company. Expediting benefits of the services deliver early and
consistent recognition of issues to avoid processing delays.
This firm analyzes an entire supply and manufacturing chain
from start of the project to quickly identify potential bottlenecks
or other potential problems. It then works to deliver solutions
at an early stage. Complete services data are free
IWT GmbH Inspection & Welding Technologies:
Limburg/Lahn Germany
For FREE Information, select #25 at ogpe.hotims.com
March 2018 P7
2/27/18 2:55 PM
 OGPE.com New Products & Services
Two-screw pumps aid refinery, tank terminal
unloading, transfer
New lighter, smaller Houttuin TT
two-screw pumps help refinery
and tank terminal operators opti-
mize unloading and transfer.
The positive displacement de-
signs deliver a wide variety of flu-
ids, even under changing or un-
predictable process conditions,
declares their manufacturer. The API 676-3rd-compliant models
load or unload cargo in the same amount of time, regardless of
liquid involved or discharge head required.
CIRCOR Pumping Technologies: Delden The Netherlands
For FREE Information, select #27 at ogpe.hotims.com
Gas-lift, ESP system production optimization
New ForeSite production optimization platform software
combines physics-based models with advanced machine-learning
data analytics. It improves performance across conventional and
unconventional oil and gas assets.
The new release builds on ForeSite’s existing capabilities (op-
timization support for reciprocating rod-lift systems) adding
support for gas-lift and electric submersible pump systems, as
well as naturally flowing wells.
Weatherford International plc: Houston
For FREE Information, select #28 at ogpe.hotims.com
Latest enterprise level pipeline applications suite
introduced
EPMS R1.03 Enterprise
Pipeline Management Solu-
tion is launched “for deploy-
ment at the heart of the pipe-
line operations management
environment.”
The new software supplements a core SCADA platform with
specific gas and liquid applications that enable pipeline opera-
tors to manage delivery contracts and associated logistics in a
safe, cost effective, and efficient manner.
EPMS is developed to be used in combination with common
supervisory and monitoring functions. It is based on a well-
designed modular platform that is both IT friendly and secure,
declares the provider.
As no two pipeline applications are identical and operational
philosophies can differ from one operator to the next — the
suite allows easy templates and functions modification.
Yokogawa Corporation of America: Sugar Land TX
For FREE Information, select #29 at ogpe.hotims.com
For Free Information or Literature — Click The Link
P8 March 2018
180305OGJ_P8 8
Tube connection system solves assembly issues
HOKE GYROLOK XP tube connection system is announced
to “significantly improve the installation assembly process and
ensure safer, more reliable tube-fitting connections.” The fittings
cannot be overtightened — to avoid leaks.
They specifically overcome challenges of fittings assembly
onto a complete range of corrosion resistant heavy wall tubes.
HOKE GYROLOK XP grips heavier wall tubes to increase work-
ing pressure by up to 80% over conventional designs.
CIRCOR International: Spartanburg SC
For FREE Information, select #30 at ogpe.hotims.com
Collar couplings support LNG-to-FSRU transfer
This manufacturer expands its Emergency Release Collar
Couplings line to support LNG transfer to Floating Storage
Regasification Units.
The 10-in. field-tested, me-
chanical emergency release
coupling system is designed to
manage ship-to-ship LNG
transfer of 2,250 cubic metres
per hour per line.
When operating across mul-
tiple lines, systems will support optimum FSRU transfer flow
of 10,000 to 12,000 cubic metres per hour, it’s declared.
ERC technology incorporates low pressure drop management
to ensure transfer can achieve high flow rates. Installed aboard
an FSRU, the coupling will be part of the pipeline that connects
to the LNG carrier.
Alpha Process Controls: Peterlee, County Durham UK
For FREE Information, select #31 at ogpe.hotims.com
March Issue
Bonus Distribution
GEO 2018: Kingdom of Bahrain
IADC/SPE Drilling Conference: Fort Worth
AFPM Annual Meeting: New Orleans
EITEP Pipeline Technology Conference: Berlin
Subsea Tieback Forum & Conference: Galveston
SPE ICoTA: The Woodlands
CIPPE: Beijing
2/27/18 2:55 PM

Join more than 4,500 terminal
industry professionals at the
premier annual event for liquid
terminal owners and aboveground
storage tank operators.
ILTA 2018 is the one place to attend
informative conference sessions
and in-depth training courses,
as well as find innovative solutions
and the latest technology from
over 330 trade show exhibitors.
G R O U P D I S C O U N T S AVA I L A B L E
WWW. ILTA .O R G/AOCTS
180305OGJ_P9 9
38th ANNUA L
I NT E RNAT I ONA L
OP ERAT IN G
CON F ERE NC E &
T RA DE SH OW
HO USTON , TE XAS
MARRIOTT MARQUIS HOUSTON
GEORGE R. BROWN
CONVENTION CENTER
W HAT ATTE N DE E S SA ID
A B OU T I LTA’ S 2 017 E VENT:
“The speakers were well
prepared and cognizant of
time. I was able to learn a lot
about preventative maintenance
practices and standards.”
“This event is an amazing
resource for ILTA members.
I’ve been able to connect with
so many individuals working
in the terminal industry.”
“The number of exhibitors
and their wealth of knowledge
at ILTA’s trade show was
impressive. I discovered a
lot of new technology that is
available to terminals.”
2/27/18 2:55 PM
 SERVICES | SUPPLIERS
FAIRFIELDNODAL
Welcomes new board member
Knut Eriksen has been welcomed to
FairfieldNodal’s Board of Directors as the
company continues to
expand capabilities and
capture new market op-
portunities.
The announcement
from President and CEO
Charles Davison notes
Eriksen
“Eriksen’s industry
experience, strategic
orientation, demonstrated
business development track record, and
in-depth understanding of the offshore oil
and gas segment.”
Eriksen recently retired from Ocea-
neering International where he served
as Executive Officer and Senior Vice
President of Business Development. He
has also held other key oil and gas indus-
try executive positions on the operator,
service company, and contractor sides of
the business.
NSI TECHNOLOGIES
Founder receives frac honor
At the February Society of Petroleum
Engineers Hydraulic Fracturing Technical
Conference in The Woodlands — Dr. Mi-
chael B. Smith received the 2018 Legend
of Hydraulic Fracturing Award. It recog-
nizes his significant contributions to the
field over a lifetime of work, according to
2019 Committee Chair Martin Rylance of
BP Exploration who presented the award.
Dr. Smith
is President of
NSI Technolo-
gies, a Premier
Oilfield Group
Company
petroleum in-
dustry software
and consulting firm which specializes in
the design, optimization and execution of
hydraulic fracturing treatments. The com-
pany was formed in 1984 by Dr. Smith
and Dr. Ken Nolte who co-developed the
Nolte-Smith plot for net treating pressure
analysis and the ‘G’ function for fracturing
pressure decline analysis.
85
180305OGJ_85 85
WEG ELECTRIC CORPORATION
Announces new VP Sales, Marketing
Gary Cleveland has joined WEG Electric
Corporation as President of Sales and
Marketing.
He will be primarily
responsible for market-
ing, strategy, and sales
of low voltage motors.
Cleveland has been in
the industry 32 years,
Cleveland
starting at an EASA repair
shop in 1986. He holds a
Bachelor of Science Degree in Business
Management from CSU Stanislaus and an
MBA from University of Utah.
EMERSON ELECTRIC
Acquires Paradigm
In its second recent acquisition targeting
tech for the oil and gas industry, Emer-
son Electric Company has purchased
Houston-based Paradigm for $510 million.
It will be combined with
Roxar business to create
a comprehensive explo-
ration and production
software portfolio, according to Emerson
Chairman and CEO David Farr.
Paradigm also brings 500 global em-
ployees to Emerson which averaged about
76,500 employees during its 2017 fiscal.
Prior to the Paradigm acquisition, Em-
erson moved its Pasadena service center
to a larger facility in the Houston suburb
to house service, design, manufacturing,
and assembly operations for measurement
technologies.
ACTEON
Acquires Viking Seatech
Announced to enhance its moorings capa-
bilities, Acteon has acquired Viking Seat-
ech Group, following regulatory approval,
while selling Mirage
Machines to Actuant.
Viking Seatech ser-
vices will compliment those of InterMoor
while extending Acteon global reach for
clients while adding rental and engineer-
ing capabilities as well as chain inspection
and survey in Australia, according to Paul
Alcock, Acteon Executive Vice President
and Mark Jones, Global CEO of InterMoor.
TRACS ASSETS LTD.
Secures SaaS contract
TRACS Assets Ltd., Aberdeen, has
secured a contract with BICO Drilling
Tools Incorporated,
Houston to increase
operational efficien-
cy through automat-
ing all equipment
management processes.
TRACS Enterprise Class Software-
as-a-Service streamlines and optimizes
operational activities associated with
equipment management. Its SaaS will
provide incorporation of core back office
processing, specifically tailor mobile apps
for BICO field workers, and report key
performance indicator management.
BICO Drilling Tools, a Schoeller-Bleck-
mann Company, specializes in positive
displacement drilling motor technology,
through-tubing, and open-hole applica-
tions.
JGC CORPORATION
Lump-sum turnkey contract
PT Pertamina (Persero) subsidiary PT Per-
tamina EP Cepu (PEPC) has let a lump-
sum turnkey contract to JGC Corporation,
Yokohama, Japan.
JGC will provide
engineering, pro-
curement, and construction for a grass-
roots gas processing plant in Bojonegoro,
East Java, Indonesia.
Alongside partner PT Rekayasa Industri
of Indonesia, JGC will deliver EPC for the
plant to process 330 MMcfd of natural
gas containing 1% hydrogen sulfide and
34% carbon dioxide, produced by PEPC
and partners’ unitized Jambaran-Tiung
Biru gas field. Once in service, the plant
will produce 172 MMcfd of sales gas, con-
densate, and other associated gases to be
used primarily by a gas-fired power plant
of Indonesia’s state-owned electric power
company in East Java Province.
ASHTEAD TECHNOLOGY AND
FORUM ENERGY TECHNOLOGIES
Subsea rental JV
A joint venture to create subsea survey
and ROV equipment rental and associated
services has been agreed to by Ashtead
Oil & Gas Journal | Mar. 5, 2018
2/28/18 2:37 PM
 SERVICES | SUPPLIERS
Technology and Forum Energy Tech-
nologies. Forum will contribute its subsea
rental business currently trading as Forum
Subsea Rentals. The announcement
was made by Allan Pirie, CEO of Ashtead
Technology and Jim Harris, Forum Energy
Technologies Chief Financial Officer and
Senior Vice President.
The combined group with a rental fleet
of 19,000 assets valued as $139-million,
will service all major subsea hubs from its
Aberdeen, Singapore, Abu Dhabi, London,
and Houston bases. It will also provide
advanced engineered measurement solu-
tions and comprehensive asset manage-
ment services.
BASF, LETTERONE
Merge oil, gas subsidiaries
A letter of intent has been signed by
BASF and LetterOne to merge
their respective oil and gas
business in a joint venture to
operate as Wintershall DEA —
to create one of the largest independent
European exploration and production
companies.
BASF’s oil and gas business is bundled
in the Wintershall Group consisting of
Wintershall Holding GmbH and its sub-
sidiaries, including the gas transportation
business. LetterOne’s oil and gas business
comprises DEA Deutsche Erdol AG and its
subsidiaries.
CB&I
SASREF contract
Saudi Aramco Shell Refinery has awarded
CB&I a contract for more than $95 million
to provide engineer-
ing, procurement,
and construction of
its Al-Jubail facil-
ity’s modernization
expansion.
Executive Vice President of Engineer-
ing & Construction Duncan Wigney noted
CB&I has completed conceptual design
and FEED phase of the project while
working with SASREF to optimize invest-
ment on the new refinery configuration.
Integrated solutions will provide operating
flexibility needed to generate maximum
returns through sustainable fuels produc-
Oil & Gas Journal | Mar. 5, 2018
180305OGJ_86 86
tion, which meets Euro V regulations for
cleaner emissions.
SOFIS
To supply 4,500 interlocks
Sofis announces the order of 4,500
Netherlocks interlocks to an EPC contrac-
tor delivering the first phase
of a heavy oil development
program for Kuwait Oil Com-
pany. The interlocks will mainly be fitted to
pressure safety valves and pig traps.
The KOC program covers green-
field and brownfield facilities including
engineering, procurement, construction,
pre-commissioning, commissioning,
startup, and operations maintenance work
for the main central processing facility and
associated infrastructure. This includes
a 162-km pipeline to transport the heavy
crude from the CPF to the south tank farm
located in Ahmadi.
FLUOR
Awarded Penguins contract
An engineering, procurement, and fabrica-
tion contract has been awarded to Fluor
Corporation by Shell for its Penguins
floating
production
stor-
age and
offloading vessel in the North Sea. The
project will be led by Fluor’s Manila Philip-
pines office.
Announced by Fluor Energy & Chemi-
cals Business President Jim Brittain, Fluor
has full responsibility for design, fabrica-
tion, and delivery of the pre-commissioned
FPSO, where it will have a 45,000 barrels
of oil equivalent per day production capac-
ity and can store up to 400,000 barrels.
It will be designed to operate continuously
for 20 years without dry docking.
SURERUS PIPELINE
Appoints President
Surerus Pipeline Incorporated and Surerus
Murphy Joint Venture have appointed
Sean Surerus President. He will continu-
ous to serve on SMJV’s Executive and
Board of Directors.
Surerus joined the firm in 2001 and
has served as Surerus Pipeline Vice
President since 2012 and of SMJV for
the past three years. He will assume the
presidency from Brian Surerus, founder of
the company in 1969. Brian Surerus will
continue Chief Executive Officer.
Chris Pezoulas will assume the role of
Vice President-Operations at SMJV follow-
ing 25 years with TransCanada Pipelines
where most recently he served as Project
Director of the Prince Rupert Gas Trans-
mission project.
J2 SUBSEA, ACTEON
Appoints GM
Christian Blinkenberg has been appointed
General Manager, based in Aberdeen,
of J2 Subsea, an Acteon company. The
announcement is made by Managing Di-
rector John Walker for the provider of ROV
tooling products and services for the ROV
and underwater survey markets.
With more than 15 years of United
Kingdom, Brazil, United States, and
Nordic region oil and gas experience,
Blinkenberg “will not only help us achieve
our business goals but allow me to focus
more on the technological innovations that
have helped J2 Subsea become a global
leader in the provision of customized ROV
tooling solutions,” Walker noted.
SIMMONS EDECO
Names Denmark Base Manager
Wellhead and valve maintenance, asset
integrity solutions, and onshore drilling
services provider SIMMONS EDECO has
appointed Gavin Sherwood its Base Man-
ager – Denmark.
He will oversee all aspects of opera-
tions, marketing, and financial manage-
ment of the new Denmark base, estab-
lished to supports its growing customer
base which specializes in onshore and
offshore wellhead and asset integrity
maintenance. With 28 years experience
in oilfield services, Sherwood has played
a central role in securing new SIMMONS
EDECO business, particularly in Northern
Europe and the United Kingdom.
86
2/28/18 2:37 PM
 SERVICES | SUPPLIERS
INTERVENTEK SUBSEA ENGRG.
Appoints Director

Bruce Stuart has been appointed Sales and Business Development Director of Interventek Subsea Engineering, announces Manag-
ing Director Gavin Cowie. He joins the firm from Proserv where he was Vice President Business Development Subsea, having previ-
ously held a seven-year tenure at FMC Technologies.
In his new position with the provider of technically advanced well intervention safety solutions, Stuart will support increasing levels
of commercialization activity as new applications for its Revolution valve technology are rolled out.

WOOD HTL GROUP

Wins Saudi Aramco mega-project
Wood has secured a new multi-million-
dollar, five-year contract to support Saudi
Aramco in delivery of one of its Kingdom
of Saudi Arabia mega-projects.
Effective immediately, engineering
and project management services will be
provided to develop the Marjan oil field in
the state’s eastern province. FEED, major
increment, and overall project manage-
ment consultancy will be executed from
Wood’s Reading UK, Khobar Saudi Arabia,
and India offices.
Appoints Global Sales Director
Phil Jarvis has been appointed Global Sales Director by controlled bolting OEM HTL
Group.
His 15 years’ experience
began with Hydratight in 2002,
as he held various sales and
engineering management roles.
He achieved his Chartered
Mechanical Engineer status in
2009.
Jarvis’ primary focus in his
new post will be development
of both instant key account and
distributor OEM channels for the
Group.

87 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_87 87 2/28/18 2:37 PM

 STATISTICS
Additional analysis of market trends is available
IMPORTS OF CRUDE AND PRODUCTS through OGJ Online, Oil & Gas Journal’s electronic
information source, at http://www.ogj.com.
— Districts 1-4 — — District 5 — ———— Total US ————
2-16 2-9 2-16 2-9 2-16 2-9 2-17*
2018 2018 2018 2018 2018 2018 2017
––––––––––––––––––––––––— 1,000 b/d ––––––––––––––––––––––––—
Total motor gasoline ............. 326 618 24 20 350 638 366
Mo. gas. blending comp..... 269 559 24 20 293 579 358
Distillate...............................
Residual ..............................
222
201
233
207
21
61
3
7
243
262
236
214
129
271 OGJ CRACK SPREAD
Jet fuel-kerosine .................. 57 55 20 47 77 102 139 2-23-18* 2-24-17* Change Change,
Propane-propylene .............. 165 214 25 29 190 243 168 ———–—$/bbl ——–—— %
Other ................................... 712 446 82 68 794 513 1,126
SPOT PRICES
Total products ...................... 1,683 1,773 233 174 1,916 1,946 2,199 Product value 76.53 65.14 11.39 17.48
Brent crude 65.66 55.44 10.22 18.44
Total crude ........................... 5,858 6,602 1,163 1,286 7,021 7,888 7,285 Crack spread 10.86 9.70 1.16 11.97
Total imports ........................ 7,541 8,375 1,396 1,460 8,937 9,835 9,484
FUTURES MARKET PRICES
*Revised. One month
Source: US Energy Information Administration Product value 77.30 65.71 11.59 17.64
Data available at PennEnergy Research Center. Light sweet crude 62.48 54.02 8.45 15.65
Crack spread 14.83 11.69 3.14 26.84
Six month
EXPORTS OF CRUDE AND PRODUCTS Product value
Light sweet crude
81.18
60.58
72.32
54.95
8.86
5.63
12.26
10.25
–––––––––––––––– Total US –––––––––––––––– Crack spread 20.60 17.37 3.23 18.60
2-16-18 2-9-18 *2-17-17
––––––––––––––– 1,000 b/d ––––––––––––––– *Average for week ending.
Finished motor gasoline 918 639 848 Source: Oil & Gas Journal
Jet fuel-kerosine 77 81 147 Data available at PennEnergy Research Center.
Distillate 854 1,031 1,007
Residual 318 299 358
Propane/propylene 779 1,065 1,058
Other oils 1,762 1,837 1,269
Total products 4,708 4,952 4,687
Total crude 2,044 1,322 1,211
Total exports 6,752 6,274 5,898
NET IMPORTS
Total 2,185 3,560 3,587
Products (2,792) (3,006) (2,488)
Crude 4,977 6,566 6,075

*Revised.
Source: Oil & Gas Journal
Data available at PennEnergy Research Center.

CRUDE AND PRODUCT STOCKS

—–– Motor gasoline —––
Blending Jet fuel, ————— Fuel oils ————— Propane-
Crude oil Total comp. kerosine Distillate Residual propylene
District ———————————————————————————— 1,000 bbl —————————————————————————
PADD 1 ..................................... 11,985 65,293 60,152 8,894 48,539 6,318 2,682
PADD 2 ..................................... 112,854 58,265 51,313 7,945 31,577 1,396 10,590
PADD 3 ..................................... 223,777 83,428 74,031 15,281 40,066 18,652 27,870
1
PADD 4 ..................................... 21,155 8,124 6,094 808 4,218 252 1,951
PADD 5 ..................................... 50,707 34,223 31,854 10,100 14,546 4,665 —

Feb. 16, 2018 .......................... 420,478 249,333 223,444 43,028 138,946 31,283 43,093
Feb. 9, 2018.............................. 422,095 249,074 224,891 43,414 141,367 31,183 45,641
Feb. 17, 20172 .......................... 518,683 256,435 228,496 44,282 165,134 37,810 49,842
1
Includes PADD 5. 2Revised.
Source: US Energy Information Administration
Data available at PennEnergy Research Center.

REFINERY REPORT—FEB. 16, 2018

REFINERY –––––––––––––––––––––––––––– REFINERY OUTPUT –––––––––––––––––––––––––––
–––––– OPERATIONS –––––– Total
Gross Crude oil motor Jet fuel, ––––––– Fuel oils –––––––– Propane-
inputs inputs gasoline kerosine Distillate Residual propylene
District ––––––– 1,000 b/d –––––––– –––––––––––––––––––––––––––––––– 1,000 b/d –––––––––––––––––––––––––––––––

PADD 1 .............................................. 945 935 3,074 86 276 38 170

PADD 2 .............................................. 3,627 3,629 2,503 261 1,069 50 488
PADD 3 .............................................. 8,484 8,244 2,499 846 2,423 237 1,009
1
PADD 4 .............................................. 664 666 276 39 218 13 209
PADD 5 .............................................. 2,593 2,359 1,663 471 504 104 —
Feb. 16, 2018 ..................................... 16,313 15,833 10,015 1,703 4,490 442 1,876
Feb. 9, 2018 ....................................... 16,633 16,161 9,814 1,672 4,811 178 1,891
Feb. 17, 20172 .................................... 15,571 15,271 9,235 1,585 4,468 453 1,637

18,513 Operable capacity 88.1 utilization rate

1 2
Includes PADD 5. Revised.
Source: US Energy Information Administration
Data available at PennEnergy Research Center.

Oil & Gas Journal | Mar. 5, 2018 88

180305OGJ_88 88 2/28/18 3:51 PM

 STATISTICS
OGJ GASOLINE PRICES BAKER HUGHES RIG COUNT OGJ PRODUCTION REPORT 1 2
2-23-18 2-24-17
Price Pump Pump 2-23-18 2-24-17 –—— 1,000 b/d —–—
ex tax price* price
2-21-18 2-21-18 2-22-17 (Crude oil and lease condensate)
Alabama............................................ 1 2 Alabama ................................. 18 20
————— ¢/gal ————— Alaska ............................................... 9 7 Alaska .................................... 529 513
Arkansas ........................................... 0 1 California ............................... 491 499
(Approx. prices for self-service unleaded gasoline) California .......................................... 14 6 Colorado ................................. 413 292
Atlanta .......................... 192.2 241.7 213.0 Land................................................ 14 6 Florida .................................... 5 5
Baltimore ...................... 194.8 246.7 226.0 Offshore .......................................... 0 0 Illinois .................................... 25 24
Boston ........................... 197.7 242.7 220.9 Colorado ............................................ 33 26 Kansas ................................... 99 100
Buffalo .......................... 194.7 256.7 232.0 Florida ............................................... 0 0 Louisiana ............................... 1,555 1,524
Miami ............................ 201.6 256.8 220.0 Michigan ................................ 15 14
Illinois ............................................... 1 1 Mississippi ............................. 51 50
Newark .......................... 195.2 250.7 221.0 Indiana.............................................. 0 0 Montana ................................. 56 59
New York........................ 204.7 266.7 246.1 Kansas .............................................. 0 0 New Mexico............................. 533 440
Norfolk........................... 220.9 261.7 244.0 Kentucky............................................ 2 0 North Dakota .......................... 1,212 1,020
Philadelphia .................. 181.1 258.8 230.9 Louisiana .......................................... 60 49 Ohio ........................................ 57 52
Pittsburgh ..................... 189.0 266.7 247.0 N. Land ........................................... 36 29 Oklahoma ............................... 499 419
Wash., DC...................... 237.8 279.7 242.0 S. Inland waters .............................. 2 4 Pennsylvania .......................... 22 15
PAD I avg .................. 200.9 257.2 231.2 S. Land............................................ 6 1 Texas ...................................... 4,283 3,667
Utah ....................................... 92 84
Offshore .......................................... 16 15 West Virginia .......................... 31 24
Chicago ......................... 279.5 331.7 263.5 Maryland ........................................... 0 0 Wyoming ................................. 225 188
Cleveland ...................... 183.0 229.4 225.5 Michigan ........................................... 0 0 Other states ........................... 61 36
Des Moines .................... 185.9 235.0 220.0 Mississippi ........................................ 0 3
Detroit ........................... 175.8 235.2 220.9 Montana ............................................ 1 1 Total 10,272 9,045
Indianapolis .................. 200.9 252.2 218.9 Nebraska ........................................... 0 0
1
OGJ estimate. 2Revised. Source: Oil & Gas Journal.
Kansas City ................... 199.3 235.0 205.9 New Mexico........................................ 87 48 Data available at PennEnergy Research Center.
Louisville ....................... 192.8 237.2 217.0 New York............................................ 0 0
Memphis ....................... 206.4 246.2 217.0 North Dakota ..................................... 49 34 US CRUDE PRICES
Milwaukee ..................... 193.7 245.0 212.9 Ohio................................................... 22 19 2-23-18
Minn.-St. Paul ............... 200.0 247.0 220.0 Oklahoma .......................................... 121 101 $/bbl*
Oklahoma City ............... 188.6 224.0 204.5 Pennsylvania ..................................... 39 34 Alaska-North Slope 27° ......................................... 47.18
Omaha .......................... 188.4 235.0 210.9 South Dakota..................................... 0 0 Light Louisiana Sweet ........................................... 58.92
St. Louis ........................ 211.3 247.0 209.9 Texas ................................................. 482 386 California-Midway Sunset 13° .............................. 58.90
Tulsa ............................. 182.8 218.2 206.0 Offshore .......................................... 1 2 California Buena Vista Hills 26° ........................... 69.26
Wichita .......................... 194.4 236.9 214.0 Inland waters .................................. 0 0 Wyoming Sweet ..................................................... 59.80
PAD II avg ................. 198.9 243.7 217.8 Dist. 1 ............................................. 34 32 East Texas Sweet ................................................... 57.25
West Texas Sour 34° .............................................. 55.00
Dist. 2 ............................................. 30 30 West Texas Intermediate........................................ 60.00
Albuquerque .................. 191.4 228.7 206.3 Dist. 3 ............................................. 14 12
Birmingham .................. 191.7 232.0 209.3 Oklahoma Sweet.................................................... 60.00
Dist. 4 ............................................. 15 12 Texas Upper Gulf Coast ......................................... 53.75
Dallas-Fort Worth .......... 191.6 230.0 208.3 Dist. 5 ............................................. 3 2 Michigan Sour ....................................................... 52.00
Houston ......................... 188.6 227.0 201.3 Dist. 6 ............................................. 23 20 Kansas Common ................................................... 59.00
Little Rock ..................... 193.5 233.7 202.3 Dist. 7B ........................................... 1 6 North Dakota Sweet ............................................... 52.25
New Orleans .................. 191.4 229.8 201.3 Dist. 7C ........................................... 32 28 *Current major refiner’s posted prices except N. Slope lags 2 months.
San Antonio ................... 190.3 228.7 203.1 Dist. 8 ............................................. 299 209 40° gravity crude unless differing gravity is shown. Source: Oil & Gas
PAD III avg ................ 191.2 230.0 204.5 Dist. 8A ........................................... 17 19 Journal. Data available at PennEnergy Research Center.
Dist. 9 ............................................. 2 3
Cheyenne.......................
Denver ...........................
201.0
212.9
243.4
253.3
221.9
226.9
Dist. 10 ........................................... 11 11 WORLD CRUDE PRICES
Utah .................................................. 10 6 $/bbl
Salt Lake City ................ 200.5 248.4 226.9 West Virginia ..................................... 16 10 OPEC reference basket Wkly. avg. 2-23-18 63.09
PAD IV avg ................ 204.8 248.4 225.2 Wyoming............................................ 31 19 –– Mo. avg., $/bbl ––
Others ............................................... 0 1 Dec.-17 Jan.-18
Los Angeles ................... 280.6 337.8 306.9
Phoenix.......................... 247.3 284.7 244.6 Total US ........................................ 978 754 OPEC reference basket....................... 62.06 66.85
Portland ........................ 226.2 275.7 234.9 Total Canada ................................ 306 341 Arab light-Saudi Arabia ....................... 62.50 67.42
San Diego ...................... 273.5 330.7 288.2 Grand total ................................... 1,284 1,095 Basrah light-Iraq ................................. 61.44 66.11
San Francisco................ 290.5 347.7 291.9 US oil rigs.......................................... 799 602 Bonny light 37o-Nigeria........................ 64.64 69.92
Seattle........................... 232.9 300.7 269.6 US gas rigs........................................ 179 151 Es Sider-Libya ...................................... 63.09 68.23
PAD V avg ................. 258.5 312.9 272.7 Total US offshore ............................... 17 17 Girassol-Angola.................................... 64.97 69.77
Total US cum. avg. YTD ..................... 953 713 Iran heavy-Iran..................................... 60.87 65.85
Week’s avg. .................. 207.1 255.1 227.5 Kuwait export-Kuwait ........................... 60.94 65.74
Jan. avg......................... 203.3 251.4 228.0 Marine-Qatar........................................ 61.54 66.36
Dec. avg........................ 198.2 246.2 233.5 Rotary rigs from spudding in to total depth.
Definitions, see OGJ Sept. 18, 2006, p. 46. Merey-Venezuela .................................. 56.04 59.14
2018 to date ................. 205.6 253.7 — Murban-UAE ......................................... 63.84 68.81
2017 to date ................. 184.1 230.8 — Source: Baker Hughes Inc.
Data available at PennEnergy Research Center. Oriente-Ecuador ................................... 59.66 63.53
*
Saharan blend 44o-Algeria ................... 64.74 69.93
Includes state and federal motor fuel taxes and state Other crudes
sales tax. Local governments may impose additional taxes.
Source: Oil & Gas Journal. Fateh 32o-Dubai ................................... 61.61 66.15
Data available at PennEnergy Research Center. Minas 34o-Indonesia ............................ 56.95 60.91
Isthmus 33o-Mexico ............................. 62.57 67.57
Brent 38o-UK ........................................ 64.14 69.13
Urals-Russia ........................................ 63.75 68.69
Differentials
WTI/Brent ............................................. (6.20) (5.43)
Brent/Dubai.......................................... 2.53 2.98
REFINED PRODUCT PRICES IHS PETRODATA RIG COUNT Source: OPEC Monthly Oil Market Report.
Data available at PennEnergy Research Center.
2-16-18 2-16-18 FEB. 23, 2018
¢/gal ¢/gal Total Marketed Marketed US NATURAL GAS STORAGE1
supply supply Marketed utilization 2-16-18 2-9-18 2-16-17 Change,
Spot market product prices of rigs of rigs contracted rate (%) –——––—— bcf —––——– %
US Gulf of
Motor gasoline No. 2 Distillate Mexico. . . . . . 86 50 37 74.0 East.................................... 403 432 438 (8.0)
(Conventional-regular) Low sulfur diesel fuel South Midwest.............................. 428 468 616 (30.5)
New York Harbor ......... 179.10 New York Harbor ......... 191.20 America 41 35 29 82.9 Mountain ............................ 111 122 147 (24.5)
Gulf Coast .................. 174.10 Gulf Coast .................. 186.80 Pacific ................................ 204 213 206 (1.0)
Northwest South Central 614 649 962 (36.2)
Los Angeles ................ 192.20 Europe. . . . . 97 77 60 77.9 Salt ................................ 175 178 329 (46.8)
Motor gasoline West Nonsalt........................... 440 472 633 (30.5)
(RBOB-regular) Kerosine jet fuel Africa. . . . . . 59 43 28 65.1
New York Harbor ......... 185.10 Gulf Coast .................. 182.50 Middle Total US ............................. 1,760 1,884 2,369 (25.7)
East. . . . . . . 175 162 121 74.7 Change,
No. 2 heating oil Propane Southeast Nov.-17 Nov.-16 %
New York Harbor ......... 183.50 Mont Belvieu .............. 83.80 Asia. . . . . . . 93 76 49 64.5
Worldwide. . . . 791 659 478 72.5 Total US2 ............................ 3,732 3,977 (6.2)
1
Working gas. 2At end of period.
Source: EIA Weekly Petroleum Status Report. Source: IHS Petrodata Source: Energy Information Administration
Data available at PennEnergy Research Center. Data available in PennEnergy Research Center Data available at PennEnergy Research Center.

89 Oil & Gas Journal | Mar. 5, 2018

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 STATISTICS
PACE REFINING MARGINS WORLDWIDE NGL PRODUCTION
Dec. Jan. Feb. Feb. 11 month Change vs.
2017 2018 2018 2017 Change Change, average previous
——––—––––— $/bbl –––––––––—— % Nov. Oct. –– production –– –––— year —–
2017 2017 2017 2016 Volume
US Gulf Coast ————–—–––— 1,000 b/d ———––———— %
Composite US Gulf Refinery.............. 10.06 11.55 10.76 10.72 0.83 7.71
Mars (Coking) .................................. 10.14 11.78 11.24 10.80 0.98 9.08 Brazil ................................... 137 137 131 114 17 14.7
Mars (Cracking) ............................... 7.70 8.75 8.43 8.59 0.17 1.94 Canada................................ 882 894 844 789 55 7.0
Bonny Light ...................................... 4.60 6.47 6.01 6.21 0.25 4.10 Mexico ................................. 241 260 281 305 (25) (8.0)
US PADD II United States ...................... 4,054 3,968 3,718 3,490 228 6.5
Chicago (WTI)................................... 15.16 14.02 9.23 7.38 6.65 90.13 Venezuela ............................ 179 169 189 198 (9) (4.5)
US East Coast Other Western
Brass River ...................................... 5.62 6.80 5.87 5.45 1.35 24.73 Hemisphere ....................... 224 225 215 216 (0) (0.2)
East Coast Comp ............................. 7.54 8.55 7.51 6.87 1.68 24.41 Western
US West Coast Hemisphere.................. 5,717 5,653 5,377 5,112 266 5.2
Los Angeles (ANS) ............................ 7.00 9.73 11.82 13.69 (3.95) (28.87)
NW Europe Norway................................. 338 352 341 348 (7) (1.9)
Rotterdam (Brent) ............................ 0.38 0.28 1.59 3.45 (3.17) (91.95) United Kingdom ................... 90 90 87 71 15 21.1
Mediterranean Other Western
Italy (Urals) ...................................... 1.99 1.54 3.85 5.33 (3.79) (71.16) Europe ............................... 9 9 9 8 1 7.6
Western Europe ............. 437
372

451
372

437
373

428
435

9
–61

2.1
–14.1

Far East
Singapore (Dubai) ............................ 4.88 4.15 6.15 4.40 (0.26) (5.80)
Russia ................................. 821 766 817 788 29 3.6
Source: Jacobs Consultancy Inc. Other FSU ............................ 463 432 445 245 200 81.4
Data available at PennEnergy Research Center. Other Eastern
Europe ............................... 16 16 17 16 1 8.2
Eastern Europe .............. 1,300
640

1,214
638

1,279
640

1,049
643

230
(3)

21.9
(0.4)

Algeria ................................. 450 449 494 502 (8) (1.6)

Egypt ................................... 200 200 199 202 (3) (1.3)
US NATURAL GAS BALANCE Libya....................................
Other Africa .........................
50
145
50
151
50
157
50
132 25
0 0.0
19.0
DEMAND/SUPPLY SCOREBOARD Africa.............................. 845 850 901 886 14 1.6

Sept. Total YTD Saudi Arabia........................ 1,870 1,870 1,865 1,837 27 1.5
Nov. Oct. Nov. 2017-2016 ––– YTD ––– 2017-2016 United Arab Emirates .......... 675 675 669 646 23 3.5
2017 2017 2016 change 2017 2016 change Other Middle East ................ 812 824 832 738 94 12.8
——————————— bcf ——————––————— Middle East..................... 3,357 3,369 3,366 3,221 145 4.5
DEMAND Australia.............................. 51 51 50 56 (5) (9.5)
Consumption ................... 2,352 2,036 2,164 188 24,136 24,618 (482) China................................... 12 12 12 12 0 0.0
Addition to storage .......... 203 385 178 25 3,226 2,888 338 India .................................... 126 126 124 115 9 7.8
Exports ............................ 288 281 228 60 2,868 2,084 784 Other Asia–Pacific ............... 146 146 147 150 (3) (2.1)
Canada ......................... 74 68 75 (1) 836 674 162 Asia–Pacific ................... 335 335 333 333 0 0.1
Mexico .......................... 134 133 120 14 1,407 1,265 142
LNG ............................... 80 80 33 47 625 145 480 TOTAL WORLD ................. 11,991 11,872 11,692 11,029 663 6.0
Total demand .................. 2,843 2,702 2,570 273 30,230 29,590 640
Totals may not add due to rounding.
SUPPLY Source: Oil & Gas Journal.
Production (dry gas) ........ 2,321 2,329 2,162 159 24,433 24,457 (24) Data available at PennEnergy Research Center.
Supplemental gas............ 6 4 5 1 51 52 (1)
Storage withdrawal.......... 288 137 213 75 2,498 2,563 (65)
Imports ............................ 242 243 231 11 2,763 2,726 37
Canada.......................... 236 241 222 14 2,695 2,645 50 OXYGENATES
Mexico ........................... 0 0 0 (0) 1 1 (0)
LNG................................ 6 2 9 (3) 67 80 (13) Nov. Oct. YTD YTD
Total supply ..................... 2,857 2,713 2,611 246 29,745 29,798 (53) 2017 2017 Change 2017 2016 Change
———————––—––– 1,000 bbl –––—————————
NATURAL GAS IN UNDERGROUND STORAGE
Nov. Oct. Sept. Nov. Fuel ethanol
2017 2017 2017 2016 Change
—————————— bcf —————————— Production .................. 32,469 32,076 393 343,810 332,512 11,298
Stocks ......................... 22,863 21,574 1,289 22,863 19,136 3,727
Base gas 4,354 4,355 4,356 4,372 2,477
Working gas 3,732 3,817 3,568 3,977 (245)
Total gas 8,086 8,172 7,924 8,349 2,232 MTBE
Production .................. 1,571 1,492 79 15,061 16,074 (1,013)
Source: DOE Monthly Energy Review. Stocks ......................... 1,201 1,140 61 1,201 819 382
Data available at PennEnergy Research Center.
Source: DOE Petroleum Supply Monthly.
Data available at PennEnergy Research Center.

US HEATING DEGREE–DAYS
Nov. Oct. Nov. — Total degree days YTD —
2017 2017 2016 % change 2017 2016 % change
New England ................................................................ 746 237 672 11.0 4,866 4,875 (0.2)
Middle Atlantic ............................................................. 702 214 609 15.3 4,248 4,378 (3.0)
East North Central........................................................ 774 292 582 33.0 4,492 4,535 (0.9)
West North Central ....................................................... 806 363 569 41.7 4,779 4,529 5.5
South Atlantic .............................................................. 323 89 290 11.4 1,700 1,977 (14.0)
East South Central ....................................................... 408 147 339 20.4 2,109 2,422 (12.9)
West South Central....................................................... 179 59 154 16.2 1,078 1,308 (17.6)
Mountain ...................................................................... 487 355 513 (5.1) 3,747 3,694 1.4
Pacific .......................................................................... 351 178 331 6.0 2,694 2,402 12.2
US average*............................................................ 491 193 418 17.5 3,035 3,096 (2.0)

*Excludes Alaska and Hawaii.

Source: DOE Monthly Energy Review.
Data available at PennEnergy Research Center.

Oil & Gas Journal | Mar. 5, 2018 90

180305OGJ_90 90 2/28/18 3:51 PM

 MARKET • Employment? HIRE SEE RESULTS—Ask me how!
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 MARKET • Employment? HIRE SEE RESULTS—Ask me how!
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93 Oil & Gas Journal | Mar. 5, 2018

180305OGJ_93 93 2/28/18 2:37 PM

 ADVERTISING SALES ADVERTISERS INDEX
US Sales
Mike Moss, (713) 963-6221, mikem@pennwell.com.
Stan Terry, (713) 963-6208, stant@pennwell.com. COMPANY NAME PAGE COMPANY NAME PAGE
Grace Jordan, (713) 963-6291, gracej@pennwell.com

Australia / New Zealand

Mike Twiss, Miklin Business Services, Unit 15, Ariel Corp 9 Liberty Mutual 12
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Tel +61 8 9529 4466, Fax +61 8 9529 4488
Email: miklinbusiness@bigpond.com Atlas Copco Group 19 Moxa Americas P3
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Paul Westervelt, (713) 449-6305, pwestervelt@pennwell.
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France / Belgium / Spain / Portugal / Pipeline Energy Expo 41
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OGJ Reprints
Jill Kaletha, Mossberg & Co, 800-428-3340 x149,
jkaletha@mossbergco.com, Attn: Jill Kaletha,
Mossberg & Co, 301 E. Sample Street, South Bend,
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Custom Publishing
Roy Markum, Vice-President/Custom Publishing, roym@
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6228

Marketing Solutions
Should you need assistance with creating your ad,
please contact Paul Andrews, Vice President
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Oil & Gas Journal | Mar. 5, 2018 94

180305OGJ_94 94 2/28/18 3:51 PM

 THE EDITOR’S PERSPECTIVE
New England faces
power problems if
gas lines not built
by Bob Tippee, Editor
New England’s electricity users have been
warned: Reliability of the electrical system
faces problems related to regional obstruction-
ism.
In an annual outlook, ISO New England
(ISO-NE) cited a recent study showing, “If over-
all fuel security is not addressed, the region
will face a setback to both future power system
reliability and state efforts to transition to clean
energy economy-wide, as well as increased
energy costs.”
New pipelines would address fuel security
most efficiently. But New Englanders seem not
to want them.
Last month, Gordon Welie, president and
chief executive officer of ISO-NE, told the US
Senate Energy and Natural Resources Commit-
tee that gas now accounts for nearly half the
energy used to generate power in the system
his organization manages.
In cold snaps, like New England’s chiller of
December and January, gas-price surges force
a switch to temporarily cheaper but less-effi-
cient coal and oil-fired generation.
The study he and Board Chair Philip Shapiro
reported in the annual outlook examined 23
scenarios that assumed no new gas-supply
infrastructure.
“Energy shortfalls due to inadequate fuel
would occur with almost every fuel-mix sce-
nario in winter 2024-25, requiring frequent use
of emergency actions to protect the grid,” Welie
told senators.
But local opposition to pipelines keeps gas
otherwise available from the nearby Appala-
chian basin from reaching New England in
needed amounts.
Responding to opposition last June, for
example, Enbridge suspended the expansion
of its system in New York, Connecticut, and
Massachusetts. Other projects proposed for
northeastern US states are delayed.
Welie told the Senate committee his region
needs to invest in renewable energy and
associated transmission equipment, fuel infra-
structure with long-term contracts, or further
reductions in demand for wholesale electricity
and natural gas.
“The alternative is negative impacts on
system reliability, chronic price spikes during
cold weather, higher emissions when it’s more
economic to burn oil than natural gas, and the
possibility of further interventions by ISO-NE in
the wholesale electricity market to try to delay
critical resources from retiring,” he said.
(From the subscription area of www.ogj.com,
posted Feb. 23, 2018; author’s e-mail: bobt@
ogjonline.com)
95
180305OGJ_95 95
WATCHING GOVERNMENT
Nick Snow
Washington Editor
Governors call for reforms
Three Western US Republican gover-
nors expressed some hope that there
will be more cooperation than over-
reach from the federal government in
addressing joint concerns. They also
told the US House Oversight and Gov-
ernment Reform Committee on Feb.
27 that there’s considerable room for
improvement in areas besides public
land management and environmental
protection.
C.L. “Butch” Otter, who will end
his third term as Idaho’s governor
early next year, said there have
been times under three presidential
administrations when Washington has
treated the state as a true partner,
with a meaningful voice in national
policies that most directly affect
Idaho’s citizens.
“At other times—and far too
often—I have experienced the kind of
dysfunction and heavy-handedness
from our national government that
make a mockery of what the [US Con-
stitution’s] framers meant by federal-
ism,” Otter said. “Idaho has been
treated as if we are little more than
a box to check rather than a partner
with which to collaborate in the inter-
est of the people we serve.”
The limited and very narrow pow-
ers the Constitution granted the feder-
al government have expanded beyond
what was enumerated originally, Otter
said. “That kind of ‘mission creep’ is
most apparent throughout the West
wherever the federal government con-
trols access to and use of enormous
swaths of our land,” he said.
Gov. Susana Martinez noted that
US Bureau of Land Management
drilling permit decision delays have
created a backlog of more than 900
applications in New Mexico, costing
the state $1.9 million and the federal
government $3.4 million daily. The
savings would be substantial if BLM
delegated its federal drilling permit
responsibility to states which are more
efficient, she said.
Utah Gov. Gary R. Herbert sug-
gested that changing laws and rules
would be a poor substitute when a
cultural change is what’s needed.
“Congress and federal agencies must
stop viewing state input as merely a
box-checking exercise rather than a
genuine attempt to learn from us,” he
said.
More than stakeholders
Some federalism infractions are pro-
cess problems, Herbert said. While
the US code “is littered with sugges-
tions that federal agencies consult
with states as simply one among
many stakeholders,” this doesn’t
recognize they actually are sover-
eign governments and partners who
should be involved throughout the
policymaking process, he asserted.
“I don’t want to leave you with
a completely negative picture. We
are currently enjoying a season of
good relationships with many federal
agencies, many of [which] are trying
to push decision-making down to
the states,” Herbert said. “But good
cooperation shouldn’t depend on a
particular official or administration; it
should be simply the way things are
always done, regardless of who is in
power.”
Oil & Gas Journal | Mar. 5, 2018
2/28/18 2:37 PM
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