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„Drillers and Dealers‟ – July 2010 Edition
About The Oil Council and „Drillers and Dealers‟
The Fallacy of „Easy Oil‟
o By Robin Mills, Energy Economist and Author of 'The Myth of the Oil Crisis'
Waste to Energy – A Recyclable Hydrocarbon Footprint?
o By Ennio Senese, Executive Partner, Resources, Accenture
Oil Council Assemblies
Shale Gas Comes To Europe – Another “Game Changer”?
o By Doug Glass, Partner and Greg Hammond, Partner, Akin Gump Strauss
Hauer & Feld LLP
„On the Spot‟ with our Question of the Month (Part One)
o “Do you except an increased wave, a stagnant lull or sporadic activity of new
M&A/A&D transactions in Q3 and Q4 of 2010?”
„On the Spot‟ with our Question of the Month (Part Two)
o “How significant a role will unconventional oil (extra heavy oil, oil sands and
oil shale) and unconventional gas (CBM, shale gas, tight gas) play in
tomorrow’s global energy mix? Are these unconventionals now in fact
“Wall Street Investor” (Column) – PE Investing: Setting the Record Straight
o By Ziad Abdelnour, President & CEO, Blackhawk Partners, Inc.
“Golden Barrels” (Column) – The Market is The Market
o By Simon Hawkins, Head, Oil & Gas Research, Ambrian
“The Oil Outlook” (Column) – Fears of Weaker Recovery Mire Crude
o By Gianna Bern, President, Brookshire Advisory and Research
A Nightmare Well
o By Elaine Reynolds, Oil Analyst, Edison Investment Research
The Fallacy of ‘Easy Oil’
Written by Robin Mills, Energy Economist and Author of 'The Myth of the Oil Crisis'
There is one thing on which almost all pundits, industry veterans, forecasting agencies and
members of the public seem to agree. Energy, particularly hydrocarbons, is going to get ever
scarcer and more expensive. The „age of easy oil‟ is over.
Former Shell CEO Jeroen van der Veer opined in April 2008 that, “Easy oil and easy gas...is
simply depleted” and that December, his unlikely soul-mate, Russian Prime Minister Vladimir
Putin, concurred: “The era of cheap energy, including cheap gas, is coming to an end”.
Oil prices remain high by historic levels, and the continuing Macondo disaster in the Gulf of
Mexico seems to confirm the belief that the oil industry is venturing into ever more-challenging frontiers.
Business plans and economic projections are founded on the belief in the end of easy oil. It predicts a rosy future
for the Middle East and Russia, drives growth in renewable energy and alternative vehicles, and leads many to
worry about „peak oil‟, resource wars and a collapse of industrial civilisation.
But what if this belief is wrong?
Resources in the ground are clearly abundant. Canadian Association of Petroleum Producers Vice President
Greg Stringham, pointing to the 175 billion barrels recoverable from the Canadian oil sands, says, “It won't be a
lack of resources that causes a shift away from oil. There's lots of oil.” The United States Geological Survey
recently updated their estimates for recoverable oil from Venezuela‟s Orinoco Belt to 513 billion bbl. Compare
this to BP‟s estimate of some 1200 billion bbl of global conventional oil reserves.
Some shale formations, such as the US‟s Bakken and Eagle Ford, contain substantial amounts of oil and natural
gas liquids too, a form of unconventional oil which has emerged from nowhere in the past few years.
Traditional onshore light crude, though often inaccessible to the international oil companies, remains plentiful too.
We might be sceptical of Iraq‟s plans to reach some 12 million barrels per day output by 2015, despite the
assistance of Shell, Total, ExxonMobil, CNPC and others. The political, security and logistical challenges are
clearly huge. But most industry observers agree that, in the longer term, the technical potential is there. Iraq‟s
reserves are likely to increase substantially once the supermajors start work, not to mention the almost unbroken
string of discoveries in the Kurdistan region.
Next door, despite sanctions and mismanagement, exploration successes in Iran suggest substantial remaining
potential: at least 21 billion bbl found since 1998 in four fields near the Iraqi border. Saudi Arabia has substantial
spare capacity, while Kuwait and Abu Dhabi recently updated ambitious plans for production gains.
Non-OPEC is not slacking either. Despite high taxation, maturing fields, often outdated technology and a
capricious legal environment, Russian production continues to creep up. Kazakhstan‟s long-delayed Kashagan
field will finally come onstream around 2013 and yield more than 1 million bbl per day. Brazil‟s enormous pre-salt
play continues to deliver new discoveries and is now moving into early production. At the same time, frontier
exploration is finally yielding fruit, with major finds in Ghana and Uganda, and promising signs in areas such as
Mozambique, the Falklands Islands and Greenland.
And we should not forget the potential of old fields. Global average recovery factors hover around 33%, but 50-
60% is often achieved in the North Sea and onshore USA, indicating a vast, low-risk prize for better reservoir
management and more systematic use of enhanced oil recovery. Mature areas such as Colombia, Egypt and
Oman are rebounding impressively from some years of decline.
Instead of fears that non-OPEC production had peaked, the IEA now sees output broadly flat to 2015. Admittedly,
action following the Macondo blowout may hamper US deepwater production, but elsewhere in the world, higher
safety standards are to be welcomed, and probably mean only moderately higher costs.
During the decade to 2009, stimulated by high oil prices, reserves increased in every region and by 23% overall,
even excluding the undeveloped portions of the Canadian oil sands. Production growth, running at 1.1% annually
during the 1990s, accelerated under the stimulus of Asian demand to 1.4% per year from 2000 up to the onset of
the economic crisis.
As for gas, the success of US shales has demonstrated that fears earlier this decade of a shortage were wildly
pessimistic. Led by technology, the industry was able to respond to high prices, and demonstrate that
unconventional resources can be brought into play fast enough to make a difference. Europe, China, Australia,
Indonesia, South Africa and India are now all looking seriously at shale gas and coal-bed methane.
With no OPEC to cut production, gas prices remain well below oil on an energy-equivalent basis. Remaining
global gas resources may be as much as 12400-20800 Tcf, plus a more speculative 6000 Tcf of unconventional
gas outside North America. At the upper end, this equates to 250 years of current production.
Add to this the enormous potential of coal gasification, the conversion of coal and gas to liquid petroleum, the
significant if problematic role of biofuels, and the tantalising potential of gas hydrates and cooking oil from
How do we reconcile this abundance of resources with fears of declining production? The result is the appeal to
„the end of easy oil‟. The argument goes that new petroleum supplies, though available, are more difficult and
costly than before, requiring new technology, located in remote or unstable regions, or environmentally
damaging. Hence at best, prices will continue to rise; at worst, some of these resources may be permanently
Yet the idea of easy oil ignores history, and the advance of technology.
There has never been an age of easy oil. Drillers in Persia in the early 1900s had to contend with smallpox,
hostile tribes, corrosive water and misleading surface geology. North Sea roughnecks of the 1970s faced
mountainous seas, blowouts and massive cost over-runs. Technology advances in line with our needs. Drilling in
two kilometres of water was unthinkable in the 1990s; now, it is almost routine.
Much of the run-up in industry costs this century is the result of inadequate investment in the previous decade,
and a consequent shortage of engineers, geologists, rigs and steel. In the early 2000s, oil sands developments
were thought to require an oil price around $30 per barrel; now $80 is often quoted. Yet the geology has not
changed, while technology has advanced significantly. Given time, these bottlenecks can be remedied.
Oil extraction costs are a constant battle between increasing depletion and advancing technology. Once we crack
the secret of developing a large resource, such as shale gas or extra-heavy oil, costs fall over time as we gain
Yes, many unconventional plays have higher development costs and require special approaches, but they have
no exploration risk, and are typically located onshore in stable countries. As some of the US gas shales are
cheaper than traditional North American plays, unconventional resources are becoming conventional.
Talking about the „end of easy oil‟ is an admission that we have failed as an industry. It gives entirely the wrong
message. It tells countries lucky enough still to have some „easy oil‟ that there is no point opening up to
international investment, and no risk of competition if they don‟t.
It tells bright young people at university that petroleum is a sunset business and they should look elsewhere for a
career. And it tells the general public that energy prices are only going to rise, and that society should make
costly efforts to develop alternatives to oil and gas. These are dangerous trends, at a time that many people are
already hostile to the petroleum industry on environmental grounds.
Instead, the message should be that we are developing the technology and business models to turn difficult
petroleum into easy and environmentally acceptable energy. That is how international oil companies can keep
themselves useful and relevant to the leading oil nations, and to the globe‟s energy consumers.
By Robin Mills
Robin M. Mills is a Dubai-based energy economist, and author of ‘The Myth of the
You can contact Robin directly at: email@example.com
The Myth of the Oil Crisis’ explores myths surrounding the global consumption of
oil.With oil prices rising, drivers wince whenever they pull into the petrol station
and businesses watch their bottom lines shrink.
Predictions suggest that the situation will only get worse as oil dries up. It's a
plausible argument, especially considering the rate at which countries like China
and India are now using oil. Even more worrisome, the world's largest oil fields sit
in unstable, geopolitical hotspots like Iran and Iraq.
More information on his book can be found at: www.oilcrisismyth.com
Waste to Energy – A Recyclable Hydrocarbon Footprint?
Written by Ennio Senese, Executive Partner, Resources, Accenture
Volatility, Uncertainty and Interdependence 50%. Assuming that in 2030 oil provides the same
percentage of global energy that it did in 2005.
These are the buzz-indicators of today’s world and
as recent events show, the world is more This energy demand increase will cause an
interconnected and unpredictable than ever before. additional 30 billion barrels of oil to be consumed
The recent fall outs in the economy and
environment have exposed us to enormous A key-factor behind the astonishing increase in
challenges and provide evidence how nations are energy demand is the growing economies of the
really interdependent. emerging markets. As countries industrialize, more
energy is required for economic growth and to
In Europe for example, Greece is clearly not alone increase standards of living.
facing the economic financial crisis, and
environmental disasters, whether natural (Iceland) Strong per capita income growth, rapid
or by likely human error, (Gulf of Mexico) are also industrialization, and rapid population growth are all
confronting us with our duty to define the kind of contributing factors to the increase in global energy
global economy and environment we want for demand. With urbanization and improvement in
tomorrow. standards of living, the demand for energy
Governments, although often blindfolded by
national sentiments and interests, leaning on the The increasing demand for energy is limited by
mandate given by their electorate, seem to irreplaceable and ultimately ending petroleum
understand that it is their responsibility to devise reserves. According to the EPA, domestic oil field
sound policies for a stronger and more sustainable production in the U.S. has become increasingly
economy and environment. expensive, as easy-oil has already been exploited.
Clean and affordable energy, including renewable Some experts speculate that global oil production
and sustainable forms of energy, should be a has reached a maximum and that production will
central element of these efforts. soon enter a terminal state of decline. Alternative
technologies will be needed to supply increasingly
Arguably Sustainability leans on two E-pillars: precious oil to the global economy.
Economy and Environment.
My thought on this, is that Peak Oil will never be
reached as at one point in time the economics of
“Despite the temporary difficult oil exploration in combination with the ever
increasing environmental impact of growing
decline in crude oil prices conventional consumption of Hydrocarbons, will
during the current global push the sense of urgency to come with
alternatives, of which we had a preview already in
economic downturn, a 2009 when new energy ballooned everywhere, with
$170 per barrel by 2020 is a cost indicator about half of the $/bbl in that year.
not unthinkable” Despite the temporary decline in crude oil prices
during the current global economic downturn, a
$170 per barrel by 2020 is not unthinkable and will
The increase in global energy demand and the trigger the effect described before.
decrease of easy oil and natural gas is driving the
market towards alternative energy sources. This When we speak $/bbl, we tend to think in terms of
issue cannot be neglected. fuel. The question is what the effect will ultimately
have on the petrochemical industry, the mother of
The IEA projects that between 2005 and 2030 all plastics.
global demand for energy will increase by over
Today, society is highly dependent on plastics, There are a number of reasons why only a small
almost as an incorporated addiction. percentage of plastic get recycled, one is consumer
awareness and public opinion, another one is
technical; there are many different types of plastics,
“This energy demand which makes it difficult and costly to separate.
increase will cause an Particularly those which make up items like
additional 30 billion televisions, mixers, and even mobile phones are
almost impossible to recycle.
barrels of oil to be
consumed annually.” However, there is another recycling process for
plastics which is gaining interest, since it is
becoming more economic, has good demand
At a micro level it keeps the foods we eat fresh, the growth potential and more importantly, it is more
medicines we take secure, and the homes we live in sustainable. It is the transfer of waste plastic back
safe. On macro level, the industrial applications are into its original state – i.e. back to oil.
too many to tell, from ship cabins to biscuit-
factories, plastic is omnipresent. According to the British Plastics Federation, there
has been significant growth in the recycling of waste
As a result, consumption is increasing at a rapid plastic including plastics into oil over the past few
pace. In fact, the global culture of consumerism years for several reasons:
relies upon plastic for its very existence. The overall
plastic market is growing at a rate of more than 7% Plastics are one of the most sustainable uses
per year. In 2005, over 230 million metric tons (over of oil since it “borrows” fossil hydrocarbons and
500 billion pounds) of plastic was produced globally. returns them afterwards into the fuel cycle. In
short plastics start as oil and we can recycle
Just to illustrate the scale of the waste as a them back into oil,
consequence, I want to focus on just one dimension
of it – waste plastic, which is responsible for around Used plastics can be recycled up to six times,
7% of the waste content of the average UK dustbin. making them much more cost effective than
other forms of recycling,
According to general consensus, the amount of
plastic waste today in the world is estimated at 100 If it doesn’t make economic or environmental
million tons per year and growing – but only a small sense to recycle plastics, then their energy
amount of this plastic is actually recycled. content can be recovered through Energy from
Waste incineration. Used plastics have a higher
For example, the UK uses over 5 million tonnes of calorific value than coal and at a time of high
plastic each year of which an estimated 25% is energy prices, unrecyclable materials can,
currently being recovered or recycled. Germany through Energy from Waste provide a much
recycles 44% of its plastics. In other parts of the needed local energy supply.
world, the figure is much lower.
So how viable is this recycling process of waste
It is commonly known fact there exists this terrible plastic to oil?
mass of plastic waste floating around the in the
North Pacific Ocean known as the Great Pacific
Garbage Patch. “It seems we are running
Shockingly, this Garbage Patch is twice the size in
out of time and options,
area of France and it is growing rapidly. 90% of this putting pressure on
Garbage Patch is made up of plastic. Around 10%
of all the plastic in the world eventually makes it into
society to come with
the world’s oceans. new solutions.”
Today there are four ways to dispose of waste
plastic: Recycling, landfill, Incineration, and There are numerous examples of plants around the
Dumping. world, which are able to melt down most types of
plastic and convert them into oil which can be used
Unfortunately these come with severe drawbacks to make either fuel oil or higher value oil products
and limitations. like gasoline, diesel, and jet fuel. The economics of
such plants vary, with some companies operating
Incineration, landfill, and dumping present harmful plants that work at low as $10/bbl.
environmental impacts and recycling has not yet
generally overcome the barriers of cost and The trouble with most of the plants currently
efficiency. It seems we are running out of time and operational is that they are all small; typically
options, putting pressure on society to come with producing between 20-50,000 barrels of oil per
new solutions. year. Some are using unique technologies, which
require less energy intensity and do not require the refining technology, and add traditional-renewable
plastics to be separated. to the refinery portfolio.
At the moment, companies are finding it hard to
scale up such plants, which is due to fact that many “We need courage to leave
of the technologies in use are new and are still
the old paradigms and
build a new one based two
Also, depending on the location of the plant, they
can be subject to competition from increasing E-pillars: the Environment
regulation around fuel production and fuel and the Economy.”
specifications, competition from other fuels and
uncertain economics due to fuel subsidies for
example. Finally, we need spread more awareness of the oil
solutions for waste plastic. This innovative process
Finally most waste projects tend to depend on and the projects associated with it, should serve as
expensive and complex supply chains, which can a role model to showcase these waste plastic to oil
often make the project uneconomic. recycling technologies.
So with the fundamental looking good, how can we Together, we should be aiming to transform the
scale up the case for plastics to oil recycling? vision of plastic as a waste material to one where
plastic is seen as a valuable feedstock and
We are in an age where we know that demand for resource.
oil is continuing to increase, as is the amount of
plastic which is being wasted, and we also know Such a transformation could mean in this
that there is a shortage of sustainable plastic waste increasingly unstable and urban world, waste plastic
projects. could actually help to directly solve the world’s
Our perspective is that there are several areas of
focus which could mean a transformation for this To this we can also add that pressure has to be
business. increased on businesses and governments to
realize the opportunity in front of us, rather than
Firstly we need to see much more collaboration thinking in terms of un unpopular political and
between government, local authorities and industry business theme which is a seems a threat to
to resolve the problem of waste plastic, which business and politics as usual.
means more financial support for new and existing
projects, higher investment in the technologies In order to allow future generations the chance to
around this process. live in a world which is prosperous, clean and
green, we need to come to grips with the new reality
Following on from this we would need to see an and identify the new opportunities.
acceleration of policies to support the spread and
adoption of the waste plastics to oil process and its Clean and affordable energy, including renewable
associated technologies. and sustainable forms of energy, are centres of
gravity in this new direction.
In addition, since refinery margins seem to be
staying under pressure for a long period, an Finally, we need courage to leave the old
opportunity to create additional value could be paradigms and build a new one based the two E-
identifying those new plastic-to-fuel-conversion- pillars: the Environment and the Economy.
technologies allowing cohabitation with traditional
Written by Ennio Senese, Executive Partner, Resources, Accenture, with thanks to Julie Adams, Senior
The Accenture Energy industry group serves the oil and gas sector including upstream, downstream and
oil service companies. http://www.accenture.com/Global/Services/By_Industry/Energy/default.htm
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Shale Gas Comes To Europe – Another “Game Changer”?
Written by Doug Glass, Partner and Greg Hammond, Partner, Akin Gump Strauss Hauer & Feld LLP
Even though the presence of natural gas in shale Pass LNG terminal has the capacity to receive one
seams has been known to oil companies for decades shipment per day, in the space of two years only 10
(the first commercial gas well drilled in the US in 1821 ships have docked. The remaining eight LNG import
was a shale gas well), gas from shale seams has terminals in the US have been similarly affected by the
historically been dismissed as too difficult to extract shale gas revolution and are running at only 10% of
and too expensive. capacity.
However, recent increases in energy prices have Environmental Impact
incentivised and driven the development of new
technologies, with the result that shale gas is currently Although natural gas is the cleanest burning of the
causing a revolution in the gas fields of North America. fossil fuels, environmental concerns have been raised
The US Department of Energy has estimated that surrounding the method of extraction of shale gas,
there is enough shale gas to supply North America for particularly the possible environmental impact of
the next 90 years. hydraulic-fracturing on fresh water supplies.
The economic success of certain shale gas fields, The US Environmental Protection Agency has begun
such as the Barnett Shale play in Texas, indicate the an extensive examination of hydraulic-fracturing. Since
widespread potential of shale gas as a sustainable the technique uses considerable quantities of
and relatively clean energy source. chemicals mixed with water, this often requires the
chemical/water mix to be held in ponds at ground level
Method of Extraction until removed by tanker or re-injected into the earth.
Some hold the view that the fracking mixture, once
In the past, shale has been disregarded for the injected, can seep into the fresh water table
purposes of gas production due to its insufficient underground.
permeability (which did not allow significant gas flow to
a well bore thereby making gas extraction Environmentalists allege that this may in turn have an
uneconomic). However, modern technological impact on ground and surface water quality,
advances in horizontal drilling techniques and in threatening the environment and human health.
hydraulic fracturing have meant that flow rates and
recoverability have significantly improved - resulting in The environmental impact of hydraulic-fracturing is
highly profitable operations. currently being debated within the US Senate’s climate
and energy bill. According to recent reports, the latest
The process of extraction begins with the well casing draft of the bill seeks to exclude regulation of this
being cracked open by explosive charges to create a technique by the EPA. A further discussion draft
series of perforations along a horizontal well bore proposed by BP and two other energy companies
drilled through the shale seam thousands of feet below provides that regulation would be the responsibility of
the surface. Water, sand and chemicals are then the individual states. This discussion draft also
pumped into the well at high pressure through the recommends against publication of the chemicals
openings in the pipes, “fracturing” the surrounding rock used in the fracturing fluid as this would comprise
which allows the gas to flow freely to (and through) the disclosure of “trade secret information”.
Even though similar methods of extraction have been
Impact on Global Gas Supply and Demand used for decades in the US, historically there were few
concerns surrounding the environmental impact, since
The impact of the shale gas revolution is already being the sites had been situated in unpopulated areas.
felt around the world, and its influence on global gas
supply and demand is currently changing the shape of However, as sites have moved closer to the denser
the industry. One result is that the proliferation of shale population groupings, environmentalists have been
gas has had a major impact on LNG imports into prompted to argue that occupiers of land alongside
America. The Sabine Pass LNG terminal on the drill sites and above the horizontal penetration paths
Texas-Louisiana border was built at a cost of US$1.5 have a right to know what potential contaminants
billion as a vital component of the US energy could affect their nearby ground water supplies.
infrastructure for the next generation.
In response to the environmental lobbyists, one can
Tankers from Qatar and other LNG producing expect that nations within
countries were expected to dock at the on-site
receiving terminal in order to supply LNG straight into Europe which have historically been forced to rely on
the US domestic gas network. Although the Sabine neighbouring states for their energy supplies will fight
long and hard to secure their own domestic energy Europe mineral rights must be acquired to develop the
supplies. subsoil - but a separate agreement must then be
made with the holder of the surface rights before any
Equally relevant will be the lessons to be learned in drilling can start. In addition, due to the greater
due course from the recent oil spill at the Macondo dissipation of land interests and the more dense
well in the Gulf of Mexico which will no doubt conclude development and usage of the land, numerous such
that (i) no development of hydrocarbons is without risk; surface-right agreements are often required as a pre-
and (ii) problems incurred on-shore are generally condition to the commencement of operations.
easier to remedy than those off-shore.
In addition to this, a major issue facing oil companies
Specific European Issues in Europe is the greater concentration of inhabitants.
Drilling shale gas requires multiple wells, which is
Not surprisingly, the explosion in North American comparatively easy in the wide open spaces of North
shale gas development has triggered interest all over America but will have a greater effect on the denser
Europe. Even though the potential for shale gas in population groupings in Europe in terms of health and
Europe remains uncertain, the major gas companies safety and sheer practicality.
are keen not to make the same key mistake which
they made in the US. By being too slow off the mark in Another stark logistical consideration is that, in
the US, they had to spend billions of dollars buying contrast with North America, Europe currently has a
assets from independent explorers. far more limited supply of drilling rigs.
It is believed that at least 40 companies are currently Finally, the concerns relating to possible
looking for shale gas in Europe with all the major oil environmental contamination, which are currently
companies, except BP, being present in the market. being debated in the US, will no doubt also be strongly
Licences to explore for shale gas in Sweden, Poland, voiced in Europe, especially given Europe’s greater
Germany, France, Hungary and Austria are being and closer population groupings. Whilst there are
snapped up by the majors. many factors in the US shale gas industry which will
be different to the European industry, one can
Exxon-Mobil is believed to have shale gas areas in probably assume that many similar arguments will be
Germany and Hungary and to have applied for permits echoed in great detail in Europe, particularly as to
in Poland. Shell has acquired licences in Sweden. whether there should be pan-European regulation of
ConocoPhillips recently drilled the first European shale hydraulic fracturing.
gas well under an exploration agreement with Lane
Energy in a shale formation in Poland. More recently, The Future
Akin Gump has also been working on a possible shale
project in Russia. There are undoubtedly hurdles which need to be
overcome before Europe’s shale deposits can be
There are several issues which are specific to Europe. exploited to the full. Although many issues are similar
Firstly, no two shale rock formations are ever the to those in the US, the different geographic,
same. Consequently, the geological expertise built up demographic and regulatory landscapes in Europe are
in North America may prove not to be applicable to presenting different challenges.
Europe, since the Texan and Pennsylvanian plains (for
example) are geologically very different to the However, as in the US, the enormous potential
mountains of Central and Eastern Europe. advantages to be gained from this new gas resource
simply cannot be ignored and, if found to be
Similarly, a variety of legal issues arise in Europe commercially viable, European shale gas may have
relating to land. In the US, the holder of the mineral the ability to transform the energy industry in Europe
rights generally has the right to use the surface of the for decades to come.
land under which the minerals lie, with only an
obligation to compensate the surface owner for any Undoubtedly, one can expect that the “first movers”
damage. and the most experienced players having the best
strategy, skills, technology and advisers will prevail.
However, the real estate and land use laws in Europe
are very different, more diverse, more complicated and 7 July 2010 – Copyright: Akin Gump Strauss Hauer &
largely untested in the shale gas context. Generally, in Feld LLP - www.akingump.com
Doug Glass and Greg Hammond are partners in the London Office of Akin Gump Strauss Hauer & Feld. Since its
foundation in Texas, Akin Gump Strauss Hauer & Feld has been one of the leading international oil and gas law
firms - advising clients at every stage of the hydrocarbons value chain. In addition to the more traditional oil & gas
transactions, in recent years Akin Gump has been increasingly active in the area of "unconventional"
hydrocarbons and in the last six months alone has advised on the following:
Anadarko – in its US$1.4 billion carry-to-earn Marcellus Shale gas joint venture with Mitsui;
Consol Energy - in its acquisition of the Appalachian shale gas and other properties of Dominion Resources
for US$3.48bn; and
Enterprise Products – in its acquisition of a Haynesville shale gas gathering system for US$1.2bn.
In Europe, Akin Gump in London is currently advising on two shale gas projects in Poland and one in Russia.
‘On the Spot’ with our Question of the Month (Part One)
“Do you except an increased wave,
a stagnant lull or sporadic activity of new
M&A/A&D transactions in Q3 and Q4 of 2010?”
“Whilst there has been a limited amount of very large corporate transactions in the first half of
2010 there has been a steady flow of smaller opportunities in the marketplace. The larger
transactions are driven by a need to focus capital on core projects such as shale gas (in the
US) and other capital-intensive ventures. Whilst the rationale for smaller deals are also driven
by capital discipline and a need to focus many are on offer due to a complete lack of capital by
With respect to the next 6 months Stellar sees very little change (and certainly no downturn) in
the sub- USD100mm market where capital for developments, exploration etc. will remain very
tight indeed. This will ensure that projects that require investment (particularly those that involve some reservoir
or political risk) will continue to come into the market in a fairly steady flow.
In the mid-sized part of the market we see much more enthusiasm and willingness for companies to consider
mergers. In particular, many those with market capitalisation of less than USD500million are actively looking at
the acquisition or merger with other companies that would benefit from being part of a larger entity. Stellar
expects continuing deal flow and news on the back of this model with the mergers of Bridge and Silverstone,
Norse and Pan Petroleum and Afren‟s acquisition of Black Marlin as just a few examples.
In the larger sector of the market we expect the market to be dominated by BP sales which will draw in funds
from many of the larger oil and gas Majors and large Independents. This will inevitably impact the availability of
finance for other deals and may precipitate some of the buyers of BP‟s assets to sell their non-core assets to
raise capital for the purchases. We also feel that the pace of overseas growth of some National Oil Companies
will slow and several may retrench back to home markets as projects compete for precious capital.
From Stellar‟s perspective, after 11 years of working as an independent advisor in the upstream M&A/A&D
market, we are currently experiencing our highest ever level of deal-flow through our business and see no
evidence of things slowing down.”
... Dave Fassom, Director, Stellar Energy Advisors Limited (Oil Council Member)
“Increase. Buyers are able to hedge the higher commodity prices and sellers are starting to
come around to valuations they feel compensate them for taking the exploration or development
risk. Increased regulations offshore will drive buyers onshore looking for lower risk Bakken, West
Texas and Colorado oil that is now being developed using proven drilling techniques that provide
a payback on wells within the first two years.
After payback, these wells can produce 500 barrels per day for years providing the buyer a
consistent return on investment while the seller gets a premium for the exploration risk.”
... Steve Crower, Energy Investment Banker, Starlight Investments LLC (Oil Council Member)
“Despite earlier improvements in credit and equity markets and corporate balance sheets, U.S. M&A activity
remained sluggish in the first half of 2010. Unforeseen economic events in the last two months triggered a global
ripple effect reviving sentiments of uncertainty – setting the stage for a challenging M&A environment for large
cap transactions in the second half, according to the Transaction Services practice at PwC. However, PwC
contends that the middle market may be a different story.
“Going into the second half, record dry powder in the private equity space and unprecedented cash
levels on the balance sheets of corporate America will combine with the desire of family held businesses
and private equity backed management teams to sell prior to looming tax increases”
Bob Filek, Partner, PricewaterhouseCoopers’ Transaction Services.
U.S. M&A activity was down three percent compared with the same period in 2009. The number of closed deals
in the first half of 2010 represents the lowest deal volume this decade, according to PwC. For the first five months
of 2010, there were 2,969 closed deals representing $317 billion, compared with 3,065 deals valued at $323
billion in the same period of 2009.
While deal value and volume are down, willing lenders and open credits markets are available for transactions,
according to PwC.
“Banks and institutions are providing capital to execute deals. They are lending more conservatively, but
credit is available from a variety of sources and in a variety of types – including traditional leveraged
loans. Companies are taking advantage of depressed valuations – looking for deals to grow and
diversify at discounted prices. Even with the uncertainty in Europe, a hesitant consumer and volatile
markets, it‟s still an attractive time to buy. While there is still ambition to complete mega deals, the „hit
rate‟ will be low. The sweet spot for deals will be one to five billion dollars and below, with a mega deal
or two sprinkled in. Private equity players will also remain active in the distressed area, using their debt,
hedge and distressed funds to find deals in untraditional ways. While there are concerns about stricter
regulation for certain alternative investment classes, private equity is a resilient and innovative business
run by sophisticated investors who will still get deals done, regardless of what transpires in Washington.”
Greg Peterson, Partner, PricewaterhouseCoopers’ Transaction Services
Corporate buyers continue to employ strategic deal making, pursing attractively valued companies and seeking
out „mergers of productivity‟ as a means to capture benefits of scale and cost savings. The median deal size in
the first half was $107 million, indicating that smaller, middle market deals have become the new „normal.‟
PwC expects divestitures, carve-outs and spin-offs to continue to contribute to deal activity as companies
separate certain assets and operations no longer seen as core to the business. The likely candidates to acquire
these assets are private equity players who have strong relationships with large corporations that may be
interested in selling certain assets. Business units within the industrial products and technology sectors are
among the industries where PwC expects to see increased divestiture activity.
The current private equity overhang at nearly $850 billion (three and a half times the overhang in 2000)
represents 54% of all capital commitments made between 2004 and 2009. Over 85% of the $850 billion is in
funds larger than $1 billion, including 48% in funds larger than $5 billion, according to Cambridge Associates.
Declining values of the Euro and Pound are also providing a strong backdrop for cross-border deals, particularly
in Europe. “Typically, during U.S. downturns, European companies take advantage of a poor U.S. economy, but
this time, foreign buyers have to deal with issues at home, including a challenging financing market, reduced
demand and declining currency values,” according to PwC‟s Filek. “As a result, we expect the inverse to occur.
U.S. corporates are going to see good opportunities to acquire high quality franchises and brands in Europe.”
Sectors ripe for consolidation include:
Financial Services – Until the impact of U.S. financial regulation is fully realized, uncertainty will be
cause for continued stagnation of deals in the sector, other than some continuing interest in FDIC
supported takeovers. However, opportunities exist for companies to divest non-core assets and consider
capital raising alternatives such as debt or equity raises. Consolidation in the property and casualty
insurance is still expected in light of continued soft premium pricing and desire to maximize scale, while
life insurance consolidations will likely continue to be a less active space given returning investment
portfolio valuations and focus on product redesign.
Oil & Gas – Oil & gas commodity price differential will drive companies to increase their oil positions
through acquisitions. Equipment and service companies will expand their product and geographic
footprint through transactions. The offshore drilling moratorium will be an obstacle for those highly
levered to Gulf of Mexico E&P projects but will likely not dampen the growing level of transactions in the
Power & Utilities – Despite uncertainty surrounding energy policy and regulatory changes, M&A activity
in the sector has been a pleasant surprise, as significant regulated and merchant company transactions
have been announced in the first two quarters of 2010. PwC expects this trend to continue, with a
cautious eye towards regulatory approvals of the announced transactions. IOUs continue to shed non-
core assets and M&A activity remains strong in the renewable space. Expect to see continued sales of
merchant power plants, particularly driven by the current and projected commodity prices.
According to PwC, the wild card in the second half will be just how much incentive looming tax increases give
buyers to sell. “The economics could be compelling enough to drive a rush to exit by December 31, which could
mean a busy holiday season for deal makers,” says Filek.
By PricewaterhouseCoopers’ US Transaction Services Team
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• Plus special sessions focussing on private equity, the independent oil and gas
markets, the future of unconventionals and Latin America
‘On the Spot’ with our Question of the Month (Part Two)
“How significant a role will unconventional oil (extra
heavy oil, oil sands and oil shale) and unconventional
gas (CBM, shale gas, tight gas) play in tomorrow’s
global energy mix? Are these unconventionals now in
fact becoming conventional?”
“Significant. As high quality middle east imported crude declines or is consumed by developing
countries closer to the area, unconventional oil will play a big part in contributing to supply the
US and European markets. Alberta oil sands are 95% of all of Canadian oil reserves and 13% of
global oil reserves with 173 billion barrels of recoverable oil in place. The bitumen in place is low
quality but with additional refining, Canada can produce approximately 1.5 million barrels per
day from Steam Assisted Gravity Drainage (SAGD) projects that have only been commercial in
the past 15 years. Production should increase to 2.0 million barrels per day due to advances in
engineering and design.
Oil shale (similar to what is in western Colorado) is a few years away, but if commodity prices stay in the current
range there are some techniques using portable nuclear heating elements that may be proven soon and could be
used to make oil shale production economical. These low quality crude plays are the bottom of the barrel when
comparing reserves, but they are on soil that is politically stable and can be managed for the long term.”
... Steve Crower, Energy Investment Banker, Starlight Investments LLC (Oil Council Member)
“Most major upstream exploration companies are moving into unconventional resources such as coal seam gas
and shale gas. Super-major exploration companies predict that as much as 16% of production this year will be
from unconventional resources. Around 20% of upstream global mergers and acquisitions deals in 2008 were in
coal seam gas and a high percentage in recent times were in shale gas, with some extraordinary prices paid, e.g.
the $41B XTO deal. Over the past 5 years coal seam gas investment was the number one oil and gas strategy;
for every $1 invested in 2004 coal seam gas returned $4.4 Global coal seam gas production has increased
rapidly, nowhere more so than in Australia, where coal seam gas now comprises 30% of proven and probable
(2P) gas reserves and is still rising. The rise of gas as a cleaner fuel and the increasing "liquidity" of LNG
markets, especially from abundant shale gas and coal seam gas will see more being paid for unconventional
fields. I believe that we are approaching the tipping point fast”
... Chris McKeown, Commercial & Business Development Manager, L&M Energy (Oil Council Member)
“There is no question that at some point, unconventional oil will play a significant role in our energy economy,
especially oil shale. The oil locked in shale in the Piceance Basin of my home State of Colorado are larger than
all the known deposits in the world - so there is little doubt that resource is part of our future.
Moreover, the Shell technology has essentially broken the century-old technological barrier, so oil there can now
be produced at marketable prices.
So we are left with a problem of political will more than anything else. With a State Governor who opposes the
production of any new fossil fuels (and who has imposed an onerous and difficult new regulatory process on
O&G), and with a federal Administration unfriendly to oil shale, most companies are simply waiting for a better
I frequently tell clients these are battles they'll eventually win, but many companies are just waiting for a better
political window. It is unfortunate that politics, not economics, is the primary driver of energy policy - but of course
that has always been the case.”
... Greg Walcher, Energy and Natural Resources Consultant [Managing Director, Global Energy & Natural
Resources at LeaderBridge] – (Oil Council Member)
“I think we should perhaps start distinguishing between 'conventional unconventionals' like oil
sands, extra-heavy oil and shale gas, which are commercial today, and the remaining
unconventionals like oil shale and gas hydrates, which still await technological and commercial
breakthroughs. To extend the debate further, there is also oil and gas in difficult places -
ultradeep water, ultradeep reservoirs, the Arctic - and conventional oil extracted via tertiary
recovery/EOR. These can be comparably expensive to unconventional oil, as can 'stripper
Then we have liquid hydrocarbons derived from coal, gas and biomass/biofuels, and natural
gas made from coal or landfill waste. These are not traditional oil/gas extraction technologies at all, but the end
product can be indistinguishable to the consumer from traditional fuels. I agree the Shell technique for oil shale is
very promising, along with some other new ideas, which get round the old problems of waste rock, high water
use, land degradation, etc.
We need, though a new term. It's getting too confusing distinguishing between the oil shale deposits in places
like Colorado, and the shale oil reservoirs like the Bakken. I'd suggest that the Bakken and its like be called shale
oil, as with 'shale gas' which everyone is familiar with now, and the oil derived by transformation of immature
source rocks like the Green River Formation could be called kerogen oil (and to make it even more confusing, the
Shell process produces natural gas as well as oil!)
The potential volumes of kerogen oil are enormous, amounting to trillions of barrels (as against the ~1 trillion
barrels of conventional oil produced to date). It's not just confined to Colorado etc, there are big high-quality
kerogen-shale deposits in Jordan, Morocco, Australia, Brazil and other places. Maybe the process will have to
get started there and overcome the environmental hurdles before it really emerges in the US.
The big question for me is whether kerogen oil can be economically competitive as vehicle fuel, or whether all-
electric vehicles (electricity from natural gas, nuclear, renewables or whatever) will win out.”
... Robin Mills, Energy Economist and Author of 'The Myth of the Oil Crisis' (Oil Council Member)
Wall Street Investor – PE Investing: Setting the Record Straight
Written by Ziad Abdelnour, President and CEO, Blackhawk Partners Inc
We at Blackhawk meet on the average over 500 entrepreneurs a year; and the question that keeps recurring at
all times by every one of our entrepreneurs seeking funding is: Why is every private equity fund we meet trying to
take advantage of us? We are much more comfortable in dealing with family offices such as Blackhawk; could
you please help us?
Our view in this regard is very simple:
As venture capital and private equity continue to make news headlines, entrepreneurs may find it challenging to
distinguish fact from fiction.
1. Do investors win at the expense of entrepreneurs?
2. Are investors out to wrest control from management?
3. Is an investor's sole focus on the final liquidity event?
Without question, misperceptions can prevent an entrepreneur from making rational, fact-based decisions.
During my 20 years as an investor, I have come to identify what I call "The Five Myths of Private Equity." Let's
closely examine these five myths, one by one:
Myth #1: Private equity is a win-lose game -- investors win, entrepreneurs lose.
According to this myth, private investors somehow make off with the value of your company -- perhaps buying at
a too-low price and cutting you out of the eventual rewards that you'd earn from going public or selling to another
company. Remember, though, that private equity investors only make money if the value of your company
appreciates -- and, in most cases, the entrepreneur retains a substantial interest in the business. After all, it's in
their best interest to help you grow your company and increase its value. Almost by definition, if the investor wins,
the entrepreneur wins.
Moreover, a private equity investment provides entrepreneurs with the opportunity to diversify their assets. You
receive cash for part of your share in the company, which you can spend or invest as you see fit. As a result, you
immediately reduce your exposure to events at a single company, in a single industry -- and can access cash that
you may need for retirement, college tuition, or major purchases.
Myth #2: Valuations are the only consideration when you're shopping the deal.
Valuation is certainly an important consideration since you want to get a fair price when you sell your company.
However, it's equally important to partner with an investor who shares your goals and who will work with you to
achieve them. When you focus exclusively on valuation, you risk ending up with a partner who doesn't
understand your company, your growth strategies, or your industry.
Let's say, for example, that you sell your company to an investor whose expectations for your business are
unrealistically high. You may obtain a good price for your company, but that relationship is likely to sour as the
business fails to meet the investor's expectations. On the other hand, an investor with a more nuanced
understanding of your company would work with you to increase its value in a realistic and sustainable way.
Myth #3: Private equity investors don't add value because they haven't been in an operating role.
Most entrepreneurs have ample experience with operating issues. In fact, that's one of the main reasons private
equity investors should not try to micromanage portfolio companies. However, they can add value by challenging
management to think outside the box.
Investors who have backed many different companies at rapid growth stages can recognize patterns that may not
be obvious to the management team. They may have a network of relationships that can also assist companies
in recruiting talent at the board and management level. They can often help companies explore strategic
partnerships with other firms.
Myth #4: Taking venture capital/private equity money means you lose control of your company.
If you take on a minority investment, you can continue to control your company -- making all operating decisions
and having the ultimate say over strategic issues. Selling less than half of your company leaves you in charge,
while providing liquidity to you and other early shareholders.
Myth #5: Private equity investors are only interested in your exit strategy.
When a private equity firm invests in your company, they do expect to exit their investment within the next five to
seven years. Since the firm has limited partners who expect liquidity at some point, they can't hold their
investment forever. However, this doesn't mean that your company will have to sell your company or take it
public. Alternatives might include recapping the company with bank debt, swapping out one investor with a new
private equity investor, or raising capital from a strategic partner.
In any event, your private equity partner has a vested interest in growing your company over the next several
years up to the exit event. Their goal during this period is the same as yours: to increase the value of your
company by expanding the business.
Focus on what's important, put the myths to rest
Whether to take on private equity is a complex decision, requiring in-depth analysis of your personal and
business goals, the market environment, and the financing options available. Focusing on these important
considerations -- rather than on common misperceptions -- will help you make the right decision. It's time to put
the myths to rest.
Looking forward to doing business with you and to continue being your resource for deals, capital, relationships
Your feedback as always is greatly appreciated.
Ziad K. Abdelnour,
President and CEO, Blackhawk Partners, Inc
About Ziad K. Abdelnour: Once referred to by the New York Times as one of the 100 most creative and
fiercest investment bankers on Wall Street, Ziad K. Abdelnour is a dealmaker, trader and financier
with over 20 year experience in merchant banking, private equity, alternative investments and
physical commodities trading. Since 1985, Mr. Abdelnour has been involved in over 125 transactions
totaling over $30 billion in the investment banking, high yield bond and distressed debt markets and
has been widely recognized for playing an integral role in those three key market sectors.
He founded Blackhawk Partners, Inc., in 2004; a New York based private equity ”family office” that
focuses on originating, structuring and acting as equity investor in management-led buyouts,
strategic minority equity investments, equity private placements, consolidations, buildups, and
growth capital financing. For more information please visit: http://blackhawkpartners.com
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Golden Barrels: The Market is the Market
By Simon Hawkins, Head, Oil & Gas Research, Ambrian
One of the best pieces of advice I was given when I produced a drop of oil. This is by all accounts an
started in the City is “the market is the market”. At first extraordinary time.
it sounded silly and obvious but having lived with the
idea for more than a few years now the message has
a timeless truth about it. “The good news is that
The idea is that no matter who we think we are, what
there is still an appetite
organisation we think we represent, what insight we for a good story”
think we have on a stock or a sector, whatever
opportunity we think we’re highlighting to investors, the
market will respond in a way that is sometimes So what would be our advice to companies looking to
predictable and sometimes not. brave the elements to raise cash at this tempestuous
It will be influenced by things we know about and
sometimes by things we don’t. It has its own ebbs and The good news is that there is still an appetite for a
flows, high tides and low tides, sometimes gets good story but investors are understandably picky.
whipped up by a storm that can devastate us.
If you have a good story resulting in strong,
And sometimes, in the calm of the day, it allows us to transparent cash flows, a robust cash position after the
jump into a small boat, potter out a mile or two on the fund raise, reasonable scale and a liquidity in the stock
turn of a gentle tide so we can fish for our lunch. for investors to exit if they need to you will be off to a
Over the last three months we have seen the market
wipe around £90bn off the value of the UK Oil and Gas IPOs require all of that plus a little more courage. To
sector, leaving it valued at around £250bn. The loss of be successful, not only does the investment case have
£90bn is equal to the combined market capitalisation to be good on an absolute basis, but it has to be better
of 119 out of the 122 stocks that make up the sector: than its listed peer group.
everything up to and including BG Group.
If it isn’t the market is likely to put capital into stock that
Yet, while BP has plummeted and pulled down its Big it knows, trusts, has a track record with and can
Oil peers, the explorers have been enjoying a punish if things go wrong.
renaissance on the back of exploration success in the
Falklands, the North Sea and elsewhere. But that’s just my view. After all, the market is the
Rockhopper, one of the best performers, is now the Let me know your views at:
18th largest company in the sector without having firstname.lastname@example.org
Previously, Simon was
founder of Omni
and held senior
positions at UBS and
having been ranked
number one by
Thomson Extel for his coverage of the European Gas sector,
number two in European Oils and three in European Utilities.
Prior to joining the City, Simon had eight years international
experience with the Shell, working in economics and finance
in Nigeria, The Netherlands, the Far East and the US. He is
now Head of O&G Research at Ambrian, a specialist energy
and resources investment bank.
Ambrian provides full service investment banking to a broad range of institutional and corporate clients, including Corporate
Finance, Corporate Broking and Equities. Ambrian is focused on three key sectors, Oil and Gas, Mining and
Cleantech/Alternative Energy, where it has developed in-depth expertise and relationships. www.ambrian.com
The Oil Outlook
June 2010: Fears of Weaker
Recovery Mire Crude Markets
By Gianna Bern, President,
Brookshire Advisory and Research
Crude markets have retrenched on continued fears prices, have taken big hits in the last few weeks on
that a weaker-than-expected global recovery will sovereign debt fears.
take place in the second half of 2010.
Crude oil prices have plunged to near $71 per “Barring any geopolitical
barrel as projected economic growth begins to slow
in the US, Europe, and China. While economic events, crude oil prices will
growth was never projected to be robust, a modest continue to trade beneath
recovery now hangs in the balance.
the $80 per barrel mark
Fears of a double dip recession plague U.S. equity
markets while anticipated spending cuts weigh on
for the near term.”
U.K. equity markets.
Global markets await results of European bank
All told, crude oil prices are not projected to flirt with stress tests and indications of debt reduction
$90 per barrel levels any time soon. Over the near throughout many countries. As the year progresses,
term, we don't expect crude oil prices to advance we expect this sentiment to proliferate.
much above the $80 per barrel mark.
Sovereigns will try to implement debt reduction
Robust Crude Supplies plans and mitigate potential ratings downgrades.
To compound matters, crude supplies on both sides We will continue to see sovereign ratings
of the Atlantic are plentiful. U.S. crude supplies, downgrades and several countries placed on
currently at 363 million barrels, are near 2009 levels Outlook Negative or Evolving -- rating agency speak
when crude prices were considerably weaker than for potential future downgrade coming unless swift
our current $72 per barrel. action is taken typically within the year.
With northern hemisphere summer drive season Emerging Market Strength
near the half way mark, we anticipate that gasoline
demand will remain sluggish for the remaining two Emerging markets of China, India, and Brazil
months of the peak summer drive season. This continue to carry the day as GDP growth is
situation is not helping ample crude supplies. expected to vary from 5% to upwards of 6% or 7%
in Brazil. These economies are growing as
At mid-summer, gasoline supplies are also plentiful indicated by buoyant corporate bond issuances
placing further downward pressure on gasoline amid a weak corporate lending environment.
prices. Gasoline demand is simply not
materializing. Emerging markets have also exhibit continued
commodity demand albeit slower-than-expected
Sovereign Scares Continue GDP growth. At this rate, we expect developed
markets in Europe and the U.S. will remain
Once we consider continued Eurozone sovereign lackluster for much of 2011. Barring any geopolitical
debt concerns, global equity markets remain jittery events, crude oil prices will continue to trade
at best. Commodity markets, including crude oil beneath the $80 per barrel mark for the near term.
About Gianna: Gianna Bern is a registered investment advisor and President of Brookshire Advisory and Research, Inc.
About Brookshire: Brookshire is an investment advisory firm focused on energy investment research, risk management, and
credit portfolio management with clients in Europe, Latin America & the U.S: www.brookshireadvisoryandresearch.com
“A decision without information is a
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A Nightmare Well
Written by Elaine Reynolds, Oil Analyst, Edison Investment Research
Many years ago, when I began working as an I write about those days now, because they come to
engineer in the oil industry, I was sent on my first trip my mind as I see all the speculation in the media
offshore to a semi-submersible that was drilling an regarding what went wrong on BP’s Macondo well,
exploration well for my company in the North Sea. especially when it was reported that the BP
engineers referred to it as a ‘nightmare’ well in
This was no ordinary well however, but an HPHT internal memos.
well, with a pressure of around 14,000 psi and a
temperature of 3500C. ‘Halliburton recommended 21 centralisers on the
liner’, the press reports, ‘but BP only ran 6’ implying
It was the 1980s, in the infancy of HPHT technology, that clearly BP was cutting back, but this may not
and it was not clear how we would develop any necessarily be so.
Halliburton is recommending the ideal number of
In the process of drilling the well, we encountered a centralisers in order to maximize the chances of a
high pressure zone that had not been predicted from good cement job.
offset well data, and by the time I arrived, the well
was being held under control on a knife-edge, with BP wants this, but is also looking at the implications
an increase in mud weight resulting in losses, and a of each additional centraliser increasing the risk of
decrease causing an influx. getting stuck in the hole, or of increasing the surge
effect into the formation, thereby increasing losses
and exacerbating a complex well that was difficult to
“We need to allow for control.
due process and wait for My point is that, until we know the full facts, we really
the results of the don’t know what the thinking behind each step was,
and we cannot say what really went wrong.
jumping to conclusions.” We need to allow for due process and wait for the
results of the investigation before jumping to
As a young and green engineer, I was only there to
observe and learn, but I can still clearly recall the I only hope that the engineers have fully documented
tension and anxiety of those days. the risk assessments of all their decisions, and that
they were allowed to do their job by management.
A great deal of thought and debate went into every
action that was taken on the well, with every And that well in the North Sea?
precaution taken, right down to us being restricted to
eating only uncooked food to ensure that there were We achieved our objective safely, and the field
no ignition sources on the rig. began production in 1997, continuing to this day.
About Elaine Reynolds: Elaine is an oil analyst at Edison Investment Research. Prior to joining
Edison she had fourteen years experience as a petroleum engineer with Texaco in the North
Sea and Shell in Oman and The Netherlands.
Edison is Europe’s leading independent investment research company. It has won industry
recognition, with awards in both the UK and internationally. The team of more than 50 includes
over 30 analysts supported by a department of supervisory analysts, editors and assistants.
Edison writes on more than 250 companies across every sector and works directly with
corporates, investment banks, brokers and fund managers. Edison’s research is read by every
major institutional investor in the UK, as well as by the private client broker and international
investor communities: www.edisoninvestmentresearch.co.uk
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