Gas y Petroleo Enero 2017

JAN.
2, 2017 | USD 20
International Petroleum News and Technology | www.ogj.com
FORECAST &
REVIEW
LEVANT BASIN DEVELOPMENT

UKCS REDUCES DRILLING COSTS
NIGERIA SPEEDS UP REFINERY PLANS
PIPELINE CORROSION DEFECTS
170102ogj_C1 1
12/23/16 10:32 AM
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170102ogj_C2 2
12/23/16 10:32 AM
CONTENTS
Jan. 2, 2017 Volume 115.1
WORLD OIL MARKET AT A GLANCE
140
FIG.
G 1
Spot Crude Prices
FIG. 1a
Brent
WTI
Brent-WTI spread
120
BLM approves master

leasing plan for
southeastern Utah
Nick Snow
32
BP to team with Kosmos

on Mauritania, Senegal
ffshore blocks
35
100
2.0
80
1.5
60
40
0.0
0.5
1.0
Mar. 2014
May 2015
World oil production, y-o-y change*
33
Gulfport strikes
$1.85-billion deal
to enter Oklahoma
SCOOP
Matt Zborowski
EPA final rule amends

chemical plant risk
management
requirements
Nick Snow
33
36
Diamondback boosts
Delaware basin
position with
$2.4-billion purchase
2014
July 2016
FIG. 1c
NonOPEC excl. US
Oklahoma develops
seismicity guidelines for
SCOOP, STACK plays
OECD
FSU
Europe
China
Other Asia
Americas
Middle East
Africa
0.5
4.0
FIG. 1b
1.0
20
20
Jan. 2013
World oil demand, y-o-y change
2.5
Million b/d
$/bbl
GENERAL INTEREST
3.0
3.2
2015
2016
2017
20
OECD commercial oil inventories

Max/Min 2011-15
Average2011-15
FIG. 1d
2015
2016
SPECIAL REPORT
FORECAST & REVIEW
Oil industry holds recovery prospects in 2017

Conglin Xu, Laura Bell
20
Matt Zborowski
US House Energy and

Commerce leaders ask
GAO to examine SPR
Nick Snow
34
36
Total to buy stake in US

LNG group Tellurian
37
US energy security at
20-year peak,
US Chamber
assessment finds
Nick Snow
34
REGULAR FEATURES
COVER
With a deal on production cut, OPEC, Russia,
and other producers are looking to speed
up the oil market rebalance process. This is
supportive of oil prices, while it remains to
be seen how quickly and to what extent US
shale oil producers might respond by resuming more drilling. Oil & Gas Journals annual
special report, Forecast & Review, starting on
p. 20, takes a fresh look at this years supply
and demand for oil and gas.
170102ogj_1 1
OG&PE
P1
NEWSLETTER 6
LETTERS/CALENDAR 12
JOURNALLY SPEAKING 16
EDITORIAL 18
SERVICES/SUPPLIERS 77
STATISTICS 79
MARKET CONNECTION 82
ADVERTISERS INDEX 83
EDITORS PERSPECTIVE/
WATCHING GOVERNMENT 84
12/29/16 10:55 AM
170102ogj_2 2
12/22/16 1:34 PM
IRANS SHARED PERSIAN GULF OIL, GAS FIELDS
FIG. 1
Area
shown
IRAQ
IRAQ
Azadegan
IRAN
SAUDI
ARABIA
Yadavaran
IRAN
Arash
KUWAIT
Oil
Gas
Esfandiar
Farzad A
SAUDI
ARABIA
Farzad B
BAHRAIN
0
Miles 124
North
field
55
38
Hingam
South
Pars
Sirri
OMAN
TECHNOLOGY...
EXPLORATION & DEVELOPMENT
DRILLING & PRODUCTION
PROCESSING
TRANSPORTATION
Irans joint fields offer

development, partnership
opportunities
Industry, government
work to reduce
UKCS drilling costs
Nigeria advances
programs to rehabilitate,
expand refining capacity
Omid Shokri Kalehsar
Paula Dittrick
Robert Brelsford
38
47
55
Probabilistic approach
evaluates reliability
of pipelines with
corrosion defects
India upgrades
exploration policy,
seeks international
investment
Shell uses Raman

spectrometer to
evaluate Marcellus gas
GUIDE TO WORLD
CRUDES:
Norwegian Skarv Blend
assayed
Ripunjaya Bansal
42
Grant A. Myers
Usman Ahmed
Peter H.O. Christian
John M. Pope
58
Nelson-Farrar
monthly cost indexes
50
Gary Farrar
61
UKCS DRILLING ACTIVITY
FIG. 1
250
Developments
Exploration, appraisal
64
Study assesses floating

roof designs against
rain, pontoon puncture
Ahmed Saad Noaman
Mohamed Elsamnody
Ashraf Ghorab
70
Gary Farrar
62
200
Wells spudded
NELSON-FARRAR
QUARTERLY
COSITMATING:
Yearly refinery
construction indexes
listed for 80+ years
Mohamed el Amine Ben Seghier

Mourad Bettayeb
Elahmoune Bouali
Mohamed Gaceb
150
100
50
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
*estimate
Source: Oil & Gas Authority
170102ogj_3 3
47
12/29/16 10:55 AM
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170102ogj_5 5
12/22/16 1:34 PM
OGJ
Newsletter
Jan. 2, 2017
International News
for oil and gas professionals
GENERAL INTEREST Q U IC K TA K E S
Total to buy $2.2 billion in Petrobras assets
Total SA has agreed to acquire $2.2-billion in upstream and
downstream assets from Petroleo Brasileiro SA (Petrobras) as
part of the firms strategic alliance announced in October 2016.
Total will partner with Petrobras in two presalt licenses in
the Santos basin, taking 22.5% interest in the BMS-11 license,
which includes the Iara fields that are currently under development; and 35% interest and operatorship of the BMS-9 license,
which includes Lapa field that recently started production.
The firms say they will jointly develop solutions for long
subsea tie-backs, reservoirs with high carbon dioxide content,
and digital geosciences data management. Total also will offer
Petrobras the option of taking 20% stake in the Perdido Belt
deepwater exploration Block 2 recently awarded off Mexico.
Total also will acquire some regasification capacity in the
Bahia LNG terminal and 50% interest in two cogeneration
plants in the Bahia area. The deal includes pipeline transport
capacity that will allow Total to supply gas to the plants.
Total and Petrobras jointly participate in 19 E&P consortiums worldwide. In Brazil, the firms are partners in development of the giant Libra field, which is the first production sharing contract in the Brazilian presalt Santos basin.
Outside Brazil, Petrobras and Total are partners on Chinook
field in the US Gulf of Mexico, the deepwater Akpo field in Nigeria, and the gas fields of San Alberto and San Antonio-Itau in
Bolivia, as well as in the Bolivia-Brazil gas pipeline.
Anadarko parts with Marcellus assets for $1.24 billion

Anadarko Petroleum Corp. has agreed to sell its operated and
nonoperated upstream assets and operated midstream assets in
the Marcellus shale of north-central Pennsylvania to Alta Marcellus Development LLC, a wholly owned subsidiary of Houston-based Alta Resources Development LLC, for $1.24 billion.
The deal includes 195,000 net acres. At the end of thirdquarter 2016, sales volumes from the properties totaled 470
MMcfd. Excluded from the deal are the Marcellus midstream
assets owned by Western Gas Partners LP.
With this transaction, we have announced or closed monetizations totaling well in excess of $5 billion in 2016, while
principally focusing Anadarkos US onshore activities on our
170102ogj_6 6
For up-to-the-minute news,

visit www.ogjonline.com
world-class oil-levered assets in the Delaware and DJ basins,

said Al Walker, Anadarko chairman, president, and chief executive officer.
Anadarko in November sold its Carthage upstream and
midstream assets in East Texas to Castleton Commodities International LLC for $1 billion. The firm this month also closed
on its $2-billion purchase of Freeport McMoRan Oil & Gass
deepwater Gulf of Mexico assets.
Anadarko confirmed that it added 2 rigs in each of its Delaware and DJ basin positions early in fourth-quarter 2016. The
firm plans to further increase activity in each area, expecting
to end first-quarter 2017 with 14 operated rigs in the Delaware
and 6 in the DJ, compared with 7 and 1 in the basins, respectively, at the end of third-quarter 2016.
Haynesville assets net $465 million for Chesapeake

Chesapeake Energy Corp. has agreed to sell a portion of its
acreage and producing properties in its Haynesville shale operating area in northern Louisiana to an affiliate of Dallas-based
Covey Park Energy LLC for $465 million.
The sale includes 41,500 net acres and 326 wells currently
producing 50 MMcfd of gas net to Chesapeake. The deal is expected to close in this years first quarter.
The first deal comprised Chesapeake agreeing to sell 78,000
net acres with 250 wells producing 30 MMcfd of gas net to
Chesapeake to Indigo Minerals LLC, a Houston-based firm created in 2006 thats backed by Martin Cos., Yorktown Partners
LLC, Trilantic Capital Partners LLC, and Indigo management.
Chesapeake says it has now exceeded its 2016 asset sales
goal by $500 million, bringing total gross proceeds from divestitures either signed or closed in the year to $2.5 billion.
Covey Park was formed in June 2013 with $300 million of
financial sponsorship from energy and resources private equity
firm Denham Capital Management LP. In November, Covey
Park said it agreed to acquire 90,000 net acres with average
net production of 35 MMcfd in Panola, Nacogdoches, and San
Augustine counties in Texas; and DeSoto, Bossier, and Sabine
Parishes in Louisiana from an undisclosed seller.
At the time, the firm said it owned 321,000 gross and
218,000 net acres of leasehold in Texas and Louisiana, with
expected fourth-quarter net production of 325 MMcfd and total
proved reserves of 2.5 tcf.
Oil & Gas Journal
12/29/16 12:54 PM
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170102ogj_7 7
12/28/16 4:10 PM
ICE BRENT / NYMEX LIGHT SWEET CRUDE

$/bbl
55.50
55.00
54.50
54.00
53.50
53.00
52.50
52.00
US INDUSTRY SCOREBOARD 1/2

4 wk.
average
Latest week 12/16
Dec. 21
Dec. 22
Dec. 23
Dec. 261
Motor gasoline
Distillate
Jet fuel
Residual
Other products
Dec. 27
WTI CUSHING / BRENT SPOT
Crude production
NGL production2
Crude imports
Product imports
Other supply2 3
TOTAL SUPPLY
Net product imports
YTD avg.
year ago1
Change,
%
8,995
4,031
1,620
358
4,783
19,787
9,277
3,608
1,613
270
5,272
20,040
(3.0)
11.7
0.4
32.6
(9.3)
(1.3)
9,369
3,801
1,640
330
4,925
20,065
9,151
3,901
1,574
204
4,881
19,711
2.4
(2.6)
4.2
61.8
0.9
1.8
8,745
3,410
7,921
2,116
2,329
24,521
(2,761)
9,180
3,337
7,852
1,861
2,065
24,295
(2,215)
(4.7)
2.2
0.9
13.7
12.8
0.9
8,761
3,466
7,916
2,163
2,239
24,545
(1,921)
9,316
3,192
7,341
2,008
2,345
24,202
(1,733)
(6.0)
8.6
7.8
7.7
(4.5)
1.4
16,458
16,706
90.6
16,711
16,773
92.3
(1.5)
(0.4)
16,228
16,473
90.0
16,188
16,429
91.1
0.2
0.3
Refining, 1,000 b/d

Dec. 21
Dec. 22
Dec. 23
Dec. 261
Dec. 27
Crude runs to stills

Input to crude stills
% utilization
Latest week 12/16
Latest
week
Previous
week1
485,449
228,736
153,515
43,368
41,461
483,193
230,045
155,935
44,276
41,937
Same week
year ago1 Change
Change
Change,
%
Stocks, 1,000 bbl

Crude oil
Motor gasoline
Distillate
Jet fuelkerosine
Residual
Stock cover (days)4
Dec. 21
Dec. 22
Dec. 23
Dec.
261
Dec. 27
ICE GAS OIL / NYMEX HEATING OIL

/gal
171.00
168.00
165.00
162.00
159.00
156.00
153.00
150.00
YTD
average1
Supply, 1,000 b/d
NYMEX NATURAL GAS / SPOT GAS - HENRY HUB

$/MMbtu
3.750
3.700
3.650
3.600
3.550
3.500
3.450
3.400
Change,
%
Product supplied, 1,000 b/d
TOTAL PRODUCT SUPPLIED
$/bbl
55.50
55.00
54.50
54.00
53.50
53.00
52.50
52.00
4 wk. avg.
year ago1
2,256
(1,309)
(2,420)
(908)
(476)
452,477
220,495
151,315
39,451
43,480
Change, %
Crude
Motor gasoline
Distillate
Propane
Futures prices5 12/23
Light sweet crude ($/bbl)
Natural gas, $/MMbtu
32,972
8,241
2,200
3,917
(2,019)
7.3
3.7
1.5
9.9
(4.6)
Change, %
29.5
25.4
38.1
66.2
29.5
25.7
39.7
77.1
0.0
(1.2)
(4.0)
(14.1)
Change
29.1
23.8
41.9
71.1
52.56
3.48
51.93
3.47
0.63
0.00
35.77
1.81
1.4
6.7
(9.1)
(6.9)
Change Change,%
16.79
1.67
46.9
92.6
Based on revised figures. 2OGJ estimates. 3Includes other liquids, refinery processing gain, and unaccounted for crude oil. 4Stocks
divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices.
Source: Energy Information Administration, Wall Street Journal
Dec. 21
Dec. 22
Dec. 23
Dec. 261
Dec. 27
BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE
PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU

/gal
122.00
116.00
110.00
104.00
66.00
65.00
64.00
63.00
1Not
2,100
1,800
1,678
1,500
1,443
1,200
300
236
Nov. 15
Dec. 21
Dec. 22
Dec. 23
Dec. 261
Dec. 27
NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3

/gal
166.00
165.00
164.00
163.00
162.00
161.00
160.00
159.00
2,400
Dec. 15
Jan. 16
Feb. 16
Mar. 16
Apr. 16
May 16
Jun. 16
July 16
Aug. 16
Sept. 16
Oct. 16
Nov. 16
Note: Monthly average count
BAKER HUGHES RIG COUNT: US / CANADA

800
700
700
653
600
500
300
224
200
126
100
Dec. 211
Dec. 221 Dec. 231
Dec. 261
Dec. 271
available 2Reformulated gasoline blendstock for oxygen blending

3Nonoxygenated regular unleaded
10/16/15 10/30/15 11/13/15
10/9/15
10/23/15
11/6/15
11/27/15 12/11/15
11/20/15
12/4/15
12/25/15 10/14/16 10/28/16
12/18/15
10/7/16
10/21/16
11/11/16
11/4/16
11/25/16
11/18/16
12/9/16
12/2/16
12/23/16
12/16/16
Note: End of week average count
170102ogj_8 8
Oil & Gas Journal | Jan. 2, 2017
12/29/16 12:54 PM
Obama signs RESPONSE bill into law

US President Barack Obama has signed into law S. 546, which
aims to provide first responders the resources and tools to handle hazardous spills from crude-oil train derailments, said the
measures sponsor, US Sen. Heidi Heitkamp (D-ND).
The Railroad Emergency Services Preparedness, Operational Needs, and Safety Evaluation (RESPONSE) bill became law
just days before the third anniversary of the Dec. 30, 2013, derailment of a crude-oil train in Casselton, ND, which prompted
her to introduce it on Feb. 24, 2015, Heitkamp said.
She wanted to make certain that first responders are prepared to handle the transportation of crude oil on the rails,
especially since many of them in rural communities like Casselton are volunteers, the senator said.
The law will establish a public-private council that combines
emergency responders, federal agencies, and leading experts to
review training and best practices for first responders. This
councilco-chaired by the Federal Emergency Management
Agency and the Pipeline & Hazardous Materials Safety Administrationwill provide Congress with recommendations on
how to address first responders safety needs with increased
railway safety challenges so they can best protect communities
across the country, Heitkamp said.
EXPLORATION & DEVELOPMENT Q U IC K TA K E S

Anadarko gulf tie-back program adds discoveries
Anadarko Petroleum Corp. encountered more than 210 ft of
net oil pay in multiple Miocene-aged reservoirs with Warrior
exploration well, which was drilled 3 miles from K2 field in
the Gulf of Mexico on Green Canyon Block 562. Anadarko, the
wells operator, expects to tie-back the Warrior discovery to its
Marco Polo production facility on Green Canyon Block 608.
Anadarko reported the net pay with no other details related
to the discovery. The company holds 65% working interest in
the well. At its Phobos appraisal well in the Sigsbee Escarpment
Blocks 39 and 40, the company has encountered more than
90 ft of net oil pay in Pliocene-aged reservoir similar to nearby
Lucius field. This secondary accumulation will be evaluated for
tie-back to Anadarkos Lucius facility, which is 12 miles north
of Phobos. Drilling is ongoing toward the primary Wilcox formation objective, Anadarko said. The operator owns 100%
working interest at Phobos.
The operators fifth production well at its Heidelberg field
has encountered the reservoir sand with more than 150 ft net
oil pay to date. The well will be completed once drilling operations finish, and Anadarko expects to bring the well on production early in 2017. Heidelberg is in 5,260 ft of water 130 miles
off Louisiana.
Gazprom Neft makes Serbian discovery

A new deposit in Serbias Pannonian oil and gas basin may contain recoverable reserves of 432,000 tonnes, according to Russias PJSC Gazprom Neft. The Idos-X-4 well was drilled to the
170102ogj_9 9
Neogene-aged formation at a depth of 2,268-2,287 m in the

Idos-Sever (Northern Idos) field.
The well was drilled by Serbias Naftna Industrija Srbije (NIS
Oil Co.) with plans based on its 3D seismic interpretation. The
well was completed with an initial flow rate of 27.8 tonnes/day.
Idos-Sever field is under pilot development and is expected to
begin production in 2017, the company said.
Gazproms Head of Geological Exploration and Resource
Base Development Alexei Vashkevich said, The challenge for
discovering new deposits in traditional oil and gas areas is related to the small size of these deposits. The Pannonian basin
contains highly complex geological structures formed through
unconventional traps. Recent advancements is seismic operations have improved Serbian drilling rates to 100% in 2015
from 83% in 2014, Vashkevich said.
Gazprom acquired a 51% stake in Serbias NIS for 400 million in 2009. The acquisition led the way for NIS to begin a
long-term campaign to revamp its refining facilities. In September 2016, NIS completed a major turnaround at its 4.8 milliontonne/year Pancevo refinery.
Three blocks awarded offshore Cyprus

Cypruss Ministry of Energy, Commerce, Industry, and Tourism has awarded Blocks 6, 8, and 10 in the countrys exclusive
economic zone to four international firms.
Exploration Block 6 was awarded to a partnership of Eni
Cyprus Ltd. and Total E&P Cyprus BV. Eni will be operator
with 50% stake.
Exploration Block 8 was awarded to Eni Cyprus, which will
hold 100% interest.
Exploration Block 10 was awarded to a partnership of ExxonMobil Exploration & Production Cyprus (Offshore) Ltd. and
Qatar Petroleum International Upstream OPC. Operatorship
and distribution of interests in that block were not reported.
Applicants not receiving bids were Cairn Energy PLC and
Delek Group Ltd. Eni says the blocks have geological affinities with those successfully explored by Eni in the neighboring areas offshore Egypt, where supergiant Zohr gas field was
discovered.
Eni already has interests in Blocks 2, 3, and 9 following the
2nd international bid round in 2012, and it holds three exploration blocks on the Egyptian side: Shorouk, where Zohr is located; Karawan, where Eni has 50% stake; and North Leil, where
Eni holds 100% interest.
BOEM schedules central gulf lease sale for March

The US Bureau of Ocean Energy Management will livestream
central Gulf of Mexico Lease Sale 247 at 9 a.m. CST on Mar. 22.
The 12th and final gulf sale under the Obama administrations Outer Continental Shelf 2012-17 leasing program offers
more than 48 million acres offshore Louisiana, Mississippi, and
Alabama, encompassing all available unleased areas in the central planning area (CPA). It covers 9,118 blocks 3-230 miles
offshore in 9-11,115 ft of water.
12/29/16 12:54 PM
The previous 11 sales held in the current 5-year program

netted more than $3 billion, BOEM says.
Activity in the last central gulf auction, Lease Sale 241 held
in March 2016, was down markedly compared with the previous years auction, drawing 148 bids on 128 blocks from 30
companies, with apparent high bids totaling $156 million (OGJ
Online, Mar. 23, 2016). Shell Offshore Inc. led all firms with
apparent high bids totaling $24.9 million.
DRILLING & PRODUCTION Q U IC K TA K E S

Libya expects more oil output after line reopening
Libyas National Oil Corp. said an oil pipeline that had been
shut down for more than 2 years has reopened in western Libya.
NOC estimated the reopening of the pipeline along with increasing production from two oil fields could supply an additional 270,000 b/d of crude oil within 3 months. The reopened
oil fields were Sharara and El Feel.
Libyas current production fell to less than 300,000 b/d at
times during 2016. Analysts noted that it remains uncertain if
Libya will get additional oil to the world market. The nations
oil production fell from a peak of more than 1.6 million b/d
after Moammar Gadhafi death in 2011.
Increased Libyan production could complicate an attempt
by the Organization of Petroleum Exporting Countries attempt
to support oil prices. OPEC plans to cut cartel production by
1.2 million b/d starting in January. Libya and Nigeria were exempted from that agreement.
Brent crude oil prices fell on the London market after NOCs
announcement on Dec. 21, 2016.
The fields could add 175,000 b/d to Libyas output within
1 month, NOC estimated, adding that volume could grow to
270,000 b/d in 3 months. OPEC reported Libya produced almost 575,000 b/d during November.
NOC Chairman Mustafa Sanallah issued a news release saying the pipeline and fields were reopened without any payoffs
or backroom deals. Sanallah said, For the first time in nearly
3 years all our oil can flow freely. I hope this marks the end of
the use of blockade tactics in our country.
BP, SOCAR sign LOI for ACG field development

State Oil Co. of the Republic of Azerbaijan (SOCAR) and BP
PLC-operated Azerbaijan International Operating Co. (AIOC)
have signed a letter of intent for future development of AzeriChirag-Gunashli (ACG) field off Azerbaijan in the Caspian Sea.
The agreement will cover development of the field until
2050 and will add significant resource development potential
to the middle of the century, the companies said. ACG currently produces 620,000 boe/d.
In addition to BP, shareholders in AIOC are Chevron Corp.,
INPEX Corp., Statoil ASA, ExxonMobil Corp., Turkish Petroleum Corp. (TPAO), Itochu Corp., and ONGC Videsh Ltd.
The companies say the agreement sets key commercial
terms for future ACG development and enables the parties to
10
170102ogj_10 10
conclude negotiations and finalize fully-termed agreements in

the next few months.
ACG is a supergiant field 100 km east of Baku covering 432
sq km. It lies in 120-170 m of water. Reservoir depth is 2,0003,500 m.
The existing ACG production-sharing agreement was signed
in September 1994 for 30 years. Oil production from the field
began in November 1997. To date the field has produced more
than 3 billion bbl of oil with around $33 billion of investment.
There are six producing platforms on ACG, linked with an
onshore terminal in Sangachal near Baku. From the terminal
ACG oil is exported to market primarily by the Baku-TbilisiCeyhan oil export pipeline and the Western Route Export Pipeline to Supsa.
ExxonMobil unit lets FPSO contract for Liza field

Esso Exploration & Production Guyana Ltd. (EEPGL) has let
contracts to SBM Offshore NV for a floating production, storage, and offloading vessel for Liza field offshore Guyana.
SBM Offshore will perform front-end engineering and design for the FPSO, and, subject to the projects final investment
decision in 2017, will construct, install, and operate the vessel.
The ExxonMobil Corp. unit submitted an application for
a production license and its initial development plan for Liza
field in early December. The development plan submitted to the
Guyana Ministry of Natural Resources includes development
drilling, operation of the FPSO, and subsea, umbilical, riser,
and flowline systems.
Liza field lies on the 27,000-sq-km Stabroek block 193 km
offshore. Its potential resource estimate is more than 1 billion
boe. EEPGL is operator with 45% interest in Stabroek.
PROCESSING Q U IC K TA K E S
BP buys outlets in Australia for $1.8 billion (Aus.)
BP PLC has bought Australian retailer Woolworths national
chain of retail outlets for $1.8 billion (Aus.). The deal includes
527 convenience sites and 16 development sites in Australia.
Woolworths has previously been supplied by Caltex Australia, a company that was also in talks to buy the outlets outright.
Once the deal is completed in the next 12 months, Caltexs market share in Australia will slip to about 18% while BP,
which already has 15% on its own brand name, will rise to 39%
overall and be a clear market leader.
An important part of the deal involves the operation of convenience stores at the outlets. BP will trial the Woolworths Metro format at its own service stations before committing to roll it
out across the chain.
The BP-Woolworths deal requires approval from the Foreign
Investment Review Board and the Australian Competition and
Consumer Commission (ACCC). Given the new BP dominance,
some analysts tip that the ACCC will tell BP to divest some of
the stations to third parties.
The Woolworths fuel business has a revenue of about $4.6
12/29/16 12:54 PM
billion (Aus.)/year, which led to a pretax profit of $117 million

in the 2015-16 financial year.
Woolworths is in need of the cash from the sale to reduce
debt. The company is attempting to streamline its operations to
try to revive declining earnings.
Caltex will continue to supply the Woolworths retail outlets
until the BP deal is completed. Caltex has launched two acquisitions of its own in the last few months: Victorian retailer Milemaker Petroleum for $95 million (Aus.) and Gull New Zealand
for $340 million (NZ).
The New Zealand acquisition of Gull increases its infrastructure and enhances the companys retail fuel supply through a
low-risk entry into a new market.
Gull operates 77 retail sites and operates a further 22 supply
sites. The company sells about 300 million l./year of transport
fuel, equivalent to 5% of the New Zealand market.
The Mount Maunganui terminal has a total storage capacity
of 90 million l. Caltex said it will retain the Gull brand, management and employees.
TRANSPORTATION Q U IC K TA K E S
Shell divests Australian aviation fuels unit
Royal Dutch Shell PLCs Australian arm, based in Melbourne,
has made an arrangement with Viva Energy Australia Pty. Ltd.
to sell its local aviation fuels division for $250 million.
The deal comes 2 years after Shell sold its other Australian
refining and fuels businesses to Viva for $2.9 billion in 2014. It
has also heightened speculation that the major is planning to
sell out of its remaining 13.3% stake in Perth-based upstream
company Woodside Petroleum Ltd.
The aviation sale is slated to close by mid-2017. The arrangement is similar to the earlier downstream deal in that Viva will
still use the Shell brand for the aviation refueling business under a licensing agreement.
Viva is owned by European commodity trader Vitol and Abu
Dhabi interests. The company sees the aviation deal as highly
complementary to its existing downstream activities.
The arrangement will enable Viva to expand into major Australian airports as well as build supply to the smaller regional
airfields and provide fuel direct to customers.
The Shell sellout of its Woodside interest is now widely
tipped to occur early in 2017 given that Shell has already said
its stake has been reclassified as nonstrategic. Analysts expect
the interest will be divested as a block sale to investors.
Shell says that its direct interest in offshore Western Australian operationsthe North West Shelf domestic gas-LNG project, Gorgon domestic gas-LNG and Prelude Floating LNG
will remain in place.
Caltex makes first move into New Zealand

Sydney-based fuel importer and refiner Caltex Australia Pty.
Ltd. has made its first move into New Zealand with the acquisition of importer and distributor Gull New Zealand for $340
million (NZ).
The deal provides Caltex with a fuel import terminal at
Mount Maunganui on the North Island as well as the companys
retail outlets throughout the North Island.
The move follows Caltexs purchase last month of Victorian
retailer Milemaker Petroleum for $95 million (Aus.) that gave
Caltex control of 46 service stations in Victoria, Australia.
Caltex closed its Kurnell refinery in Sydney several years ago
and has established a major fuel import facility on that site. It
has also established a buying and trading arm in Singapore to
supply its Australian operations.
170102ogj_11 11
First cargo departs Freeport LPG export terminal

Phillips 66 reported that its Freeport LPG export terminal in
Freeport, Tex., is fully operational after the loading of its first
contracted cargo. The Commander, a very large gas carrier, departed the terminal on Dec. 16, 2016.
The Freeport LPG terminal can simultaneously load two
ships with refrigerated propane and butane at a combined rate
of 36,000 bbl/hr. Supply is sourced from Phillips 66 Partners
Sweeny fractionator and Clemens storage facility, which is connected by pipeline to the Mont Belvieu Hub.
The export facility was developed to satisfy the growing
international demand for affordable US NGL. Expecting US
production to continue to grow, Phillips 66 says its evaluating
additional NGL fractionation and infrastructure alternatives
along the US Gulf Coast.
Tubridgi field to be redeveloped as storage

DBP Development Group, wholly owned by DUET Group, is
planning to redevelop the depleted Tubridgi gas field, onshore
Carnarvon basin of Western Australia, as a gas storage facility
with a capacity to hold 42 petajoules of gas.
Tubridgi is about 30 km from the town of Onslow close to
Chevron Corp.s Wheatstone and BHP Billiton Ltd.s Macedon
domestic gas production facilities. It is also connected to the
Dampier-Bunbury natural gas trunkline.
The new Tubridgi facility will be the largest gas storage in
Western Australia capable of supporting daily injection and
withdrawal rates of about 50 terajoules/day.
DBP has already signed up CITIC Pacific Mining Management Ltd., operator of the Sino iron magnetite project at Cape
Preston 100-km southwest of Karratha, as a foundation customer under a 10-year agreement with options for a further 5
years. Further customers are being sought.
The facility is scheduled to be operational by June next year.
It will cost an estimated $69 million (Aus.) to build.
Tubridgi field, originally discovered in 1981 by Otter Exploration, produced 69 petajoules during its lifetime between 1991
and 2004 from 21 wells.
The reservoir is at 550 m, so required injection pressures are
low. Porosity and permeability are described as excellent and
reservoir pressure is supported by an active aquifer that will
ensure virtually constant rates of gas deliverability.
11
12/29/16 12:54 PM
2017-2018 EVENT CALENDAR

Denotes new listing or 25-26.
a change in previously
2017 API Inspection
published information.
Summit, Galveston,
Tex., web site: www.
api.org/Events-andTraining/Calendar-ofEvents/2017/inspection
JANUARY 2017
Jan. 30-Feb 2.
West Africa Energy
Assembly, Lagos, web Permian Basin Optimization Strategies
site: www.oilandgas2017, Houston, web
council.com/confersite: www.permianence/west-africa 17.
basin-optimizationstrategies-2017.com/
Asia-Pacific Assembly, Singapore, web Jan. 31-Feb. 1.
site: www.oilandgasEnergy Mexico 2017
council.com/event/
Expo & Congress 2017,
asia-pacific 18-19.
Mexico City, web site:
European Gas Confer- http://www.energymexico.mx/generalinfo.
ence 2017, Vienna,
web site: www.europe- php Jan. 31-Feb. 2.
angas-conference.com/
23-25.
FEBRUARY 2017
Well Site Automation
Gulf of Mexico Oil Spill
2017, Houston, web
site: www.wellsite-auto- & Ecosystem Science
Conference, New
mation.com/ 24-25.
Orleans, web site: web.
iagc.org/events/2017Global Oil & Gas
Gulf-of-Mexico-Oil-SpillMiddle East & North
and-Ecosystem-SciAfrica Conference,
Cairo, web site: www. ence-Conference-79/
details 6-9.
oilgas-events.com/
Find-an-Event/GlobalIADC Health, Safety,
Oil-Gas-Middle-EastNorth-Africa-(1) 24-26. Environment & Training Conference &
SPE Hydraulic Fractur- Exhibition, Houston,
ing Technology Confer- web site: www.iadc.
ence, The Woodlands, org/event/2017-iadchealth-safety-environTex., web site: www.
ment-training-conferspe.org/events/
ence-exhibition/ 7-8.
hftc/2017/ 24-26.
Cuba Oil & Gas 2017

Summit, Havana, web
site: www.cubaoilgassummit.com/ 7-9.
7th Basra Oil & Gas
International Conference & Exhibition,
Basra, web site: www.
basraoilgas.com/Conference/ 8-11.
CWC Iran LNG & Gas
Partnerships Summit,
Frankfurt, web site:
www.iranlngandgas.
com/ 14-16.
SPE Canada Unconventional Resources

Conference, Calgary,
web site: www.spe.
org/events/en/2017/
Nigeria Oil & Gas Conconference/17urc/
ference & Exhibition,
homepage.html 15-16. Abuja, web site: www.
cwcnog.com/ Feb. 27SPE Canada Heavy
Mar. 2.
Oil Technical Conference, Calgary, web
Papua New Guinea Oil
site: www.spe.org/
& Gas Summit, Port
events/en/2017/
Moresby, web site:
conference/17choc/
pngoilgas.com/ Feb.
homepage.html/ 15-16. 28.-Mar. 1.
NAPE Summit, Houston, web site: napeexpo. MARCH 2017
com/shows/about-theshow/summit 15-17.
International Conference on Oil, Gas &
International ConferPetrochemical Engience on Petroleum & neering, Rome, web
Petrochemical Engisite: www.waset.org/
neering, London, web conference/2017/03/
site: www.waset.org/
rome/ICOGPE 5-6.
conference/2017/02/
london/ICPPE 16-17.
Society of Petroleum
19th International
International ConferConference on Oil,
NACE International
Gas & Petrochemical
Pipeline Coating Tech- ence on Oil & Gas
Projects in Common
Engineering (ICOGPE
nology Conference,
Fields, Bangkok, web 2017), Venice, web
Houston, web site:
pipelinecoating.nace. site: www.waset.org/
conference/2017/02/
conference/2017/02/
org/ 24-26.
bangkok/ICOGPCF 7-8. venice/ICOGPE 16-17.
Offshore West Africa,
Lagos, web site: www. International Conferoffshorewestafrica.com/ ence on Oil & Gas Proj- Engineers (SPE)
ects in Common Fields, Reservoir Simulation
index.html 24-26.
Amsterdam, web site: Conference, Montwww.waset.org/confer- gomery, Tex., web site:
Oil & Gas IP Summit,
ence/2017/02/amster- www.spe.org/events/
London, web site:
rsc/2017/ 20-22.
www.oilandgasip.com/ dam/ICOGPCF 7-8.
12
170102ogj_12 12
Mexico Upstream Sum- www.spe.org/events/

mit, Mexico City, web dc/2017/ 7-9.
site: www.cwcmexicooilgas.com/ 21-22.
Eastern Mediterranean Gas Conference,
Australasian Oil & Gas Nicosia, Cyprus, web
Exhibition & Confersite: www.cvent.com/
ence (AOG), Perth,
events/eastern-medweb site: aogexpo.com. iterranean-gas-conau/ 22-24.
ference-2017/eventsummary-d0ce4a6bcLNG Summit, Houston, 4894d2881a0087eweb site: lng-usa.com/ 3d40461e.aspx 14-15.
23-24.
SPE/IADC Drilling Conference &
SPE International
Exhibition, The Hague,
Polyolefins Conferweb site: www.spe.
ence, Houston, web
site: www.spe-stx.org/ org/events/en/2017/
conference/17dc/
conference.php Feb.
homepage.html 14-16.
26-Mar. 1.
Engineers (SPE) 20th

Middle East Oil & Gas
Show & Conference
(MEOS), Manama,
Bahrain, web site:
meos17.com/ 6-9.
SPE 20th Middle East
Oil & Gas Show &
Conference (MEOS),
Bahrain, web site:
meos17.com/ 7-9.
SPE/IADC Drilling
Conference & Exhibition, Dublin, web site:
New Zealand Petroleum Conference 2017,

New Plymouth, web
site: www.petroleumconference.nz/ 21-23.
North Africa Petroleum
Exhibition & Conference (NAPEC), Algeria,
web site: www.napecdz.com/ 21-24.
IADC Drilling HSE&T
Asia Pacific Conference & Exhibition,
Kuala Lumpur, web
site: www.iadc.org/
event/asia-pacific-drilling-hset-2017/ 22-23.
Corrosion 2017 Conference & Expo, New

SPE/IADC 2017
Orleans, web site:
Drilling Conference & nacecorrosion.org/
Exhibition, The Hague, 26-30.
web site: www.spe.
org/events/en/2017/
SPE Oklahoma City
conference/17dc/
Oil & Gas Symposium,
homepage.html 14-16. Oklahoma City, web
site: www.speokcsymSPE Latin American
posium.org/ 27-31.
& Caribbean Mature
Fields Symposium,
IADC/SPE Managed
Salvador, Bahia, Brazil, Pressure Drilling &
web site: www.spe.
Underbalanced Operaorg/events/en/2017/
tions Conference & Exsymposium/17lama/
hibition, Rio de Janeiro,
homepage.html 15-16. web site: www.iadc.org/
event/2017-iadcspeSPE Symposium:
managed-pressureIraqThe Petrodrilling-underbalancedleum Potentiality &
operations-conferenceFuture of Energy,
exhibition/ 28-29.
Amman, Jordan, web
site: www.spe.org/
International SAP Conevents/en/2017/
ference for Oil & Gas,
symposium/16abas/
Lisbon, web site: www.
homepage.html 15-16. oilandgastechnology.
net/events 28-30.
15th Global Oil & Gas
Turkey, Istanbul, web
Cost-Effective Prosite: www.global-oilgas. duced Water Managecom/Turkey/Home/
ment 2017, Pittsburgh,
15-16.
web site: www.shalewater-marcellus-utica.
SPE/ICoTA Coiled Tub- com/ 29-30.
ing & Well Intervention
Conference & Exhibi- Ghana SummitOil,
tion, Houston, web site: Gas, LNG & Power,
www.spe.org/events/
Accra, web site: www.
ctwi/2017/ 21-22.
cwcghana.com/ 29-30.
12/29/16 10:55 AM
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170102ogj_13 13
12/22/16 1:34 PM

APRIL 2017
Mexico, web site: www.

oilandgascouncil.com/
conference/mexico-oiland-gas-assembly 5-6.
AAPG 2017 Annual

Convention & Exhibition, Houston, web site:
www.aapg.org/events/ GPA Midstream Conconferences/ace/ 2-5. vention, San Antonio,
web site: gpaconvention.org/ 9-12.
International Conference on Petroleum
Industry & Energy,
11th Global Oil & Gas
Brisbane, web site:
Atyrau Conference,
www.waset.org/confer- Kazakhstan, web site:
ence/2017/04/briswww.oilgas-events.
bane/ICPIE 3-4.
com/Oiltech-AtyrauConference/ 11-12.
International Conference on Oil, Gas &
Global Oil & Gas Atyrau
Petrochemistry, Dubai, Exhibition, Atyrau,
web site: petrochemis- Kazakhstan, web site:
try.madridge.com/ 3-5. www.oilgas-events.
com/Atyrau-Oil-GasExhibition 11-13.
SPE Oil & Gas India
Conference & Exhibition, Mumbai, web
East Africa 2017 Oil &
site: www.spe.org/
Gas Exhibition & Conevents/en/2017/
ference, Nairobi, web
conference/17ogic/
site: www.expogr.com/
homepage.html 4-6.
kenyaoil/ 11-13.
Ocean Business 2017,
Southampton, UK,
web site: www.ths.
org.uk/event_details.
asp?v0=512 4-6.
SPE International
Conference on
Oilfield Chemistry,
Montgomery, Tex.,
web site: www.spe.
org/events/en/2017/
conference/17occ/
homepage.html/ 3-5.
SPE Asia Pacific
Health, Safety, Security, Environment & Social Responsibility Conference, Kuala Lumpur,
web site: www.spe.
org/events/en/2017/
conference/17aphs/
homepage.html/ 4-6.
Neftegaz 2017 17th

International Exhibition
for Equipment & Technologies for Oil & Gas
Industries, Moscow, web
site: www.neftegaz-expo.
ru/en/neftegaz_2017/
17-20.
International Conference on Oil, Gas

& Petrochemical
Engineering, Paris, web
conference/2017/04/
paris/ICOGPE 18-19.
SPE Western Regional

Meeting, Bakersfield,
Calif., web site: www.
spewrm.org/ 23-27.
LNG International Summit, Barcelona, web

International Oil Spill
site: lngsummit.org/
Conference, Long
24-25.
Beach, Calif., web site:
iosc2017.org/ 15-18.
European Symposium on Improved
International Oil Rail
Oil Recovery, Stavan- & Ports Conference,
ger, web site: www.
Tehran, web site: http://
eage.org/event/
www.ite-exhibitions.
index.php?eventid=
com/Event-Manag1496&Opendivs=s3
ment/ITE-TURKEY/Oil24-27.
Rail-Ports 15-16.
International Chemical
& Oil Pollution Conference & Exhibition,
Marina Bay Sands, Singapore, web site: www.
icopce.com/ 25-28.
170102ogj_14 14
EIC Connect Oil & Gas

UAE 2017, Dusit Thani,
Abu Dhabi, web site:
www.the eic.com/EICConnect/MiddleEast/
AbouttheEvent.aspx 16.
www.oilgas-events.
com/OGU-Conference
17-19.
SPE Latin America &
Caribbean Petroleum
Engineering Conference, Buenos Aires,
web site: www.spe.
org/events/en/2017/
conference/17lacp/
homepage.html/17-19.
IADC Drilling Onshore Conference &
Exhibition, Houston,
web site: www.iadc.
org/event/2017-iadcdrilling-onshore-conference-exhibition/ 18.
International Conference on Shale Oil

& Gas Engineering,
Paris, web site: www.
waset.org/conferCape Town Conference ence/2017/05/paris/
MAY 2017
2017, Cape Town, web ICSOGE 18-19.
site: www.oilandgascouncil.com/event/
16th Africa IndepenInternational Conference on Oil Reserves cape-town-conference dents Forum, London,
16-17.
web site: www.
& Energy Systems,
oilgas-events.com/
Rome, web site: www.
Find-an-Event/Africawaset.org/conferCanada LNG ConferIndependents-Forum
ence/2017/05/rome/
ence & Exhibition,
24-25.
ICORES 4-5.
Vancouver, web site:
www.canadalngexport.
com/16-18.
Turkmenistan Gas
International ConferCongress, Turkmenence on Oil, Gas & Petrochemical EngineerGas-To-Power World bashi, web site: www.
ing, Los Angeles, web Congress 2017, Cape oilgas-events.com/TGC
Town, web site: www. 24-25.
conference/2017/04/
oilandgascouncil.com/
los-angeles/ICOGPE/
event/gas-power-world- International Gas Union
home 5-6.
congress 17-18.
Research Conference
(IGRC), Rio de Janeiro,
web site: www.igu.
Colombia Oil & Gas
GPA 2017 Spring
org/events/igrc-2017
Conference & ExhibiConference, Milan,
tion, Cartagena, web
web site: https://www. 24-26.
site: 10times.com/
gpaeurope.com/eventcolombia-oilgas-exhibi- details.aspx?event=55
tion 7-9.
17-19.
JUNE 2017
Engineers (SPE)
Health, Safety, Security,
Environment & Social
Responsibility ConferenceNorth America,
New Orleans, web site: SPE Reservoir Characwww.spe.org/events/
terization & SimulaGastech Conference & hsse/2017/ 18-20.
tion Conference &
Exhibition, Tokyo, web
Exhibition, Abu Dhabi,
site: www.gastechIndia Oil & Gas Pipeline web site: www.spe.
event.com/ 4-7.
Conference (IOGPC),
org/events/en/2017/
Mumbai, web site:
conference/17rcsc/
https://www.asme.org/ homepage.html 8-10.
Mexico Energy
events/iogpc 20-22.
Assembly, Polanco,
14
Pipeline Simulation
Interest Group 48th
Annual Conference, Atlanta, web site: https://
psig.org 10-12.
CWC China LNG & Gas

International Summit &
Exhibition, Beijing, web
site: chinalngsummit.
com/ 17-19.
World Congress on
Petroleum & Refinery,
Osaka, Japan, web site:
petroleum.omicsgroup.
com/ 1-3.
OGU Oil & Gas Uzbekistan Conference,

Tashkent, web site:
International Conference on Oil Reserves &

Energy Management,
New York, web site:

www.waset.org/conference/2017/06/newyork/ICOREM 4-5.
Future Oil & Gas, London, web site: www.
futureoilgas.com/ 6-7.
Caspian International
Oil & Gas Exhibition,
Baku, web site: www.
caspianoilgas.az/enmain/ 6-9.
International Caspian
Oil & Gas Conference,
Baku, web site: www.
oilgas-events.com/
Caspian-OG-Conference 7-8.
SPE European
Formation Damage Conference &
Exhibition, Budapest,
web site: www.spe.
org/events/en/2017/
conference/17efdc/
homepage.html 7-8.
International Conference on Oil Reserves &
Environmental Policy,
Copenhagen, web site:
www.waset.org/conference/2017/06/copenhagen/ICOREP 11-12.
The 16th Asian Oil,
Gas & Petrochemical
Engineering Exhibition,
Kuala Lumpur, web
site: www.oilandgasasia.com/home/index.
php 11-13.
EAGE Conference &
Exhibition 2017, Paris,
web site: www.eage.org/
event/?eventid=1488
12-15.
SPE Europec 2017
at EAGE Conference
& Exhibition, Paris,
web site: www.spe.
org/events/en/2017/
conference/17euro/
12/29/16 10:55 AM

LNG Fuels Summit,
Amsterdam, web site:
www.lngfuelssummit.
com/ 13-15.
waset.org/conference/2017/06/paris/
ICORE 25-26.
IADC Asset Integrity &

Reliability Conference
& Exhibition, Houston,
web site: www.iadc.org/
event/2017-iadc-assetintegrity-reliabilityconference-exhibition/
22-23.
Global-Oil-Gas-Middle- IADC Drilling HSE&T

IADC Drilling Middle
East-North-AfriEurope Conference & East Conference &
ca-%281%29 17-19.
Exhibition, Amsterdam, Exhibition, Dubai, web
web site: www.iadc.org/ site: www.iadc.org/
event/euro-hset-2017/ event/me2017/ 3-4.
13th Russian PetroOil & Gas Indonesia
International Conferleum & Gas Congress
2017, Jakarta, web site: 27-28.
ence on Advanced
(RPGC), Moscow, web
oilgasindonesia.com/
Kazakhstan InternationMaterials & Ressite: www.oilgas20-23.
International Conferal Oil & Gas Conference
ervoir Engineering
events.com/RPGCence on Petroleum
& Exhibition (KIOGE
for Extreme Oil &
Congress/ 27-29.
IADC Well Control
Industry & Energy,
Kazakhstan), Almaty,
3rd Oil & Gas ConferGas Environments,
Conference of the
Istanbul, web site:
web site: www.kioge.kz/
ence, Houston, web
Edinburgh, web site:
14th Moscow Interna- Americas & Exhibition, site: oil-gas.omicsgroup. www.waset.org/confer- en/conference/aboutwww.waset.org/confer- tional Oil & Gas Exhibi- Galveston, Tex., web
ence/2017/09/istanbul/ conference/ 4-6.
com/ 21-22.
ence/2017/06/edinICPIE 28-29.
tion (MIOGE), Moscow, site: www.iadc.org/
burgh/ICAMREEOGE/ web site: www.oilgasevent/2017-iadc-well- Argentina Oil & Gas
home 15-16.
control-conferenceevents.com/MIOGEEngineers Annual
Expo 2017, Buenos
americas-exhibition/
Exhibition 27-30.
Technical Conference &
Aires, web site: www. OCTOBER 2017
29-30.
International ConferExhibition, San Antonio,
aogexpo.com.ar/en
ence on Oil Reserves, IADC World Drilling
25-28.
SPE 2017 Kuwait Oil & web site: https://www.
Systems & Manageexpocheck.com/en/
2017 Conference &
Gas Show & Conferment, Dubai, web
Exhibition, Amsterdam, SEPTEMBER 2017
CWC World LNG & Gas ence (KOGS), Mishref, expos/2378-spe-atcesite: waset.org/conferweb site: www.iadc.
society-of-petroleumKuwait, web site:
Series: Asia Pacific
ence/2017/06/dubai/
engineers-annualorg/event/world-drillSPE Offshore Europe
kogs2017.com/ 2-5.
Summit, Singapore,
ICORSM/ 18-19.
technical-conferenceing-2017/ 28-29.
Conference & Exhibi- web site: asiapacific.
and-exhibition 9-11.
tion, Aberdeen, web
cwclng.com/ 26-29.
International Confersite: www.offshoreence on Oil Reserves, JULY 2017
europe.co.uk/ 5-8.
Systems & Management, Dubai, web site: 22nd World Petroleum Science & Applied
www.waset.org/cofer- Congress (WPC),
Research Conference
ence/2017/06/dubai/
on Oil & Gas Geological
Istanbul, web site:
ICORSM 18-19.
www.22wpc.com/ 9-13. Exploration & Development, Gelendzhik,
CWC World LNG & Gas The 16th Asian Oil, Gas & Russia, web site: www.
Series: 15th Americas Petrochemical Engineer- eage.org/event/index.
Summit, Houston,
php?eventid=1512&
ing Exhibition, Kuala
web site: lngamericas. Lumpur, web site: www. Opendivs=s3 11-14.
cwclng.com/ 20-22.
oilandgas-asia.com/
Israels Ministry of National
home/index.php 11-13. SPE Latin American
Infrastructure, Energy and Water
Brasil Offshore, Rio de
& Caribbean Health,
Resources has launched a licensing
Janeiro, web site: www. International ConferSafety, Environbrasiloffshore.com/en/ ence on Oil, Gas &
ment & Sustainround for offshore gas and oil
Home/ 20-23.
ability Conference,
Coal Technology,
exploration.
Zurich, web site: www. Santa Cruz, Bolivia,
web site: www.spe.
The 8th Ghana Sumwaset.org/conferCompanies that are interested in
mitOil, Gas, LNG & ence/2017/07/zurich/ org/events/en/2017/
participating in the offshore bid round
conference/17lahs/
Power, Accra, web site: ICOGCT 29-30.
www.cwcghana.com/
may register and purchase the bid
22-23.
documents and data package in the
International ConferAUGUST 2017
designated website ence on Oil & Gas
International Conference on Oil Reserves The Oil & Gas Confer- Transportation,
www.energy-sea.gov.il
& Energy Producence, Denver, web site: Zurich, web site: www.
tion, Paris, web site:
www.theoilandgascon- waset.org/conference/2017/09/zurich/
waset.org/conferference.com/ 13-17.
The deadline for submission of bids is
ICOGT 15-16.
ence/2017/06/paris/
April 21, 2017
ICORE 25-26.
East Africa 2017 Oil
Global Oil & Gas Middle
& Gas Exhibition &
East & North Africa
International ConferConference, Dar-esence on Oil Reserves Salaam, Tanzania, web Conference, Cairo, web
& Energy Producsite: www.expogr.com/ site: www.oilgas-events.
tion, Paris, web site:
tanzania/oilgas/ 16-18. com/Find-an-Event/
ISRAELI GAS
OPPORTUNITIES
170102ogj_15 15
15
12/29/16 10:55 AM
JOURNALLY SPEAKING
Ups, downs, and escape
CHRISTOPHER E.
SMITH
Managing EditorTechnology
16
170102ogj_16 16
The US Energy Information Administration predicts that total world crude oil consumption will
close to within 430,000 b/d of production in 2017
(97.42 million b/d vs. 96.99 million b/d). This gap
is much smaller than 2016s 710,000 b/d production surplus and the recent high of 1.71 million b/d
reached in 2015. The International Energy Agency
went one step further in its Dec. 13, 2016, Oil Market Report, noting that if agreed-to Organization
of Petroleum Exporting Countries and non-OPEC
production cuts are implemented as announced,
demand would actually outstrip supply for firsthalf 2017.
Forecasted price responses, however, remain
mixed. As of Dec. 6, 2016, EIAs forecast 2016
West Texas Intermediate average price was $43.07/
bbl, increasing to $50.66/bbl for 2017. The World
Bank, by contrast, on Oct. 20 pegged average
2016 crude prices at $43/bbl, but saw 2017 prices
reaching $55/bbl. Private predictions, meanwhile,
are both more bearish and more bullish, with
Bank of America Merrill Lynchs forecast of a $61/
bbl average Brent price for 2017 leading the bulls.
Translating these oil price predictions into exploration spending, Wood Mackenzie Ltd. forecasts a slight decrease to $37 billion in 2017 from
$40 billion in 2016 before steady expansion begins again in 2018. Exploration spendings share
of total upstream capital expenditure is also expected to return to growth in 2018, after generally
eroding since 2010 and falling sharply in 2015-16.
WoodMac forecasts Brent to average $77/bbl in
2019 (OGJ Online, Dec. 9, 2016).
But cause for caution remains, particularly regarding the non-OPEC portion of the production
cuts. From the press release: Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Equatorial
Guinea, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, the Russian Federation, Republic of
Sudan, and Republic of South Sudan commit to
reduce their respective oil production, voluntarily
or through managed decline, in accordance with
an accelerated schedule. The combined reduction
target was agreed at 558,000 b/d for the aforemen-
tioned producers. Neither the absence of a timetable for these cuts nor the fact that at least some
would occur through already-accounted-for attrition were explicitly addressed.
EIA predicts January 2017 Permian basin crude
oil production will be 3% higher than November
2016 production, reaching a record 2.13 million
b/d. It increased its overall US crude production
forecast for 2017 to 8.78 million b/d from 8.73 million b/d in the wake of the OPEC-led agreement.
Brazil did not participate in the production-cut
discussions and intends to continue to grow its
output. Faltering security caused Nigerian production to drop in 2016. The OPEC member is
exempt from the announced cuts and increases in
2017 depend on security improvements. But to the
degree it can boost production this year, ongoing
fiscal difficulties would make it hard-pressed not
to do so.
The lighter side

Need to escape? According to FX Research as reported in Variety magazine, a new record total of as
many as 500 scripted television shows will be on
offer this year (vs. 192 in 2006). Want to really get
out? Lonelyplanet.com lists Canada, Colombia, and
Finland as the years top travel destinations, with
Bordeaux, Cape Town, and Los Angeles the Top 3
cities. Best values? Nepal, Namibia, and Porto, Portugal.
Yes, of course theres lots of work to be done in
2017. Questions regarding oil prices, US production, cybersecurity, and Middle Eastern stability
all loom justifiably large, the more so when their
interconnected nature is considered.
But, let us not approach the world as simply
a place in which to conduct business. Lets have
some fun along the way.
If you just cant pull yourself off the couch and
TV wont do the trick, progress in both virtual reality headsets and the platforms supporting them
should also be a feature of 2017. Who knows, maybe youll even be able to stream your stock ticker
through them.
12/29/16 10:56 AM
CoStrip provides a better way

to degasify water
WATER TECHNOLOGIES
Veolia Water Technologies has developed CoStrip as a better
solution for degasification of water in a variety of applications.
CoStrip offers a number of advantages as compared to
conventional degasification towers, including:
Effective removal of dissolved gases such as BTEX, VOCs, CO2 and H2S
without the need for upstream treatment
Want to learn more?

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Tel +1-800-337-0777
water.info@veolia.com
www.veoliawatertech.com
170102ogj_17 17
12/22/16 1:34 PM
EDITORIAL
The threat lingers

Timing sharpened illumination last month when the
conservative Energy and Environmental Legal Institute published a scantly reported study about the
Rockefeller familys campaign against the industry
that made it rich. The study, The Rockefeller Way:
The Familys Covert Climate Change Plan, describes how descendants of John D. Rockefeller fund
social causes to amass influence in policy areas of
their choosing. Since the 1980s, a priority cause has
been global warming, now branded climate change.
Their crusade to collapse the fossil fuel industry
in favor of renewable energy is well-documented,
from their involvement in major global climate treaties and organizationsthe UN Intergovernmental
Panel on Climate Change in 1992 to the 1997 Kyoto Protocolto spending hundreds of millions to
advance the renewable energy industry, the study
says. Through their Sustainable Development Program, the Rockefellers continue to promote their
self-serving clean energy policies throughout both
the federal government and general public.
Stark phrases
Oil and gas professionals characteristically recoil
from stark phrases like crusade to collapse the fossil fuel industry. But the study is convincing. It describes meetings hosted by the Rockefeller Family
Fund in 2012 and 2016 aimed at disparaging the
oil and gas industry by stigmatizing a single company, ExxonMobil Corp., and using state attorneysgeneral as witch hunters. The study further reports
how Rockefeller money supported a Columbia
Journalism School investigation leading to a Los
Angeles Times report critical of ExxonMobil. The
report documented expressions of concern about
climate change from within the company as early as
the late 1970s but noted ExxonMobil kept its focus
on oil and gas and supported research highlighting uncertainties of climate science. New York Atty.
Gen. Eric Schneiderman has tried to fashion a fraud
case out of this retrospection.
Fabricating scandal out of old conversations
abuses science. Since ExxonMobilthen only Exxonbegan studying climate change and the Rockefellers adopted the cause, much has been learned.
Prominent among the lessons is how much remains
to be learned, especially about climate sensitivity:
18
170102ogj_18 18
the extent of warming likely to occur as carbon

dioxide accumulates in the atmosphere. Temperature measurements contradict the forecasts of dangerous warming made by computer models tuned
to high sensitivity. Evolving science thus provides
growing reason to emphasize uncertainty and to
doubt the wisdom of spurning fossil energy. The
uncertainty didnt arise because ExxonMobil supported research questioning 80s-era alarmism. Its
evident in the temperature record.
The Rockefellers and their beneficiaries thus
advocate radical policies anticipating theoretical
outcomes rendered increasingly improbable by
observation. They should be easy to ignore. Yet
they influence policy.
On Dec. 20, 2016, about when E&E Legal published its Rockefeller study, US President Barack
Obama removed 115 million federal acres in the Arctic Ocean from future leasing and 3.8 million acres
in the Northern and Middle Atlantic. He acted under
an obscure provision of the Outer Continental Shelf
Lands Act. Not 2 weeks earlier, he had withdrawn
25.8 million acres from federal leasing off western
Alaska with more legal legerdemain: creation of the
North Bering Sea Climate Resilience Area.
Frontal attacks
These frontal attacks against oil and work conform
with the campaign against fossil energy funded by
the Rockefeller groups. And they follow the dreadful and consistent pattern of Obamas presidency:
stifling oil and gas production and use with too
much regulation and too little leasing. At this writing, Obama had a month left in office and an evident
yearning to please groups committed to blocking
oil and gas work wherever and however possible.
The industry can only wonder whats next.
Obamas acreage withdrawals off Alaska and the
East Coast just happened to occur as the E&E Legal
report appeared. But the coincidence provides an
important reminder: Resistance to hydrocarbon energy wont disappear because Donald J. Trump won
the presidency. Well-funded and well-organized, it
will continue trying to manipulate policy from the
fringe. It will continue, indeed, trying to collapse
the fossil energy industry. The oil and gas business
must never think otherwise.
12/29/16 10:56 AM
170102ogj_Rev_19 19
12/29/16 1:15 PM
GENERAL INTEREST
Oil industry holds

recovery prospects in 2017
WORLDWIDE SUPPLY AND DEMAND
Conglin Xu
Senior Editor-Economics
2016
2017
1st
2nd
3rd
4th
1st
2nd
3rd
4th
Qtr.
Qtr.
Qtr.
Qtr.
Year
Qtr.
Qtr.
Qtr.
Qtr.
Year
Million b/d
Laura Bell
Statistics Editor
On Nov. 30, 2016, the Organization of

Petroleum Exporting Countries agreed to
cut 1.2 million b/d from global oil production. Non-OPEC producers, notably
Russia, also have agreed to cut 558,000
b/d, representing the largest non-OPEC
contribution ever to be agreed upon.
With the proposed production cut,
OPEC, Russia, and other producers are
looking to speed up the rebalancing of
the global oil market. The agreements
have been received
positively as the
price of Brent crude
oil has risen sharply
following the anSPECIAL
nouncements.
REPORT
Although the cut
depends on implementation and compliance, the action is supportive of crude
oil prices as industry heads into 2017.
The oil market will likely swing from
surplus to deficit in the first half of 2017
in the wake of the OPEC and non-OPEC
output cuts.
With rapidly shrinking costs of production, US shale oil producers will especially benefit from higher prices. It re-
DEMAND
OECD
Americas . . . . . . .
Europe . . . . . . . . .
Asia Pacific . . . . . .
Total OECD. . . . . .
24 .5
13 .6
8 .5
46.7
24 .4
13 .9
7 .6
46.0
25 .0
14 .4
7 .8
47.2
24 .6
13 .7
8 .2
46.5
24 .6
13 .9
8 .1
46.6
24 .5
13 .7
8 .6
46.8
24 .5
14 .0
7 .6
46.1
24 .9
14 .3
7 .7
46.1
24 .6
13 .7
8 .2
46.4
24 .6
13 .9
8 .0
46.6
Non-OECD
FSU . . . . . . . . . . .
Europe . . . . . . . . .
China . . . . . . . . . .
Other Asia . . . . . . .
Latin America . . . .
Middle East . . . . . .
Africa . . . . . . . . . .
Total Non-OECD . .
4 .6
0 .7
11 .7
13 .1
6 .5
7 .9
4 .2
48.7
4 .6
0 .7
12 .0
13 .1
6 .8
8 .5
4 .2
49.8
4 .9
0 .7
11 .7
12 .8
6 .9
8 .8
4 .1
49.8
5 .0
0 .7
12 .0
13 .4
6 .8
8 .4
4 .3
50.5
4 .8
0 .7
11 .9
13 .1
6 .8
8 .4
4 .2
49.7
4 .7
0 .7
11 .9
13 .6
6 .5
8 .2
4 .3
50.0
4 .8
0 .7
12 .1
13 .7
6 .7
8 .6
4 .4
51.0
5 .1
0 .7
12 .2
13 .4
6 .8
8 .9
4 .2
51.4
5 .0
0 .7
12 .4
13 .9
6 .8
8 .5
4 .4
51.8
4 .9
0 .7
12 .2
13 .7
6 .7
8 .6
4 .3
51.0
Total Demand . . . .
95.4
95.8
97.1
96.9
96.3
96.8
97.1
98.3
98.2
97.6
Supply
OECD
Americas . . . . . . .
Europe . . . . . . . . .
Asia Pacific . . . . . .
Total OECD. . . . . .
19 .9
3 .6
0 .4
24.0
19 .0
3 .4
0 .4
22.8
19 .4
3 .3
0 .4
23.1
19 .4
3 .4
0 .5
23.3
19 .4
3 .5
0 .4
23.3
19 .5
3 .4
0 .5
23.4
19 .4
3 .4
0 .5
23.3
19 .5
3 .3
0 .5
23.3
19 .5
3 .4
0 .5
23.4
19 .5
3 .4
0 .5
23.3
Non-OECD
FSU . . . . . . . . . . .
Europe . . . . . . . . .
China . . . . . . . . . .
Other Asia . . . . . . .
Latin America . . . .
Middle East . . . . . .
Africa . . . . . . . . . .
Total Non-OECD . .
14 .3
0 .1
4 .2
2 .8
4 .4
1 .3
2 .0
29.0
14 .0
0 .1
4 .1
2 .7
4 .4
1 .3
1 .9
28.6
14 .0
0 .1
3 .9
2 .7
4 .6
1 .3
2 .0
28.6
14 .5
0 .1
3 .8
2 .7
4 .6
1 .3
2 .1
29.1
14 .2
0 .1
4 .0
2 .7
4 .5
1 .3
2 .0
26.8
14 .3
0 .1
3 .8
2 .6
4 .6
1 .2
2 .1
28.8
14 .2
0 .1
3 .8
2 .6
4 .7
1 .2
2 .1
28.7
14 .3
0 .1
3 .7
2 .6
4 .7
1 .2
2 .1
28.9
14 .5
0 .1
3 .7
2 .6
4 .7
1 .3
2 .1
29.1
14 .4
0 .1
3 .8
2 .6
4 .7
1 .2
2 .1
28.9
Processing gains . .
Global biofuels . . .
2 .3
1 .9
2 .3
2 .4
2 .3
2 .8
2 .3
2 .4
2 .3
2 .4
2 .3
2 .0
2 .3
2 .5
2 .3
2 .9
2 .3
2 .5
2 .3
2 .5
Total Non-OPEC . .
57.1
56.1
56.8
57.0
56.8
56.5
56.8
57.4
57.3
57.0
OPEC
Crude . . . . . . . . . .
NGL . . . . . . . . . . .
Total OPEC. . . . . .
32 .8
6 .7
39.6
33 .1
6 .8
39.9
33 .6
6 .9
40.5
34 .1
6 .9
41.0
33 .4
6 .8
40.2
32 .7
7 .0
39.7
32 .7
7 .0
39.7
32 .7
7 .0
39.7
32 .7
7 .0
39.7
32 .7
7 .0
39.7
Total supply . . . . .
96.7
96.0
97.3
98.0
97.0
96.2
96.5
97.1
97.0
96.7
Stock change . . . .
1 .3
0 .2
0 .2
1 .1
0 .7
(0 .6)
(0 .6)
(1 .2)
(1 .2)
(0 .9)
Totals may not add due to rounding .

Source: International Energy Agency; OGJ estimate of OPEC crude supply 4Q 2016 through 2017 .
US ENERGY DEMAND
2015
2016
Trillion btu
Oil . . . . . . . . . . .
Gas . . . . . . . . . . .
Coal . . . . . . . . . . .
Nuclear . . . . . . . . .
Hydro, other . . . . .
Total . . . . . . . . . .
35,603
28,256
15,571
8,338
9,785
97,553
35,817
28,471
14,388
8,370
10,195
97,240
Change,
%
2017,
trillion btu
0 .6
0 .8
(7 .6)
0 .4
4 .2
(0.3)
35,924
28,505
14,719
8,382
10,295
97,825
Change,
%
0 .3
0 .1
2 .3
0 .2
1 .0
0.6
2015
2016
2017
% share of total energy
36 .5
29 .0
16 .0
8 .5
10 .0
100.0
36 .8
29 .3
14 .8
8 .6
10 .5
100.0
36 .7
29 .1
15 .0
8 .6
10 .5
100.0
Source: 2015 US Energy Information Administration; 2016 and 2017 OGJ estimate and forecast .
Totals may not equal sum of components due to independent rounding
20
170102ogj_20 20
12/29/16 10:54 AM
WORLD OIL MARKET AT A GLANCE

140
FIG.
G 1
Spot Crude Prices
FIG. 1a
3.0
Brent
WTI
Brent-WTI spread
120
1.5
Million b/d
80
$/bbl
2.0
40
1.0
0.5
20
0.0
0.5
20
Jan. 2013
4.0
1.0
Mar. 2014
May 2015
2014
July 2016
World oil production, y-o-y change*
FIG. 1c
3.2
NonOPEC excl. US
US
OPEC
WORLD
3.0
3.1
Billion bbl
1.0
0.0
2015
2016
2017
OECD commercial oil inventories

Max/Min 2011-15
Average2011-15
FIG. 1d
2015
2016
3.0
2.0
Million b/d
FIG. 1b
OECD
FSU
Europe
China
Other Asia
Americas
Middle East
Africa
2.5
100
60
World oil demand, y-o-y change
2.9
2.8
2.7
1.0
2.6
2.0
2.5
2013
2014
2015
2016
2017
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
*Based on historial EIA data.

Source: IEA, EIA, OGJ analysis
mains to be seen how quickly and to what extent US shale oil

drillers might respond by resuming more drilling. OPECs
willingness to underwrite higher prices and for how long,
while losing share to the US, will be a question.
Meanwhile, as the proposed cut is for 6 months, highcost producers might not take higher prices for granted and
would be cautious at sanctioning new investments.
Interestingly, the results by a vector auto regression (VAR)
model suggest that, even without the agreement among producers, crude oil prices would still be able to recover gradually in the first half of 2017. If the model-based forecasts
were true, one would reevaluate the short-run and long-run
impacts of the agreement.
As the price tailwinds over the past years is likely to wane
this year, global oil demand is to revert to structural verities.
Emerging markets in the Asia-Pacific region continue to be
the engine of demand with the expansion of manufacturing,
urbanization, and rising incomes.
170102ogj_21 21
Meanwhile, the fact that inventories are close to record

highs will have a dampening effect on the rebalancing of
the market. Massive crude oil and refined product inventories may take time to go down even when demand exceeds
supply.
For the whole year 2016, US natural gas inventories were
6% more than their 5-year average. However, the overall
supply-demand balance of the US gas market is tightening.
Demand for US gas is receiving a boost from a forthcoming colder winter, rising US gas exports, and strong demand
from the power generation sector. Although annual production in 2015 rose despite lower gas prices, monthly US gas
production has since declined in 2016.
World economy, oil demand

Global economic growth is forecast to accelerate this
year, largely driven by improvements in the US and parts of
emerging economies. Commodity price recovery will stabi-
21
12/29/16 10:54 AM
GENERAL INTEREST
OGJ FORECAST OF US SUPPLY AND DEMAND

2017
Volume,
% change
1,000 b/d
from 2016
12016
Volume,
% change
1,000 b/d
from 2015
DOMESTIC DEMAND
Motor gasoline . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,400
7,783
1,617
0 .6
0 .7
0 .5
9,340
7,731
1,609
1 .8
1 .7
1 .9
Jet fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,600
1,098
502
(0 .6)
(0 .6)
(0 .6)
1,610
1,105
505
4 .0
3 .0
6 .3
Distillate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,940
3,396
544
1 .5
1 .5
1 .7
3,880
3,345
535
(2 .9)
(3 .6)
1 .7
Residual . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
300
171
129
(16 .7)
(16 .6)
(16 .8)
360
205
155
39 .0
36 .7
42 .2
LPG and ethane . . . . . . . . . . . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,600
2,577
23
3 .6
3 .6
0 .0
2,510
2,487
23
(1 .5)
(1 .7)
15 .0
Other products . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,889
1,721
168
(3 .6)
(3 .6)
(3 .4)
1,960
1,786
174
(2 .1)
(0 .3)
(17 .5)
TOTAL DOMESTIC DEMAND . . . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,729
16,746
2,983
0 .4
0 .5
(0 .6)
19,660
16,659
3,001
0 .7
0 .3
2 .8
EXPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,500
5,068
432
5 .8
5 .8
5 .9
5,200
4,792
408
9 .8
10 .5
1 .2
TOTAL DEMAND . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,229
21,814
3,415
1 .5
1 .7
0 .2
24,860
21,451
3,409
2 .4
2 .4
2 .6
SUPPLY
DOMESTIC PRODUCTION . . . . . . . . . . . . . . . .
Crude & condensate . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,300
8,246
1,054
5 .7
6 .1
2 .6
8,799
7,772
1,027
(6 .5)
(6 .9)
(3 .7)
NGL & LRG . . . . . . . . . . . . . . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,800
3,736
64
8 .6
8 .7
1 .6
3,500
3,437
63
4 .7
4 .9
(4 .5)
Total US field production . . . . . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,100
11,982
1,118
6 .5
6 .9
2 .6
12,299
11,209
1,090
(3 .6)
(3 .6)
(3 .8)
Renewable fuels, oxygenates . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,130
1,105
25
(0 .9)
(0 .9)
0 .0
1,140
1,115
25
2 .4
2 .5
0 .0
IMPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crude oil . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,500
6,335
1,165
(4 .9)
(4 .9)
(5 .0)
7,890
6,664
1,226
7 .2
6 .9
8 .5
Products & unfinished oils . . . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,260
1,947
313
2 .3
2 .3
2 .3
2,210
1,904
306
5 .9
4 .5
15 .9
TOTAL IMPORTS
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,760
8,282
1,478
(3 .4)
(3 .3)
(3 .3)
10,100
8,568
1,532
6 .9
6 .4
9 .9
Processing gain, loss, etc . . . . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,080
893
187
(1 .7)
(1 .8)
(1 .6)
1,099
909
190
3 .5
1 .6
13 .8
TOTAL NEW SUPPLY . . . . . . . . . . . . . . . . . . .

Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,070
22,262
2,808
1 .7
2 .1
(0 .7)
24,638
21,801
2,829
1 .1
0 .6
4 .0
STOCK CHANGE . . . . . . . . . . . . . . . . . . . . . . .
Dist . 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dist . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(319)
311
(630)
(222)
350
(580)
CRUDE RUNS TO STILLS . . . . . . . . . . . . . . . .

TOTAL INPUT TO STILLS . . . . . . . . . . . . . . . . .
TOTAL REFINING CAPACITY . . . . . . . . . . . . . .
REFINING UTILIZATION (%) . . . . . . . . . . . . . .
16,350
16,655
18,500
90 .0
0 .6
0 .8
0 .6
0 .2
16,250
16,520
18,390
89 .8
0 .4
0 .5
1 .8
(1 .3)
TOTAL INDUSTRY STOCKS2 . . . . . . . . . . . . . .

Refined products . . . . . . . . . . . . . . . . . . . .
Crude oil . . . . . . . . . . . . . . . . . . . . . . . . . .
SPR crude oil stocks . . . . . . . . . . . . . . . . .
1,250
793
457
695
(5 .3)
(5 .3)
(5 .4)
1,320
837
483
695
2 .4
(0 .4)
7 .5
0 .0
IMPORT DEPENDENCY
Total Imports % Domestic Demand . . . . . . . .
Net Imports % Domestic Demand . . . . . . . .
49 .5
21 .6
51 .4
24 .9
Preliminary estimate . 2Million bbl at end of period .
22
170102ogj_22 22
lize the economies of resource-exporting

countries that have been suffering over
the past few years.
The International Monetary Funds
forecasts for economic growth are 3.1%
for 2016 and 3.4% for 2017 compared
with an estimated 3.2% for 2015. The
World Bank revised its 2016 global economic growth forecast down to 2.4% in
June from the 2.9% projected in January.
Global growth is projected to pick up to
2.8% by 2017.
According to the IMF, the Organization for Economic Cooperation and Developments (OECD) growth rate for 2017
is forecast at 1.8% compared with 1.6%
in 2016 and 2.1% in 2015. Non-OECD
growth is forecast at 4.6% for 2017 compared with 4.2% in 2016 and 4% in 2015.
Downside risks, however, have become more pronounced. These include
low interest rates after the 2008 recession, which has
spurred rising asset prices, rising
debts, and rising
vulnerability
to
a sharp global financial tightening.
SPECIAL
Consumption and
REPORT
investment in advanced economies
are softer-than-expected. World trade growth is exceptionally low. Chinas slowdown has been
faster-than-anticipated. Exchange rate
uncertainties and capital flow risks have
increased in emerging market economies. Fiscal initiatives have been called
on in many countries to encourage
growth and job creation. However, longrun structural reforms are still difficult to
carry out. The influence of unfavorable
demographics is unlikely to be reversed
soon. Policy and geopolitical uncertainties have been heightened globally.
In this context, global oil demand is
expected to revert to structural verities,
including fuel efficiency gains, economic
growth, urbanization and industrialization trends, and population growth in
emerging economies.
According to the International Energy
Agencys December Oil Market Report,
12/29/16 10:54 AM
GENERAL INTEREST
global oil demand growth is forecast to US NATURAL GAS SUPPLY AND DEMAND
ease to 1.4 million b/d in 2016 and 1.3
2014
2015
2016
Change, %
2017,
Change, %
million b/d in 2017, having peaked at a
bcf
2016/2015
bcf
2017/2016
5-year high of 1.8 million b/d in 2015.
Marketed production
. . . . . . . . . . . . . . . . .
7,985
7,881
7,100
(9 .9)
7,400
4 .2
According to IEA figures, non-OECD Texas
Pennsylvania . . . . . . . . . . . .
4,258
4,813
5,300
10 .1
5,850
10 .4
1,254
1,288
1,219
(5 .4)
1,186
(2 .7)
demand will rise 2.6% in 2017, led by Federal Gulf of Mexico . . . .
Other states . . . . . . . . . . . .
14,001
14,772
14,668
(0 .7)
14,837
1 .2
other areas in Asia excluding China.
Total production . . . . . . . . .
27,498
28,754
28,287
(0 .3)
29,273
3 .5
Chinese oil demand in 2017 will increase Imports
2,634
2,625
2,884
9 .9
2,700
(6 .4)
modestly to 12.2 million b/d from 11.9 Canada . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . .
1
1
1
(1 .7)
1
(1 .9)
million b/d last year, IEA forecasts. This LNG . . . . . . . . . . . . . . . . . .
59
92
82
(10 .9)
77
(6 .1)
Total imports . . . . . . . . . . .
2,695
2,718
2,968
9 .2
2,778
(6 .4)
represents a growth slowdown to 2.5%
Supplemental gas . . . . . . . .
60
59
57
(3 .4)
60
5 .3
from 2.9%.
Losses, etc .* . . . . . . . . . . . .
(1,891)
(1,894)
(1,773)
(6 .4)
(1,900)
7 .2
Total new supply . . . . . . . .
28,362
29,637
29,539
(0 .3)
30,211
2 .3
Non-OECD and non-Asia demand,
heavily comprised of oil and commodity Supply from storage . . . . . .
(254)
(546)
205
(137 .5)
(50)
(124 .4)
Total supply . . . . . . . . . . . .
28,108
29,091
29,744
2 .2
30,161
1 .4
exporters, including the Middle East and
Africa, should benefit from improving oil Exports
LNG . . . . . . . . . . . . . . . . . .
16
28
186
564 .3
450
141 .9
prices.
Pipeline . . . . . . . . . . . . . . .
1,498
1,755
2,095
19 .4
2,220
6 .0
Total exports . . . . . . . . . . .
1,514
1,784
2,281
27 .9
2,670
17 .1
OECD demand growth will be largeTotal consumption . . . . . . .
26,593
27,306
27,463
0 .6
27,491
0 .1
ly flat in 2017, due to low intensity of Source: 2014 and 2015 Energy Information Administration; 2016 and 2017 OGJ estimates and forecast .
use, rising fuel efficiency, and an overall
sluggish economy. Demand growth will
vary across regions. The most recently
reported IEA demand figures revealed OIL, GAS, PRODUCTS PRICES
modestly growing US demand, flattish
Crude oil
Products
Natural gas
Average
No . 2
Average
OECD European demand, and contractAverage
landed
Unleaded
fuel oil
delivered
US wellhead
cost of
gasoline
wholesale
Henry Hub
commercial
ing OECD Pacific demand.
price
imports
pump price
price
spot price
price
Year
$/bbl /gal
$/Mcf
By comparison the US Energy Information Administration expected a high1976 . . . . . . .
8 .19
13 .32
61 .4
NA
NA
1 .64
1977 . . . . . . .
8 .57
14 .36
65 .6
NA
NA
2 .04
er 2017 demand growth of 1.6 million
1978 . . . . . . .
9 .00
14 .35
67 .0
36 .9
NA
2 .23
1979 . . . . . . .
12 .64
21 .45
90 .3
56 .9
NA
2 .73
b/d, up from 1.4 million b/d in 2016, as
1980 . . . . . . .
21 .59
33 .67
124 .5
80 .3
NA
3 .39
most recent global economic data have
1981 . . . . . . .
31 .77
36 .47
137 .8
97 .6
NA
4 .00
1982 . . . . . . .
28 .52
33 .18
129 .6
91 .4
NA
4 .82
been more positive than previous expec1983 . . . . . . .
26 .19
28 .93
124 .1
81 .5
NA
5 .59
1984 . . . . . . .
25 .88
28 .54
121 .2
82 .1
NA
5 .55
tations.
1985 . . . . . . .
24 .09
26 .67
120 .2
77 .6
NA
5 .50
1986 . . . . . . .
12 .51
13 .49
92 .7
48 .6
NA
5 .08
In addition, a historical decomposi1987 . . . . . . .
15 .40
17 .65
94 .8
52 .7
NA
4 .77
tion analysis of OGJ shows that specula1988 . . . . . . .
12 .58
14 .08
94 .6
47 .3
NA
4 .63
1989
.
.
.
.
.
.
.
15 .86
17 .68
102 .1
56 .5
NA
4 .74
tive oil demand rebounded during 2015
1990 . . . . . . .
20 .03
21 .13
116 .4
69 .7
NA
4 .83
1991 . . . . . . .
16 .54
18 .02
114 .0
62 .2
NA
4 .81
(Fig. 3). This might reflect increased
1992 . . . . . . .
15 .99
17 .75
112 .7
57 .9
NA
4 .88
stockpiling in oil-importing countries to
1993 . . . . . . .
14 .25
15 .72
110 .8
54 .4
NA
5 .22
1994 . . . . . . .
13 .19
15 .18
111 .2
50 .6
1 .89
5 .44
take advantage of low oil prices. How1995 . . . . . . .
14 .62
16 .78
114 .7
51 .1
1 .72
5 .05
1996 . . . . . . .
18 .46
20 .31
123 .1
63 .9
2 .75
5 .40
ever, such speculative oil demand is re1997 . . . . . . .
17 .23
18 .11
123 .4
59 .0
2 .49
5 .80
1998 . . . . . . .
10 .88
11 .84
105 .9
42 .2
2 .09
5 .48
treating as oil prices rise.
World oil supply,

OECD inventories
OPEC agreed to cut output by 1.2 million b/d from January 2017. OPEC supply
targets, set for the first time since 2008,
leave Saudi Arabia bearing the brunt of
the cut. Nigeria and Libya are exempt,
Iran got a slight increase, and Iraq was
allocated a cut of 210,000 b/d.
The organization secured a reduction of 558,000 b/d from non-OPEC
producers. In addition to Russia
170102ogj_23 23
1999 . . . . . . .
2000 . . . . . . .
2001 . . . . . . .
2002 . . . . . . .
2003 . . . . . . .
2004 . . . . . . .
2005 . . . . . . .
2006 . . . . . . .
2007 . . . . . . .
2008 . . . . . . .
2009 . . . . . . .
2010 . . . . . . .
2011 . . . . . . .
2012 . . . . . . .
2013 . . . . . . .
2014 . . . . . . .
2015 . . . . . . .
2016* . . . . . .
15 .56
26 .72
21 .84
22 .51
27 .56
36 .77
50 .28
59 .69
66 .52
94 .04
56 .35
74 .71
95 .73
94 .52
95 .99
87 .39
44 .39
38 .55
17 .23
27 .53
21 .82
23 .91
27 .69
36 .07
49 .29
59 .11
67 .97
93 .33
60 .23
76 .50
102 .92
101 .00
96 .99
88 .16
45 .38
38 .69
116 .5
151 .0
146 .1
135 .8
159 .1
188 .0
229 .5
258 .9
280 .1
326 .6
235 .0
278 .8
352 .7
364 .4
352 .6
336 .7
244 .8
214 .0
49 .3
88 .6
75 .6
69 .4
88 .1
112 .5
162 .3
183 .4
207 .2
274 .5
165 .7
214 .7
290 .7
303 .1
296 .6
274 .1
156 .5
121 .0
2 .26
4 .31
3 .96
3 .38
5 .47
5 .89
8 .69
6 .73
6 .97
8 .86
3 .94
4 .37
4 .00
2 .75
3 .73
4 .37
2 .62
2 .49
5 .33
6 .59
8 .43
6 .63
8 .40
9 .43
11 .34
12 .00
11 .34
12 .23
10 .06
9 .47
8 .91
8 .10
8 .08
8 .90
7 .91
7 .34
*Estimated .
Source: 1976-2015 US Energy Information Administration; 2016 OGJ estimates .
23
12/29/16 10:54 AM
GENERAL INTEREST
US PRODUCTION OF CRUDE OIL AND LEASE CONDENSATE

1
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1,000 b/d
District 1 . . . . . . . . . . . . . . .
Fla ., NY, Pa ., W .Va . . . . . . . .
Cumulative
1859-2016,
1,000 bbl
45
45
48
48
47
47
40
40
26
26
22
22
21
21
18
18
21
21
21
21
2,899,776
2,899,776
24
5
100
6
16
6
1012
60
425
5
Total Dist. 2. . . . . . . . . . . . . 1,659
26
6
125
8
18
8
1177
71
432
5
1,876
26
7
136
9
20
8
1081
41
399
6
1,733
26
7
128
8
21
8
855
22
326
6
1,407
27
6
120
9
20
8
662
14
249
6
1,121
25
5
114
6
19
7
418
13
205
5
817
25
5
111
7
18
6
310
13
190
5
690
25
5
108
7
16
6
218
16
184
6
591
26
5
108
7
17
7
172
16
175
6
539
26
5
100
7
16
6
124
15
172
5
476
3,706,648
573,952
6,715,682
804,201
1,323,844
526,652
3,685,040
1,211,413
15,536,914
85,516
34,169,862
District 3 . . . . . . . . . . . . . . .
Alabama . . . . . . . . . . . . . . .
22
Arkansas . . . . . . . . . . . . . . .
14
Louisiana . . . . . . . . . . . . . . 1,417
Mississippi . . . . . . . . . . . . .
59
New Mexico . . . . . . . . . . . .
400
Texas . . . . . . . . . . . . . . . . . 3,497
Total Dist. 3 . . . . . . . . . . . . 5,409
27
17
1,384
68
402
3,765
5,663
27
19
1,306
67
339
3,452
5,210
28
18
1,201
67
279
2,785
4,378
26
18
1,206
67
234
2,226
3,777
23
16
1,243
66
196
1,712
3,256
20
16
1,597
65
178
1,307
3,183
20
16
1,435
64
168
1,418
3,121
21
17
1,153
60
162
1,285
2,698
20
17
1,266
57
162
1,306
2,828
724,197
1,836,933
33,740,237
2,546,092
6,197,786
70,179,032
115,224,277
320
63
81
195
659
346
78
101
237
762
262
82
112
209
665
179
80
96
173
528
135
72
83
158
448
108
66
72
150
396
85
69
68
145
367
78
76
63
141
358
66
86
60
145
357
66
96
54
148
364
2,548,268
1,877,378
1,588,726
7,529,708
13,544,080
495
531
1
Total Dist. 5 . . . . . . . . . . . . 1,027
US total . . . . . . . . . . . . . . . 8,799
483
582
1
1,066
9,415
496
612
1
1,109
8,764
515
597
1
1,113
7,466
526
587
1
1,114
6,486
561
591
1
1,153
5,644
599
613
1
1,213
5,474
645
627
1
1,273
5,361
683
652
1
1,336
4,951
722
667
1
1,390
5,079
17,957,085
29,650,921
55,107
47,663,113
213,500,997
Total Dist. 1 . . . . . . . . . . . .
District 2 . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . .
Michigan . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . .
North Dakota . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . .
Others2 . . . . . . . . . . . . . . . .
District 4 . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . .
Montana . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . .
Wyoming . . . . . . . . . . . . . . .
Total Dist. 4 . . . . . . . . . . . .
District 5 . . . . . . . . . . . . . . .
Alaska . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . .
Nevada . . . . . . . . . . . . . . . .
Preliminary . 2Includes Missouri, South Dakota and Tennessee .
IMPORTS OF REFINED PRODUCTS

1
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1,000 b/d
Gasoline . . . . . . . . . . . . . . . .
Kerosene . . . . . . . . . . . . . . .
Jet fuel-kerosene . . . . . . . . .
Distillate . . . . . . . . . . . . . . . .
Residual . . . . . . . . . . . . . . . .
Unfinished oils . . . . . . . . . . .
Other2 . . . . . . . . . . . . . . . . . .
Total US . . . . . . . . . . . . . . .
66
1
146
154
311
580
951
2,210
71
4
132
200
192
547
940
2,086
49
-94
195
173
547
839
1,897
45
1
84
155
225
656
963
2,129
44
1
55
126
256
598
992
2,072
105
3
69
179
328
687
1,198
2,569
134
2
98
228
366
606
1,146
2,580
223
3
81
225
331
677
1,138
2,678
302
2
103
213
349
763
1,400
3,132
413
3
217
304
372
717
1,410
3,436
Preliminary . 2Includes plant condensate .

Source: US Energy Information Administration
which had already committed to curb production by

300,000 b/d over first-half 2017Azerbaijan, Bahrain,
Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan also agreed to reduce
output. Notably, Mexicos oil production is already set to
fall due to natural declines.
24
170102ogj_24 24
Following a period of growth in 2013-15, total nonOPEC liquids production contracted by nearly 900,000
b/d year-over-year in 2016. The main contributors to the
decline were the US, China, Mexico, Colombia, and other
OECD Europe. Production in Russia, Brazil, Congo, and
the UK continued to rise last year.
12/29/16 10:54 AM
GENERAL INTEREST
SUPPLY AND DEMAND FOR CRUDE IN THE US

1
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1,000 b/d
SUPPLY
Crude imports2 . . . . . . . . . . . . . . .
Crude production . . . . . . . . . . . . .
Crude adjustment . . . . . . . . . . . . .
7,890
8,799
82
16,711
7,363
9,415
128
16,906
7,344
8,764
170
16,278
7,730
7,468
222
15,420
8,527
6,487
132
15,146
8,935
5,646
178
14,759
9,213
5,475
90
14,778
9,013
5,353
83
14,449
9,783
5,000
15
14,798
10,031
5,077
27
15,135
Total demand . . . . . . . . . . . . . . . .
16,250
525
0
16,775
16,188
465
0
16,653
15,848
351
0
16,199
15,312
134
0
15,446
14,999
67
0
15,066
14,806
47
0
14,853
14,724
42
0
14,766
14,336
44
56
14,436
14,648
29
19
14,696
15,156
27
7
15,190
Crude stock change (industry) . . . .
(4)
254
79
(26)
80
(94)
12
13
122
(55)
483
695
1,178
449
695
1,144
393
691
1,084
357
696
1,053
365
695
1,060
331
696
1,027
333
727
1,060
325
727
1,052
326
702
1,028
286
697
983
Total supply . . . . . . . . . . . . . . . . .
DEMAND
Crude refinery runs . . . . . . . . . . . .
Crude exports . . . . . . . . . . . . . . . .
Crude into SPR . . . . . . . . . . . . . . .
Primary (industry) . . . . . . . . . . . .
SPR . . . . . . . . . . . . . . . . . . . . . . .
Total crude stocks (million bbl)
1
Preliminary . 2Includes imports for the Strategic Petroleum Reserve . 3Includes Alaskan crude in transit .
Source: US Energy Information Administration .
US ENERGY CONSUMPTION AND EFFICIENCY

GDP,
billion
2009
$
1950 . . . . . . . . . . 2,184 .0
1955 . . . . . . . . . . 2,739 .0
1960 . . . . . . . . . . 3,108 .7
1965 . . . . . . . . . . 3,976 .7
1970 . . . . . . . . . . 4,722 .0
1975 . . . . . . . . . . 5,385 .4
1980 . . . . . . . . . . 6,450 .4
1985 . . . . . . . . . . 7,593 .8
1990 . . . . . . . . . . 8,955 .0
1995 . . . . . . . . . . 10,174 .8
2000 . . . . . . . . . . 12,559 .7
2001 . . . . . . . . . . 12,682 .2
2002 . . . . . . . . . . 12,908 .8
2003 . . . . . . . . . . 13,271 .1
2004 . . . . . . . . . . 13,773 .5
2005 . . . . . . . . . . 14,234 .2
2006 . . . . . . . . . . 14,613 .8
2007 . . . . . . . . . . 14,873 .7
2008 . . . . . . . . . . 14,830 .4
2009 . . . . . . . . . . 14,418 .7
2010 . . . . . . . . . . 14,783 .8
2011 . . . . . . . . . . 15,020 .6
2012 . . . . . . . . . . 15,354 .6
2013 . . . . . . . . . . 15,612 .0
2014 . . . . . . . . . . 15,982 .0
2015 . . . . . . . . . . 16,397 .0
1
2016 . . . . . . . . . 16,649 .0
2
2017 . . . . . . . . . 17,013 .0
Energy
consumption,
trillion
btu
Energy
consumption
per GDP,
2009 $
(Mbtu)
Oil
energy
consumption,
trillion
btu
Oil energy
consumption
per GDP,
2009 $
(Mbtu)
Natural
gas energy
consumption,
trillion
btu
34,616
40,208
45,086
54,015
67,838
71,965
78,067
76,392
84,485
91,032
98,817
96,170
97,643
97,917
100,090
100,188
99,484
101,015
98,891
94,118
97,444
96,842
94,416
97,148
98,317
97,553
97,240
97,825
15 .8
14 .7
14 .5
13 .6
14 .4
13 .4
12 .1
10 .1
9 .4
8 .9
7 .7
7 .7
7 .6
7 .5
7 .3
7 .0
6 .9
6 .6
6 .3
6 .5
6 .6
6 .4
6 .1
6 .2
6 .2
5 .9
5 .8
5 .8
31,632
37,410
42,137
50,577
63,522
32,732
34,205
30,925
33,552
34,441
38,286
38,190
38,226
38,790
40,227
40,303
39,824
39,489
36,907
34,959
35,489
34,824
34,016
34,609
34,881
35,603
35,838
36,053
14 .5
13 .7
13 .6
12 .7
13 .5
6 .1
5 .3
4 .1
3 .7
3 .4
3 .0
3 .0
3 .0
2 .9
2 .9
2 .8
2 .7
2 .7
2 .5
2 .4
2 .4
2 .3
2 .2
2 .2
2 .2
2 .2
2 .2
2 .1
5,968
8,998
12,385
15,769
21,795
19,948
20,235
17,703
19,603
22,671
23,824
22,773
23,510
22,831
22,923
22,565
22,239
23,663
23,843
23,416
24,575
24,955
26,089
26,805
27,383
28,256
28,471
28,474
Natural gas
energy
consumption
per GDP,
2009 $
(Mbtu)
2 .7
3 .3
4 .0
4 .0
4 .6
3 .7
3 .1
2 .3
2 .2
2 .2
1 .9
1 .8
1 .8
1 .7
1 .7
1 .6
1 .5
1 .6
1 .6
1 .6
1 .7
1 .7
1 .7
1 .7
1 .7
1 .7
1 .7
1 .7
Total oil
and natural
gas energy
consumption,
trillion
btu
Total
oil and
gas energy
consumption
per GDP,
2009 $
(Mbtu)
Oil and
natural gas
energy
% of total
energy
37,600
46,408
54,522
66,346
85,317
52,680
54,440
48,628
53,155
57,112
62,110
60,963
61,736
61,621
63,150
62,868
62,063
63,152
60,750
58,375
60,064
59,779
60,105
61,414
62,264
63,859
64,309
64,527
17 .2
16 .9
17 .5
16 .7
18 .1
9 .8
8 .4
6 .4
5 .9
5 .6
4 .9
4 .8
4 .8
4 .6
4 .6
4 .4
4 .2
4 .2
4 .1
4 .0
4 .1
4 .0
3 .9
3 .9
3 .9
3 .9
3 .9
3 .8
108 .6
115 .4
120 .9
122 .8
125 .8
73 .2
69 .7
63 .7
62 .9
62 .7
62 .9
63 .4
63 .2
62 .9
63 .1
62 .8
62 .4
62 .5
61 .4
62 .0
61 .6
61 .7
63 .7
63 .2
63 .3
65 .5
66 .1
66 .0
Estimate . 2Forecast .
With the production cut factored in, non-OPEC

spending will flow into the non-OPEC shale marsupply for 2017 is still anticipated to rise 200,000
ket in 2017.
b/d, according to IEAs latest Oil Market Report.
Production from Brazil, Canada, Ghana, and
A price recovery above $50/bbl could contribute
Congo will continue to rise this year with new projto supply growth in the US and in other non-OPEC
ects ramping up. Chinese production will continue
producing countries not participating in the supply
to decline, following a fall of 335,000 b/d last year,
SPECIAL
reductions.
as no uptick in activity expected from the major
REPORT
Increased activity in the US is already under
companies.
way, particularly in the Permian basin. Rystad EnAccording to IEA data, taken together, OECD
ergy analysis shows that as much as $15 billion in increased
stocks have lost 74.5 million bbl since reaching a historical
170102ogj_25 25
25
12/29/16 10:54 AM
GENERAL INTEREST
CRUDE IMPORTS BY COUNTRY OF ORIGIN 1

1
Algeria3 . . . . . . . . . . . . . . . .
Angola3 . . . . . . . . . . . . . . . .
Australia . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . .
Colombia . . . . . . . . . . . . . . .
Congo, former Zaire . . . . . . .
Congo (Brazzaville) . . . . . . .
Ecuador3 . . . . . . . . . . . . . . .
Gabon3 . . . . . . . . . . . . . . . .
Indonesia3 . . . . . . . . . . . . . .
Iran3 . . . . . . . . . . . . . . . . . .
Iraq3 . . . . . . . . . . . . . . . . . .
Kuwait3 . . . . . . . . . . . . . . . .
Libya3 . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . .
Nigeria3 . . . . . . . . . . . . . . . .
Norway . . . . . . . . . . . . . . . .
Oman . . . . . . . . . . . . . . . . .
Qatar3 . . . . . . . . . . . . . . . . .
Saudi Arabia3 . . . . . . . . . . . .
Trinidad & Tobago . . . . . . . .
United Arab Emirates3 . . . . .
United Kingdom . . . . . . . . . .
Venezuela3 . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . .
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1,000 b/d
Total imports . . . . . . . . . . . .
20
162
1
3,206
0
473
0
3
233
5
43
0
401
222
8
4
568
192
52
43
0
1,140
12
16
24
745
316
7,890
3
124
10
3,169
0
373
0
9
225
10
36
0
229
204
3
0
688
54
9
0
0
1,052
7
2
11
776
369
7,363
6
139
2
2,882
0
294
0
4
213
16
20
0
369
309
5
0
781
58
9
0
0
1,159
5
13
10
733
317
7,344
29
201
1
2,579
1
367
0
18
232
24
18
0
341
326
43
0
850
239
17
3
0
1,325
8
2
21
755
329
7,730
120
222
6
2,425
1
403
0
29
177
42
6
0
476
303
56
0
975
406
26
9
0
1,361
27
0
18
912
527
8,527
178
335
9
2,225
2
397
11
53
203
34
20
0
459
191
9
0
1,102
767
53
41
5
1,186
33
7
36
868
711
8,935
328
383
10
1,970
4
338
9
70
210
47
33
0
415
195
43
3
1,152
983
25
12
0
1,082
45
2
120
912
822
9,213
281
448
11
1,943
8
251
9
64
181
63
15
0
449
180
61
7
1,092
776
58
30
8
980
40
39
103
951
965
9,013
312
504
33
1,956
11
178
0
67
214
58
16
0
627
206
68
2
1,187
922
30
17
0
1,503
23
4
78
1,039
728
9,783
443
498
2
1,888
6
137
0
63
198
63
15
0
484
175
84
1
1,409
1,084
56
32
0
1,447
48
9
101
1,148
640
10,031
Total from OPEC . . . . . . . . .
3,183
2,673
3,005
3,493
4,031
4,209
4,553
4,355
5,415
5,388
Includes imports for the Strategic Petroleum Reserve . 2Preliminary . 3OPEC member .
Source: US Energy Information Administration .
EXPORTS OF REFINED PRODUCTS AND CRUDE

*2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1,000 b/d
Gasoline . . . . . . . . . . . . . . . .
Distillate . . . . . . . . . . . . . . . .
Residual . . . . . . . . . . . . . . . .
Lubricants . . . . . . . . . . . . . . .
Coke . . . . . . . . . . . . . . . . . . .
Asphalt and road oil . . . . . . .
LPG . . . . . . . . . . . . . . . . . . .
Other refined products . . . . .
Total refined products . . . . .
Crude . . . . . . . . . . . . . . . . . .
Total exports . . . . . . . . . . . .
578
1,231
312
78
624
21
893
938
4,675
525
5,200
476
1,176
326
72
538
19
783
883
4,273
465
4,738
442
1,101
364
67
541
23
537
750
3,825
351
4,176
373
1,134
362
73
524
25
332
664
3,487
134
3,621
409
1,007
388
75
503
30
196
530
3,138
67
3,205
479
854
424
68
499
31
148
436
2,939
47
2,986
296
656
405
62
449
30
132
281
2,311
42
2,353
195
587
415
57
391
27
100
209
1,981
44
2,025
172
528
355
60
377
23
67
191
1,773
29
1,802
127
268
330
59
366
19
57
180
1,406
27
1,433
*Preliminary .
record of 3,102 million bbl in the July, but they remain 300
million bbl above the 5-year average.
Preliminary data show a fourth monthly draw in oil
stocks in the OECD last November, marking the longest
stretch of draws seen since 2011.
Combined with projected demand and production for the
first half of the year, inventory draws are expected. However,
given the magnitude of the current inventory overhang, a
6-month agreement is unlikely to prove sufficient in resetting OECD inventories back to more normalized levels.
A VAR model analysis

Since oil prices are notoriously difficult to predict, practitio-
26
170102ogj_26 26
ners have long relied on futures. However, recently developed economic vector auto-regression (VAR) models (Kilian
and Baumeister, 2009, 2010) have been used for short to
medium-term real oil price forecasting. The literature of the
past few years has shown that these real oil price forecasts
provide more accurate predictions of the future path of real
oil prices relative to futures or other models.
According to an analysis calculated by the OGJ staff, the
VAR model forecasts display consistently high directional
accuracy throughout the evaluation period from June 2014
to August 2016. Interestingly, the model forecasts gradual
recovery in real oil prices starting from early 2017. Since the
forecast is based on a dataset until August and doesnt fac-
12/29/16 10:54 AM
GENERAL INTEREST
ROTARY RIG ACTIVITY BY STATES

YTD avg. through
Dec. 23, 2016
Alabama . . . . . . . . . . . . . . . .
Alaska . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . .
Offshore . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . .
North . . . . . . . . . . . . . . . . . .
Inland waters . . . . . . . . . . . .
South . . . . . . . . . . . . . . . . . .
Offshore . . . . . . . . . . . . . . . .
Michigan . . . . . . . . . . . . . . . .
Mississippi . . . . . . . . . . . . . . .
Montana . . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . . . .
Nevada . . . . . . . . . . . . . . . . .
New Mexico . . . . . . . . . . . . . .
New York . . . . . . . . . . . . . . . .
North Dakota . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . .
South Dakota . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . .
Gulf Coast . . . . . . . . . . . . . .
Offshore & inland waters . . .
North . . . . . . . . . . . . . . . . . .
Panhandle . . . . . . . . . . . . . .
East . . . . . . . . . . . . . . . . . . .
West Central . . . . . . . . . . . .
West . . . . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . . .
West Virginia . . . . . . . . . . . . .
Wyoming . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . .
Total US . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . .
Inland Waters . . . . . . . . . . . . .
Offshore . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Canada-land . . . . . . . . . . . . .
Canada-offshore . . . . . . . . . . .
Grand total . . . . . . . . . . . . . .
2015
2014
2013
2012
2011
2010
1 .0
8 .0
0 .0
0 .3
5 .8
5 .7
0 .1
19 .2
0 .0
0 .2
1 .3
0 .3
3 .3
1 .4
46 .4
17 .5
2 .8
5 .3
20 .8
0 .0
2 .8
0 .0
0 .7
0 .4
25
0 .0
31 .1
13 .2
68 .4
19 .9
0 .0
235 .9
34 .6
1 .4
1 .9
7 .8
12 .3
26 .6
151 .3
3 .1
10 .5
11 .3
0 .1
509.6
484 .0
2 .9
22 .7
2 .3
11 .2
0 .0
6 .4
13 .1
12 .3
0 .8
38 .6
0 .7
0 .2
1 .9
0 .4
13
1 .5
77 .6
28 .1
4 .8
11
33 .8
0 .0
5 .1
1 .7
2 .1
0 .3
52 .8
0 .0
84 .7
24 .8
117 .6
41 .7
0 .0
432 .6
92 .4
0 .9
4 .8
19 .2
26 .6
44 .6
244 .2
7 .4
18 .7
27
0 .0
983.3
944 .1
4 .9
35 .5
5 .8
9 .8
0 .0
11 .5
41 .9
40 .5
1 .4
67 .8
1 .7
0 .4
1 .6
1 .8
28 .5
3 .2
110 .6
27 .8
15 .2
16 .1
51 .6
0 .0
12 .9
8 .5
2 .0
0 .9
91 .6
0 .0
176 .2
40 .5
199 .3
55 .4
0 .4
880 .9
176 .2
2 .2
16 .7
63 .6
41
105 .6
475 .7
25 .1
28 .6
53 .8
0 .0
1,860.7
1,788 .7
14 .8
57 .1
4 .9
9 .2
0 .3
13 .7
38 .1
36 .4
1 .7
63 .4
1 .8
0 .0
3 .7
1 .3
26 .9
0 .6
107 .9
23 .4
20 .4
15 .4
48 .8
0 .5
10 .8
11 .5
1 .4
2 .6
77 .1
0 .0
173 .1
32 .1
178 .6
58 .9
1 .3
835 .1
162 .3
4 .6
21 .1
65 .3
41 .6
91 .1
449 .2
29 .3
28 .1
48 .4
0 .8
1,761.4
1,684 .6
20 .7
56 .1
5 .4
7 .1
0 .2
21 .3
44 .0
43 .3
0 .7
64 .4
1 .4
0 .1
1 .0
1 .0
30 .3
2 .7
123 .8
35 .7
18 .1
26 .2
43 .7
1 .8
10 .8
20 .0
0 .9
1 .3
83 .7
0 .3
187 .9
18 .4
195 .8
84 .1
0 .9
899 .3
171 .9
2 .3
26 .0
71 .1
61 .2
93 .5
473 .4
36 .9
25 .9
46 .6
1 .4
1,918.7
1,852 .3
19 .0
47 .4
6 .5
6 .5
0 .0
34 .4
44 .8
44 .7
0 .1
71 .9
1 .2
0 .0
1 .3
1 .0
28 .6
5 .1
164 .5
96 .9
17 .0
21 .8
28 .9
2 .2
9 .3
9 .0
1 .0
3 .3
79 .1
0 .0
168 .2
10 .9
180 .2
109 .7
0 .8
840 .3
154 .4
3 .2
32 .9
70 .7
112 .7
81 .5
384 .9
27 .6
21 .4
48 .3
1 .5
1,878.6
1,828 .8
17 .6
32 .3
5 .0
7 .7
0 .0
39 .1
32 .0
31 .8
0 .5
57 .7
1 .2
0 .0
1 .8
3 .3
20 .4
5 .5
191 .5
134 .2
13 .7
16 .1
27 .5
0 .0
10 .7
6 .6
1 .6
5 .6
62 .2
1 .2
113 .5
7 .4
127 .5
84 .7
0 .6
658 .7
119 .9
3 .6
35 .7
59 .8
146 .9
68 .6
224 .2
26 .6
23 .1
40 .3
3 .4
1,538.9
1,493 .3
14 .2
31 .5
126 .5
1 .8
637.9
191 .5
2 .4
1,177.2
374 .5
1 .7
2,236.9
350 .6
2 .4
2,114.4
362 .6
1 .0
2,282.3
417 .3
1 .4
2,297.3
343 .5
1 .8
1,884.2
2009
2008
2007
3 .7
7 .7
0 .0
44 .1
22 .8
22 .0
0 .8
50 .4
0 .6
0 .0
0 .8
2 .1
19 .6
9 .7
150 .0
89 .2
8 .1
14 .8
37 .9
0 .0
10 .1
2 .7
0 .3
3 .4
43 .7
2 .2
49 .4
7 .9
94 .4
41 .7
0 .3
432 .2
88 .2
3 .4
24 .8
34 .8
150 .7
38 .5
91 .7
18 .3
22 .2
40 .0
7 .1
1,087.4
1,035 .3
8 .2
43 .9
4 .5
8 .3
0 .0
50 .4
41 .2
40 .4
0 .8
114 .0
1 .0
0 .0
0 .5
1 .7
11 .3
10 .2
167 .3
67 .9
20 .4
25 .6
53 .3
1 .1
13 .1
10 .7
0 .1
3 .3
78 .6
6 .0
68 .1
11 .6
200 .0
23 .0
1 .6
898 .4
187 .1
10 .1
41 .7
81 .9
305 .8
93 .9
178 .0
41 .6
26 .9
73 .9
10 .6
1,879.0
1,791 .8
22 .0
65 .3
4 .6
8 .4
0 .0
45 .4
35 .4
33 .8
1 .6
106 .7
0 .4
0 .3
0 .1
2 .0
13 .8
9 .0
177 .0
57 .9
24 .6
33 .8
60 .7
1 .5
14 .0
16 .9
0 .1
2 .2
78 .1
6 .4
38 .9
13 .2
188 .2
15 .6
1 .5
834 .3
180 .3
10 .5
36 .7
60 .5
294 .8
94 .6
156 .9
41 .1
31 .6
73 .6
7 .6
1,767.8
1,669 .8
25 .7
72 .6
221 .5
1 .2
1,310.1
380 .4
1 .2
2,260.6
340 .0
2 .5
2,110.3
Source: Baker Hughes Inc . Note: May not add due to independent rounding .
tor in the production cut, it suggests that crude oil

prices will recover on itself even without the agreement among producers.
If the model-based forecasts were true, one
would rethink the short-run and long-run impacts
of the agreement.
est report from the Bureau of Labor Statistics, an

estimated 178,000 jobs were added to the economy. The unemployment rate decreased by 0.3 of a
percentage point, and the total number of unemployed persons declined 387,000 to 7.4 million.
Increased employment and wages will further
SPECIAL
support
growth, offsetting somewhat sluggish exREPORT
US economy, energy use
ternal demand. Additionally, a more expansionary
US economic growth is set to strengthen in 2017.
fiscal stance is expected for the new administraOGJ forecasts that the US economy, measured by
tion, as public spending and investment rise, while
real gross domestic product, will expand at a rate of 2.2%
taxes are cut.
this year. Although real GDP growth of 2016 was estimated
Energy use in the US contracted 0.3% in 2016, according
at 1.5%, economic activity has been expanding at a moderate
to EIA data, but is expected to increase in 2017, boosted by
pace since mid-2016.
expanding economic activities. It is worth noting that EIA
Employment also has risen steadily. According to the latdata on energy consumption is subject to frequent revisions,
170102ogj_27 27
27
12/29/16 10:54 AM
GENERAL INTEREST
FORECASTS OF THE REAL PRICE OF OIL BASED ON A VAR MODEL
FIG. 2
110
100
90
80
$/bbl
Real Brent prices
70
Forecast as of Jun. 2014

Forecast as of Sept. 2014
60
Forecast as of Nov. 2014

Forecast as of Dec. 2014
50
40
Forecast as of Feb. 2015

Forecast as of May 2015
Forecast as of Aug. 2015
Forecast as of Oct. 2015
Forecast as of Dec. 2015
30
Forecast as of Jun. 2016

Forecast as of Aug. 2016
30
May2014
Oct2014
Mar2015
Aug2015
Jan2016
Jun2016
Nov2016
Apr2017
Sept2017
Source: Authors calculations.
drilling activities recover, economic growth accelwhich might affect related analysis.
erates, and winter might be colder, distillate conOil demand this year will rise 0.3%, following
sumption is expected to increase.
a growth of 0.6% last year. The impact of earlier
Jet fuel price is forecast to increase to $1.64/gal
sharp price falls between 2014 and early 2016 on
from $1.33/gal last year, EIA said. Jet fuel demand
gasoline consumption may start to fade this year.
will decrease slightly from last years high.
Oil will remain the dominant energy source in the
SPECIAL
Residual fuel consumption increased 39% last
US, holding 36.7% of the market.
REPORT
year, driven by recent expansion of tanker fleets,
Gas consumption is predicted to increase 0.1%
increased long-distance trade, and lower Russian
this year compared with a 0.8% increase last year.
residual fuel exports. Going forward, tanker rates should reThe gas market share will stand at 29.1% this year compared
cover as the global market slowly returns to balance.
with 29.3% in 2016 and 29% in 2015.
Gas generated about 34% of the countrys total electricity in 2016, up from 32.7% in 2015. The estimated share
US oil production
of coal-fired electricity generation was 30.5% last year. Last
As a result of lower oil prices, US crude and condensate
year was the first year that gas-fired electricity generation
production decreased 6.5% to 8.8 million b/d in 2016. OGJ
exceeded that fired by coal. In 2017, coal consumption is
expects a robust US oil production response to higher oil
estimated to increase due to rising gas rates.
prices in 2017. US crude oil production is forecast to average
9.3 million b/d this year, up 5.7% from 2016. The forecast is
US oil demand
based on an estimated WTI average of $55/bbl for 2017 comOGJ forecasts US demand for motor gasoline to average 9.4
pared with $43/bbl in 2016.
million b/d in 2017, a 0.6% increase from the 2016 level.
Activity in the US shale patch is already increasing. US
This is down from a 1.8% year-over-year increase seen in
producers have put 207 rigs back in service since hitting
2016. The regular gasoline retail price is projected to average
a low of 316 oil rigs in May. The majority of the rigs were
$2.30/gal in 2017, up from $2.14/gal in 2016, according to
added to the Permian basin.
EIAs December Short-Term Energy Outlook.
According to a OGJ analysis, US oil rig count response to
Demand for distillate, which is used mostly as heating oil
WTI changes has been four times more sensitive since the
and transportation fuel, decreased 2.9% last year to an avprice fall (Fig 4b).
erage of 3.88 million b/d, reflecting a warmer-than-normal
During second-half 2016, the Lower 48 rig count has exfirst quarter in 2016, sluggish growth in first-half 2016, and
panded from 7 rigs/week in the third quarter to 10 rigs/week
reduced transportation in the oil and gas sector. This year, as
in the fourth quarter. In December, an expansion speed of
28
170102ogj_28 28
12/29/16 10:54 AM
GENERAL INTEREST
170102ogj_29 29
$/bbl
Contributions of shocks
21 rigs/week was reached.

HISTORICAL DECOMPOSITION OF OIL PRICES
FIG. 3
In recent financial filings, a number
20
of US independent companies revised
upwards their 2016 capital expendi10
ture guidance while suggesting further
increases in spending and activity in
0
2017, especially in the Permian basin.
100
At the same time, these companies em10
phasize spending within or near cash
90
flow in their business plans.
80
Befitting from the improved price
20
environment, less asset impairments,
70
and enhanced cost efficiency, the US
30
60
shale industry is now closer to being
able to fund capital spending programs
40
50
within operational cash flows. During
Oil supply
40
the third quarter, for the first time, the
50
Econ. activity based oil demand
sector reached free cash flow neutraliSpeculative oil demand
30
Real crude prices
ty. However, upward pressure on costs
60
20
will reappear once the industry scales
Nov2014
Apr2015
Sep2015
Feb2016
Jul2016
up activity, posting new challenges to
Source: Authors calculations. Historical decomposition results are based on a four-variable structural VAR model of the global crude oil market
US oil producers.
using sign restrictions.
The Gulf of Mexico is expected
to see continued crude production
growth in 2017, following a 7% increase last year, primarily
Imports, exports
driven by new projects coming online.
Lower US crude production and high demand to build crude
US natural gas liquids production will increase 8% to 3.5
inventories led to higher crude imports in 2016. The narmillion b/d this year, OGJ forecasts.
rowing price differentials between US crude and international benchmarks led to increased imports in refining areas
Inventories
where imported crude had a delivered cost advantage relaIndustry stocks of crude ended last year at an estimated 483
tive to similar US crude.
million bbl, up from 449 million bbl a year earlier. At the
During 2016, the US imported 7.89 million b/d of crude,
end of 2016, the Strategic Petroleum Reserve held 695 milup 7.2% from the volumes imported in 2015. This increase
lion bbl, unchanged from a year ago.
reversed a multiyear decrease in crude oil imports as a rePreliminary data from EIA suggest that US crude stocksult of increasing production. Although US crude exports
piles continued to build through to mid-November, before
increased by 60,000 b/d to 525,000 b/d in 2016, net imports
drawing on the back of higher demand from refineries and
of crude oil increased 7% year over year, marking the first
lower imports.
increase since 2010.
The US Department of Energys Office of Fossil Energy
Imports from OPEC members rose 510,000 b/d, or 19%,
recently announced that it will sell crude oil from the SPR as
from a year ago. Imports from Iraq increased by 172,000
early as January. The announcement came after a Continub/d, contributing to most of the imports increase in Gulf
ing Resolution that included a provision for DOE to sell up
Coast. Imports from Nigeria increased 138,000 b/d, thanks
to $375.4 million in crude oil from the SPR was enacted into
to its increasing competitiveness for seaborne light sweet
law earlier in December 2016. This sale is the first of several
crude into East Coast.
planned sales totaling nearly 190 million bbl during fiscal
Imports from non-OPEC countries increased less than
years 2017 through 2025.
20,000 b/d. Imports from Mexico fell 120,000 b/d, offsetting
Latest EIA data show that, as US refineries ramped up
the increase in imports from Canada and Colombia. Despite
output seasonally in November, oil product stocks gained,
wildfires in Alberta that disrupted production in secondespecially for gasoline and distillate stocks. Seasonal inquarter 2016, Canada remained the top crude oil exporter to
crease in demand and strong exports led to a further decline
the US. Canadian heavy crude is particularly well suited for
in propane stocks. Jet fuel stocks were 3.1 million bbl above
US refiners in the Midwest and Gulf Coast.
year-ago levels at end-November due to higher imports.
In 2016, led by residual fuel, US imports of refined products increased 5.9% from a year ago to 2.2 million b/d. In
2016, US exported 4.67 million b/d of petroleum products
29
12/29/16 10:54 AM
GENERAL INTEREST
US OIL PRODUCTION, TRADE

WTI price, US oil rig count
FIG. 4a
1800
110
1600
100
1400
90
FIG. 4b
0.0
800
% change
$/bbl
1000
70
60
0.5
1.0
600
50
Jul. 2014-Dec. 2016
400
40
WTI prices
Oil rig count
30
1.5
Jan. 2010-Dec. 2012
0
2010 2011 2012 2013 2014 2015 2016 2017
Oil production in key US regions
2.0
0
1,500
10 12
Week
14
16
18
20
FIG. 4d
1.5
Crude net imports
Product net exports
Bakken
Eagleford
Haynesville
Marcellus
Permian
Utica
Niobrara
1.0
1,000
500
0
Jan. 2007
US crude, product trade, y-o-y change
FIG. 4c
Billion bbl
2,000
Jan. 2012-Jun. 2014
200
2,500
Thousand b/d
Impact of WTI shock on US oil rig count*
1200
80
20
0.5
Rig count
120
FIG. 4
0.5
0.0
0.5
Apr. 2010
Aug. 2013
Dec. 2016
1
Jan. 2014
Oct. 2014
Aug. 2015
June 2016
*Shows the impulse responses of US oil rig count to a decrease in WTI.

Source: EIA, OGJ analysis
almost 10 times the crude oil export volumean

increase of 402,000 b/d over 2015. Mexico, Canada, and the Netherlands received the greatest volumes of US petroleum products in 2016.
While US exports of distillate and gasoline increased by 55,000 b/d and 102,000 b/d, respectively, LPG exports increased by 110,000 b/d. Propane
is now the second-largest US petroleum product
export, surpassing motor gasoline.
spreads, and higher costs for Renewable Identification

Numbers (RIN).
Refining cash margins for the 2016 averaged
$11.21/bbl for the Midwest, $14.36/bbl for the West
Coast, $9.28/bbl for the Gulf Coast, and $3.74/
bbl for the East Coast, according to Muse Stancil
SPECIAL
& Co. The average cash refining margins for these
REPORT
refining centers averaged a respective $17.58/bbl,
$22.42/bbl, $11.27/bbl, and $5.52/bbl in 2015.
US refiners ran at lower utilization rates of 89.8%
Refining
in 2016 compared with 91% in 2015. Refining capacity of
Higher product demand in 2015 in reaction to lower crude
2016 increased 1.8% to 18.4 million bbl from a year ago.
prices led to higher margins, rising refining capacity, and
As demand growth starts to slow down and gasoline and
higher utilization. However, this trend has begun to reverse in
distillate inventories remain high, a flat utilization rate is
2016 as increased products inventories have outpaced demand
expected this year.
growth, leading to lower margins and reduced utilization. In
Meantime, if the border tax of the administration of new2017, refiners will face challenges coming from weak crack
ly elected US President Donald J. Trump were to be imple-
30
170102ogj_30 30
12/29/16 10:54 AM
GENERAL INTEREST
MARKETED NATURAL GAS PRODUCTION 1

2
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
MMcfd
Alaska . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . .
New Mexico . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . .
Wyoming . . . . . . . . . . . . . . . .
Federal offshore . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .
899
5,078
3,337
6,813
19,267
4,354
3,332
34,208
77,287
941
4,868
3,410
6,848
21,590
4,914
3,530
32,673
78,775
946
5,372
3,369
6,387
21,877
4,916
3,435
29,035
75,336
927
6,466
3,210
5,462
20,914
5,091
3,587
24,376
70,034
960
8,075
3,322
5,529
20,425
5,525
4,119
21,126
69,080
999
8,299
3,390
5,175
19,487
5,916
4,965
17,622
65,853
1,033
6,154
3,623
5,006
18,292
6,365
6,157
15,202
61,833
1,087
4,197
3,846
5,090
18,769
6,464
6,665
13,191
59,309
1,089
3,763
3,951
5,227
18,910
6,215
6,358
12,518
58,031
1,188
3,741
4,159
4,887
16,776
5,611
7,668
11,305
55,332
Volume change . . . . . . . . . . .
Percent change . . . . . . . . . .
(1,488)
(2)
3,439
5
5,303
8
954
1
3,227
5
4,021
7
2,523
4
1,278
2
2,699
5
2,155
4
Imports . . . . . . . . . . . . . . . . .
Exports . . . . . . . . . . . . . . . . .
8,109
6,232
7,447
4,886
7,385
4,149
7,899
4,307
8,574
4,423
9,504
4,129
10,249
3,114
10,278
2,938
10,886
2,632
12,624
2,253
Includes nonhydrocarbon gases . 2Preliminary .

REFINERY RUNS BY DISTRICTS

2016
Input to
Crude
crude
% of
runs1
stills1
operable
1,000 b/d
capacity
Crude runs
2015
2014
2013
2012
2011
2010
2009
2008
2007
1,000 b/d
East Coast . . . . . . . . . . 1,020

Appalachian Dist . 1 . . .
94
Total Dist . 1 . . . . . . . . 1,114
1,017
95
1,111
86 .2
96 .5
87 .0
1,029
93
1,122
1,000
87
1,087
949
89
1,038
827
92
919
1,009
88
1,097
1,037
81
1,118
1,171
89
1,259
1,332
90
1,421
1,426
87
1,513
Ill ., Ind ., Ky .2 . . . . . . . . 2,310

Minn ., Wisc ., Daks . . . . 488
Okla ., Kan ., Mo . . . . . . 811
Total Dist . 2 . . . . . . . . 3,609
2,303
488
811
3,602
89 .8
94 .4
94 .5
91 .4
2,285
481
796
3,562
2,246
462
815
3,523
2,181
446
779
3,406
2,210
450
782
3,442
2,191
440
741
3,372
2,115
420
746
3,281
2,004
408
723
3,135
2,079
412
730
3,221
2,131
401
694
3,226
Texas
Inland . . . . . . . . . . . . 687
Gulf Coast . . . . . . . . . 4,164
Louisiana Gulf . . . . . . . 3,329
N . La ., Ark . . . . . . . . . . 220
New Mexico . . . . . . . . 123
Total Dist . 3 . . . . . . . . 8,523

Total Dist . 4 . . . . . . . . 595
Total Dist . 5 . . . . . . . . 2,408
Total US . . . . . . . . . . 16,250
680
4,176
3,475
198
123
8,652
592
2,562
16,520
96 .6
87 .2
94 .1
81 .5
96 .0
90 .5
86 .2
87 .6
89 .8
655
4,213
3,296
224
125
8,513
602
2,390
16,189
650
4,063
3,212
206
123
8,254
581
2,402
15,847
640
3,918
3,072
209
112
7,951
578
2,339
15,312
612
3,707
3,092
208
115
7,734
573
2,331
14,999
601
3,460
3,063
219
105
7,448
545
2,346
14,808
565
3,609
2,966
189
105
7,433
540
2,351
14,724
558
3,407
2,781
170
103
7,020
540
2,382
14,336
584
3,276
2,749
182
107
6,899
536
2,571
14,648
570
3,417
3,035
187
106
7,315
542
2,560
15,156
Preliminary . 2Includes Appalachian Dist . 2

mented, the crude purchasing economics would change, according to Simmons & Co. Refiners with flexibility to shift
from imports to domestic barrels would be advantaged,
while domestic refiners with heavy exposure to imported
crude could be most negatively impacted.
Natural gas
US natural gas consumption increased 0.6% in 2016 to 75.22
bcf/d, according to latest EIA data. The largest increase in
consumption last year was in the electric power sector due to
power plant improvements and lower gas prices. Combined
consumption in the commercial and residential sectors declined 5% due to warm winter in the first quarter of 2016.
Industrial consumption of the year increased 2%.
170102ogj_31 31
Consumption will grow 0.1% this year, OGJ forecasts.

The growth is supported by the expectation of a colder winter in US Northeast and Midwest, partly offset by higher gas
prices and slightly lower share in the power generation sector.
The temperature from December 2016 through March
2017 are projected to average 3% warmer than normal, but
this forecast is 13% colder than the same period last year,
according to the National Oceanic and Atmospheric Administration. Colder winter temperature will lead to an increase
in commercial and residential gas consumption this year.
According to EIA, gas will generate 33% of the countrys
power this year, compared with 34% last year. Coal is able to
regain some share from gas at higher gas prices. Gulf Coast
31
12/29/16 10:54 AM
GENERAL INTEREST
US REFINED PRODUCTS, NATURAL GAS LIQUIDS, AND CRUDE STOCKS

1
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1,000 bbl
Gasoline2 . . . . . . . . . . . . . . .
Motor3 . . . . . . . . . . . . . . . .
Aviation3 . . . . . . . . . . . . . . .
Special naphthas . . . . . . . . .
Kerosene . . . . . . . . . . . . . . .
Distillate . . . . . . . . . . . . . . . .
Residual . . . . . . . . . . . . . . . .
Kerosine jet fuel . . . . . . . . . .
Natural gas liquids & LRG . . .
Unfinished oils . . . . . . . . . . .
Other refined products . . . . .
Total products stocks . . . . . .
Crude stocks (ex . SPR) . . . .
Total stocks (ex . SPR) . . . . .
SPR stocks . . . . . . . . . . . . .
Total stocks (incl . SPR) . . . .
233,320
232,492
828
1,290
2,354
154,005
39,893
42,199
204,127
84,410
75,404
837,000
483,000
1,320,000
695,080
2,015,080
236,351
235,465
886
1,336
2,574
161,326
42,148
40,390
197,040
82,861
76,206
840,232
449,220
1,289,452
695,119
1,984,571
241,460
240,368
1,092
1,375
2,124
136,286
33,662
38,274
175,364
78,345
68,324
775,214
393,341
1,168,555
690,959
1,859,514
228,904
228,034
870
1,262
1,886
127,543
38,144
37,183
128,425
77,959
67,035
708,341
357,063
1,065,404
695,969
1,761,373
231,958
230,888
1,070
1,228
1,759
134,809
33,951
39,620
153,268
82,284
68,136
747,013
365,496
1,112,509
695,268
1,807,777
224,302
223,147
1,155
1,061
2,449
149,212
34,189
41,483
129,374
78,809
62,578
723,457
330,679
1,054,136
695,951
1,750,087
220,540
219,435
1,105
1,016
2,419
164,306
41,347
43,218
120,782
80,624
59,872
734,124
333,430
1,067,554
726,545
1,794,099
224,328
223,282
1,046
1,121
2,476
165,964
37,168
43,397
112,628
79,893
57,605
724,580
325,179
1,049,759
726,616
1,776,375
214,738
213,550
1,188
1,438
2,248
146,013
36,057
37,969
126,909
83,463
60,241
709,076
325,840
1,034,916
701,823
1,736,739
219,369
218,107
1,262
1,571
2,804
133,944
39,338
39,458
105,870
81,209
58,736
682,299
286,105
968,404
696,941
1,665,345
Preliminary . 2Includes reformulated, oxygenated, and other finished gasoline . 3Includes blending components .
Although 2016 inventories were 6% more than

petrochemical plants also add demand, but petrotheir 5-year average, the surplus has been shrinkchemical plants experiencing some delays in expecting. The increase in US working natural gas invened in-service dates.
tories through the 2016 injection seasonthe peUS production has declined in 2016, but likely
riod from April through October when most gas is
to resume growth in 2017 as producers increase
stored underground to help meet heating demand
drilling and oil production increases associated gas
SPECIAL
during the upcoming winterwas 45% less than
volumes. Shale gas wells continue to be the largest
REPORT
the build last year and 37% smaller than 5-year avsource of total gas production.
erage increase during the comparable time.
For the fourth consecutive year, Pennsylvania
Estimated gas exports in 2016 increased tresaw the largest total gain in annual production,
mendously by 27.9% to 2.3 tcf. LNG exports increased to
with marketed production increasing to an estimated 14.5
186 bcf in 2016 from 28 bcf a year ago. Pipeline exports inbcfd in 2016, up from 13.18 bcfd in 2015 and 11.6 bcfd in
creased 19.4% to 2 tcf.
2014. Texas remained the largest gas producing state, but
The amount of US gas moving to Mexico will continue
the states production declined 9.9% last year to 19.5 bcf/d.
to increase this year because of growing demand from the
Gas prices at Henry Hub declined more than 40% to
country electric power sector and flat gas production.
$2.62/MMbtu in 2015 from an average of $4.55/MMbtu in
Houston-based Cheniere Energy Sabine Pass LNG termi2014. Gas prices in 2016 averaged even lower at $2.5/MMbnal in Louisiana is consuming about 1 bcfd gas since Train
tu. However, as weather likely brings cold air, Henry Hub
2 started producing LNG in July, and is expected to double
gas prices rebounded to an average $3.57/MMbtu in Decemthat capacity this year. There are currently four LNG export
ber, the highest since Dec. 2014, compared to $1.93/MMbtu
terminals in the US under construction.
during the same period in 2015.
BLM approves master leasing plan for southeastern Utah

Nick Snow
Washington Editor
The US Bureau of Land Management approved its first master leasing plan for Utah, encompassing 785,000 acres of
public land managed by its Moab and Monticello field offices. It will guide responsible oil, gas, and mineral development in southeastern Utah while protecting important natural resources, iconic scenery, and recreational opportunities,
the US Department of the Interior agency said.
32
170102ogj_32 32
BLM brought together a diverse set of stakeholders, including local community members, industry representatives, recreation enthusiasts, tribes, and other interested
parties, to develop the Moab Master Leasing Plan/Approved
Resource Management Plan Amendments, it said.
The agency also worked closely with state and local agencies as well at the National Park Service and the US Environmental Protection Agency, it said. More than 28,000 public
comments were received and considered during the final
plans development.
12/29/16 10:54 AM
GENERAL INTEREST
BLM said its approved plan focuses protection on areas
with high scenic quality, high-use recreation areas, and
other areas with sensitive resources, while keeping energy
exploration and development in areas with fewer resource
conflicts. It said key elements included:
Prioritizing new leasing of oil, gas, and potash in different parts of the planning area to reduce conflicts from
overlapping development and allow for orderly development.
Phasing potash leasing to test whether development is
feasible.
Reducing wellsite density to minimize surface disturbance in sensitive areas.
Protecting National Park scenic qualities by strategically closing 145,000 acres of BLM-administered lands to
mineral leasing.
Allowing energy development while providing additional surface protection to about 306,000 acres that are
highly valued for scenery and recreation, through the use of
No Surface Occupancy stipulations on future leases.

Using a comprehensive list of the most current and
best management practices to reduce, prevent, or avoid adverse environmental or social impacts.
Providing additional protections for the Old Spanish
National Historic Trail.
BLM launched the MLP concept in May 2010 to address
a federal onshore oil, gas, and minerals leasing system in
which nearly half of all proposed parcels received community protests, and a substantial number resulted in litigation.
It initially developed plans in Colorado and Wyoming before
bringing the concept to Utah (OGJ Online, Aug. 27, 2015).
In conjunction with making the Moab MLP final, BLM
also released the preliminary alternatives for the San Rafael
Desert MLP, which was initiated earlier this year and will
involve about 525,000 acres in Utahs Emery and Wayne
counties. Comments will be accepted through Jan. 20, 2017,
the agency said.
Oklahoma develops seismicity guidelines for SCOOP, STACK plays

The Oklahoma Corporation Commissions Oil and Gas
Conservation Division (OGCD) has developed seismicity
guidelines for operators in the South Central Oklahoma Oil
Province (SCOOP) and the Sooner Trend Anadarko basin
Canadian and Kingfisher counties (STACK).
These areas are expected to account for much of Oklahomas future oil and gas activity. SCOOP and STACK producers currently are focusing on crude oil and condensates
although there also is associated gas.
OGCD and the Oklahoma Geological Survey (OGS) representatives said they developed seismicity guidelines as a
proactive approach.
Numerous earthquakes have been associated with injection wells in the Arbuckle formation. OGCD Director Tim
Baker noted the SCOOP and STACK plays are incapable of
generating huge amounts of wastewater. In the Arbuckle,
produced water is injected into disposal wells.
Production from the Mississippian limestone and
Hunton dewatering play operations within the 15,000-sqmile earthquake area of interest (AOI) has resulted in an unprecedented amount of salt water which was already in the
formation coming up with the oil and natural gas, Baker
said. By comparison, the SCOOP and STACK plays have
very small amounts of produced water.
OGS Director Jeremy Boak said Oklahoma developed a
plan to mitigate earthquake risk in the SCOOP and STACK
using both new and old information. The SCOOP and
STACK guidelines link possible earthquake activity to hydraulic fracturing.
Then-state seismologist Austin Holland did some work
on small earthquakes some years ago in what is now widely
170102ogj_33 33
known as the SCOOP and STACK, and showed some of them

might have been related to hydraulic fracturing, Boak said.
Term of the new guidelines are that if an earthquake
greater than or equal to 2.5 magnitude occurs within 1.25
miles of fracturing operations, the operator will being internal mitigation but operations will continue.
If theres a quake greater or equal to 3.0 magnitude, the
operator is to halt operations for at least 6 hr and participate
in a conference call with the OCC staff. If reduced seismic
activity follows, the operator could be allowed to resume operations with revised completion procedure.
Any quake greater than or equal to 3.5 magnitude will
result in immediate suspension of fracturing, and OCC staff
and the operator will discuss whether continued operations
will be allowed.
EPA final rule amends

chemical plant risk
management requirements
Nick Snow
Washington Editor
The US Environmental Protection Agency issued a final rule

amending its risk management program (RMP) requirements for petrochemical and other chemical plants to make
accidental releases less likely and improve emergency responses. It will help prevent accidents, such as one at a West
33
12/29/16 10:54 AM
GENERAL INTEREST
Texas agricultural fertilizer plant in April 2013 that killed 14
people, EPA said on Dec. 21.
This rule is based on extensive engagement with nearly
1,800 people over the last two and a half years, said Mathy
Stanislaus, EPAs Assistant Administrator for the Office of
Land and Emergency Management. These changes are intended to protect the lives of emergency responders and the
public, while preserving information security.
The Accidental Release Prevention regulations under Section 112(r) of the Clean Air Act (CAA)also known as the
EPA RMP regulationsrequire covered facilities to develop
and implement a risk management program, EPA said. It
shares RMP information with state and local officials to help
them plan for and prevent chemical accidents and releases.
EPA said the amendments to its RMP regulations are a
key action item under US President Barack Obamas Executive Order (EO) 13650, Improving Chemical Facility Safety
and Security. While developing and finalizing the rule, the
agency met with stakeholder groups, solicited public comments, held listening sessions and webinars, and considered
extensive comments on the proposed rule, it indicated.
It said the amendments are intended to:
Prevent catastrophic accidents by improving accident
prevention program requirements.
Enhance emergency preparedness to ensure coordination between facilities and local communities.
Improve information access to help the public understand the risks at RMP facilities.
And improve third-party audits at RMP facilities.
American Fuel & Petrochemical Manufacturers Pres. Chet
Thompson immediately criticized EPAs risk management
program amendments. This regulation is the definition of
a midnight rule rushed to completion without adequate review and consideration, and should either be withdrawn or
subjected to congressional disapproval, he said on Dec. 21.
Safety is a core value of AFPMs members, but EPAs revision to this rule will have no meaningful impact on safety
and only increase costs, Thompson maintained. If advancing worker and public safety is the goal, we dont believe this
rule does that.
US House Energy and Commerce

leaders ask GAO to examine SPR
Nick Snow
Washington Editor
US House Energy and Commerce Committee leaders asked

the Government Accountability Office to investigate whether the US Strategic Petroleum Reserve is being managed effectively and if the US should continue its participation in
the International Energy Agency.
34
170102ogj_34 34
The SPR was established in 1975 and received its last

major life extension between 1993 and 2000. Today, more
than 70% of its equipment and infrastructure exceeds its
serviceable life, Chairman Fred Upton (R-Mich.) and Ranking Minority Member Frank Pallone Jr. (D-NJ) said in a Dec.
22 letter to GAO Comptroller General Gene L. Dodaro.
They said the US Department of Energy, which manages the 713.5 million bbl reserves four underground storage
sites along the Louisiana and Texas Gulf Coast, concluded in
a recent report to Congress that the SPRs aging infrastructure and shifts in US midstream systems have reduced its
ability to add incremental barrels of crude oil to the market.
The report revealed that the effective distribution capacity
of the SPR could be more than 2 million bbl below the design
drawdown rate of 4.4 million b/d in certain oil disruption scenarios, Upton and Pallone said. These findings suggest that
the SPR may have difficult meeting its energy supply mission.
They asked GAO to assess options for the SPR to more efficiently and cost-effectively meet US energy security needs
and comply with international obligations by May 31, 2017,
concerning:
The state of the reserves surface and subsurface infrastructure, and its ability to mitigate an energy supply disruptions impact.
DOEs management of the SPR, and the quality of
DOEs analysis to support decision-making regarding the reserves long-term future.
Cost-effective options to protect the US from energy
supply shocks, including whether the reserve should be
maintained and, if so, the optimal configuration, management, and operations, including commercialization and
privatization of federal assets.
Cost-effective compliance options to meet US obligations to the IEA, referring, as necessary, to other member
countries stock-holding practices.
Since it was established, the SPR has had two emergency
drawdowns: 17.3 million bbl were sold to 13 companies on
Jan. 31, 1991, during the Operation Deseret Storm campaign
against Saddam Husseins regime in Iraq; and 20.8 million
bbl of loans and sales following Hurricane Katrina in 2005.
There also have been test sales, exchanges, and non-emergency sales and coordinated releases.
US energy security at 20-year peak,

US Chamber assessment finds
Nick Snow
Washington Editor
US energy security is at its strongest point in 2 decades, the

latest edition of the US Chamber of Commerces Index of US
Energy Security Risk found.
12/29/16 10:54 AM
GENERAL INTEREST
The index employs 37 different energy security metrics in
four major risk areas: geopolitical, economic, reliability, and
environmental. A lower index score indicates a lower level of
risk, it explained.
The seventh annual edition of the index covers 19702040 and incorporates the latest historical data and forecast models. In 2015the most recent year availablerisk
dropped 3 points, to 78, the lowest level since 1996, the US
Chamber said on Dec. 14.
It is not a coincidence that American energy security has
shown vast improvements at the same time that Americas
innovative energy industry was able to ramp up oil and gas
production, said Karen A. Harbert, president of the Chambers Institute for 21st Century Energy, which produces the
annual report.
Measurements related to oil and gassuch as imports,
import expenditures, and oil pricesand to efficiency
showed the biggest improvements, she said. Despite slumping prices, domestic crude oil output still increased by more
than 7%, although that was off the pace of previous years.
Natural gas production achieved a record peak, with a 5%
increase in 2015, Harbert said.
There were warning signs despite the overall good news,
she continued. Crude oil price volatility rose significantly,

driven by the desire of some large producing countries to
capture greater market share by driving prices down sharply. Rapid price shifts in either direction can create unstable
market conditions that increase energy security risks, Harbert said.
In addition, electricity capacity marginsthe amount of
unused power capacityhave declined, increasing the vulnerability of Americas electric grid in the event of a disruption, she warned.
The greatest threats to Americas energy security are
largely components that we control, said Harbert. A continued regulatory assault on American energy production
could lead to less diversity and reliability. And perhaps the
biggest threat of all is the keep it in the ground movement,
which if actually implemented, would erase the gains made
in recent years and bring us back to an era of dependence on
foreign sources of oil.
Looking ahead, the index projected energy security to average 78.3 points from 2016-40, with some softening of production increases due to prices. However, improvements are
expected in energy efficiency and in transportation-related
metrics, the US Chamber said.
BP to team with Kosmos on Mauritania, Senegal offshore blocks

BP PLC will invest nearly $1 billion to partner with Kosmos
Energy Ltd. for exploration and development of six blocks
off West Africa.
BP has agreed to acquire 62% interest including operatorship of Blocks C-6, C-8, C-12, and C-13 offshore Mauritania,
and 32.49% effective working interest in Saint-Louis Profond and Cayar Profond blocks offshore Senegal (OGJ Online, May 9, 2016).
Kosmos will maintain 28% and 32.51% effective working interest in the licenses offshore Mauritania and Senegal,
respectively, and will continue as exploration operator and
drill three exploration wells beginning in 2017.
The combined 33,000 sq km of acreage could contain 50
tcf of gas resource potential and 1 billion bbl of liquids resource potential, according to Kosmos estimates. The area
includes Tortue field offshore Mauritania estimated by Kosmos to contain more than 15 tcf of discovered gas resources
(OGJ Online, Nov. 12, 2015).
Under the terms of the agreement, Kosmos will receive fixed consideration of $916 million, including $162
million in cash up front; $221 million carry on exploration and appraisal, including a drill stem test on Tortue expected to be completed in 2017; and $533 million
maximum carry on development costs until production
startup on Tortue, including a front end engineering and
design study to be completed in 2017 with the objective of
170102ogj_35 35
reaching a final investment decision by 2018.

Kosmos also will receive a contingent bonus of up to $2/
bbl for up to 1 billion bbl of liquids, structured as a production royalty, subject to a future liquids discovery and oil price.
Bob Dudley, BP chief executive officer, said, We believe our
expertise in integrating the gas value chain, together with a talented exploration partner in Kosmos, along with the support of
the Mauritanian and Senegalese governments brings together
all the elements needed to create a new LNG hub in Africa.
The new partners plan to process and transport the gas
from Tortue at a nearshore LNG facility to reduce development time and improve capital efficiency. The proposed
complex could be expanded in phases to accommodate future gas discoveries.
In addition to the existing blocks, the companies have
agreed to cooperate in areas of mutual interest in offshore
Mauritania, Senegal, and Gambia with Kosmos acting as the
exploration operator and BP as the development operator.
Subject to government approvals, the deals are expected
to close by first-quarter 2017.
The move follows BP getting 10% interest in Abu Dhabis
ADCO onshore oil concession (OGJ Online, Dec. 19, 2016).
BP last month purchased 10% interest in the supergiant
Zohr natural gas field offshore Egypt from operator Eni SPA
(OGJ Online, Nov. 28, 2016).
35
12/29/16 10:54 AM
GENERAL INTEREST
Gulfport strikes
$1.85-billion deal
to enter Oklahoma SCOOP
It has four operated rigs active in the Utica and has contracted its fifth and sixth horizontal rigs to respectively begin operations in November and December.
Quantums activity this year includes the formation of
Sentinel Peak Resources LLC and its subsequent $742-million purchase of Freeport-McMoRan Inc.s onshore oil and
gas properties in California (OGJ Online, Oct. 14, 2016).
Matt Zborowski
Assistant Editor
Gulfport Energy Corp., Oklahoma City, has agreed to acquire 46,400 net surface acres in the core of the South Central Oklahoma Oil Province (SCOOP) from Vitruvian II
Woodford LLC, a portfolio company of Houston private equity firm Quantum Energy Partners, for $1.85 billion.
The contiguous position totals 85,000 net effective acres,
which includes rights to 46,400 Woodford acres and 38,600
Springer acres, in Grady, Stephens, and Garvin counties in
Oklahoma, with 80% held by production.
The properties are primarily in the over-pressured liquids-rich to dry gas windows of the play, with production of
183 MMcfd of gas equivalent in October and total estimated
proved reserves of 1.1 tcf of gas equivalent at Sept. 30.
The deal includes 48 producing horizontal wells and an
additional interest in more than 150 nonoperated horizontal
wells. Four rigs are currently operating on the acreage. Gulfport plans to maintain a four-rig program in the play during
2017 and add two more rigs at the beginning of 2018.
Gulfport says it has identified stacked-pay potential on
the acreage with 1,750 gross drilling locations, including
more than 775 gross locations with internal rates of return
of 75%, targeting the Woodford and Springer intervals. The
firm sees upside potential through infill drilling and additional prospective zones.
The purchase price comprises $1.35 billion in cash and
18.8 million in shares of Gulfport common stock privately
placed to the sellers, subject to adjustment. The deal is expected to close in February 2017.
Expanding beyond the Utica

Combining Vitruvians high-quality SCOOP position with
our prolific Utica assets will transform our company and solidify Gulfport with core positions in two of North Americas high-return natural gas basins, commented Michael G.
Moore, Gulfport chief executive officer and president.
The announcement comes a week after Gulfport reported
it had agreed to buy 2,600 net undeveloped acres in northern Monroe County, Ohio, from an undisclosed third party
for $87 million. That deal is expected to close this month.
Gulfport currently has some 211,000 net acres focused
on the core of the dry, wet gas and condensate windows of
the Utica Point Pleasant. Company production in the region
averaged 713 MMcfed during the third quarter and reserves
total 1.7 net tcfe.
36
170102ogj_36 36
Diamondback boosts
Delaware basin position
with $2.4-billion purchase
Matt Zborowski
OGJ Assistant Editor
Diamondback Energy Inc., Midland, Tex., has agreed to acquire Austin-based Brigham Resources Operating LLC and
Brigham Resources Midstream LLC for $2.43 billion. Its Diamondbacks second deal for southern Delaware basin acreage since it entered the area earlier this year.
The deal covers 76,319 net leasehold acres in Pecos and
Reeves counties, Tex., with November net production averaging 9,482 boe/d, of which 77% was oil, from 48 gross
producing horizontal wells and 16 gross producing vertical
wells. The acreage is 83% operated with average working
interest of 81%.
Diamondback says recent horizontal wells on and surrounding the properties have confirmed geochemical data
that indicate Wolfcamp A, Wolfcamp B, 3rd Bone Spring,
and 2nd Bone Spring as primary targets.
The firm estimates development potential within the
footprint of the deal includes 1,213 net horizontal locations,
and says additional development and downspacing potential may exist throughout the Wolfcamp and Bone Spring
intervals.
The contiguous position supports average lateral lengths
of 8,000 ft based on current leasehold, with multiple opportunities to increase lateral lengths, the firm says.
The acquisition, effective Jan. 1, 2017, and expected to
close in February, comprises $1.62 billion in cash and 7.69
million shares of Diamondback common stock. Diamondback also will receive $50 million in existing infrastructure,
including gas pipeline, fresh water access, frac ponds, and
salt water gathering and disposal infrastructure.
Major Permian player

Once complete, Diamondbacks leasehold interests in the
Permian basin will total 182,000 net surface acres.
We feel that the single well economics of over 100% internal rates of return at todays commodity prices on this
[newly acquired] acreage compete for capital in the top quar-
12/29/16 10:54 AM
GENERAL INTEREST
tile of our existing inventory and are comparable to the acreage we acquired in July 2016 in the southern Delaware basin, said Travis Stice, Diamondback chief executive officer.
In that deal, Diamondback gained 19,180 net surface acres
primarily in Reeves and Ward counties, Tex., from an unnamed seller for $560 million.
Stice said the firm believes it can now support 15-20 operated rigs overall. In addition to our soon to be added sixth
rig that will begin developing our previously acquired acreage in the Delaware basin, we plan to add two additional rigs
to develop this pending acquisition in 2017, he said.
Diamondback also believes production from the new
acreage along with increased production from its other assets will enable the firms overall production growth to surpass 60% in 2017 at the midpoint of its current guidance
range.
Brigham Resources was founded in 2012 by current
Chairman Bud Brigham, current Chief Executive Officer
Gene Shepherd, and former members of management from
Brigham Exploration Co. following its sale to Statoil ASA. Its
backed by private equity firms Warburg Pincus LLC, Yorktown Partners LLC, and Pine Brook Road Partners LLC.
Total to buy stake

in US LNG group Tellurian
Total SA has agreed to buy 23% of Tellurian Investments Inc.
at $5.85/share for $207 million.
The French multinational firm said the move entails developing an integrated gas project comprising the acquisition of gas production in the US to the delivery of LNG to
international markets from the Driftwood LNG terminal.
Meg Gentle, Tellurian president and chief executive officer, said, Totals investment materially strengthens Tellurians position as a large infrastructure development company
and is an important milestone in the growth of Tellurians
LNG business, including the Driftwood LNG project in Calcasieu Parish, La.
Gentle, formerly of Cheniere Energy Inc., joins former
Cheniere Chairman, Chief Executive, and President Charif
Souki at the newly established firm.
Driftwood LNG is in the engineering design and prefiling phase of the project. The US Federal Energy Regulatory
Commission approved its prefiling request in June. Tellurian expects to commence construction in 2018 and produce
LNG in 2022. The terminal will be able to export up to 26
million tonnes/year of LNG.
Giles Farrer, research director, global LNG, at global
natural resources consultancy Wood Mackenzie Ltd., commented on the deal, Total acquiring a 23% stake in Tellurian and yesterdays announcement that BP [PLC] has farmed
into a near-shore [floating LNG] project in Mauritania and
170102ogj_37 37
Senegal is a sign that a technological shift is under waythe

majors are going big on small-scale LNG.
BP on Dec. 19 said it will invest nearly $1 billion to team
with Kosmos Energy Ltd. for exploration and development
of six blocks off West Africa (OGJ Online, Dec. 19, 2016).
That deal includes Mauritanias offshore Tortue field, where
the new partners plan to process and transport gas at a nearshore LNG facility.
The jury is still out on whether small-scale LNG is really
cheaper per tonne of LNG produced than large scale, but its
certainly a more manageable investment and thats appealing in the present environment, Farrer said. As one of the
big LNG portfolio players, Total can add both financial clout
and could support the development of some of the trains by
buying LNG from the project.
He added, This is a typical Total LNG acquisition. Its
built its LNG business on acquisitions over the last few years
with deals in Australia and Russia. It buys significant but
minority stakes in projects at an early stage [and] then helps
mature them.
OIL & GAS JOURNAL

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Oil & Gas Journal may be purchased
by contacting
Rhonda Brown,
Reprint Marketing Manager,
Foster Printing Co.
4295 Ohio St.,
Michigan City, IN 46360,
1-866-879-9144 (ext. 194)
219-561-2023 (fax)
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www.marketingreprints.com
37
12/29/16 10:54 AM
TECHNOLOGY
Irans joint fields offer development,

partnership opportunities
Omid Shokri Kalehsar
Yalova University
Yalova, Turkey
Joint fields with Iraq
Five of Irans joint oil fields are on its border with Iraq, which
has a 7-year plan to increase oil production to 12 million
b/d. The Iraqi government invited Iran to invest in its crossAfter 36 years of limited access to tools, technologies, and
border fields in 2010 with the aim of improving developinternational exploration and development partners, Iran is
ment and increasing production, but Iran declined the offer
now working to expand its domestic hydrocarbon resources.
due to a lack of financial resources.
The UN Security Council in July 2015 unanimously adopted
While Iran was under international sanctions, Iraq proResolution 2231 endorsing the Joint Comprehensive Plan of
duced 295,000 b/d from its joint fields compared with Irans
Action, providing Iran with sanctions relief in exchange for
130,000 b/d. Iraqs government also signed agreements with
the countrys commitment to curtail its nuclear program.
several major international oil companies to increase the
Three-fourths of the countrys reserves lie within its nacountrys production from its cross-border fields.3 Iran antional borders, but Iran shares 28 oil and gas fields with
nounced in January 2016 a plan to increase oil production
neighboring countries. These joint fields contain
from Iraqi joint fields to 200,000 b/d in 2017 and
20% of Irans oil reserves and 30% of its natural
as much as 700,000 b/d in subsequent years.4 Both
1
gas. Of the 28 joint fields, 15 are oil fields and 11
countries have revised their oil contracts with benare located in the Persian Gulf.2 Ongoing sanctions
efits outlined for joint fields, but Iraqs ongoing dehave caused Irans development of these cross-borvelopment gives it an economic advantage as Iran
der fields to lag those of its neighbors.
revives its oil and gas sector.5
Azadegan oil field, which is shared with Iraq,
EXPLORATION &
holds
an estimated 33 billion bbl of oil and is one of
DEVELOPMENT
the largest oil fields in the world (Fig. 1). It is divided into north and south sectors. Iraq
produced more than 185,000 b/d in
IRANS SHARED PERSIAN GULF OIL, GAS FIELDS
FIG. 1
2016 from North Azadegan and plans
to increase production by 40,000 b/d.
Iran produces only 50,000 b/d from
Area
South Azadegan field.6
shown
Irans President Hassan Rouhani
IRAQ
has
put forth a 52-month development
IRAQ
IRAN
Azadegan
plan for South Azadegan, calling for
SAUDI
Yadavaran
320,000 b/d of oil production and 197
ARABIA
million cu m/day (MMcmd) of natural
IRAN
gas production in its first phase, with a
Arash
second phase to add 60,000 b/d of oil.7
KUWAIT
Iran already has made several attempts
Oil
Gas
to improve development in AzadeEsfandiar
gan. As early as 2004, Japans Inpex
Farzad A
Corp. signed an agreement to produce
Farzad B
SAUDI
150,000 b/d of oil from Azadegan, but
ARABIA
the company withdrew from Irans
Hingam
South
energy sector in 2006 under pressure
BAHRAIN
North
Pars
field
from the US government. Russias GazOMAN
0
Miles 124
Sirri
prom and the Government of India
UNITED ARAB
0
Km 200
QATAR
Persian Gulf EMIRATES
made subsequent attempts to develop
Source: US Energy Information Agency; WoodMackenzie Ltd.
Irans Azadegan field but were unsuc-
38
170102ogj_38 38
12/22/16 1:34 PM
cessful. China National Petroleum

Corp. was the latest international operator to sign development agreements
with Iran regarding Azadegan, but the
operator has experienced major delays in bringing the field online. Azar
oil field is in the Ilam province near
the Iraqi border in the Anaran Block
and its stony surface conditions have
impeded development. The field is estimated to contain 400 million bbl of
oil. In 2014, Iranian operators began
producing 30,000-35,000 b/d from
Azar. The Iranian government plans
to increase production to 65,000 b/d.8
South Pars field
IRAN, QATAR SHARED FIELD
FIG. 2
Persian
Gulf
IRAN
Polit
ical b
order
Wells
South Pars
field
D
N
M
QMB-1
NWD-3
NWD-1
UG-1
NF-1
NWD-5
C
O
G K
B
A
J
H
NWD-2
NWD-6
NWD-4
South Pars, one of the worlds largest
UISE-1
gas fields, is shared by Iran with Qatar
North
(North field), and has proven natural
QMO-1A
field
RUH-1
gas reserves of 14 trillion cu m (tcm),
Persian
or 7.5% of global gas reserves. The field
QME-1
Gulf
also contains an estimated 18 billion
bbl of condensate. The joint field covRQ-1
ers 9,700 sq km, of which 3,700 sq km
IRAN
IRAQ
MK-2
constitute Irans South Pars (Fig. 2).
Qatar began producing and exporting
Area
natural gas from North field in 1998,
shown
QATAR
and the Qatari government has signed
development agreements with Total
SAUDI
Persian
Gulf
SA, Eni SPA, and Statoil ASA, among
ARABIA
others.
0
Miles
25
QATAR
Qatar has invested a cumulative
0
Km
40
$400 billion in North fields development, becoming one of the worlds
largest exporters of LNG earning
about $100 billion/year as a result.9
Qatar produces 650 MMcmd of gas and 425,000 b/d of oil
in two phases, respectively. Iran is seeking investors to issue
from North field, and plans to add 52,000 b/d.10
exploration licenses for the field.
Iran has invested $70-80 billion to develop South Pars,
Iran shares Farzad A and B natural gas fields with Saudi
which explains the disparity with Qatars production. IraArabia in the Persian Gulf. Farzad B, which was discovered
nian Minister of Petroleum Bijan Zanganeh said the counby Indias state-owned Oil and Natural Gas Corp. Videsh,
trys gas production would equal Qatars by late 2017 or
contains 5.1 tcm of gas. Iran estimates that Farzad B will cost
early 2018. He added that even under sanctions South Pars
$5 billion to develop. A consortium from India has shown
gas production has increased 150 MMcmd since 2013, when
interest in the project. Minister Zanganeh has said Farzad B
President Rouhani came to power. Zanganeh said more than
is Irans first development priority and he expects to have a
85 MMcmd will be added in 2017.11
development agreement signed by March 2017.12
Arash gas field, known as Aldorah in Kuwait, lies southSaudi Arabia
west of Khark Island in the Persian Gulf. Geographically, the
Iran shares several fields with Saudi Arabia. Esfandiar field
field is shared between Iran and Kuwait, but Saudi Arabia
contains 532 million bbl of proven oil reserves. Iran signed
has laid claim to the resource in recent years. Arash field has
agreements with Malaysian firm Petronas for its developproven gas reserves of 368 billion cu m (bcm). Arash is a
ment before sanctions disrupted financing in 2009. The
needed domestic supply of natural gas for Kuwait and Saudi
project was planned to deliver 10,000 b/d and 20,000 b/d
Arabia, both of which have oil-centered reserves.
170102ogj_39 39
39
12/22/16 1:34 PM
TECHNOLOGY
CASPIAN SEA
FIG. 3
Astrakhan field
Area
shown
Kashagan
field
KAZAKHSTAN
Korchagin
field
and while the country had planned on

raising production to 45,000 b/d, financial constraints led to cancellation
of the project.13
Hengam oil and gas field is Irans
only joint field with Oman. Eighty
percent of Hengam lies inside Iran,
with production of 20,000 b/d of oil
and 40 MMcmd of natural gas outstripping Omans.10
UZBEKISTAN
Caspian Sea
RUSSIA
Caspian
Sea
GEORGIA
Azeri-Chirag-Guneshli
fields
AZERBAIJAN
ARMENIA
TURKEY
Shah Deniz
field
Oil refinery
Natural gas processing plant
Cheleken
contract area
Sardar Jangal
field
Natural gas field

Oil field
Agreed-upon maritime boundaries
IRAN
Theoretical Caspian equidistant line
0
0
Sources: US Energy Information Administration, US Geological Survey, IHS
Kuwait and Saudi Arabia established Al-Khahji Joint Operations in 2000 to develop Arash field with a goal of producing 1 bcm/year of natural gas by 2017.
Iran is not operating in Arash field, but it has invited investors to develop its gas reserves. The field is expected to
become a point of contention between Irans renewed oil and
gas sector and neighboring Arab countries.14
UAE, Oman
Salman oil and gas field holds 473 million bbl of oil and 5.2
bcm of natural gas. Studies for this field have shown 70% of
the reserves are Irans with the UAE controlling 30%. Iran
produces 40,000 b/d from the field and the UAE 70,000
b/d.10
The UAE holds the majority of reserves from the joint
Nosrat oil field, but Iran began producing from the field
in 1995. Irans production, however, peaked at 3,300 b/d,
40
170102ogj_40 40
The Caspian Sea is shared by Iran,

Russia, Azerbaijan, Turkmenistan, and
Kazakhstan. These countries have attempted to agree to terms for Caspian
Sea exploration, but negotiations have
not yielded a defined framework (Fig.
3). Iran has proposed that the Caspian be divided into five equal parts,
but the governments cannot agree on
boundary locations.
TURKMENISTAN
Maritime boundaries also directly
confound the relationship between
Azerbaijan and Iran, with both countries maintaining conflicting claims
of offshore energy reserves. Foremost
among these disputes are Azerbaijans
Araz-Alov-Sharg hydrocarbon blocks:
a 1,400 sq km area containing an estimated 700 bcm of natural gas. Azer200 Miles
baijani control of Alov field, 120 km
southeast of Baku and known as Al322 Km
borz in Iran, is particularly disputed,
Iran claiming that it lies partially in its
territorial waters. As recently as 2001,
two BP PLC research vessels were
driven from Alov field by an Iranian gunboat, and work has
stalled in the region.
Irans Alborz field development was financially and technologically limited during sanctions. The country identified
several Caspian Sea prospects but had no access to technology to drill in 1,000 m of water, and sanctions limited access
to western exploration companies.16
Azerbaijani officials argue the Caspian should be divided
by its median line and perpendicular borders extending to
the national coast lines, as outlined by the 1982 UN Convention on the Law of the Sea. Russia and Kazakhstan adhere
to the UN Convention and both countries plan to develop
hydrocarbon resources from their corresponding Caspian
territories.15
Iran petroleum contract

The National Iranian Oil Corp. is targeting production in-
12/22/16 1:34 PM
TECHNOLOGY
creases from South Pars and West Karoun (Azedegan field)
in the post-sanctions era.17
Irans Petroleum Contract (IPC), meanwhile, was developed in November 2015 to provide more transparent and
lucrative investment opportunities to international oil companies seeking development projects.
The preceding buy-back models shorter operating windows, high upfront expenditures, and uncertainties of project continuity had limited international investment. IPC increases protection for commitments from international oil
companies. It includes four phases: exploration, development, production, and enhanced oil recovery, but provides
15-20 year exploration phases as opposed to the buy-back
versions 5-7 year window.
The Iranian government has said it will target nearly 50
oil and gas projects worth $185 billion for inclusion of IPC
by 2020, many of which are in joint fields.18 Iran is seeking foreign investments of $50 billion/year, and Frances Total and Italys Eni have expressed interest in new developments.19
In addition to overseas investment, Iran will also rely on
cooperation from neighboring countries to improve joint
field development and increase security and stability in the
region.
References
1. Spiritual: in rounds of sanctions towards others lay our
hands, Aug. 22, 2016, www.radiofarda.com.
2. Irans joint oil fields to knowcommon fields in the
Persian Gulf, Aug. 20, 2016, www.namehnews.ir.
3. Irans share of joint oil and gas fields, Dec. 12, 2015,
www.radiofarda.com.
4. Iran Daily, Iran to increase crude from joint Iraq fields
by 200,000 b/d, Feb. 2, 2016.
5. Tabnak Professional News Site, Plunder Irans oil
fields, Mar. 30, 2016.
6. Azadegan oil field, Mar. 30, 2016, www.taamolnews.ir.
7. Tasnim News, Irans backwardness in the impressions
of the 28 joint oil and gas fields was confirmed, Dec. 5,
2016.
8. Iran Daily, Azar Oilfield extraction from September
2015, Oct. 10, 2014.
9. Mehr News Agency, Qatars new tactics to delay the
development of South Pars, Dec. 20, 2015.
10. Mashregh News, Joint assessment of Irans position
in 28 oil and gas fields, Mar. 3, 2016.
11. Shana News Agency, Zanganeh: Gas Extraction from
South Pars to Equal Qatars, Aug. 28, 2016.
12. Natural Gas Asia, Iran, India to Seal Farzad-B Gas
Field Before 2016 is Out, Apr. 10, 2016.
13. Fars News Agency, Last detail of articulation in
shared fields, May 2, 2016.
14. Aryan, H., Arash gas field-Dura, the conflict with Iran,
Kuwait and Saudi Arabia, July 30, 2016.
170102ogj_41 41
15. Shokri, O., Iran-Azerbaijan Energy Relations in the

Post Sanctions Era, Middle East Policy, Spring 2016, Vol. 23,
No. 1, pp. 139.
16. Mnshv, R., Irans share of joint oil and gas fields,
Dec. 12, 2015.
17. Shana News Agency, Development of Joint Oil Fields
Top Priority: NIOC, June 14, 2016.
18. Nasralla, S., and Sheahan, M., Iran eyes $185 billion
oil and gas projects after sanctions, Reuters News Service,
July 23, 2015.
19. Wilkin, S., Iran Expects $25 Billion Oil Contracts
Signed Within Two Years, Bloomberg, Aug. 10, 2016.
The Author
Omid Shokri Kalehsar (ushukrik@gmail.com)
is an energy analyst in Washington DC. He is a
PhD candidate in international relations at Yalova
University, Turkey. He has also served as country analyst at the PRIX Index on Political Risk
and Oil Exports. He holds an MA in political
science and international relations (2013) from
Yeditepe University, Istanbul, and an MA in translation studies
(2012) from Istanbul University. He holds a BA in English language translation (2006) from Ardebil Payam Noor University,
Ardebil, Iran. He is a member of the European Political Science
Association.
41
12/22/16 1:34 PM
TECHNOLOGY
EXPLORATION &
DEVELOPMENT
India upgrades exploration policy,

seeks international investment
Ripunjaya Bansal
National Institution for
Transforming India (NITI) Aayog
New Delhi
Indias upstream sector needs private

investment to expand exploration and
expertise in its deepwater and ultradeepwater areas, which account for a
third of the countrys discoveries. A
progressive and practical exploration
policy should expand Indias upstream
sector.
The countrys New Exploration Licensing Policy (NELP) has launched
nine rounds to date, with the last held
in 2010. A close look at the data shows
that NELP has largely been unsuccessful in meeting its objective of increasing production and attracting international investors. This article elaborates
on the reasons for this lack of progress

and provides suggestions on remedial
actions required to attract global exploration companies, with the goal of
enhancing Indias domestic hydrocarbon resource development.
Indias upstream sector opened
to private investment in 1999 with
NELPs first round. The Government
of India realized the need to increase
domestic crude oil and natural gas
production as the countrys two staterun firms Oil and Natural Gas Corp.
(ONGC) and Oil India Ltd. (OIL) were
struggling to do so. But NELP was initially biased toward safeguarding government interests, which affected the
policys proper implementation. The
government has since sought to address NELPs shortcomings.
India is largely dependent on im-
OIL TRENDS
FIG. 1
250
203
200
Million tons
Imports, crude
185
150
Consumption, products
ports to meet its crude requirements,

making it vulnerable to supply disruptions. The country has diversified its
oil supply sources over the last 2 years,
taking advantage of the sharp decline
in crude prices to switch out of longterm contracts with Middle East suppliers when possible in favor of African
spot purchases. Nigeria became Indias
top supplier in June 2015, but Saudi
Arabia quickly regained the position
in October that same year.
The share of imports in Indias total
oil consumption soared to 81% in 201516 from 34% in 1999-2000, and the
International Energy Agency (IEA) has
predicted this could increase to 90% by
2040.1 Domestic production has been
almost static (Fig.1 and Fig. 2).
Pre-NELP licensing
In the late 1970s, Indias blocks were
awarded only to ONGC and OIL for
exploration. The government nominated NOCs upon formal expression
of interest. From 1980-95, 28 exploration blocks were offered to private
companies under pre-NELP licensing,
but ONGC and OIL retained rights of
participation after discovery of hydrocarbons.
Petroleum mining leases (PML) also
100
50
NELP BLOCK STATUS*
Production, crude
36.94
254
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year
42
170102ogj_42 42
Awarded
Table 1
Operational
Relinquished
98
156
*As of March 2015.

Source: DGH, Activity Report 2014-15
12/22/16 1:34 PM
TECHNOLOGY
Rollout, new discoveries

NELP was formulated in 1997-98 and
came into effect in 1999, opening Indian fields to foreign direct investment
(FDI). The new policy provided a level
playing field for state-run, private, and
other international companies to be
awarded blocks through competitive
bidding. In nine bid rounds to date,
NELP has awarded 254 blocks to national, private, domestic, and foreign
companies, generating $25 billion of
investments as of March 2015.2
During 2000-05, new discoveries
occurred on a monthly basis. Reliance Industries Ltd.s KG D6 gas field
ranked as the worlds largest discovery
in 2002. But while NELP discovery
figures are promising, the program has
so far not achieved its primary objective, increasing domestic production.
NELP facts, figures

Aside from a handful of private companies, NELP has been unsuccessful
in attracting major outside investment.
Table 1 shows the total number of
blocks awarded, operational, and relinquished under NELP. The 98 operational blocks seem encouraging, but
only 9 blocks are producing, providing a clearer picture of NELPs effectiveness.
Reliance Industries, ONGC, and
Gujurat State Petroleum Corp. (GSPC)
have made the bulk of the discoveries
under NELP (Table 2). Reliance has
54 of 65 (83%) oil and gas discoveries among private firms. ONGC and
GSPC account for 97.4% of discoveries among NOCs. The absence of supermajor exploration companies on
this list shows that NELP has attracted
few independent oil companies. Public
170102ogj_43 43
GAS TRENDS
70
FIG. 2
Consumption
60
54
50
Billion cu m
were offered pre-NELP in 1992 and

1993 to private companies under the
condition that a joint venture (JV) be
formed with an NOC. Part of NELPs
1999 launch was the Indian governments desire to reduce oil and gas imports 10% by 2022, a goal which will
require aggressive production increases to meet based on 2014-15 levels.
Domestic production
40
32
30
21
20
LNG imports
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year
NELP DISCOVERIES
Table 2
Operator
Oil
Gas
Total
Focus Energy Ltd.

Gujarat State Petroleum Corp.
Jay Polychem (India) Pvt. Ltd.
Jubilant Oil & Gas Pvt. Ltd.
Naftogaz India
Niko Resources
Oil India Ltd.
Oil & Natural Gas Corp.
Reliance Industries Ltd.
NELP total
0
14
1
2
1
0
1
18
12
49
1
10
0
4
0
2
1
31
42
91
1
24
1
6
1
2
2
49
54
140
Source: DGH Activity Report 2014-15
sector companies continue to dominate Indias upstream sector (Table 3).

The rate at which discoveries are
brought to production raises doubt
as to NELPs efficiency. Out of 140 oil
and gas discoveries made under NELP,
only 16 (11 oil and five gas) are producing (Table 4). Reliance is the only
private company producing. Niko Resources Ltd.s two mature gas discoveries in Gujarat have ceased production. NELP production accounted for
less than 1% of Indias 37 million ton
total in 2015-16 (Table 5).
Oil production from the RJON-90/1 Block in Rajasthan, a JV
between Cairn India Ltd. (70%) and
ONGC (30%), accounted for 23% of
Indias 2015-16 domestic production.
Cairn India operates the block and
produces from the Mangala, Bhagyam,
Aishwariya, Raageshwari, and Saraswati fields. Cairn acquired the explo-
DISCOVERY OWNERSHIP
Table 3
Operator type
Oil
Gas
Total
Private
State-owned
16
33
49
42
65
75
ration interest from Royal Dutch Shell

in 2002, the major having acquired
its rights pre-NELP in May 1995. Reliances KG-DWN-98/3 (KG D6) field
produces more than 99% of gas from
NELP developments (Table 6). The KG
D6 gas field is the largest field developed under NELP and its gas production declined 78% from 2010 to 2015.
Exploration efforts
Reliance and Focus Energy Ltd. are Indias most active domestic exploration
companies (Table 7). Cairn India is
the leading foreign driller, but most of
its activity is isolated to RJ-ON-90/1.
43
12/22/16 1:34 PM
TECHNOLOGY
NELP PRODUCING BLOCKS

Block
CB-ONN-2000/1
CB-ONN-2000/2*
CB-ONN-2002/3
CB-ONN-2003/2
KG-DWN-98/3
KG-OSN-2001/3
CB-ONN-2004/1
CB-ONN-2002/1
CB-ONN-2004/2
CB-ONN-2001/1
Operator
GSPC
Niko
GSPC
GSPC
RIL
GSPC
ONGC
ONGC
ONGC
ONGC
Total
Table 4
Discoveries
Oil
Gas
Total
3
0
2
1
1
0
1
1
1
1
11
0
2
0
0
2
3
0
0
0
0
3
2
2
1
3
3
1
1
1
1
18
Production start
July 2007
April 2004
February 2014
March 2014
September 2008
August 2014
March 2015
March 2015
March 2015
May 2015
Price, marketing controversy
*Closed
Niko Resources and British Gas Exploration & Production (India) Ltd. have
also drilled exploration wells (Table 8).
Public sector undertakings (PSUs)
have drilled 283 wells under NELP
(Table 9). ONGC drilled most of these.
Tables 8-10 show the lack of exploration efforts and capital investment in
Indias oil and gas sector. From NELPs
inception through March 2015 a total
of 6,959 exploration wells have been
drilled. By comparison, in 2012 alone
roughly 48,000 and 13,000 exploration wells were drilled in the US and
Canada, respectively.
disproportionate government shares

in profitability. Operators viewed the
variable government share for some
contracts as a disincentive for increased production from KG D6. The
issue has been sorted out, but the conflict demonstrated the importance of
clearly defined incentives.
Cost recovery disputes

NELPs production sharing contract
(PSC) allows operators to recover exploration and development costs. The
governments percentage is committed
in the operators bid, and it increases
incrementally with improved production throughout the development period. The policy was designed for an
operator to share a larger percentage of
its revenue during early development
phases with smaller increments added
as the field matures.
In NELP VI, some operators misinterpreted this provision, resulting in
NELP VII introduced more controversy, with conflicting statements in the

PSCs Article 21 concerning natural
gas. The provision allowed operators
to market produced gas and simultaneously stated that gas would be sold
per the governments policy for utilization among different sectors. The government instituted price mechanisms
to reconcile the conflict, establishing
uniform prices for NELP gas across
different sectors and a distinction between the price at which gas is sold
and the value that formed the basis
for calculating government revenue.
Indias government made the distinction between gas price and value to
safeguard its share of royalty. The government later clarified that its share
of revenue would be calculated on the
NELP OIL PRODUCTION

Block
Table 5
2010
2011
2012
2013
2014
2015
Billion cu m
KG-DWN-98/3
CB-ONN-2000/1
CB-ONN-2001/1
CB-ONN-2002/1
CB-ONN-2002/3
CB-ONN-2003/2
CB-ONN-2004/1
CB-ONN-2004/2
KG-OSN-2001/3
1.07
0.03
0
0
0
0
0
0
0
1.12
Total
0.68
0.04
0
0
0
0
0
0
0
0.72
0.39
0.04
0
0
0
0
0
0
0
0.44
0.27
0.04
0
0
0.13 10-3
0.15 10-3
0
0
0
0.32
0.26
0.04
0
0
0.34 10-3
1.63 10-3
0.05 10-3
0.06 10-3
3.55 10-3
0.31
NELP GAS PRODUCTION

Block
KG-DWN-98/3
CB-ONN-2000/1
CB-ONN-2000/2*
CB-ONN-2003/2
KG-OSN-2001/3
Total
0.13
0.02
0.37 10-3
0.11 10-3
0.01 10-3
2.02 10-3
0.33 10-3
0.75 10-3
2.54 10-3
0.16
Table 6
2010
2011
2012
2013
2014
2015
Billion cu m
20.40
0.91 10-3
0.05
0
0
20.45
15.61
0.85 10-3
0.03
0
0
15.64
9.51
0.77 10-3
0.01
0
0
9.53
5.05
1.47 10-3
0
0.01 10-3
0
5.05
4.46
1.57 10-3
0
0.06 10-3
0.11
4.57
2.42
0.91 10-3
0
0.08 10-3
0.10
2.52
*closed
44
170102ogj_44 44
12/22/16 1:34 PM
TECHNOLOGY
NELP EXPLORATION EFFORTS, PRIVATE COMPANIES

Domestic
Essar Oil Ltd.
Focus Energy Ltd.
Geo Enpro
Hindustan Oil Exploration Co. Ltd.
Interlink Petroleum Ltd.
Jay Polychem (India) Ltd.
Jubilant Oil & Gas Pvt. Ltd.
Mercator Petroleum Private Ltd.
Prize Petroleum Company Ltd.
Reliance Industries Ltd.
Selan Exploration Technology Ltd.
Total
basis of either price or value, whichever is higher, making the distinction

irrelevant. These amendments were
intended to address NELPs problems,
but ultimately added unnecessary layers of complexity.
Production, revenue sharing

Revenue sharings inactive status during the cost recovery phase has led to
conflicts in managing upfront costs.
Several operators, including Reliance,
have been accused of inflating costs
with the intent of delaying the governments profit sharing. The government
is working to resolve this issue, but in
May 2016 also introduced the Discovered Small Field Policy (DSFP), offering 67 marginal fields held by ONGC
and OIL spread over nine sedimentary
basins for outside investment.
Indias government introduced the
Hydrocarbon Exploration Licensing
Policy (HELP) as part of DSFP, providing a single license for conventional
and unconventional hydrocarbons, including oil, gas, shale, coalbed methane, tight gas, and gas hydrates. HELP
gives operators the freedom to market produced oil and gas domestically
through a transparent bidding process, and alleviates the conflicts experienced in early NELP licensing.
HELP also does away with cost recovery based on pretax investment
multiples and simplifies the revenue
sharing model. Exploration periods
are extended to 8 years for onshore
and shallow-water areas and 10 for
deep and ultra-deepwater blocks. Un-
170102ogj_45 45
Wells drilled
17
84
2
15
2
2
14
2
2
134
4
Table 7
Foreign
Wells drilled
British Gas Exploration & Production (India) Ltd.

Cairn India
Conoro Resources Ltd.
ENI (India) Ltd.
Hardy E&P India Inc.
Heramac Ltd.
Naftogaz
Niko Resources Ltd.
OAO Gazprom
Oilex-NL Holdings Ltd.
Okland Offshore Holdings Ltd.
Petrogas
Premier Oil North East India
278
PSU EXPLORATION
Table 8
Company
Regime
ONGC
OIL
ONGC
OIL
GSPC
IOCL
NTPC
Nomination
Nomination
PSC
PSC
Total
15
228
4
1
4
2
8
26
3
1
1
3
1
297
Wells drilled
5,725
351
205
78
16
7
2
6,384
Source: DGH Activity Report; 2014-15
der NELP, these periods were 7 and

8, respectively. HELP is a progressive
step toward practical resource development.
Lack of private interest

Only 19% of Indias 3.14 million sq
km of sedimentary basins are moderately to well-explored. Potential
reserves numbers suffer from a lack
of data and accurate estimates, and
companies often hesitate to commit
to profit-revenue splits in advance of
bidding.
Indias 2,000-m deepwater eastern
offshore area is its most prospective
region, which accounts for 43% of its
total gas discoveries (Table 10). Technical difficulty and higher costs deter
widespread exploration, and the lack
of supportive market prices further
reduces the economic viability of Indias deepwater. The obstacle of fewer
data can be overcome with aggressive
exploration, but Indias policies need
improvement to attract more international investment.
Data, exploration
Operators require more subsurface
data to commit to finding and developing resources in Indias unexplored
basins. Indias policy should remove
operator work requirements until the
industry has basic geological and geophysical data to survey. Policies should
be clear enough to avoid disputes and
the government should abide by contractual norms to ensure private investors of project continuity.
Indias policies must focus on increasing exploration activities across
all 26 sedimentary basins. Expanding
exploration efforts2D, 3D, and drillingwill alleviate uncertainties in Indias subsurface.
India plans to replace NELP with
the Open Acreage Licensing Policy
(OALP), allowing companies to bid
year round on prospective acreage
instead of waiting for an annual government-sanctioned bidding round.
OALP has not launched, and its success would depend on geological data.
Indias government is forming a National Data Repository (NDR) that
45
12/22/16 1:34 PM
TECHNOLOGY
REGIONAL DISCOVERY TYPES

Deepwater
Shallow water
Onshore
NELP total
INDIAS PROSPECTIVE ACREAGE
Table 9
Gas
Oil
Total
Investigative level
40
37
14
91
6
2
41
49
46
49
55
140
Moderate to well explored

Poorly explored
Exploration initiated
Unexplored
References
0.598
0.689
1.15
0.698
Planning & Analysis Cell, October

2016, www.ppac.org.in.
2. Government of India, Directorate
General of Hydrocarbons, Petroleum
Exploration and Production Activity
Report 2014-15, March 2016, pp. 212.
1. Government of India, Ministry of

Petroleum & Natural Gas, Petroleum
The author
Ripunjaya Bansal
(ripunjaya.
19
22
bansal@gov.in)
37
working at NITI
22
Aayog, Government of India,
where he developed the India
Energy Security
Scenarios (IESS) 2047 V2 project. He
has a bachelors degree
in mechanical engineering from Thapar University, Patiala, India. He is
a member of the Society
of Automotive Engineers
(FSAE).
Area, million sq km
Source: DGH Activity Report; 2013-14
Source: DGH
will house exploration and production

data. The government has already begun assessment of Indias sedimentary
basins, a priority given datas place as a
precondition for the OALP.
Table 10
Total area, %
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170102ogj_46 46
12/22/16 1:34 PM
Industry, government work

to reduce UKCS drilling costs
Paula Dittrick
Upstream Technology Editor
Wells spudded
UK Continental Shelf (UKCS) costs have doubled

MER UK covers exploration, asset stewardship
since 2004, contributing to record-low drilling acincluding production efficiency and improved oil
tivity while operators and government collaborate
recovery, regional development, infrastructure,
to find ways to keep the basin competitive despite
technology including enhanced oil recovery, and
an ongoing oil-price slump.
decommissioning.
These efforts have targeted a 50% cut in core
Updated energy law, effective in 2016, transDRILLING &
drilling costs. Factors contributing to escalating
ferred
various petroleum-related functions from
PRODUCTION
expenses include rising rig costs, dropping operthe UK Secretary of State to the UK Oil & Gas Auational efficiency, tightening industry standards,
thority (OGA), which has wide-ranging responsiand growing technical complexity involved in acbilities and authorizations.
cessing smaller reserves.
The Technology Leadership Board (TLB), one of several
UKCS statistics showed 19 development wells drilled
MER UK Forum Boards representing industry, the OGA,
during first-quarter 2016, the lowest level in decades. Exand government, works to help restore competitiveness to
ploration drilling ebbed to its lowest level since the 1970s
the North Sea basin. TLB has five priorities: small pools,
(Fig. 1). The number of fields ceasing production continues
well-cost reduction, asset integrity, digital technologies and
to climb (Fig. 2).
data, and decommissioning.
UK petroleum law since 1998 has required the maximiKaty Heidenreich, Oil & Gas UK operations optimizazation of economic recovery from oil and gas. A formal strattion manager, is part of the TLBs well-cost reduction work
egy called Maximizing Economic Recovery (MER UK) calls
group. She reports significant progress among operators
for government and industry to jointly find ways to improve
and service providers in optimizing well designs, raising
efficiency and reduce UKCS operational costs.
technology awareness, and deploying operational improvements.
The TLB work group estimates a
50%
reduction in core-drilling costs
UKCS DRILLING ACTIVITY
FIG. 1
could
unlock more than 5 billion boe
250
Developments
of reserves during the next decade.
Exploration, appraisal
Technology yet to be developed could
200
unlock another 11.5-22 billion boe of
potential resources after 2022.
There is the potential for deliver150
ing estimated well-construction capital expenditure savings equivalent to
100
more than 40 wells per year by 2020,
said Heidenreich.
50
Industry must sustainably implement cost-reduction practices and efficiency gains to futureproof the
0
basins competitiveness with other ba2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
*estimate
sins, said Heidenreich.
She sees savings coming from in-
170102ogj_47 47
47
12/22/16 1:34 PM
TECHNOLOGY
Fields, cumulative
dustrys ongoing efforts at improving

FIELDS CEASING PRODUCTION
FIG. 2
collaboration, technology, and drilling
120
efficiency (Fig. 3).
2016 activity survey
2015 activity survey
Operators and contractors have di100
rect influence over certain well-construction costs, she told a Society of
80
Petroleum Engineers Aberdeen chapter dinner meeting in September 2016,
60
listing options that include:
Using rigs for shorter durations.
40
Standardizing and simplifying
rig designs.
20
Reducing operational uncertainty.
0
Accelerating adoption of new
2015
2016
2017
2018
2019
2020
technology.
Source: Oil & Gas UK
Oil & Gas UK scheduled various
workshops in which operators and
contractors discussed ways to collaborate on improving operational efficiencies and implementing
plate. They now can lift and place the valve using a wirenew and emerging technologies.
line mast-tugger, cutting costs by eliminating the need for
a platform deck crew and crane driver during placement.
Efficiency task force
Total SA reported it reduced the time needed to comOil & Gas UK members publicly share best-operating
plete planned tasks related to UKCS production operapractices and its Efficiency Task Force (ETF) encourages
tions by 12% over 3 months. A company initiative encooperation between companies. The associations web
couraged workflow changes to improve safety, increase
site features a Rapid Efficiency Exchange on which comproduction efficiency, and control costs.
panies report both individual and collective efficiencyOffshore teams used visualization techniques to acrelated achievements.
celerate certain operations and maintenance activities.
BP PLC reduced drilling time by 24 days per 10,000 ft
Total reported improved efficiency in numerous tasks,
drilled during the appraisal of a possible third phase of
including site checks and meeting work-permit requiredevelopment on Clair field, west of Shetland, compared
ments.
with similar drilling programs. Rig time dropped to 39
days from 53 days.
Production efficiency
The major attributed its increased efficiency to new
OGA said industry was unlikely to reach its 2016 productechnologies, lessons learned from previous drilling exertion efficiency (PE) target of 80%, defining PE as actual
cises, and focused performance management.
production as the percentage of structural maximum proTechnology alone saved an average 4 days of drilling
duction potential. OGAs comment came in November
per well, according to BP. The company also completed a
2016 as it released its 2015 survey of operator-provided PE
dual-zone well test with a single run instead of two runs,
data (Fig. 4).
saving at least 14 days.
UKCS operators reported an average 71% PE, up by 6%
BPs overall approach to well operations in the appraisfrom 2014 and marking steady progress from 2012, which
al of Clair reduced drilling time enough that an additional
marked a PE low of 60%.
sixth well was drilled within the original 5-well schedule.
Further focus on efficiency, continuous improvement,
Nexen Petroleum UK Ltd. saved about 30,000
and collaboration across the industry is required if the
($37,535)/well intervention by using a different type of
UKCS is to come close to achieving the shared industry
valve than the one routinely used.
and OGA target, OGA said.
Crews had used a shear-seal valve, the size of which reEvery 1% increase in PE equates to an additional 8.43
quired workers to remove a major deck hatch. The logismillion boe of production based on 2015 production voltics involved cost Nexen time and money. It switched to a
umes, according to OGA.
slimbore shear-seal ball valve that was taller and slimmer
Evidence shows a reversal in the declining production
than the shear-seal valve.
potential trend coupled with a sustained decrease in proThe alternate valve fit through a much smaller openduction loss volumes in the UKCS, OGA said. This has
ing, requiring fewer workers to remove a smaller deck
yielded an increase in realized production in 2015, the
48
170102ogj_48 48
12/22/16 1:34 PM
TECHNOLOGY
UKCS POTENTIAL SAVINGS, DRILLING*

100
90
80
70
60
50
40
30
20
10
0
FIG. 3
240
120
100
80
60
40
20
2016
2017
2018
2019
2020
Collaborate
Adapt technology
Adopt technology
Process
Drilling efficiency
0
2021
2022
50% cost reduction
Status quo costs
*Assuming all savings from 50% cost reductions are reinvested into well construction and accounting for a natural decline.
Source: Oil & Gas UK
UKCS
FIG. 4
100
1,200
90
Production, MMboe
Oil & Gas UK issued a report in No1,000

vember 2016 that forecast a gradual
rise in oil and gas decommissioning
800
offshore UK and Norway to 2025. The
report, based on the Decommissioning
600
Insight 2016 survey, forecast 17.6 billion would be spent on UKCS decom400
missioning during 2016-25, up from a
forecast of 16.9 billion for 2015-24.
200
Mike Tholen, OIl & Gas UK upstream policy director, notes that de0
commissioning isnt occurring at the
2006
pace that the overall oil market might
suggest: With low oil prices continuing, you might expect decommissioning to be a key focus, however, we
are not witnessing a rush to decommission. Some companies, according to Tholen, deferred stopping production because field life was extended through sustained efficiency
improvements while other companies expedited decommissioning to take advantage of lower service costs in the oilprice downturn.
More than 100 platforms are forecast for complete or partial removal from the UK and Norwegian continental shelves
by 2025 and some 1,800 wells scheduled to be plugged and
abandoned. The central North Sea will account for more
than half of the 17.6 billion in anticipated decommissioning expenditures on the UKCS in 10 years, Tholen said.
170102ogj_49 49
80
70
Efficiency, %
North Sea decommissioning
Wells drilled
Well-construction efficiency, %
highest since 2011 and a clear indicator of improved performance.

OGA emphasized the need for
maximizing returns on North Sea
production efforts.
Survey respondents said 28 of 91
production hubs surpassed the 80%
PE target during 2015. Most high performers were in the northern and central North Sea.
Ten of 24 individual oil companies
surveyed said they passed the 80% PE
target. PE reports varied from a high
of 90.9% to a low of 50.3%.
Increased levels of production in
the North Sea are unlikely to be sustained in the medium-to-long term,
OGA said. Against this background
of declining production, it is more
important than ever to maximize returns.
60
50
40
2007 2008 2009 2010 2011 2012 2013 2014 2015
Decommissioning costs have fallen since the 2015 survey, particularly for well plugging and abandonment.
Industry also is using the oil-price downturn as a time for
focusing on cost reductions and efficiency improvements.
Companies are working to identify future investment opportunities. There could still be up to 20 billion bbl of oil and
gas to recover from the UKCS, Tholen said.
Oil & Gas UK expected that a more positive production
outlook could reduce the average UKCS operating cost to
15/boe by Dec. 31, 2016, from an estimated 17.80/boe in
2014. The 15% reduction during 2014-16 could almost reverse the last 3 years of increased operating costs, the trade
association said.
49
12/22/16 1:34 PM
TECHNOLOGY
Shell uses Raman spectrometer to evaluate Marcellus gas

Grant A. Myers
Usman Ahmed
Peter H.O. Christian
John M. Pope
WellDog
Laramie, Wyo.
Shell International E&P Inc. and WellDog jointly ran two

field trials in the Marcellus shale in northern Pennsylvania
using a downhole reservoir Raman system (DRRS) and soft-
ware that analyzed chemicals within the wellbore to estimate natural gas and ethane content.
Reservoir engineers evaluated DRRS for its effectiveness
in identifying natural gas liquids (NGLs) in shale and sweet
spots for dry gas and wet gas. The field trials helped engineers place laterals in the most productive gas intervals.
The DRRS logging tool integrated a wireline-conveyed
Raman spectrometer and an analogue sensor to measure low
hydrocarbon levels in water. DRRS can measure different
gases, including methane and ethane, dissolved in water.
The tool used a laser to illuminate a
chemical substance, causing either elastic
scattering or inelastic scattering. Elastic
scattering is Rayleigh scattering while inelastic scattering is Raman scattering.
Raman spectroscopy provides a chemically-selective technique for identifying
molecules through vibrational, rotational, and other low-frequency modes. Laser
light interacts with molecular vibrations.
A photon-energy change causes a photon-frequency shift, providing readings
that reveal molecular bonding and structure. The readings identify multiple chemical constituents (analytes) and measure
each, including solubilized gases and other
liquid hydrocarbons.
The direct laserbased technique generates a spectrum of
embedded Raman sigDRILLING &
natures that identifies
PRODUCTION
hydrocarbons and nonhydrocarbons during
logging as a function
of depth and time. DRRS measures concentrations of different gases, including
natural gas liquids (NGLs) and other hydrocarbons, solubilized or diluted in fluids
extracted from shale. Real-time readings
distinguish levels of dissolved methane,
free methane gas, and other light hydrocarbons in the wellbore or produced water.
Developers commercialized DRRS technology in 2005, initially using it for coalbed
Engineers lower the system into a Marcellus well. Raman spectroscopy identifies
the location and types of hydrocarbons in shale formations. Photo from WellDog.
50
170102ogj_50 50
Based on a presentation to the SPE/AAPG/

SEG Unconventional Resources Technology
Conference, San Antonio, Aug. 1-3, 2016.
12/22/16 1:34 PM
TECHNOLOGY
Logistics, goals
RAMAN PEAKS, METHANE CONCENTRATIONS

12,000
FIG. 1
CH4 at 53 mM or 850 ppm (w/w)*

11,000
Count, arbitrary units
methane plays and coal mine methane.

A third-generation DRRS completed in
late 2012 features enhanced instrument sensitivity and better detection
levels for use in shale plays.
Readings identified zones of highest resource density based on in-situ
chemical composition and estimated
partial pressure of hydrocarbons given
their relative solubility in water.
10,000
Workers ran Field Trial 1 during 2013

9,000
in an uncased well in McKean County, Pa., where the Marcellus is 25-30 ft
thick. Several logging runs confirmed
methane entering the well bore. The
8,000
well was air-drilled to 5,000 ft TD
through the base Marcellus and Onondaga limestone. The wells bottom rat
2,870 2,880 2,890 2,900 2,910 2,920 2,930 2,940 2,950 2,960
hole was in Oriskany sandstone.
Raman shift, cm1
Field Trial 2 during 2015 involved
*mM = miliMolar. w/w = weight methane/weight water
a cased well in Potter County, Pa..,
where the Marcellus shale is almost
100 ft thick. Spectral gamma-ray logging showed this Marcellus wellsite
featured Basal, Middle Marcellus, and
Upper Marcellus zones.
Three separate logging stages progressed vertically. Each zone measured about 10 ft in height. Perforated
intervals were logged using the DRRS
in both dynamic and static modes.
Crews sealed perforated intervals using packers.
DRRS data defined plume formation, enabling engineers to estimate
the methane mass entering the well
per time unit. They also estimated hydrocarbon composition and relative
richness at different stratigraphic intervals.
Field Trial 2 results showed the Upper Marcellus as the most productive
interval and the best lateral location
for a single completion.
Field trials occurred in Pennsylvania. The downhole system helps producers find
Authors obtained solubility consweet spots and plan the most productive completions for a given well. Photo from
stants using proprietary tables based
WellDog.
on gas type, reservoir pressure, temperature, and fluid-electrical conductivity. Concentrations of solubilized gases were compared
peaks for methane dissolved in water at three different conwith effective partial pressures of reservoir gases.
centrations.
Crews calibrated surface and downhole instruments to
The Raman signature varied as a function of solute condetermine hydrocarbon composition. Fig. 1 shows Raman
centration while peak location was invariant. Different
170102ogj_51 51
51
12/22/16 1:34 PM
TECHNOLOGY
DRRS CALIBRATION, CARBON DIOXIDE

800
DRRS CO2 calibration
CO2 concentration, mM
700
600
500
400
300
200
100
0
70
Raman peak
DRRS methane calibration
CH4 concentration, mM
60
50
40
30
20
10
0
Area ratio
METHANE RESOURCE DENSITY

Formation density, g/cc
TOC, wt %
Specific gravity
Porosity, mole %
DRRS gas content, scf/ton
GRI gas contest, scf/ton
Basal
Middle
Upper
2.35
10.0
0.78
0.15
474
620
2.55
4.4
0.68
0.06
602
235
2.55
8.0
0.72
0.10
976
463
chemicals occupy unique locations in the DRRS spectra. The

Raman peak varies for carbon dioxide in water (Fig. 2a) and
methane in water (Fig. 2b).
A shale-evaluation protocol quantified concentrations of
specific hydrocarbons and correlated the measurements to
partial pressures and chemical compositions.
Researchers formalized a testing program enabling rapid,
accurate, and inexpensive in-situ profiling of vertical and
lateral variations in hydrocarbons and pore pressures. They
52
170102ogj_52 52
also evaluated trends arising from

shale interaction with wellbore fluids.
FIG. 2a
The project included three phases.
Phase I involved laboratory testing of
the technologys effectiveness at determining reservoir conditions. Phase II
involved development of field trials.
Phase III involved field trial deployment and DRRS result interpretation.
Technical hurdles remain before
DRRS can be routinely used in all
types of unconventional resource evaluation and assessment. One concern
is potential interference with Raman
spectra by background signals due to
cyclic organic compounds and particulates, either from synthetic drilling fluid additives, completion fluids,
or naturally occurring material in the
FIG. 2b
reservoir fluid.
Researchers are working to suppress, mitigate, or avoid such background signal interference.
Laboratory simulations of subsurface reservoir conditions enabled testing of DRRS ability to detect gaseous
and solution-gas hydrocarbons. Lab
tests also demonstrated the systems
accuracy despite background signals.
Background spectra acquired from
flowback water and fresh water at
various exposure times showed no appreciable background signals despite
high-turbidity in the flowback sample. This suggests DRRS can measure
the spectral quality of water following
shale contact.
Extensive testing showed DRRS readings to be undeterred by backscattered Rayleigh light in highly scattering
circumstances within wellbore fluid.
Solubilized methane gas was in both flowback and fresh
water samples. Raman peaks indicated that DRRS can detect solubilized methane in produced water. Raman readings of ethane gas solubilized in Marcellus flowback water
samples were acquired at various partial pressures and exposure times.
FIG. 2
Field-trial results
Workers carefully filled the well in Field Trial 1 with fresh
water from the bottom up to prevent drilling debris dispersion into the water column. This precautionary measure before logging mitigated background signal potential, particulate scattering, and other optic noise.
DRRS readings verified an anticipated formation-wellbore
12/22/16 1:35 PM
TECHNOLOGY
Pressure, psi
fluid exchange. A total of 27 DRRS

METHANE, SALINE FLUID, WATER
FIG. 3
passes were done during three sepa1,000
Saline
rate logging runs at logging speeds of
10-45 ft/min. Crews acquired addiDe-ionized water
800
tional DRRS readings during station4,725 ft below surface
y = 24,570x + 480.19
ary surveys at various depths between
Linear, saline
R2 = 0.9941
logging passes.
600
Linear, de-ionized water
Simultaneous measurements of
conductivity, temperature, and pres400
sure established trends in wellbore
y = 5,297.1x + 281.43
R2 + 0.9945
fluid chemistry and other fluid attributes. These measurements were tak200
en throughout logging.
Methane entered the well bore over
0
a very short vertical interval at about
0.08
0.06
0.04
0.02
0
0.02
0.04
0.06
0.08
4,757 ft, the top of the Lower MarcelArea ratio
lus. Successive logging passes enabled
backward extrapolation in time to locate the exact stratigraphic interval of
methane entry into the wellbore to an accuracy of 2 ft.
by computing the total mass of methane entering the wellSalinity heavily influenced solubility of gases in water.
bore using DRRS measurements and depth. Resource denThe solubility in hypersaline brines was greatly diminished.
sity is the total free and absorbed gas content. Adjustments
An independent lab analyzed samples of the hypersaline
to the estimate accounted for variation over time after perfobrine influx acquired during Field Trial 1 for cation-anion
ration. Mass was equated to a gas volume at standard condicomposition.
tions and linked to the originating perforated rock volume,
DRRS tool calibration determined the upper limit of ethcorrected for a number of physical and chemical properties
ane that could be solubilized in the wellbore hypersaline
of the reservoir and artifacts of the perforating process.
brine at the in-situ pressure, temperature, and salinity.
Resource-density estimation traditionally involves a
Field Trial 2 involved a Marcellus section where the shale
model from the Gas Research Institute, Chicago. The modwas almost 100 ft thick and featured three distinct lithotel correlates bulk density with total organic carbon (TOC).
ypes: Basal, Middle, and Upper Marcellus.
This articles table compares resource density determined
The DRRS pilot used a cased well that had been filled
from the GRI model with the time-integrated methane flux
with water and left dormant. Crews replaced the wellbore
measured by the DRRS.
water with clean surface water after pre-logging tests showed
the wellbore water contained high rust levels. Targeted zones
De-ionized water
for perforation were selected based on the spectral gamma
DRRS field trials confirmed a close temporal and spatial asray response and mud log values for methane and ethane.
sociation between imbibition of fresh water by shale and
The logging strategy was to perforate selected intervals
countercurrent flow of ions and gas, driven principally by
sequentially up from the Basal zone using a 10-ft perforatcapillary action and an osmosis-diffusion process. The osing gun fitted with deep penetrating charges at a 6 shots/ft
mosis diffusion stems from disequilibrium in chemical acdensity and 60 phasing for full-azimuthal coverage. Bridge
tivity of water and ions between diluted wellbore fluid and
plugs isolated each perforated zone.
shale.
Crews recorded the water volume lost due to the shale
The partial pressure of methane must be close to or exformations fluid imbibition. Each logging run consisted of
ceed the hydrostatic pressure for free gas to flow into a waDRRS readings along with conductivity, temperature, and
ter-filled well, as demonstrated in the Upper Zone of Field
pressure measurements. Conductivity increased with time,
Trial 2.
consistent with Field Trial 1 results.
Field Trial 1 results showed well-developed organic poThe conductivity increase stemmed from an influx of
rosity based on DRRS records of gas entering the well bore.
countercurrent ions generated through coupled osmosisAuthors suspect this also was the case for the Upper zone in
diffusion processes due to imbibition of water by the shale.
Field Trial 2. The trials detected no significant ethane.
DRRS peaks indicated free methane gas bubbles and solubiDRRS can provide insights into the location and produclized methane. The presence of free methane gas confirmed
tion capacity of light hydrocarbons in test wells.
high-resource density and production potential.
Its tempting to speculate that, despite being 52 miles
The authors found a new way to estimate resource density
apart, both field trials confirmed a relatively thin Marcel-
170102ogj_53 53
53
12/22/16 1:35 PM
TECHNOLOGY
Logging information from system deployment allowed Shell to

identify natural gas and estimate ultimate recovery in field trials
in the Marcellus. Photo from WellDog.
lus interval that appeared to deliver most of the gas detected

during DRRS logging.
Crews should fill or flush the borehole with fresh surface
water before logging to optimize the Raman spectrometers
sensitivity in low concentrations of light hydrocarbons and
to help avoid complications from suspended particulates
and synthetic mud additives.
The field trials demonstrated the need for DRRS tools
to operate at higher pressures and temperatures for deeper
formations. Wellbore fluid salinity was not an impediment
to DRSS. Researchers tested its performance in conditions
ranging from highly saline brine in Field Trial 1 to relatively
dilute in Field Trial 2.
Calibrating the Raman response to brine salinity at a
given pressure and temperature allowed calculation of formation water salinity. Very high formation water salinities
might decrease sensitivity (Fig. 3).
Acknowledgment
WellDog acknowledges support from Shell International
Inc. in the laboratory work and field trials outlined in this
article.
Bibliography
Engelder, T., Cathles, L., and Bryndzia, L., The fate of
residual treatment water in gas shale, Journal of Unconventional Oil and Gas Resources, Vol. 7, September 2014, pp.
33-48.
Jenkins, C. and Boyer, C., Coalbed- and shale-gas reservoirs, Society of Petroleum Engineers Journal of Petroleum
Technology, Vol. 60, No. 2, February 2008, pp. 92-99.
Lamarre, R. and Pope, J., Critical gas content technology
provides coalbed-methane-reservoir data, SPE Journal of Petroleum Technology, Vol. 59, No. 11, November 2007, pp. 108-133.
54
170102ogj_54 54
Morgan, Q., Pope, J., and Ramsay, P., Concurrent in-situ

measurement of flow capacity, gas content and saturation,
Australian Petroleum Production & Exploration Association
Conference & Exhibition, Brisbane, Queensland, May 26-29,
2013.
Odusina, E., Sondergeld, C., and Rai, C., NMR study of
shale wettability, SPE Canadian Unconventional Resources
Conference, Calgary, Nov. 1517, 2011.
Pope, J., Buttry, D., Lamarre, R., Noecker, B., MacDonald,
S., LaReau, B., Malone, P., Van Lieu, N., Perosli, D., Accurso,
M., Harak, D., Kutz, R., Luker, S., and Martin, R., Downhole
geochemical analysis of gas content and critical desorption
pressure for carbonaceous reservoirs, West Texas Geological
Society Fall Symposium, Midland, Tex., Oct. 26-28, 2005.
Poth, C.W., The Occurrence of Brine in Western Pennsylvania, Pennsylvania Bureau of Topographic and Geologic
Survey, Bulletin, 1962, p. 53.
Renouf, P. and Pope, J., Measuring gas content without
cores, CBM Review, September 2011.
The authors
Grant A. Myers (gmyers@welldog.com) is a
senior spectroscopy scientist for WellDog where
he leads the research and development of DRRS
and Raman spectroscopy tools for unconventional and conventional reservoirs. He has more
than 10 years experience in analytical chemistry
and materials science laboratories. He earned a
PhD (2012) in chemistry from the University of Utah.
Usman Ahmen (uahmed@welldog.com) is WellDog executive technical advisor. He previously
was a vice-president of global unconventional
resources at Baker Hughes Inc. He holds an
MS (1980) in petroleum engineering from Texas
A&M.
Peter H. O. Christian (pchristian@welldog.com)

is WellDog vice-president of engineering and
chief commercialization officer. He has more
than 30 years experience. He holds an MBA
(1997) from the University of
Warwicks Business School.
John Pope (jpope@welldog.com) is WellDog
founder, president, and chief executive officer.
He has a PhD (1995) in physical chemistry from
the University of Wyoming.
12/22/16 1:35 PM
Nigeria advances programs to

rehabilitate, expand refining capacity
Robert Brelsford
Niger Delta Petroleum Resources Ltd.s (NDPR)

1,000-b/sd topping plant in Ogbele field in Rivers
Stateremains Nigerias only privately held crude
processing plant, authorized to operate under an
State-owned Nigerian National Petroleum Corp.
official license issued by the government (Table 1).
(NNPC) and Nigerias Department of Petroleum
With the countrys total domestic refinery utiResources (DPR) have opened their doors to prilization
rates during the last decade yet to exceed
PROCESSING
vate local and international investors to boost both
20% (Table 2) and NNPCs recognition that, even
crude oil processing capacity and output of finished
if running at full capacity, all four state-owned refuels. The move comes as part of a plan to eliminate
fineries would be unable to meet regional demand
the countrys inability to satisfy domestic refined products
for finished fuels, the federal government in 2016 accelerdemand and curb its reliance on foreign imports.
ated programs designed to increase the efficiency of existing
The call for private capital investment to help overhaul
crude processing and add 150,000 b/sd in fresh capacity.
the countrys refining sector follows a series of efforts by reThe program involves three levels of possible participacently elected President Muhammadu Buhari to enhance the
tion from private investors, including:
focus, accountability, competitiveness, and transparency of
Provision of funds and technical expertise to restore
state-owned petroleum operations, measures which includand upgrade NPPCs subsidiary-operated refineries to pered a restructuring and reorganization of NNPC in early 2016
form at their nameplate capacities for production of ul(OGJ Online, Mar. 4, 2016).
tralow-sulfur fuels.
The invitation to investors also forms part of Buharis
Relocation and colocation of foreign brownfield refincommitment to end persistent fuel scarcity in West Africa,
eries at existing NPPC refining site pads to augment overall
caused by a combination of aging infrastructure at Nigerian
site capacity.
refineries, persistent interruptions to crude supply caused
DPR licensing for construction of privately owned and
by militant attacks to pipelines, and the countrys lack of
operated grassroots refineries.
adequate crude processing capacity to meet the finishedproduct needs of its growing population, as well as that of
Rehabilitation, modifications
the surrounding West African subregion.
As part of its proposed rehabilitation program for existing
Nigerian capacity, NNPC in April 2016 launched a tender
Background
inviting bids from investors to become financial and techniNigeria has five government-sanctioned refineries with a
cal joint-venture (JV) partners for the phased modernization
combined capacity of 456,000 b/sd. NNPC operates 455,000
of its four refineries. The program aimed to make each plant
b/sd of capacity at four refineries through its wholly owned
a standalone profitable entity operating at 100% capacity,
subsidiaries Port Harcourt Refining Co Ltd. (PHRC), Warri
according to a June 16, 2016, presentation from Dr. Ibe KaRefining & Petrochemcial Co. Ltd. (WRPC), and Kaduna Rechikwu, Nigerias minister of state for petroleum resources.
fining & Petrochemical Co. Ltd. (KRPC). A fifth refinery
Based on a system similar to Nigerias existing LNG model, the program calls for restructuring the refineries to operate as incorporated JVs, with NNPC holding 51%
NIGERIAS REFINERIES
Table 1
interest and its potential partner 49%
Company
Location
Capacity, b/sd
Configuration
Crude feedstock
interest. If selected, partners will agree
PHRC I
Rivers State
60,000
Hydroskimming
Bonny Light
PHRC II
Rivers State
150,000
Conversion
Bonny Light
to fund, rehabilitate, and jointly operWRPC
Delta State
125,000
Conversion
Escravos, Ughelli, Seplat, Slop
KRPC
Kaduna State
110,000
Conversion
Escravos, Ughelli, Slop
ate the re-fineries with NNPC for a deNDPR
Rivers State
1,000
Topping
Ogbele
fined period, and in return, receive all
Source: DPR, NNPC 2015-2016 monthly reports
offtake and marketing rights to refined
Downstream Technology
Editor
170102ogj_55 55
55
12/22/16 1:35 PM
TECHNOLOGY
director, reiterated the companys commitment to upgrade
and expand KRPCs 110,000-b/sd Kaduna refinery, confirming that efforts remain under way to explore building a more
than 1,000-km pipeline from Agadem field, Niger Republic,
to Kaduna as a way to secure alternative crude supply for
the refinery. Kaduna has experienced extended downtime as
a result of feedstock interruptions stemming from pipeline
vandalism (OGJ Online, Jan. 22, 2016).
Alongside a restreaming of the refinerys FCC in June,
KRPC is overhauling the plants kerosine hydrotreating unit,
added Malam Idi Mukhtar, KRPCs managing director, without disclosing further details.
Relocation, colocation
Nigerian National Petroleum Corp. has renewed its pledge to

ensure alternative crude supplies to subsidiary Kaduna Refining & Petrochemical Co. Ltd.s (KRPC) 110,000-b/sd refinery in
Kaduna, Kaduna State, Nigeria. The KRPC refinery has suffered
sustained operational shutdowns as a result of feedstock shortfalls caused by militant attacks to pipelines that deliver crude oil
to the plant. Photo from IMRA Group, Constantza, Romania.
products to be sold primarily in the Nigerian market until

each partner recovers its investment.
The rehabilitation program mainly seeks financial support
for projects that will enable NNPCs refineries to produce
ultralow-sulfur fuels meeting AFRI 5 (Euro 4-equivalent)quality specifications. Modifications will specifically to involve technology and catalysis upgrades of each of the refineries fluid catalytic cracking (FCC) units for production of
ultralow-sulfur gasoline. Following the estimated $500-million rehabilitation works, the PHRC, WRPC, and KRPC refineries must be equipped with post-treatment desulfurization technology, Kachikwu said.
NNPC has yet to disclose detailed results of the rehabilitation-and-operations tender, bids for which were due
May 30, 2016. In its most recently published Energy in Brief
monthly newsletter to stakeholders updating operations for
the months of July-August 2016, however, NNPC said it has
started discussions for technical partnership and support in
the refineries with Royal Dutch Shell PLC, Chevron Corp.,
and Total SA, all of which operate in Nigerias upstream.
In late November, Dr. Maikanti Baru, NNPCs managing
NNPC is advancing a concurrent plan to leverage capacity of

its subsidiaries operations by relocating brownfield refining
from abroad and siting it within its existing four refineries to
expand state-owned refining capacity to 695,000 b/sd.
Issued in February 2016, a tender seeking investors for
the relocation-colocation program specified that potential
brownfield refineries to be relocated to NNPC must be configured to strictly meet AFRI 5-quality standards for lowsulfur fuels.
In addition to increasing combined capacity of state-run
refineries, the relocation-colocation of smaller but nonetheless cost-efficient modular refineries within its existing refineries premises is another strategy to enable production of
fuels with sulfur levels 50 ppm by 2020.
While NNPC confirmed in a Mar. 31, 2016, release
that nine companies submitted bids by the tenders late
April-2016 closing date, it has yet to confirm the winning
bidders.
New capacity, plants

In addition to NNPCs rehabilitation and expansion programs, DPC has issued 25 licenses to private investors to
establish refineries in Nigeria as part of the federal governments strategy to ensure ample fuel supplies.
Alongside revalidation of three previously awarded licenses, DPC in 2015 issued 22 new licenses for construction of
privately funded grassroots refineries. A mix of modular and
conventional construction, the proposed independent refineries would add about 1.3 million b/sd of fresh processing
capacity to NNPCs expansion plan, according to a list published by DPC in March 2016 (Table 3).
2006-2015 REFINERY UTILIZATION
Table 2
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%
PHRC I, II
WRPC
KRPC
50.26
3.85
8.34
24.87
0.00
0.00
17.84
38.52
19.56
15.00
41.00
22.00
9.17
43.36
20.46
4.66
27.99
22.17
11.95
27.88
29.12
9.18
35.99
29.33
4.66
7.07
2.98
4.66
7.07
2.98
Source: NNPC, 2015 Annual Statistical Bulletin, 1st ed.
56
170102ogj_56 56
12/22/16 1:35 PM
TECHNOLOGY
DPR PRIVATE REFINERY LICENSING

Ownership
Plant site
Amakpe International
Eket, Akwa Ibom State
Refinery Inc.
Resource Petroleum & Pet- Ibeno, Akwa Ibom State
rochemicals International
Inc.
Hi Rev Oil Ltd.
Utapate, Akwa Ibom State
Azikel Petroleum Ltd.
Dangote Oil Refinery Co.
Kainji Resources Ltd.
Masters Energy Oil & Gas
Ltd.
Cross Country Oil & Gas
Ltd.
Waltersmith Refining &
Petrochemical Co. Ltd.
Grifon Energy Ltd.
Table 3
Plant configuration
Project type
Hydroskimming
Modular
Complex conversion, cracking
Conventional
Capacity, b/sd License type

12,000
100,000
Approval to construct (ATC)

ATC
Subsisting
ATC
July 2017
June 2017
Sept. 2016
2017
Hydroskimming, provision for

bottoms upgrading
Topping
Complex conversion, cracking
Modular
Obunagha, Bayelsa State

Lekki Free Trade Zone,
Lagos
Oguta, Imo State
Rumoulumeni, Rivers State
Hydroskimming
Hydroskimming
Modular
Modular
24,000
30,000
ATC
License to establish (LTE)
LTE
LTE
Obile, Imo State
Hydroskimming
Modular
20,000
LTE
June 2017
Ibigwe, Imo State
Topping
Modular
5,000
LTE
June 2017
Ipoke, Ondo State
Topping, provision to add

catalytic reformer
Hydroskimming
Modular
10,000
LTE
June 2017
Modular
120,000
LTE
June 2017

bottoms cracking
bottoms cracking
Hydroskimming
Modular
100,000
LTE
June 2017
Modular
100,000
LTE
June 2017
Modular
10,000
LTE
June 2017
Conversion cracking, provision

for bottoms upgrading
Hydroskimming
Topping
Topping
Modular
107,000
LTE
June 2017
Modular
Modular
Modular
12,000
5,000
5,000
LTE
LTE
LTE
June 2017
Aug 2017
June 2017
Conversion cracking
Hydroskimming
Conventional
Modular
107,000
20,000
LTE
LTE
June 2017
August 2017
Topping
Topping plant
Hydroskimming
Modular
Modular
Modular
10,000
10,000
20,000
LTE
LTE
LTE
June 2017
June 2017
August 2017
Sifax Oil & Gas Company Snake Island, Lagos

Ltd.
Capital Oil & Gas Industries Snake Island, Lagos
Ltd.
Aiteo Energy Resources
Ajagbodudu, Delta State
Ltd.
RG Shinjin Petrochemicals Koko, Delta State
Ltd.
Epic Refinery & PetroOporoma, Bayelsa State
chemical Industries Ltd.
Frao Oil Nigeria Ltd.
Uzere, Delta State
All Grace Energy Ltd.
Ubima, Rivers State
Green Energy International Otakikpo, Rivers State
Ltd.
Petrolex Oil & Gas Ltd.
Ibefun Ijebu, Ogun State
Clairgold Oil & Gas Engi- Koko, Delta State
neering Ltd.
Fresh Energy Ltd.
Igbomotoru, Bayelsa
Chyzob Oil & Gas Ltd.
Obuzor, Abia State
Eko Petrochem & Refining Tomaro Island, Lagos
Co. Ltd.
Modular
Conventional
50,000
License expiration
12,000
500,000
July 2017
June 2017
Source: DPR
To date, however, only two of the licensed independent

refiners have advanced their projects. Late last year, Azikel
Petroleum Ltd., Abuja, let a contract to Ventech Engineering
LLC, Houston, to build its planned 12,000-b/sd hydroskimming modular refinery in Obunagha-Gbarain, Bayelsa State,
Azikel said Dec. 1, 2016.
As of early December, construction of crude oil feedstock
tanks and refined-products tanks was 55% complete, with
fabrication also under way on Ventechs ISBL unit, which is
to be the modular refinerys central processing equipment,
according to Dr. Eruani Azibapu Godbless, president of
Azikel. Due for startup in 2018, Azikels refinery will produce high-quality variants of LPG, gasoline, kerosine, aviation fuel, diesel, and heavy fuel oil.
Construction also remains under way on Nigerian conglomerate Dangote Industries Ltd. subsidiary Dangote Oil
Refining Co.s grassroots integrated refinery and petrochemical plant in southwestern Nigerias Lekki Free Trade Zone,
near Lagos (OGJ Online, May, 13, 2015; Nov. 25, 2013).
Initially proposed as a $5-billion, 500,000-b/sd project to
be commissioned by yearend 2016, the independent refinery
now is to have a processing capacity of 650,000 b/d and, by its
2018-19 commissioning date, a capital cost of $9-11 billion.
170102ogj_57 57
Other initiatives
Independent NDPR, a subsidiary of Niger Delta Exploration
& Production PLC, is expanding its 10,000-b/sd Ogbele field
refinery (OGJ Online, Sept. 7, 2016). The project, which will
involve installation of additional crude distillation units, a
naphtha hydrotreater, a naphtha splitter, and a catalytic reforming unit for the production of gasoline, is scheduled to be
commissioned in early 2018.
Elsewhere, the local government of Nigerias Abia State
has set aside 400 hectares at Owazza in Ukwa, for Hyundai
Group of South Koreas plan to build a 250,000-b/sd refinery, the state government said on June 16, 2016.
Abia State government previously entered an agreement
with Hermes Juno Ltd. for construction of a 50,000-b/sd
modular refinery project at Owazza, according to the state
governments website.
57
12/22/16 1:35 PM
TECHNOLOGY
Anchored in 350-450 m of water about 210 km off Sandnessjoen, Norway, the Skarv floating production,
storage, and offloading (FPSO) vessel features a 15-leg mooring system equipped to produce 85,000 b/d
of medium-gravity, low-sulfur crude oil and 22 million cu m/day rich gas from 15 operating production and
injection wells drilled through five subsea templates in the Norwegian Sea. Photo from Aker BP ASA.
PROCESSING
58
170102ogj_58 58
12/22/16 1:35 PM
TECHNOLOGY
GUIDE TO WORLD CRUDES
Norwegian Skarv
Blend assayed
BP Oil International Ltd., a subsidiary of BP PLC,
published an assay for Skarv Blend crude oil based
on a sample taken Apr. 27, 2016.
BP Norge AS began production from Skarv oil
and gas field on Dec. 31, 2012, from four reservoirs
(Skarv A, BC, Idun, and Tilje) in 350-450 m of water on the Norwegian Continental Shelf, 210 km
off Sandnessjoen, Norway, between Norne field, 35
km to the north, and Heidrun, 45 km to the south
(OGJ Online, Jan. 4, 2013).
The development includes a 295-m long, 51-m
wide floating production, storage, and offloading
(FPSO) vessel that produces medium 43.3 gravity, low-sulfur (0.205 wt %) oil and rich gas from
15 operating production and injection wells drilled
through five subsea templates.
With an oil storage capacity of 875,000 b/d and
oil and gas production capacities of 85,000 b/d and
22 million cu m/day respectively, the Skarv FPSO
currently produces about 55,000 b/d of oil and 13.4
million cu m/day of gas liquids.
Skarv had an estimated ultimate recovery of
around 100 million bbl of oil and condensate and
more than 1.5 tcf (42.5 billion cu m) of rich gas
upon its discovery in 1998, and by yearend 2015
had exported about 55 million bbl of oil and 406
bcf of gas since startup.
Aker BP ASA Norge, which took ownership of
BP Norge on Dec. 1, 2016, operates and holds a
23.84% interest in Skarv. Other interests are held
by Statoil ASA 36.16%, DEA Norge AS 28.08%, and
PGNiG Norway AS 11.92%.
Aker BP is considering using tie-ins to the Skarv
FPSO to further develop its nearby Snadd North
discovery, which holds about 200 MMboe of recoverable gas. If approved, a plan for development
and production of the Snadd North concept will
be ready by yearend 2017, with production to start
sometime in 2020.
Whole crude
API gravity at 60/60 F.: 43.3
Density at 15 C., kg/l.: 0.8091
Total sulfur, wt %: 0.205
Mercaptan sulfur, ppm (wt): 3
Total nitrogen, ppm (wt): 370.0
Basic nitrogen, ppm (wt): 116
170102ogj_59 59
59
12/22/16 1:35 PM
TECHNOLOGY
Acidity, mg KOH/g: 0.003
Vis. at 20 C., cst: 2.752
Vis. at 30 C., cst: 2.229
Vis. at 40 C., cst: 1.956
Vis. at 50 C., cst: 1.691
Pour point, C.: 33
Wax, wt %: 5.0
Carbon residue, wt %: 0.80
Asphaltenes, wt %: 0.1
Vanadium, ppm (wt): < 2
Nickel, ppm (wt): < 2
Iron, ppm (wt): < 1
Ethane, wt %: 0.02
Propane, wt %: 0.38
Isobutane, wt %: 0.34
n-Butane, wt %: 1.35
Isopentane, wt %: 1.24
n-Pentane, wt %: 1.88
Cyclopentane, wt %: 0.16
C6 paraffins, wt %: 3.66
C6 naphthenes, wt %: 2.40
Benzene, wt %: 0.72
Light naphtha, C5 to 95 C.
Yield on crude, wt %: 12.55

Yield on crude, vol %: 14.55
Total sulfur, wt %: < 0.001
Paraffins, wt %: 66.76
Naphthenes, wt %: 27.49
Aromatics, wt %: 5.75
n-Paraffins, wt %: 29.91
Research octane no.: 70
Heavy naphtha, 95-149 C.

Research octane no.: 64
149-175 C.
60
170102ogj_60 60

Research octane no.: -13
Kerosine, 175-232 C.
Vis. at 40 C., cst: 1.338
Vis. at 60 C., cst: 1.035
Smoke point, mm: 22.6
Aromatics, vol %: 19.4
Naphthalenes, wt %: 1.89
Freezing point, C.: 51.5
Cetane index (ASTM D4737-90): 44.2
Refractive index at 70 C.: 1.4296
Light gas oil, 232-342 C.

Vis. at 50 C., cst: 2.831
Vis. at 100 C., cst: 1.327
Smoke point, mm: 17.0
Aromatics, vol %: 23.7
Naphthalenes, wt %: 9.00
Pour point, C.: 18
Cloud point, C.: 14
Freezing point, C.: 11.0
Wax, wt %: 3.9
Heavy gas oil, 342-369 C.


Vis. at 50 C., cst: 7.392
Vis. at 100 C., cst: 2.620
Pour point, C.: 15
Cloud point, C.: 14
Aniline point, C.: 82.4
Wax, wt %: 14.8
Light vacuum gas oil, 369-509 C.

Vis. at 60 C., cst: 18.540
Vis. at 100 C., cst: 6.210
Pour point, C.: 33
Wax, wt %: 16.2
Heavy vacuum gas oil, 509-550 C.

Total nitrogen, ppm (wt): 1,700.0
Vis. at 60 C., cst: 148.800
Vis. at 100 C., cst: 26.410
Wax, wt %: 14.7
550-585 C.
Vis. at 60 C., cst: 397.200
Vis. at 100 C., cst: 55.290
Wax, wt %: 13.7
12/22/16 1:35 PM
TECHNOLOGY
Vanadium, ppm (wt): 15
Nickel, ppm (wt): 5
Iron, ppm (wt): 4
Atmospheric residue (369-FBP)

Vis. at 60 C., cst: 50.940
Vis. at 100 C., cst: 13.130
Vis. at 120 C., cst: 8.163
Pour point, C.: 39
Wax, wt %: 14.6
Nickel, ppm (wt): < 2
Iron, ppm (wt): < 1
Vacuum residue, 509-FBP

Vis. at 100 C., cst: 119.500
Vis. at 120 C., cst: 54.73
Vis. at 150 C., cst: 22.23
Pour point, C.: 33
Wax, wt %: 11.5
Nickel, ppm (wt): 3
Iron, ppm (wt): 3
550-FBP
Basic nitrogen, ppm (wt): 1,050
Vis. at 100 C., cst: 307.900
Vis. at 120 C., cst: 122.600
Vis. at 150 C., cst: 42.50
Pour point, C.: 36
Wax, wt %: 10
170102ogj_61 61

Vis. at 100 C., cst: 1,431.000
Vis. at 120 C., cst: 451.000
Vis. at 150 C., cst: 119.90
Pour point, C.: 39
Wax, wt %: 8.3
Nickel, ppm (wt): 7
Iron, ppm (wt): 6
585-FBP
Basic nitrogen, ppm (wt): 1,230
NELSON-FARRAR COST INDEXES1

Refinery construction (1946 basis)
Explained in OGJ, Dec. 30, 1985, p. 145.
1962
Pumps, compressors, etc.
222.5
Electrical machinery
189.5
Internal-comb. engines
183.4
Instruments
214.8
Heat exchangers
183.6
Misc. equip. average
198.8
Materials component
205.9
Labor component
258.8
Refinery (inflation) index
237.6
1980
2013
2014
2015
Sep.
2015
Aug.
2016
Sep.
2016
777.3
2,221.1
2,271.9
2,313.6
2,315.2
2,333.2
2,332.2
394.7
516.7
515.8
516.5
515.5
513.2
513.2
512.6
1,046.8
1,052.9
1,062.3
1,062.8
1,035.1
1,035.7
587.3
1,509.9
1,533.6
1,554.4
1,563.8
1,605.5
1,603.2
618.7
1,293.3
1,305.0
1,305.0
1,305.0
1,221.2
1,221.2
578.1
1,317.5
1,335.8
1,350.3
1,352.5
1,341.6
1,341.1
629.2
1,538.7
1,571.8
1,434.9
1,414.5
1,431.0
1,420.9
951.9
3,123.4
3,210.7
3,293.8
3,312.0
3,405.7
3,405.7
822.8
2,489.5
2,555.2
2,550.2
2,553.0
2,615.8
2,611.8
Refinery operating (1956 basis)

Explained in OGJ, Dec. 30, 1985, p. 145.
1962
1980
2013
2014
2015
Sep.
2015
Aug.
2016
Sep.
2016
100.9
810.5
1,123.7
1,264.8
915.9
906.5
882.6
928.1
Fuel cost
Labor cost
Wages
93.9
200.5
308.3
312.8
319.2
330.0
319.9
336.5
123.9
439.9
1,506.4
1,541.3
1,584.4
1,619.4
1,574.0
1,629.9
Productivity
131.8
Invest., maint., etc.
121.7
Chemical costs
96.7
Operating indexes2
Refinery
103.7
Process units
103.6
226.3
489.1
493.1
497.1
490.8
492.0
484.4
324.8
905.3
939.4
948.0
949.1
944.3
942.9
229.2
502.6
472.3
434.6
429.4
407.4
411.8
312.7
661.8
688.5
660.0
663.2
653.2
663.3
457.5
802.6
865.3
748.1
748.4
735.4
755.8
These indexes are published in the first of each month and are compiled by Gary Farrar, OGJ Contributing Editor.
Add separate index(es) for chemicals, if any are used. Indexes of selected individual items of equipment and materials are
also published on the Quarterly Costimating page in first issues for January, April, July, and October.
2
Correction
Correct values for the 2015 refinery construction (1946 basis) index in the Dec. 5, 2016, issue of Oil & Gas
Journal are as follows: pumps, compressors, etc., 2, 313.6; electrical machinery, 516.5; internal-comb.
engines, 1,062.3; instruments, 1,554.4; heat exchangers, 1,305.0; misc. equip. average, 1,350.3; materials
component, 1,434.9; labor component, 3,293.8; and Refinery (Inflation) Index, 2,550.2.
61
12/22/16 1:35 PM
e l s o N
-F
a r r a r
u a r t e r l y
Yearly refinery construction indexes listed for 80+ years

INDEXES FOR SELECTED EQUIPMENT ITEMS
Date
Materials Labor
compo- component
nent
1926
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
87.7
93.2
83.2
76.0
72.2
68.0
68.3
73.5
74.3
78.2
86.7
84.7
82.0
82.2
84.5
86.2
86.7
87.6
89.7
100.0
122.4
139.5
143.6
149.5
164.0
164.3
172.4
174.6
176.1
190.4
61.5
64.5
64.5
66.5
60.0
49.0
49.0
55.5
55.0
60.0
66.5
71.5
73.0
74.5
77.0
82.0
86.5
88.5
90.0
100.0
113.5
128.0
137.1
144.0
152.5
163.1
174.2
183.3
189.6
198.2
Misc.
equipment
94.0
89.0
87.0
84.0
82.0
79.0
76.0
74.0
76.0
77.0
80.0
81.0
82.0
83.0
84.0
85.0
86.0
88.0
90.0
100.0
114.2
122.1
121.6
126.2
145.0
153.1
158.8
160.7
161.5
180.5
NelsonFarrar
inflation
index
Date
72.0
71.0
72.0
70.3
64.9
56.6
56.7
62.7
62.7
67.3
74.6
76.8
76.6
77.6
80.0
83.7
86.6
88.1
89.9
100.0
117.0
132.5
139.7
146.2
157.2
163.6
173.5
179.8
184.2
195.3
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
Materials
component
201.9
204.1
207.8
207.6
207.7
205.9
206.3
209.6
212.0
216.2
219.7
224.1
234.9
250.5
265.2
277.8
292.3
373.3
421.0
445.2
471.3
516.7
573.1
629.2
693.2
707.6
712.4
735.3
739.6
730.0
Labor
component
Misc.
equipment
208.6
220.4
231.6
241.9
249.4
258.8
268.4
280.5
294.4
310.9
331.3
357.4
391.8
441.1
499.9
545.6
585.2
623.6
678.5
729.4
774.1
824.1
879.0
951.9
1,044.2
1,154.2
1,234.8
1,278.1
1,297.6
1,330.0
192.1
192.4
196.1
200.0
199.5
198.8
201.4
206.8
211.6
220.9
226.1
228.8
239.3
254.3
268.7
278.0
291.4
361.8
415.9
423.8
438.2
474.1
515.4
578.1
647.9
662.8
656.8
665.6
673.4
684.4
NelsonFarrar
inflation
index
205.9
213.9
222.1
228.1
232.7
237.6
243.6
252.1
261.4
273.0
266.7
304.1
329.0
364.9
406.0
438.5
468.0
522.7
575.5
615.7
653.0
701.1
756.6
822.8
903.8
976.9
1,025.8
1,061.0
1,074.4
1,089.9
Date
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Materials
component
748.9
802.8
829.2
832.8
832.3
824.6
846.7
877.2
918.0
917.1
923.9
917.5
883.5
896.1
877.7
899.7
933.8
1,112.7
1,179.8
1,273.5
1,364.8
1,572.0
1,324.8
1,480.1
1,610.5
1,579.7
1,538.7
1,571.8
Labor
component
1,370.0
1,405.6
1,440.4
1,487.7
1,533.3
1,579.2
1,620.2
1,664.7
1,708.1
1,753.5
1,799.5
1,851.0
1,906.3
1,973.7
2,047.7
2,137.2
2,228.1
2,314.2
2,411.6
2,497.8
2,601.4
2,704.3
2,813.0
2,909.3
2,985.6
3,055.6
3,123.4
3,210.7
Misc.
equipment
703.1
732.5
769.9
797.5
827.5
837.6
842.8
851.1
879.5
903.5
910.5
933.2
920.3
917.8
939.3
951.3
956.7
993.8
1,062.1
1,113.3
1,189.3
1,230.6
1,239.7
1,224.7
1,256.4
1,286.1
1,317.5
1,335.8
NelsonFarrar
inflation
index
1,121.5
1,164.5
1,195.9
1,225.7
1,252.9
1,277.3
1,310.8
1,349.7
1,392.1
1,418.9
1,449.2
1,477.6
1,497.2
1,542.7
1,579.7
1,642.2
1,710.4
1,833.6
1,918.8
2,008.1
2,106.7
2,251.4
2,217.7
2,337.6
2,435.6
2,465.2
2,489.5
2,555.2
Gary Farrar
Contributing Editor
Here are yearly values for the Nelson-Farrar refinery inflation

cost index since 1926.
They are based on 1946 as 100, since that was the date of
index inception.
Values from 1926-45 were back calculated.
I TEMIZED REFINING COST INDEXES
The cost indexes may be used to convert prices at any date to prices at other dates by ratios to the cost indexes of the same
date. Item indexes are published each quarter (first week issue of January, April, July, and October). In addition the Nelson
Construction and Operating Cost Indexes are published in the first issue of each month of Oil & Gas Journal.
*References
Index for earlier year in

Costimating and Questions
on Technology issues
Code 0543
OGJ
OGJ
OGJ
OGJ
OGJ
OGJ
Code 531-10-1
Code 613
Code 613-0222
Code 613-0281
Code 1022-02-73
Code 613-01-03
Code 613-01-04
Code 613-0267
Code 614
Chemical Marketing
No. 13, May 19, 1958, p. 181

No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
July 7, 1975, p. 72
No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
Oct. 5, 1964, p. 149
Apr. 1, 1963, p. 119
No. 94, May 15, 1961, p. 138
July 5, 1965, p. 117
No. 58, Oct. 12, 1959, p. 186
No. 94, May 15, 1961, p. 138
No. 58, Oct. 12, 1959, p. 186
Oct. 5, 1964, p. 149
No. 58, Oct. 12, 1959, p. 186
Operating cost
(based on 1956 = 100.)
1954
1972
2013
2014
2015
Aug.
2016
Power, industrial electrical

Fuel, refinery price
Gulf cargoes
NY barges
Chicago low sulfur
Western US
Central US
Natural gas at wellhead
Inorganic chemicals
Acid, hydrofluoric
Acid, sulfuric
Platinum
Sodium carbonate
Sodium hydroxide
Sodium phosphate
Organic chemicals
Furfural
98.5
85.5
85.0
82.6
84.3
60.2
83.5
96.0
95.5
100.0
92.9
90.9
95.5
97.4
100.0
94.5
131.2
152.0
130.4
169.6
168.1
128.1
190.3
123.1
144.4
140.7
121.1
119.4
136.2
107.0
87.4
137.5
1,008.5
1,064.2
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
3,189.3
1,138.7
414.9
439.1
1,153.0
750.3
1,028.4
844.2
1,037.0
1,496.5
1,077.8
1,211.5
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
3,912.8
1,083.7
414.9
439.1
1,098.4
714.0
978.6
844.2
1,002.4
1,446.5
1,098.1
857.4
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
2,173.2
1,089.2
414.9
439.1
978.4
717.6
983.6
844.2
796.1
1,148.8
1,126.3
840.0
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
2,088.0
1,003.8
414.9
439.1
974.5
661.3
906.4
844.2
752.9
1,086.5
MEK, tank-car lots
82.6
87.5
625.0
625.0
625.0
625.0
Reporter
Phenol
90.4
47.1
500.3
500.3
500.3
500.3
Code 614-0241
62
170102ogj_62 62
No. 58, Oct. 12, 1959, p. 186
12/22/16 1:35 PM
o s t i m a t i N g
I TEMIZED REFINING COST INDEXES
*References
Index for earlier year in

Costimating and Questions
on Technology issues
1,574.0
492.0
Employ & Earn

Employ & Earn
No. 41, Feb. 16, 1969

No. 41, Feb. 16, 1969
2,943.9
3,933.2
3,293.8
3,036.7
4,091.0
3,405.7
Eng. News Record

Eng. News Record
OGJ
No. 55, Nov. 3, 1949

No. 55, Nov. 3, 1949
May 15, 1967, p. 97
1,827.1
1,204.8
1,375.6
2,077.9
1,743.1
963.2
1,360.7
1,086.9
515.8
1,125.3
1,400.6
798.2
1,052.9
1,305.0
1,178.5
1,320.9
1,312.7
1,457.9
2,099.7
1,533.6
2,014.9
1,489.7
1,025.0
2,112.1
1,773.1
1,233.6
1,398.5
2,112.7
1,730.9
984.1
1,418.0
1,130.9
516.5
1,124.5
1,402.7
757.2
1,062.3
1,305.0
1,178.5
1,320.9
1,312.7
1,449.5
2,099.4
1,554.4
2,072.6
1,380.7
966.4
1,992.0
1,802.5
1,263.7
1,401.1
2,112.7
1,713.7
995.4
1,497.1
1,174.8
513.2
1,114.1
1,422.1
741.5
1,035.1
1,221.2
1,150.4
1,237.0
1,201.2
1,464.1
2,113.0
1,605.5
2,179.5
1,427.1
1,026.8
2,116.2
Computed
Code 13
Code 1342
Code 135
Code 1015
Code 134
Code 132
Code 133
Code 117
Code 1173
Code 1175
Code 1174
Code 1194
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Computed
Code 1042
Computed
Manufacturer
Code 81
Code 81102
Code 811-0332
July 8, 1962, p. 113

No. 61, Dec. 15, 1949
No. 20, Mar. 3, 1949
May 30, 1955, p. 104
Apr. 1, 1963, p. 119
No. 20, Mar. 3, 1949
No. 22, Mar. 17, 1949
Oct. 2, 1967, p. 112
May 2, 1955, p. 104
May 2, 1955, p. 104
May 2, 1955, p. 104
No. 31, May 19, 1949
No. 36, June 23, 1949
Mar. 16, 1964, p. 154
Mar. 16, 1964, p. 154
Mar. 16, 1964, p. 154
July 1, 1991, p. 58
June 8, 1963, p. 133
June 27, 1955
No. 34, June 9, 1949
July 4, 1988, p. 193
No. 7, Dec. 2, 1948
No. 7, Dec. 2, 1948
July 5, 1965, p. 117
1,510.6
1,871.3
1,983.2
1,410.4
1,540.5
1,899.9
2,017.8
1,424.6
1,562.1
1,925.9
2,020.1
1,411.3
1,578.2
1,944.7
2,004.8
1,400.9
Code 114
Code 112
Code 1191
Code 621
Feb. 17, 1949

Apr. 1, 1968, p. 184
Oct. 10, 1955, p. 267
May 16, 1955, p. 117
346.9
319.9
337.5
330.6
349.4
365.5
225.9
221.2
386.7
265.5
246.4
125.3
350.9
3,363.2
2,907.9
2,221.1
1,727.8
1,356.2
1,889.0
982.5
1,049.0
2,073.8
2,946.5
1,152.3
674.4
2,384.3
3,392.1
2,895.4
2,271.9
1,775.9
1,419.2
1,969.8
1,024.5
1,093.8
2,153.6
2,933.8
1,181.8
692.8
2,445.5
3,369.5
2,633.2
2,313.6
1,565.4
1,408.0
1,695.2
881.6
941.5
1,914.5
2,668.1
1,179.3
642.6
2,467.2
3,334.8
2,542.6
2,333.2
1,548.5
1,465.1
1,795.5
933.8
997.2
1,706.3
2,575.9
1,175.3
644.8
2,497.4
Code 1015-0239
Code 1017-0611
Code 1141
Code 1017
Code 1017-0831
Code 1017-0711
Code 1017-0733
Code 1017-0755
Code 1017-0400
Code 1017-0622
Code 1072
Computed
Code 1149
Jan. 3, 1983, p. 76
Jan. 3, 1983, p. 76
No. 29, May 5, 1949
Jan. 3, 1983, p. 73
Apr. 1, 1963, p. 119
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
No. 5, Nov. 18, 1949
Oct. 1, 1962, p. 85
No. 46, Sept. 1, 1940
Nelson-Farrar Refinery (Inflation Index)

(1946)
179.8
438.5
2,489.5
2,555.2
2,550.2
2,615.8
OGJ
May 15, 1969
Nelson-Farrar Refinery Operation

(1956)
88.7
118.5
661.8
688.5
660.0
653.2
OGJ
No. 2, Mar. 3, 1958, p. 167
Nelson-Farrar Refinery Process Operation

(1956)
88.4
147.0
802.6
865.3
748.1
735.4
OGJ
No. 2, Mar. 3, 1958, p. 167
Operating cost
(based on 1956 = 100.)
1954
1972
2013
2014
2015
Aug.
2016
88.7
97.2
210.0
197.0
1,506.4
489.1
1,541.3
493.1
1,584.4
497.1
Construction labor cost (1946 = 100)

Skilled const.
174.6
Common labor
192.1
Refinery cost
183.3
499.9
630.6
545.9
2,796.5
3,732.8
3,123.4
2,866.3
3,848.5
3,210.7
161.4
143.6
144.7
193.1
188.1
159.1
141.1
138.5
159.9
157.7
171.2
161.9
150.5
171.7
190.7
156.8
151.0
173.8
154.6
198.5
197.8
181.2
238.0
324.4
212.4
252.5
322.8
274.9
342.0
218.4
199.6
216.3
211.0
271.0
149.3
233.3
274.3
266.7
281.9
278.5
346.5
328.4
272.4
353.4
303.9
310.6
1,780.7
1,169.8
1,342.5
2,072.6
1,728.2
952.5
1,305.4
1,046.5
516.7
1,107.4
1,395.8
798.0
1,046.8
1,293.3
1,171.5
1,310.4
1,294.2
1,421.5
2,080.4
1,509.9
1,951.1
1,379.9
999.5
2,059.5
159.9
165.9
161.9
159.0
278.5
324.4
269.1
231.8
195.0
182.7
166.5
187.1
198.7
187.0
177.0
169.0
193.4
180.0
147.3
123.0
197.0
Operating labor cost (1956 = 100)

Wages and benefits
Productivity
Equipment or materials (1946 = 100)

Bubble tray
Building materials (nonmetallic)
Brickbuilding
Brickfireclay
Castings, iron
Clay products (structural, etc.)
Concrete ingredients
Concrete products
Electrical machinery
Motors and generators
Switchgear
Transformers
Engines (combustion)
Exchangers (composite)
Copper base
Carbon steel
Stainless steel (304)
Fractionating towers
Hand tools
Instruments (composite)
Insulation (composite)
Lumber (composite)
Southern pine
Redwood, all heart
Machinery
General purpose
Construction
Oil field
Paintsprepared
Pipe
Gray iron pressure
Standard carbon
Pumps, compressors, etc.
Steel-mill products
Alloy bars
Cold-rolled sheets
Alloy sheets
Stainless strip
Structural carbon, plates
Welded carbon tubing.
Tanks and pressure vessels
Tube stills
Valves and fittings
*Code refers to the index number of the Bureau of Statistics, US Department of Labor, Wholesale Prices Itemized Cost Indexes, Oil & Gas Journal.
170102ogj_63 63
63
12/22/16 1:35 PM
TECHNOLOGY
Probabilistic approach evaluates reliability

of pipelines with corrosion defects
effect between input variables was limited to FITNET FFS.9
This article uses a probabilistic approach to determine
the failure probability of a corroded pipeline, taking into account the effect of the correlation between the input variables, and using several failure-pressure models via Monte
Carlo simulation.
Table 1 shows the most commonly used standards for
Mohamed el Amine Ben Seghier

Mourad Bettayeb
Elahmoune Bouali
Mohamed Gaceb
University Mhamed Bougara
of Boumerdes
Boumerdes, Algeria
A probabilistic approach can evaluate

the reliability of hydrocarbon pipelines
suffering active corrosion defects, taking into account the effect of the correlation between the input variables.
Considering the correlation between
the different parameters is important
while calculating the probabilities of
failure due to single and multiple defects.
Pipeline reliability assessment generally uses one of two approaches.
The first is the deterministic approach
based on standards such as B31G, modified B31G, Netto-Teixeira, DNV RP
F101, PCOORC,
Shell-92, and FITNET FFS.1-8 The
second approach
is
probabilistic
and is based on
these standards
but considers the
TRANSPORTATION
input parameters
as random or stochastic variables.
The failure of pipelines subject to
internal pressure at different points of
corrosion defects is generally correlated.9 Research on the effect of correlation between variables and defects has
been limited, but includes the effect
of the spatial correlation between the
initial defect depth and bursting probability for different pipe segments.9-11
Initial depth has a large impact if the
correlation coefficient is greater than
0.6 and the number of segments is
more than 5. Study of the correlation
64
170102ogj_64 64
FAILURE PRESSURE MODELS

Model
B31G
Table 1
Mathematic expression
2SMYSt 1 - 2d
3t
Pf = 1.11
T
2d Y if
D
1 - 3tM
2SMYSt
d
Pf = 1.11
S 1 - t X if
D
Where M =
ModifiedB31G
L
# 4.479
Dt
L
$ 4.479
Dt
1 + 0.893 DtL
2 (SMYS + 68.95MPa)t 1 - 0.85 dt

T
Y
D
1 - 0.85 tMd
L2
L
M = 1 + 0.0.6275 L2
Dt - 0.003375 D t if
Dt # 50
L2
L2
M = 0.032 Dt + 3.3if Dt $ 50
Pf =
2 2
Netto - Teixera
Pf = 1.1
2SMTSt
d 1.6 l 0.4
S 1 - 0.9435 S t X S D X X
D
DNV RP - F101
Pf = 1.1
2SMTSt 1 - dt
T
Y Where M= 1 + 0.31 DtL
D
1 - tMd
PCORRC (Battelle)
Pf =
2SMTSt
(t - d)
d
R
D - t Q 1 - t M V Where M = 1 - exp -0.157 D 2
Shell - 92
Pf =
1.8SMTSt 1 - dt
T
Y Where M= 1 + 0.805 DtL
D
1 - tMd
FITNET FSS
Pf =
2SMTSt ( 12 )
D-t
65
SMYS
1 - dt
Y Where M = 1 + 0.8 DtL
1 - tMd
2
VARIABLES
Table 2
Symbol
Type
Mean
d, mm
D, mm
L, mm
P0, MPa
t, mm
SMYS, MPa
SMTS, MPa
Normal
Normal
Normal
Normal
Normal
Log normal
Log normal
2.4
660.4
112.0
5.0
8.2
358.0
455.0
Standard deviation
0.240
19.812
5.600
0.500
0.410
25.060
31.850
12/22/16 1:35 PM
modelling the progression of active

corrosion defects in oil pipelines and
studying their residual life based on
failure pressure.
FAILURE PROBABILITY, SINGLE CORROSION DEFECT

1
FIG. 1
By correlation coefficient
FIG. 1a
0.1
0.01
0.001
170102ogj_65 65
0.3
0.6
0.9
Correlation coefficient = 0
FIG. 1b
0.1
0.01
0.001
0
Monte Carlo method
12
16
Time, years
Failure probability
The Monte Carlo (MC) simulation

method calculates the probability of
failure represented by Equation 6 by
introducing the variables of the LSF as
random variables (Equation 7). To account for correlation between the input
variables, the correlation coefficient XY
(-1 XY -1) is defined by Equation 8.
The larger the absolute value of correlation coefficient XY is, the stronger
the dependence of Variable X on Variable Y will be. Implementing the Monte Carlo method with correlated variables uses the Nataf transformation
consisting of the following steps:9 16 17
Generating random variables Yi
(Y1, Y2...) that follow the standard normal distribution N(0,1).
Calculating the correlation matrix of the input variable using
Correlation coefficient
Failure probability
A limit state function (LSF) defining

the failure mode studied can assess a
pipelines residual life. Equation 1 expresses this function according to the
theory of reliability and for a given corrosion defect. LSF is positive (Pf > Pop)
for the safe region and negative for the
failure region (Pf Pop) and depends
on the same parameters as the failure
pressure Pf , the operating pressure Pop,
and the corrosion defect dimensions
(Equation 2).12
Any prediction of the state of the
pipeline is based on the prediction of
the size of the corrosion defects detected during the inspection. If the
depth and length variation rates of a
corrosion defect are known, then the
dimensions of the depth and length
of the defect at time T are defined by
Equations 3 and 4. This article treats
corrosion rates Vd and V L as constants
determined by Equation 5.8 12-15 With
Te 15 years, Equation 6 calculates
the probability of a corrosion defect
failure.
Failure probability
Probabilistic study
Correlation coefficient = 0.6
FIG. 1c
0.1
0.01
0.001
0
4
B31G
B31G M
8
Time, years
DNV F 101
PCORRC
12
Shell-92
16
Netto-Teixera
FITNET FFS
65
12/22/16 1:35 PM
TECHNOLOGY
EQUATIONS
LSF = Pf - Pop
LSF = f (D, t, UTS, YS, d (T), L (T), Pop)

d (T) = d 0 + Vd (T - T0)
L (T) = L 0 + VL (T - T0)
Vd = d DT
G
VL = L DT
PFdefeat = Prob (LSF # 0)
n
PF = N
E [(X - n X) (Y - n Y)]
t XY =
vX vY
tl = Tij t ij
Z i = tm Yi
Where tm is the Choloky factorization
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
of the matrix tl
X i = F X-1 (z (Z l))
i
(11)
Where FX (.) is the cumulative

i
distribution function of X i
X1 = Z1 v + n
X2 = Z2 v + n
X 3 = exp (Z 3 v + n)
(12)
(13)
X 4 = exp (Z 4 v + n)
(14)
(15)
PF = 1 - % Q 1 - PFi V
(16)
Nomenclature
Pf = Failure pressure of corroded pipeline, MPa
D = pipeline diameter, mm
t = wall thickness, mm
M = Folias Factor
SMTS = ultimate tensile strength, MPa
SMYS = yield stress, MPa
d (T) = time-dependent defect depth, mm
d0 = measured defect depth at time T0, mm
L(T) = time-dependent defect surface length, mm
L0 = measured defect surface length at time T0, mm
Pop = pipeline operating pressure, MPa
LSF = Limit state function
Vd, Vl = radial, axial corrosion defect growth rate, mm/year
T_e = time since last inspection, years
PFdefect = failure probability, single corrosion defect
PF = failure probability, pipeline
xy = correlation coefficient between X, Y
x, y = mean value of X, Y
x , y = standard deviation of X, Y
Yi = random variable following the standard normal distribution
Zi = correlated variable following standard normal distribution
Xi = correlated variable following non-standard normal distributions
ij = correlation coefficient matrix of the input variables
Tij = function of ij and variable distribution
= correlation matrix
= Cholesky decomposition of matrix
FXi(xi) = cumulative distribution function of Xi
= cumulative distribution function of the standard normal variable
= standard deviation, random variable
= mean value, random variable
Equation 9.16 17
Transforming the independent variables Yi (following
N(0,1)) to correlated variables following standard normal
distribution by the orthogonal transformation (Equation 10).
Converting the variable Zi (Z1, Z2, ...) to the desired correlated variables X i (X1, X 2, ...) by the inverse transformation
(Equation 11). Otherwise, two correlated variables X1, X 2,
which follow the normal distribution N (, 2) will be expressed by Equations 12 and 13. If the correlated variables
follow the lognormal distribution LogN(, 2), Equations 14
and 15 apply.
Case study
An X52-grade, 26-in. OD crude pipeline under constant
pressure served as the test bed to study the effect of the correlation between the variables of the limit state function and
the number of corrosion defects on the reliability of a corroded pipeline by using several failure pressure standards (OGJ,
Jan. 5, 2015, pp. 80-85). Table 2 shows the input parameters
66
170102ogj_66 66
(LSF variables) encompassing correlated and uncorrelated

variables for single and multiple corrosion defects.
Failure probabilities
This article assumes that corrosion defect dimensions (L0
and d0) are correlated, since they are controlled by the same
defect. Fig. 1a shows a variation in the pipeline failure probability based on the correlation coefficient (where = 0 represents the case of the independent variables and = 0.3,
0.6, and 0.9 were chosen as dependent variable) for different
standards. An increase in the correlation coefficient corresponds to an increase in the failure probability.
Figs. 1b and 1c represent the variation in PF calculated by
the Monte Carlo method, with uncorrelated variables (where
= 0) corresponding to Fig. 1b and correlated variables (
= 0.6) shown in Fig. 1c in terms of time, T, and for different failure pressure standards. Failure probabilities PF in the
case of = 0.6 are always higher than those when = 0. The
failure probabilities given by FITNET FFS and Shell-92 are
12/22/16 1:35 PM
TECHNOLOGY
References
FAILURE PROBABILITY, FIVE CORROSION DEFECTS
Failure probability
FIG. 2
By correlation coefficient
FIG. 2a
0.1
0.01
0.001
0.3
0.6
0.9
Correlation coefficient
Failure probability
Correlation coefficient = 0
FIG. 2b
0.1
0.01
0.001
0
12
Time, years
Failure probability
higher than those given by other standards, and the B31G standard provides
the most nonconservative results. The
Netto-Teixeira standard becomes more
non-conservative after T = 4 years of
service.
When dealing with a number of corrosion defects (n = 5 in this example)
their depths, d0i, (d01, d02, d03, d04. and
d05) are both uncorrelated and correlated (Equation 16). Fig. 2a shows that
the failure probabilities with correlated variables ( = 0.3, 0.6 and 0.9) are
smaller than those with independent
variables ( = 0). This means that the
independent variables case gives more
conservative results.
In the range of correlation coefficients between 0 and 0.3, the decrease in failure probabilities is important and between 0.3 and 0.9 it is
unimportant. Fig. 2b and 2c represent
the two cases (uncorrelated = 0 and
correlated = 0.6 variables) in terms
of time, T, again for different failure
pressure standards. Results were similar to those found when dealing with
a single defect. In the case of several
corrosion defects, B31G standard was
the most nonconservative, followed by
the Netto-Teixeira standard after T = 4
years for = 0 and T = 6 years for
= 0.6. FITNET FFS and Shell-92 standards gave higher failure probabilities,
as confirmed in previous work.
For a single corrosion defect when
L0 and d0 are correlated, the larger the
correlation coefficient the more conservative the results obtained, compared
with the case where L0 and d0 are independent, which gives nonconservative
results. In the case of five corrosion defects non-correlation gives conservative
results compared with correlation.
The failure probability over time is
more important for the Fitnet FFS and
Shell-92 standards, making them more
conservative than B31G and Netto-Teixeira after roughly 4 years. The modified
B31G, DNV F101, and PCORRC standards give average values.
Correlation coefficient = 0.6
FIG. 2c
0.1
0.01
0.001
0
12
Time, years
B31G
B31G M
DNV F 101
PCORRC
Shell-92
Netto-Teixera
FITNET FFS
1. ASME-B31G, Manual for determin-
170102ogj_67 67
67
12/22/16 1:35 PM
TECHNOLOGY
ing the remaining strength of corroded pipelines: A supplement of
ASMEB31G Code for pressure piping, New York, ASME, 1991.
2. ASME-B31G, Manual for determining the remaining strength
of corroded pipelines: A supplement of ASME B31G code for pressure piping, New York, ASME, 1995.
3. Teixeira, A.P., Soaresa, C.G., Netto, T.A., and Estefen, S.F.,
Reliability of pipelines with corrosion defects, International Journal
of Pressure Vessels and Piping, Vol. 85, No. 4, April 2008, pp.
228237.
4. Corroded pipelines, recommended practice, RP-F101, Det
Norske Veritas, Elendom AS, 1999.
5. Leis, N., Stephens, D.R., An alternative approach to assess
the integrity of corroded line pipe, Prat I current status and II alternative criterion, International Offshore and Polar Engineering Conference, Honolulu, May 25-30, 1997.
6. Klever, F.J. and Stewart, G., New developments in burst
strength predictions for locally corroded pipes, International Conference on Offshore Mechanics and Arctic Engineering, Copenhagen,
June 18-22, 1995.
7. Kocak, M., Webster, S., Janosch, J.J., Ainsworth, R.A., and
Koers, R., FITNET fitness-for-service procedure, Vol. 1, GKSS
Research Center, 2008
8. Qian, G., Niffenegger, M., and Li, S., Probabilistic analysis of
pipelines with corrosion defects by using FITNET FFS procedure,
Corrosion Science, Vol. 53, No. 3, March 2011, pp. 855-861.
9. Qian, G., Markus, N., Zhou, W., and Shuxin, L., Effect of correlated input parameters on the failure probability of pipelines with
corrosion defects by using FITNET FFS procedure, International
Journal of Pressure Vessels and Piping, Vol. 105-106, May-June
2013, pp. 19-27.
10. Qian, G., Niffenegger, M., Karanki, D.R., and Li, S., Probabilistic leak-before-break analysis with correlated input parameters,
Nuclear Engineering Design, Vol. 254, January 2013, pp. 266-271.
11. Leon, D.D. and Macias, O.F., Effect of spatial correlation
on the failure probability of pipelines under corrosion, International
Journal of Pressure Vessels and Piping, Vol. 82, No. 10, October
2005, pp. 123-131.
12. Caleyo, F., Gonzalez, J.L., and Hallen, J.M., A study on the
reliability assessment methodology for pipelines with active corrosion
defects, International Journal of Pressure Vessels and Piping, Vol.
79, No. 1, January 2002, pp. 77-86.
13. Sheickh, A.K. and Hansen, D.A., Statistical modeling of
pitting corrosion and pipeline reliability, Corrosion, Vol. 46, No. 3,
March 1990, pp.190-196.
14. Ahammed, M. and Melchers, R.E., Reliability estimation
of pressurized pipelines subject to localized corrosion defects,
International Journal of Pressure Vessels and Piping, Vol. 69, No. 3,
December 1996, pp. 267-272.
15. Ahammed, M., Probabilistic estimation of remaining life of
a pipeline in the presence of active corrosion defects, International
Journal of Pressure Vessels and Piping, Vol. 75, No. 4, April 1998,
pp. 321- 330.
16. Der Kiureghian, A. and Liu, P., Structural reliability under
incomplete probability information, Journal of Engineering Mechan-
68
170102ogj_68 68
ics, Vol. 112, No. 1, January 1986, pp. 85-104.

17. Chang, C., Tung, Y., and Yang, J., Monte Carlo simulation for
correlated variables with marginal distribution, Journal of Hydraulic
Engineering, Vol. 120, No. 3, March 1994, pp. 313-344.
The authors
Mohamed el Amine Ben Seghier (mohamed.
el.amine.ben.seghier@gmail.com) is a PhD
student at University of Boumerdes, Algeria. He
holds a masters degree (2015) in transportation
and distribution of hydrocarbons. He is a member
at the University of Boumerds Laboratory of
Reliability of Hydrocarbon Equipment and Materials. His research interests include pipeline integrity, reliability and
rehabilitation, and corrosion.
Mourad Bettayeb (Bettayeb_mourad@yahoo.
fr) is a researcher and assistant professor at the
University of Boumerds Laboratory of Reliability of Hydrocarbon Equipment and Materials. He holds a graduate degree in aeronautic
engineering from the University of Blida, Algeria.
After working for a short time in that industry, he
entered the University of Liege, Belgium, where he received a
European diploma in applied science, advanced solid mechanics,
and structures calculation. Bettayebs research interests include,
oil and gas equipment reliability, pipeline reliability and rehabilitation, and materials.
Elahmoune Bouali (lfep.umbb@gmail.com) is
a researcher and director at the University of
Boumerds Laboratory of Reliability of Hydrocarbon Equipment and Materials. He holds a
graduate degree in hydrocarbon engineering from
the University of Boumerds and a PhD in safety
of integrity engineering systems (1987) from the University of
Oil and Gas in Moscow, Russia. His research interests include
reliability systems and optimization, maintenance, intelligent
systems, oil and gas equipment reliability, pipeline reliability, and
vibration detection and isolation.
Mohamed Gaceb (Gaceb_m@yahoo.fr) leads a
research team on materials behavior and technology at the University of Boumerds. He graduated in mechanical engineering (1980) from the
University of Sheffield, UK, and received his PhD
(1985) in the same field from Sheffield Hallam
University. From 1986-89 he worked as head of the fracture mechanics subdivision at the Research Centre for Energy Conversion
Systems in Algiers, moving from there to become a senior lecturer
at the University of Blida until 1998. His research interests include
component integrity, materials behavior and technology, fracture
mechanics, coatings, welding and non-destructive testing, maintenance, oil and gas equipment reliability, and pipeline reliability.
12/22/16 1:35 PM
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170102ogj_69 69
12/22/16 1:35 PM
TECHNOLOGY
Study assesses floating roof designs

against rain, pontoon puncture
Ahmed Saad Noaman
Petrojet
Cairo
Mohamed Elsamnody
Ashraf Ghorab
Ain Shams University
Cairo
TRANSPORTATION
Reducing the section-area of a crude storage tanks floating

roofs pontoons by increasing the number of pontoons inside
the roof is the best way to lower the likelihood of its sinking.
Roof design, however, must consider that the pontoons area
is limited by the space required for welders to enter it.
Most storage tanks work at atmospheric pressure. API
620 sets the maximum allowable pressure for storage tanks
at 15 psi and if pressure is greater than this it is a pressure

vessel.1 2 As the liquid level inside a floating-roof tank changes due to filling, emptying, contraction and expansion, the
roof is designed to move with the liquid.
Floating roof tanks minimize product loss due to evaporation by eliminating the free space above the stored liquid
and minimize fire hazard by decreasing volatile gases inside
the tank.
Roof design
Pontoons supply the buoyancy to single-deck roofs.3 Single-deck floating roofs decks are designed to be in contact
FLOATING ROOF DESIGN
Based on paper published in the International Journal of Engineering Development and Research
Tank diameter, m
Tank height, m
Roof outside diameter, Do; m
Material
Corrosion allowance, mm
Liquids minimum specific gravity
Liquids maximum specific gravity
Table 1
40
23
39.6
SA 283 Gr.C
3
0.7
1
NORMAL OPERATION*
FIG. 1
Product level
Deck weight
Deck plate
Deck level
Buoyancy
Backslope volume
*Roof weight = 74,000 kg.
Volume displaced = 74,000 kg/700 (product density) = 105.7 cu m. Backslope volume = 50 cu m.
Roof area = 1,232 sq m. Flotation level = (105.7 50)/1,232 = 0.045 m = 45 mm.
OPERATION, 250 MM RAIN*
FIG. 2
Deck weight +
250 mm rain
Product level
Deck level
Deck plate
Backslope volume
Buoyancy
*Roof weight = 74,000 kg. Rain weight = 1,000 (water density) 0.25 (water depth) 992 (deck area) = 248,000 kg.
Volume displaced = (74,000 + 248,000)/700 = 460 cu m. Backslope volume = 50 cu m.
Roof area = 1,232 sq m. Flotation level = (460 50)/1,232 = 0.332 m = 332 mm.
70
170102ogj_70 70
12/22/16 1:35 PM
TECHNOLOGY
with the storage liquid during normal operation, regardless
of service.
A double-deck roof consists of upper and lower steel
membranes separated by a series of bulkheads subdivided
by a radial bulkhead. Double-deck roofs are more rigid and
the air gap between the upper and lower deck plates insulates against solar heat reaching the product during hot
weather.
This article proposes a load modifying method for the
stress and deflection analyses of floating roofs, developing
formulations of deformations and loads according to the
equilibrium analysis of the floating roof. These formulations
then allow generation of a load modifying method to con-
FLOATING ROOF GEOMETRY
Table 2
Outer rim height, Hor; mm

Inner rim height, Hir; mm
Pontoon width, w; mm
Rim gap; mm
Number of pontoons, N
Outer rim diameter, or; mm
Inner rim diameter, ir; mm
Bulkhead outer height, Boh; mm
Bulkhead inner height, Bih; mm
Bulkhead width, Wb; mm
Outer rim Thk, Tor; mm
Corroded outer rim Thk, Tor; mm
Inner rim Thk, Tir; mm
Top pontoon Thk, Ttp; mm
Bottom pontoon Thk, Tbp; mm
Outer rim height, Hor; mm
Height above deck level, Hsub; mm
Corrosion allowance, mm
950
550
2,000
200
20
39,600
35,544
935
535
1,972
10
7
16
5
8
950
550
3
EQUATIONS
qa 4
Et 4
= K1 t + K2 Q t V
y
= K3 t + K3 Q t V
Get the deflection (y) fromEquation1
and then get the stressesin center and
edge from Equation 2
va 2
Et 2
x g/deck area
k1, k2, k3, and
k4 are constants
Downward force = weight onroof
buoyancy force = deck area #
floatation height # t product
(1)
(2)
A = | e = 1 A e = | e = 1 A e y A dA
n
Where:
t = plate thickness
a = outer radius of plate
q = unitlateralpressure =
KE =
1
2
yv
dm =
1
2
(3)
yv
tdv =
t
2
Where v (x, y) = E v e HT !N (x, y)$T
yv
tdA
(4)
CASE 1: NORMAL CORRODED CONDITION CURVES
FIG. 3
Stress curve
250
40
200
35
von Mises, MPa
Static displacement, mm
Deflection curve
150
100
50
0
0.0
25
20
0.2
0.4
0.6
Parametric distance
170102ogj_71 71
30
0.8
1.0
15
0.0
0.2
0.4
0.6
Parametric distance
0.8
1.0
71
12/22/16 1:35 PM
TECHNOLOGY
CASE 2: CORRODED CONDITION CURVES, 50 MM
FIG. 4
Stress curve
250
45
200
40
von Mises, MPa
Deflection curve
150
100
30
25
50
0
0.0
35
0.2
0.4
0.6
Parametric distance
0.8
20
0.0
1.0
0.2
0.4
0.6
Parametric distance
0.8
FIG. 5
Stress curve
Deflection curve
50
von Mises, MPa
300
200
100
0
0.0
0.2
0.4
0.6
Parametric distance
0.8
SA283 STEEL, GRADE C
1.0
Table 3
Tensile strength, ultimate; MPa

Tensile strength, yield; MPa
Design yield strength, MPa
Elongation at break, %
Bulk modulus, GPa
Shear modulus, GPa
Poissons ratio
Density, kg/cu m
380-485
205
136
25
160
80
0.25
7,850
POST-CORROSION VALUES*
Table 4
Case number
H, mm
q, newton/sq m
1
2
3
4
5
45
103
160
275
332
422
514
613
805
904
*H = (V displacement -V under deck level)/area roof. q =unit lateral pressure = (downward force - buoyancy force) g/deck area.
72
170102ogj_72 72
1.0
40
30
20
0.0
0.2
0.4
0.6
Parametric distance
0.8
1.0
duct a nonlinear analysis of floating roofs with finite element simulation. The analysis is developed through a series
of iterations until a solution is achieved within the error tolerance.
This article also studies whether the thermal stress on
the floating roof could cause damage by measuring strain
and temperature measured on an actual tanks floating roof
with fiberoptic gauges. Thermal stress analysis and fracture
estimation determined thermal stress on the floating roof to
be relatively small and incapable of causing an initial crack.
Temperature variation, however, could affect crack propagation.
Applying integrated variational principles to the large deflection analysis of floating roofs, this article examines the
significance of the flexural and membrane components in
deck-plate formulations, particularly the compatibility of
deformation between floating roof and supporting liquid.
12/22/16 1:35 PM
TECHNOLOGY
FIG. 6
Deflection curve
Stress curve
60
50
von Mises, MPa
300
200
100
40
30
0
0.0
0.2
0.4
0.6
Parametric distance
0.8
20
0.0
1.0
0.2
0.4
0.6
Parametric distance
0.8
1.0
FIG. 7
Deflection curve
Stress curve
70
60
von Mises, MPa
300
200
100
40
30
0
0.0
0.2
0.4
0.6
Parametric distance
0.8
Tank dimensions
Tables 1-3 describe the studied tank, a vertical cylindrical oil
storage tank featuring an external single-deck floating roof
and filled with 700-kg/cu m density oil. The tank measures
40 m in diameter and 23 m tall. It was 100% full when
tested.
20
0.0
1.0
Different assumptions about deck plate formulation commonly used in the literature result in considerably different deflection and stress patterns on the floating roof. But
modeling the deck plate as a flexural element rather than
a membrane by eliminating the need for nonlinear analysis
gives reasonable results for deflections and stresses in the
deck plate.
170102ogj_73 73
50
0.2
0.4
0.6
Parametric distance
0.8
1.0
ROARKS FORMULAS, CORRODED

CONDITION RESULTS
Case number
1
2
3
4
5
Maximum
deflection, mm
Table 5
Stress at edge,
MPa
251
264
280
307
319
41
45
51
61
66
Stress at center,
MPa
72
80
90
107
116
LINEAR STATIC ANALYSIS RESULTS,

CORRODED CONDITION
Table 6
Case number
1
2
3
4
5
Maximum stress, MPa

1,050
1,280
1,520
2,000
2,250
73
12/22/16 1:35 PM
TECHNOLOGY
PUNCTURED ROOF PROPERTIES
FIG. 8
Center line
Center of gravity
Compartments, A = 0
Top
Bottom
Y-Bar
R
Y
ANALYSIS COMPARISON, CORRODED CONDITION
FIG. 9
2,500
Maximum stress, MPa
Linear
2,000
1,500
1,000
500
Roarks formulas
Non-linear
0
0
3
Cases
ANALYSIS VS. PRODUCT DESIGN
FIG. 10
Maximum stress, MPa
160
140
Product-design stress
120
Roarks formulas
100
80
Non-linear
60
40
0
0
170102ogj_74 74
Buoyancy acting on a deck is related

to submergence of the deck above
backslope. The height of submergence
above backslope is related to the size
of the backslope. Floatation depth of
the deck is related to the weight of the
deck. The ideal condition is for buoyancy forces to equal deck loads or, in
terms of floatation, for the submergence above backslope to equal floatation depth of the deck.
If the backslope is too large, the
floatation depth of the deck is greater
than the submergence above backslope
(weight of deck is greater than buoyancy forces) and the deck floats lower
in the product than the pontoon, potentially creating a vapor space. If the
backslope is too small, the floatation
depth of the deck is smaller than the
submergence above backslope (weight
of deck is less than buoyancy forces).
The deck floats higher in the product
than the pontoon which can cause
rainwater drainage towards the pontoon.
Both Case 1 and Case 2 calculate
the flotation level for a corroded roof
pontoon: Case 1 under normal operation with no rain on the roof and Case
2 with 250 mm of rain on the roof.
Figs. 1 and 2 represent each case respectively.
The maximum submerged height
above deck level, Hsub, is 550 mm, so
the design is safe even in Case 2s condition.
Rainfall, stress, deflection
20
74
Buoyancy calculations
3
Cases
A second study at the same tank compared five different loads applied to
the corroded deck plate by using three
different analysis methods to study deflection and stresses. The first method
applied the equations of stresses and
deformations on thin plates derived
according to Roarks formulas for
stress and strain.4 The second method
used numerical nonlinear finite element analysis by applying the load
gradually and studying the effect of
the large displacement on the material
behavior in deformation and stress.
12/22/16 1:35 PM
TECHNOLOGY
THREE PONTOONS, DECK PLATE PUNCTURED*

Pontoon
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Deck
Totals
Area
0.0
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
11.8
0.0
0.0
0.0
200.8
Table 7
Centerline, degree
9
27
45
63
81
99
117
135
153
171
189
207
225
243
261
279
297
315
333
351
38.5
36.6
33.2
28.4
22.8
16.8
11.2
6.4
3.0
1.1
1.1
3.0
6.4
11.2
16.8
22.8
28.4
33.2
36.6
38.5
19.8
415.7
Area*Y
0
432
392
335
269
198
132
76
35
13
13
35
76
132
198
269
335
392
0
0
0
3,306.0
D
21.8
20.0
16.5
11.8
6.1
0.2
5.4
10.2
13.6
15.5
15.5
13.6
10.2
5.4
0.2
6.1
11.8
16.5
20.0
21.8
3.2
--
A*d2
0.0
4720.0
3213.0
1643.0
439.0
0.5
344.0
1228.0
2183.0
2835.0
2835.0
2183.0
1228.0
344.0
0.5
439.0
1643.0
3213.0
0.0
0.0
0.0
28,491.0
*Calculation of floating roof centroid: Y-bar = Sum of A*Y / Sum of Areas = 16.5 m, R = 19.8 m, e = R- Y-bar = 3.3 m. Calculation of the second moment of inertia: I = sum of A*d2 for all
compartments = 28,491 m4. Calculation of the maximum and minimum pressure: Sbot= I/Y-Bar = 1,727 cu m, Stop = I / (R+e) = I / (roof diameter - Y-Bar) = 1,233 cu m. Weight = 105,000
kg, moment = W*e = 346,500 kg.m, maximum pressure = W/total area + M/Stop = 804 kg/sq m, minimum pressure = W/total area - M/Sbot = 322 kg/sq m. Calculation of the maximum and
minimum submerged height: H = W/(total area * liquid density) = 0.747 m, Hmax = h + M/( Stop*liquid density) = 1.148 m, Hmin = h - M/(Sbot * liquid density) = 0.460 m.
Hmax = 1,148 mm > floating roof height = 950 mm. Unsafe.
The third method was the numerical application of linear finite element analysis with the deck loaded to 100% without
consideration of the large deflection effect on the material.
The five different load cases were:
Case 1: Normal Case, with no rain on the roof.
Case 2: 50 mm of rain on the roof
Case 3: 100 mm of rain on the roof.
When plate deflection becomes larger than one-half plate
thickness, as may occur in thin plates, the surface of the
middle becomes strained and the stresses in it cannot be
ignored because they change the behavior of the plate deflection. This stress is called diaphragm stress. It allows the
plate to carry a part of its load as a diaphragm in direct tension. This tension is balanced by radial tension at the edges
if the edges are held or by circumferential compression if the
edges are not horizontally restrained.
In thin plates, this circumferential compression can lead
to buckling. When large deflection occurs, the plate is stiffer
than calculated by the ordinary theory of small deflection
and the load-stress relations and load-deflection relations
become nonlinear. Stresses for a certain load are less than
indicated by the ordinary theory of small deflection.
Equations 1-2 give formulas for stress and deflection in
circular plates when middle-surface stress is taken into account. These formulas are used to achieve accurate results
whenever maximum deflection exceeds half of plate thickness.4 Table 5 summarizes results obtained by applying
Roarks formulas for stress and strain.
170102ogj_75 75
Non-linear analysis
Solidworks simulation program allowed finite-element analysis (FEA) of the deflection and stresses on the deck plate.5
FEA replaces any complex shape with the summation of a
large number of very simple shapes that are then combined
to model the original shape. Alternatively we could split the
area into a set of triangles (cover the shape with a mesh) and
sum the areas of the triangles (Equation 3). Using Equation
4 to integrate over the differential masses yields the kinetic
energy of the planar body of t thickness.
The linear theory assumes small displacements. It also
assumes that the normal-to-contact areas do not change direction during loading, therefore applying the full load in
one step. This approach may lead to inaccurate results or
convergence difficulties in cases where these assumptions
are not valid.
A large displacement solution takes more time and resources than the small displacement solution but gives more
accurate results. The large displacement solution is needed
when the acquired deformation significantly alters the structures stiffness (ability of the structure to resist loads). The
small displacement solution assumes that the stiffness does
not change during loading. The large displacement solution
assumes that the stiffness changes during loading so it applies the load in steps and updates the stiffness for each step.
Figs. 3-7 summarize the results obtained by non-linear
large displacement analysis.
Linear static analysis

Researchers applied all loads slowly and gradually until
they reached their full magnitudes, after which they were
held constant. This approach allowed neglect of inertial and
75
12/22/16 1:35 PM
TECHNOLOGY
damping forces caused by negligible accelerations and velocities.
Time-variant loads that induce considerable inertial or
damping forces may warrant dynamic analysis. Dynamic
loads change with time and in many cases induce considerable inertial and damping forces that cannot be ignored.
The relationship between loads and induced responses is
linear. The linearity assumption in the model can be made
to comply with Hookes law. Stress is directly proportional
to strain and the induced displacements are small enough to
ignore the change in stiffness caused by loading. Boundary
conditions do not vary during load application. Loads must
be constant in magnitude, direction, and distribution.
Table 6 describes the linear static analysis.
Punctured pontoons
The elastic flexure formula, buoyant forces acting on the effective area of roof and resisting its weight, provides the basis for determining roof buoyancy.6 Fig. 8 shows the punctured roofs properties, including its center of gravity and
moment of inertia. The same approach was used in studying
the punctured roofs buoyancy under three different conditions:
Deck plate and one pontoon punctured.
Deck plate and two pontoons punctured.
Deck plate and three pontoons punctured.
Calculation of the centroid occurred first, followed by
the moment of inertia, the maximum and minimum pressure acting on the floating roof due to the puncture, and the
maximum and minimum submerged height of the floating
roof due to its weight and tilt.
Fig. 9 shows the wide differences between deck plate deflection using the first two methods (Roarks formulas and
nonlinear FEA) and the third method (linear FEA). The numerical linear FEA method is not applicable because it ignores both large displacements and deformations effects on
strain, deflection, and stresses, and therefore yields much
higher results.
Nonlinear FEA is most applicable to designing floating
roof decks, simulating loading cases as they happen in reality. Roarks formulas give higher results but can be used for
quick deck plate analysis. Linear FEA is not applicable and
cannot be used to study floating roof deflection.
API 650 (Section 5, Table 5-2) puts the product design
stress of material A283 Gr.c at 137 MPa. To protect the floating roof from failure, maximum stress must not exceed this
value. Fig. 10 shows the design presented in this article as
able to carry the five different load cases without failure,
even under corroded conditions.
The results show differences between using Roarks formulas of large deflection and nonlinear FEA because the
accuracy of the nonlinear method is much higher than
Roarks. Both methods, however, are safe.
To increase floating roof-deck safety:
76
170102ogj_76 76
Use another materiel with a higher product-design

stress value, such as A516 Gr.70 or A573 Gr.70.
Increase deck-plate thickness.
Apply suitable coatings to prevent corrosion.
The tested floating roof remained floating after the puncture of two adjacent pontoons and deck plate corrosion but
sank when the number of punctured pontoons increased to
three.
References
1. API Standard 620, Design & Construction of Large,
Welded, Low-Pressure Storage Tanks, American Petroleum
Institute, Washington, 1996.
2. Long, B. and Garner, B., Guide To Storage Tanks &
Equipment, Professional Engineering, Bury St. Edmunds,
UK, 2004.
3. API Standard 650, Welded Steel Tanks For Oil Storage, American Petroleum Institute, Strategies For Todays
Environmental Partnership, Washington, 1998.
4. Roark, R.J. and Young, W.C., Roarks Formulas For
Stress and Strain, McGraw-Hill, New York, 1989.
5. Planchard, D.C., Official Guide To Certified Solidworks
Associate Exams, CSWA, CSDA, CSWSA-FEA, Solidworks
2012-15, SDC Publications, Mission, Kan., 2014.
6. Hibbeler, R.C., Mechanics of Materials, Prentice Hall,
Boston, 2010.
The authors
Ahmed Saad Noaman (ahmedsaad13@gmail.com) is a mechanical engineer at Petrojet, Cairo. He holds a BS (2008) and
MS (2016) in mechanical engineering from Ain Shams University, Cairo.
Mohamed Elsamnody (mohamed_elsamanoudy@eng.asu.edu.
eg) is a professor at Ain Shams University, from which he holds
a PhD.
Ashraf Ghorab (ashraf_ghorab@eng.asu.edu.eg) is an assistant
professor of engineering at Ain Shams University, from which he
holds a PhD (1993).
12/22/16 1:35 PM
JANUARY
2017
VOL
63;
NO.
OGPE.COM
OIL, GAS
&petrochemequipment
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
Special Report: Equipment, Products, Systems & Services for:
Refining, Petrochem, Gas Processing

Gas detection alarm and control
Oldham MX 32 alarm and control
systems meet SIL1 requirements
and are compact.
The low-profile designs monitor
a wide range of gases and use the
same platform as MX 43.
MX 32 manages both digital lines
and analog channels. Its designed
to cover all needs for a broad range of gas monitoring applications. The alarm and control systems digital technology allows
up to eight detectors to be distributed on two lines. It also allows two inputs for Wheatstone bridge sensors.
Tyco Gas & Flame Detection: The Woodlands TX
For FREE Information, select #1 at ogpe.hotims.com
Fast, consistent mud properties analysis

New MudChecker Drilling Mud Analyzers deliver fast, consistent mud properties analysis during drilling and completion.
Incorporating the latest handheld technology, the instruments
offer a faster alternative to conventional retort and titration testing, its declared.
The battery powered analyzer
is reported to be the first electronic diagnostic device of its
type for fast, simple, and accurate drilling fluid oil, water, solid,
and salt content measuring.
Patented sensitive radio-frequency technology enables fast
drill site deployment.
MudChecker also features an integral sensor probe for accurate, real-time, in-field sample tests with fast oil, solid,
or water volumes percentage data display on an integral LCD.
Salunda Limited: Oxfordshire UK
170102ogj_P1 1
Relief well injection spool is new

to boost kill mud injection rates
Relief Well Injection Spool
is newly developed to pump
up to 200 barrels per minute
of kill mud through a single
relief well.
RWIS utilizes multiple vessels in this application as opposed to the conventional
method of multiple relief
wells, notes the makers.
The new well control
equipment installs on a relief
well prior to intersecting the
blowout well. It positions between the wellhead and BOP to
effectively become a subsea injection manifold providing additional inlets for pumping kill mud.
Trendsetter Engineering & Add Energy: Houston
Setting tools = better safety, efficiency

standards for intervention, abandonment
iSet
electro-hydraulic
setting tools are designed
to provide a safer, more
reliable, and cost-effective method to set bridge
plugs, packers, gauge
hangers, and straddles. Unlike traditional tools, iSet with Cyclops touchscreen technology does not require explosive
setting charges or demand special permits for use / transport.
Probe Holdings Incorporated: Houston & Aberdeen
BONUS
DISTRIBUTION
SPE Hydraulic Fracing Conference

The Woodlands TX January 24-26
12/22/16 1:35 PM
OGPE.com
Products
AST construction, repair service opens

Gulf Coast Div., Texas Gulf Coast offices
In its ninth year of providing above ground petroleum storage tank construction and repair, this company opens a new
Gulf Coast Division with Nederland and League City Texas business units. They are
solely dedicated to providing
repair and maintenance services to customers along the
Gulf Coast.
API 650 new tank construction, API 653 routine and
emergency repairs, floating
roof replacement seals, interior/exterior coatings application,
tank foundations, and piping installation are offered to terminal owners and engineering firms across all 50 states. Additional details are yours free for the asking.
Alliance Tank Service LLC:
Cushing OK, Nederland and League City TX
Refinery software launched to improve

operational excellence, profitability
RefineryWise for The Oil & Gas Industry software is announced to transform refiners business to achieve greater operational excellence and profitability.
Its newly developed to improve visibility into contextualized, actionable data from the process automation layer
through the enterprise business system layer, and from crude
feed planning to final product blending, its noted.
Schneider Electric Software: Lake Forest CA
I/O modules bridge office/plant floor with

new EtherNet/IP and RESTful API support
A major firmware update is announced for ioLogik
E1200 remote I/O modules. It introduces support
for EtherNet/IP and a RESTful API to offer a highly
reliable, cost-effective alternative to expensive and
proprietary I/O modules while interfacing easily
with IT systems.
With such automation benefits as compact design, peer-to-peer communications, and ability to
create daisy chain networks, ioLogik E1200 series
upgrade offers an even more versatile multi-lingual tool. This
brings I/O data from the plant floor into nearly any IT platform
or system, its noted.
The firmware-updated modules are also available with a
wide range of input and output types.
MOXA: Brea CA
P2
170102ogj_P2 2
OG&PE
Publisher
Editor
Production Director
Digital Product Manager
Production Manager
Art Director
Digital Audience Development Manager
Social Media Marketing Analyst
Marketing Manager
Jim Klingele
J.B. Avants
Charlie Cole
Kristine Duran
Shirley Gamboa
Clark Bell
Jesse Fyler
Anna Alaback
Katherine Nondorff
EDITORIAL OFFICES
Oil, Gas & Petrochem Equipment
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
SALES OFFICES
North America
1421 South Sheridan Road, Tulsa OK 74112

201-374-1911
Ed Tiscornia
EdT@PennWell.com
United Kingdom, Scandinavia, The Netherlands
and The Middle East
Graham Hoyle
+ 44 1934 733871
GrahamH@PennWell.com
Germany, Switzerland, Russia, Austria, and
Eastern Europe
Andreas & Wilhelm Sicking
49 0 2903-3385-70
WilhelmS@PennWell.com
Singapore
Michael Yee
+65 9616 8080
Yfyee@singnet.com.sg
Italy
Ferruccio & Filippo Silvera
Tel. 39 02 28 46716
info@silvera.it
France, Spain, Portugal, Belgium
and Southern Switzerland
Daniel Bernard
33 (0) 1 30 71 11 19
DanielB@PennWell.com
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33 4 94 70 82 63
StefaniaT@PennWell.com
Central & South America
Jim Klingele
713 621 9720
JimK@PennWell.com
For assistance with marketing strategy or ad creation,

please contact PennWell Marketing Solutions
Vice President Paul Andrews (240) 595-2352; pandrews@pennwell.com
CORPORATE OFFICERS
Chairman
Robert F. Biolchini
Vice Chairman
Frank T. Lauinger
President and Chief Executive Officer
Mark C. Wilmoth
Executive Vice President,

Corporate Development and Strategy
Jayne A. Gilsinger
Senior Vice President,

Finance and Chief Financial Officer
Brian Conway
Need Reprints of your ad or recent editorial?

Contact Foster Printing for a quote:
866 879 9144 / pennwellreprints@fosterprinting.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.
January 2017
12/22/16 1:48 PM
New Products & Services
OGPE.com
Electronic speed governors for use with

I/O function modules, stand-alone service
Advanced lidar helps mitigate air pollution

transport in oil, gas
GOV+ Electronic Speed Governor

is a new module in this companys
PLC+ product line. It provides closedloop speed control of an engine by
controlling an actuator.
The new modules communicate
to the PLCs to monitor and control
processes via Ethernet/IP or Modbus
TCP. The speed input pulse can come
from magnetic, Hall-effect, or other
active pickup.
A configurable 4-20mA or 0-10V
analog output signal can be used to control an actuator position to control speed. GOV+ incorporates ready, purging, starting, warmup, and running startup logic.
Altronic LLC, Hoerbiger Engine Solutions: Girard OH
Advanced Lidar WINDCUBE technology is introduced to the USA as a

powerful new way to resolve the critical
air quality management challenges facing North Americas industrial and commercial sectors.
It detects lower atmospheric wind
transport conditions and industrial
aerosol plumes simultaneously and in
real-time. This enables precise identification of source, location, distance, altitude, and dispersion rates of potentially hazardous emissions including those in oil and gas operations.
Complete WINDCUBE information is yours free.
NRG Systems: Hinesburg VT
Hazardous-area
LED floodlights
New flexible, energy-efficient
6125 series and 6525 series
LED floodlights are on the
market to serve Zone 1 and
Zone 2 respectively. They achieve 21,000 lm luminous flux in
versions with 210 W power consumption; 12,000 lm in 120W models.
With a 100 lm/W luminaire efficiency, models are designed
to be more efficient than conventional HID lights and to require significantly less maintenance.
R. STAHL: Waldenburg Germany
Modulating valve control VSD

Rotork Variable Speed Drive is designed
as a simple, versatile, and reliable solution for modulating valve control.
Rotary and linear versions provide a
high response rate and stable control with
minimal overshoot in midstream and
downstream uses. They operate part-turn
and globe valves or dampers. Fail in-place
or fail-safe open/close options are available.
The VSDs offer <0.1% positional accuracy with <0.1% of
full stroke repeatability. A wide range of status, alarm, and input/output signals can be configured with parameters stored in
non-volatile memory.
Linear thrust outputs are from 2,000 to 100,000 lb; rotary
torque outputs from 2,000 to 300,000 lbf-in.
Rotork Controls Incorporated: Rochester NY
New audible, visual signaling products

SignalTech audible and visual industrial signaling products are newly introduced.
A variety of strobe and LED
lights, multiple flash pattern
LED signals, audible/visual
combinations, electromechanical horns and bells plus motordriven sounders are among the new products offered.
Additional SignalTech specifics are yours free for the asking.
Federal Signal Corporation: University Park IL
New marine breakaway couplings service

packages launched
A new series of anti-pollution
and safety Marine Breakaway Couplings service
packages are available to improve the benchmark for offshore hydrocarbon transfer.
MBC4 packages will come in four options to provide customers of the companys field-verified MBCs a flexible range of
global service choices based on their operational requirements
and logistics.
The new packages include In-field Service, GTAC (Gall
Thomson Approved Certification) Engineer Visit, GT Approved Regional Service Centre and Return to GT UK Technology Centre all of which can be called upon for MBC
inspection, refurbishment, or resetting.
As a further step to improved and safe transfer of oil and
refined products minimized downtime and peace of mind
are important MCB4 benefits, its noted.
Gall Thomson: Great Yarmouth UK
January 2017
170102ogj_P3 3
P3
12/22/16 1:35 PM
OGPE.com
Products
New
Products & Services
Safe personnel transfer carrier
Condition monitoring software, adaptor
WAVE-4 personnel transfer carriers are

introduced to support safety with efficiency
improvement.
Theyre designed for standing passengers to
protect against four major personnel transfer
risks: vertical or lateral impact, falling, and immersion. Additional benefits include a small deck footprint, quick and easy
entry/exit, buoyancy, stretcher capacity, and self-righting in
case of immersion.
Reflex Marine: Aberdeen
Reciprocating compressor lubrication equipment condition

monitoring is enhanced with new Proflo USB-IR Adaptor and
Proflo Assist Software.
They read and transfer information from Proflo PF1 monitoring device which records average
cycle time for each 30-min block
of lubrication system operations.
This transmits to a Microsoft
Windows-based laptop, tablet,
or other USB -equipped device via infrared technology.
The accompanying Proflo Assist Software presents the cycle
time trend data to personnel for convenient condition-based
maintenance capabilities.
Compressor Products International: Stafford TX
Terminal box, enclosure high-density

cable transit devices
Applications with high cable
density and high demands are
served by Roxtec HD multicable transit devices.
One cut-out for a Roxtec
HD kit accommodates up to
32 armored or non-armored
cables to drastically reduce the amount of space required when
compared to 32 cable glands.
The devices AISI 316L acidproof, stainless steel frame and
components provide environmental protection to terminal
boxes and enclosures. They come in versions for potentially
explosive atmospheres as well as non-hazardous locations.
Roxtec International AB: Karlskrona Sweden
CO2, CO optical gas imaging cameras

Monitor and detect carbon dioxide and carbon monoxide gas
leaks with new EyeCGas CO2 and EyeCGas CO infrared
gas imaging cameras.
Both enable safe, efficient, cost-effective harmful gas detection and monitoring in remote and hazardous locations.
Their optical gas imaging technology
allows you to visualize leaks remotely
in less time and without reliance upon
detecting in close proximity, notes the manufacturer.
The infrared gas imaging designs give operators immediate
identification, source, and video record of gas leaks as low as
3% with pinpoint accuracy. This helps prioritize maintenance
and quickly repair leaks to shorten production downtime.
OPGAL: Karmiel Israel
HP/HT connectors for MWD, LWD, wireline

High pressure, high temperature Vortex Connector Series is
new and specifically designed for MWD, LWD, and wireline
applications.
They are cited to deliver exceptional protection of critical
electronics in harsh environments typical of oil and gas applications allowing customers to exploit more demanding
geographies and geologies with deeper drilling and fracing capabilities.
Vortex features a single way connector and a mating boot
kit. They utilize Hypertac hyperboloid contact technology for
protection at up to 35,000 psi and 200C. with high shock and
vibration resistance.
Smiths Connectors: Hudson MA
Coming in February:
Special Report: The newest, equipment,

products, systems, services for oil & gas
Maintenance & Plant Operations
OG&PE and OGPE.com

All Products All The Time:
Oil & Gas Journals Product Section
Free Information or literature Click the link

P4
170102ogj_P4 4
January 2017
12/22/16 1:35 PM
OGPE.com
New Products & Services
Resource to help streamline oil, gas,

energy company safety processes
Station = flexible gas delivery system for

analytical instruments
This supplier of tailored environmental, health, safety, and

quality software has launched a new resource to help oil, gas,
and energy companies streamline
their safety processes.
This free Streamlining EHS with
Sharepoint: Oil & Gas information
booklet and product brochure offers
information on the state of oil and
gas in 2016, how the firm supports
its oil and gas clients, and information on their safety modules along
with a case study.
The 18-page literatures seven
chapters also highight HSEQ for oil and gas, implementation,
ROI details, as wel as the Shawcor case history.
Pro-Sapien Software Ltd.: Glasgow UK
Eliminate regulator component

damage during cylinder change-out
with AURA Control Station and at
the same time reduce leak paths.
Designed to maximize efficiency
and precision in analytical instrumentation uses, the station provides
primary control for inlet pressure
up to 3,000 psig. This fully configurable design includes dualstage regulator, mounting bracket, plus flexible hose in a minimal footprint for limited-space installation.
AURA Gas Controls: Virginia Beach VA
For FREE Literature, select #250 at ogpe.hotims.com
New protective eyewear line launched

New Riley high performance safety glasses and goggles are
on the market to deliver the
perfect combination of comfort, protection, and style.
Designed particularly for
offshore eye safety, key developments include TempFLEX
flexible, Thermoplastic Elastomer side arm and temple tips for
grip security plus ear comfort. An inclinable temple mechanism, adjustable nose bridge, and length adjustable temples
offer a tailored fit. TECTON coating is available as standard
across the majority of the line.
Riley Eyewear: Manchester UK
Plungers reduce or eliminate shut-in

times, maximize production
Pad Sleeve Bypass Plunger reduces and even
eliminates shut-in times while maximizing production, its announced.
This padded version has more controlled travel
times than a traditional sleeve. It also allows for a
tighter seal in wells with tubing irregularities.
A Bridgeport Texas well was producing 5 bbl oil
and 500 Mcf gas using a traditional 9-in. sleeve
and a stainless steel ball. The 6,760-ft well had
slight tubing irregularities.
Pad Sleeve Bypass Plunger replaced the traditional tool. Three months later it had traveled 4,735 round
trips, consistently running 11.5 min per trip. It successfully
increased oil production by 40%; gas production by 10%.
PCS Ferguson, Dover Artificial Lift: Frederick CO
Welding gun with built-in fume extractor
Software turns smartphone or tablet

into condition monitoring data collector
The RoboVent Extractor welding gun with built-in fume

extraction at the tip is on the now market.
Its captures 90 to 95% of weld fumes at the source in a package just slightly larger than a
standard weld gun. Design is
such that fumes are captured
as soon as they are generated.
The lightweight, maneuverable handle and streamlined
nozzle offer maximized visibility and control. Its paired with a dust collector (also available from the maker) to collect and filter toxic fumes generated by manual welding. The RoboVent Extractor is intended
for MIG and GMAW welding processes that employ shielding
gases.
RoboVent: Columbus OH
The Machine Sentry condition monitoring system can now

be complemented with software that turns any Android or
Windows device into a condition monitoring data collector.
Machine Sentry mobile software installs on any of the
aforementioned to eliminate the need for custom-made
data
collection
devices.
Machine Sentry integrates
all condition monitoring
techniques and watchkeeping
data into a condition based
maintenance solution to provide effective maintenance
planning and reporting. It includes automatic fault diagnosis assistant to identify potential
rotating equipment issues.
AVT Reliability: Rotherham UK
January 2017
170102ogj_P5 5
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12/22/16 1:35 PM
OGPE.com
Products
2016
Product & Service Highlights/Review
Important New Oil & Gas Innovations OG&PE Announced in 2016

Ethernet gateways = simple, flexible
oil, gas devices connection over Wi-Fi
Tyco Gas & Flame Detection formed as

global solutions provider
MGate W5108 & W5208

industrial Ethernet gateways are announced as the
first to combine serial, Modbus RTU/ASCII/TCP, DNP3,
and Ethernet communication
over 802.11a/b/g/n Wi-Fi networks. They are designed to
flexibly simplify industrial devices connection over Wi-Fi where previously they would have
required multiple devices.
MOXA: Brea CA
With intentions to be the global

solutions provider of choice for all
entities with gas and flame detection needs, Tyco International announces formation of Tyco Gas &
Flame Detection. The new operating brand of Tyco Life Safety Products Division represents the culmination of integration activities since
Tycos acquisition of Industrial
Safety Technologies last year with
its combination of Detcon, Oldham, Gas Measurement Instruments (GMI) and Simtronics together with the gas and
flame detection portfolio of Scott Safety.
This free 20-page brochure provides complete information
on gas and flame detection specialties of the newly formed solutions provider.
Tyco Gas & Flame Detection, Tyco International:
Princeton NJ
LNG, gas processing and transmission

filtration applications
A variety of efficient filtration/separation applications are cited for
gas processing and transmission or
LNG operations in this free eightpage brochure.
These are achieved by thousands
of different filter elements developed by this manufacturer. They
are emphasized to deliver such optimized filtration/separation benefits
as increased process performance, decreased downtime, lower
maintenance costs, and improved operating efficiencies.
The literature illustrates and describes air and gas as well as
liquid filter elements, filter vessel internals, and services.
JONELL Filtration Group Company: Houston
Oilfield burner management systems

pressure control
Fisher pressure controls for oilfield burner management systems
are presented in this free brochure.
They help accomplish safe startup, operation, and shutdown at oil
and gas facilities. There they are
cited to reduce maintenance, improve up-time, and provide a safe
environment for fire tube vessels
and field personnel. Explained and
diagrammed are how the pressure
control solutions are essential.
Regulator Technologies, Emerson Automation Solutions:
McKinney TX
P6
170102ogj_P6 6
Upgraded analyzers = improved XRF PMI

A major SPECTRO xSORT handheld Xray Fluorescence Spectrometer upgrade
improves XRF analysis for positive material
identification directly applicable to refinery and petrochemical complex infrastructure integrity testing.
The newly upgraded 3.62-lb analyzer
inspects piping, vessels, and constructions
plus analyzes steels to precisely determine
chemical compositions and assure the right materials for a job.
AMETEK SPECTRO Analytical Instruments:
Kleve Germany & Mahwah NJ
Intrinsically safe field connects

serve multiple oil, gas duties
SPA2IS Programmable Alarm Trips
are announced for oil and gas extraction, petrochemical, and refining.
With built-in I.S. field connections, they help monitor, control, and measure signals in hazardous areas. Models have an
alarm solution that significantly reduces wiring, installation,
and maintenance costs, declares their manufacturer.
As a combination alarm trip and temperature transmitter,
SPA2IS includes built-in IS field connections for current/voltage, resistance temperature detectors, and thermocouples.
Moore Industries-International Incorporated: North Hills CA
January 2017
12/22/16 1:35 PM
OGPE.com
Advertiser Product & Service Followup + 2016 Review
December 2016 Advertiser Product & Service Followup

Companies featured here advertised their equipment, products, systems, or services in December 5 Oil & Gas Journals OG&PE
products section. These summaries give you an opportunity to receive free information or literature on leading manufacturers
and service providers oil and gas specialties. Go to OGPE.com Click Product Info (white typeface) at top. You will receive
prompt, complete response from these valued OG&PE media partners and/or be directed to their websites.
PROTG SG:
ULTRA-FLOW:
Newly introduced reusable single gas monitors are on the

market to provide one monitor, many gases, plus 15 swappable sensors.
PROTGE SG design and benefits include long life, replaceable lithium battery as well as advanced MasterDock II Technology. All models have global regulatory approvals.
Scott Safety: The Woodlands TX
ScottSafetyNation.com/Protege
Field-installed ULTRA-FLOW Centralizers / Paraffin Scrapers deliver full-circle wiping of tubing inside diameters.
Designed to provide more gripping force on sucker rods, the
downhole tools afford more fluid flow-by along with useful life
from longer vanes and bearing surfaces as well as positive wear
indicators.
Oilfield Improvements Incorporated: Broken Arrow OK
RodGuides.com
EDS-405A:
Newly announced as the managed switch that saves you money EDS-405A Ethernet Switch.
It matches or surpasses specs on similarly priced designs with regard to time and effort for configuration, maintenance, troubleshooting, or service. The ethernet switch configurations also include an impressive level of software and service support at no extra
charge to greatly reduce ongoing ownership costs.
MOXA: Brea CA
pages.moxa.com/savemoney
Product Innovations Announced in OG&PE / OGPE.com in 2016

API 610 midstream/downstream pumps
Roto-Jet RO-FT API 610 Pumps
are announced as between-bearing configurations applicable to
midstream and downstream refining, petrochemical, and chemical processing.
Specifically designed for demanding, low-flow high-head
services, models fully meet API 610 11th Edition. Their broad
operating range is achieved without generation of damaging
hydraulic forces during a process upset.
Weir Flow Control: East Kilbride UK
New high-sensitivity gas chromatograph

mass spectrometer
Outstanding qualitative and quantitative performance is announced for
new GCMS-QP2020 high-sensitivity gas chromatograph mass spectrometer.
Instruments comprise proprietary
multi-function ion source, patented high-speed scan control,
and new ultra-fast turbomolecular pump along with comprehensive databases and multiple sample introduction devices.
Complete spectrometer specifics are yours free on request.
Shimadzu Scientific Instruments: Columbia MD
AC-powered torque multipliers operate over 100 to 4,500 lb-ft

EvoTorque 2 alternating-current-powered torque multipliers are announced to provide outstanding accuracy, versatility, and easy operations.
The new generation tools are factory calibrated and certified to 3% accuracy regardless of fluctuating voltages. They operate over 100 to 4,500 lb-ft while measuring torque, torque and angle, and
torque audit mode for pretightened bolts. Both 110-v ac or 230-v ac versions are offered. The 23-lb
tools communication is via USB and Bluetooth 4.0 data transfer (Bluetooth Smart).
Up to 3,000 readings can be stored in EvoTorque 2s internal memory with time and date stamping.
EvoLog PC software manages data and tool configuration.
Norbar Torque Tools Incorporated: Willoughby OH For FREE Information, select #35 at ogpe.hotims.com
January 2017
170102ogj_P7 7
P7
12/22/16 1:35 PM
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Save $150 (USD) on Full Conference Registration when you register by April 16, 2017.
For its 21st year, PNEC continues to deliver a power-packed, technical program surrounding changes in key technologies and
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when millions of invested dollars are at risk. Network with your peers and exhibitors from leading technology companies at
this one-of-a-kind global event targeting:
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STATISTICS
IMPORTS OF CRUDE AND PRODUCTS
Districts 1-4
District 5
12-16
12-9
12-16
12-9
2016
2016
2016
2016
1,000 b/d
Total US
12-16
12-9
12-18*
2016
2016
2015
Total motor gasoline .............

Mo. gas. blending comp.....
Distillate...............................
Residual ..............................
Jet fuel-kerosine ..................
Propane-propylene ..............
Other ...................................
437
429
211
43
29
119
560
605
511
230
187
101
99
440
10
10
0
100
157
37
50
18
14
2
64
79
58
100
447
439
211
143
186
156
611
623
525
232
251
180
157
541
334
315
167
324
65
149
545
Total products ......................
1,399
1,662
354
321
1,754
1,984
1,584
Total crude ...........................
7,356
6,440
1,114
920
8,470
7,360
7,326
Total imports ........................
8,755
8,102
1,468
1,241
10,223
9,343
8,910
*Revised.
Data available at PennEnergy Research Center.
EXPORTS OF CRUDE AND PRODUCTS

Finished motor gasoline
Jet fuel-kerosine
Distillate
Residual
Propane/propylene
Other oils
Total products
Total crude
Total exports
NET IMPORTS
Total
Products
Crude
Total US
12-16-16
12-9-16
*12-18-15
1,000 b/d
795
1,131
472
275
189
142
1,130
1,321
1,205
259
283
296
842
902
711
1,573
1,433
1,017
4,874
5,259
3,843
557
485
500
5,431
5,744
4,343
4,794
(3,120)
7,914
3,600
(3,275)
6,875
Additional analysis of market trends is available

through OGJ Online, Oil & Gas Journals electronic
information source, at http://www.ogj.com.
OGJ CRACK SPREAD
12-23-16*12-25-15* Change Change,

$/bbl %
SPOT PRICES
Product value
Brent crude
Crack spread
66.86
53.53
13.33
FUTURES MARKET PRICES

One month
Product value
68.18
Light sweet crude
52.56
Crack spread
15.62
Six month
Product value
74.77
Light sweet crude
55.66
Crack spread
19.11
47.47
35.87
11.60
19.39
17.66
1.73
40.85
49.24
14.92
49.32
36.62
14.70
18.86
15.94
0.92
38.23
43.53
6.23
58.07
40.39
17.68
16.70
15.27
1.43
28.75
37.80
8.09
*Average for week ending.

Source: Oil & Gas Journal
4,567
(2,259)
6,826
*Revised.
Source: Oil & Gas Journal
CRUDE AND PRODUCT STOCKS

Motor gasoline
Blending
Jet fuel,
Fuel oils
PropaneCrude oil
Total
comp.
kerosine
Distillate
Residual
propylene
1,000 bbl
District
PADD 1 .....................................
PADD 2 .....................................
PADD 3 .....................................
PADD 4 .....................................
PADD 5 .....................................
14,636
149,313
245,690
23,997
51,813
61,985
51,109
79,509
7,768
28,365
57,015
44,267
69,447
5,467
26,251
12,084
6,610
15,032
668
8,973
65,639
29,787
42,361
3,769
11,960
10,513
1,243
25,375
251
4,078
6,464
24,804
57,752
1
3,519
Dec. 16, 2016 ..........................

Dec. 9, 2016 .............................
Dec. 18, 20152 ..........................
485,449
483,193
452,478
228,736
230,045
220,495
202,447
204,416
194,375
43,367
44,276
39,451
153,516
155,935
151,316
41,460
41,937
43,479
92,539
95,622
97,638
Includes PADD 5. 2Revised.

REFINERY REPORTDEC. 16, 2016

REFINERY
OPERATIONS
Gross
Crude oil
inputs
inputs
1,000 b/d
District
REFINERY OUTPUT
Total
motor
Jet fuel,
Fuel oils
Propanegasoline
kerosine
Distillate
Residual
propylene
1,000 b/d
PADD 1 ..............................................
PADD 2 ..............................................
PADD 3 ..............................................
PADD 4 ..............................................
PADD 5 ..............................................
1,082
3,798
9,049
597
2,367
1,080
3,798
8,964
600
2,217
3,268
2,658
2,473
306
1,520
73
242
887
33
397
363
1,143
2,870
185
561
46
43
217
9
76
151
401
976
1
170
Dec. 16, 2016 .....................................

Dec. 9, 2016 .......................................
Dec. 18, 20152 ....................................
16,893
16,703
16,541
16,659
16,474
16,469
10,225
9,958
9,601
1,632
1,704
1,751
5,122
5,008
4,937
391
427
386
1,698
1,729
1,697
18,459 Operable capacity

1
91.5 utilization rate
Includes PADD 5. Revised.

170102ogj_77 77
77
12/28/16 4:10 PM
STATISTICS
OGJ GASOLINE PRICES
OGJ PRODUCTION REPORT
BAKER HUGHES RIG COUNT
Price
Pump
Pump
ex tax
price*
price
12-21-16 12-21-16
12-23-15
/gal
(Approx. prices for self-service unleaded gasoline)
Atlanta ..........................
160.6
210.0
Baltimore ......................
171.1
222.1
Boston ...........................
169.0
214.0
Buffalo ..........................
164.6
225.7
Miami ............................
159.0
214.0
Newark ..........................
181.9
214.8
New York........................
189.8
250.8
Norfolk...........................
199.3
240.1
Philadelphia ..................
154.3
223.1
Pittsburgh .....................
171.3
240.1
Wash., DC......................
193.8
235.7
PAD I avg ..................
174.1
226.4
186.0
195.0
191.0
211.0
199.0
176.0
226.0
261.1
200.0
216.0
209.0
206.4
Chicago .........................
Cleveland ......................
Des Moines ....................
Detroit ...........................
Indianapolis ..................
Kansas City ...................
Louisville .......................
Memphis .......................
Milwaukee .....................
Minn.-St. Paul ...............
Oklahoma City ...............
Omaha ..........................
St. Louis ........................
Tulsa .............................
Wichita ..........................
PAD II avg .................
208.4
181.2
174.3
176.1
174.6
176.7
175.8
181.5
164.7
178.6
168.5
167.6
165.0
165.3
162.8
174.7
257.0
227.6
224.7
225.0
222.9
212.4
220.2
221.3
216.0
225.6
203.9
213.7
200.7
200.7
205.2
218.5
230.0
180.0
210.0
201.0
166.0
178.0
190.0
208.9
190.0
200.0
160.0
188.0
179.9
164.0
175.0
188.0
Albuquerque ..................
Birmingham ..................
Dallas-Fort Worth ..........
Houston .........................
Little Rock .....................
New Orleans ..................
San Antonio ...................
PAD III avg ................
167.6
168.0
164.7
160.4
162.8
163.0
164.6
164.4
204.9
207.2
203.1
198.8
203.0
201.4
203.0
203.1
189.9
177.9
179.9
180.9
187.9
182.9
180.9
182.9
Cheyenne.......................
Denver ...........................
Salt Lake City ................
PAD IV avg ................
174.2
176.9
163.8
171.6
216.6
217.3
211.7
215.2
190.8
185.7
210.0
195.5
Los Angeles ...................

Phoenix..........................
Portland ........................
San Diego ......................
San Francisco................
Seattle...........................
PAD V avg .................
Weeks avg. ..................
Nov. avg... .....................
Oct. avg.. ......................
2016 to date .................
2015 to date .................
241.9
181.5
169.5
211.9
216.9
191.0
202.1
176.5
171.1
176.3
165.4
195.1
300.9
218.9
219.0
270.9
275.9
253.9
256.6
223.2
217.8
222.9
212.1
242.4
290.0
204.5
225.0
283.9
286.0
247.0
256.1
202.2
216.8
229.5
2
12-23-16
12-25-15
1,000 b/d
12-23-16 12-25-15
Alabama............................................
Alaska ...............................................
Arkansas ...........................................
California ..........................................
Land................................................
Offshore ..........................................
Colorado ............................................
Florida ...............................................
Illinois ...............................................
Indiana..............................................
Kansas ..............................................
Kentucky............................................
Louisiana ..........................................
N. Land ...........................................
S. Inland waters ..............................
S. Land............................................
Offshore ..........................................
Maryland ...........................................
Michigan ...........................................
Mississippi ........................................
Montana ............................................
Nebraska ...........................................
New Mexico........................................
New York............................................
North Dakota .....................................
Ohio...................................................
Oklahoma ..........................................
Pennsylvania .....................................
South Dakota.....................................
Texas .................................................
Offshore ..........................................
Inland waters ..................................
Dist. 1 .............................................
Dist. 2 .............................................
Dist. 3 .............................................
Dist. 4 .............................................
Dist. 5 .............................................
Dist. 6 .............................................
Dist. 7B ...........................................
Dist. 7C ...........................................
Dist. 8 .............................................
Dist. 8A ...........................................
Dist. 9 .............................................
Dist. 10 ...........................................
Utah ..................................................
West Virginia .....................................
Wyoming............................................
Others NV-1 .......................................
2
9
1
6
6
0
28
0
0
3
1
0
48
22
1
2
23
0
0
2
0
0
33
0
32
19
84
32
0
321
1
0
22
23
5
6
6
14
3
27
182
18
2
12
4
8
19
1
1
11
1
9
9
0
24
0
2
0
12
0
56
27
1
8
20
0
0
5
0
1
38
0
55
15
88
26
0
319
3
0
36
36
19
11
3
16
2
27
138
13
3
12
3
16
17
1
Total US ........................................
Total Canada ................................
653
224
700
126
Grand total ...................................

US oil rigs..........................................
US gas rigs........................................
Total US offshore ...............................
Total US cum. avg. YTD .....................
877
523
129
25
510
826
538
162
24
983
(Crude oil and lease condensate)

Alabama .................................
23
Alaska ....................................
516
California ...............................
534
Colorado .................................
325
Florida ....................................
5
Illinois ....................................
26
Kansas ...................................
99
Louisiana ...............................
1,350
Michigan ................................
17
Mississippi .............................
62
Montana .................................
64
New Mexico.............................
400
North Dakota ..........................
987
Ohio ........................................
59
Oklahoma ...............................
408
Pennsylvania ..........................
17
Texas ......................................
3,513
Utah .......................................
82
West Virginia ..........................
25
Wyoming .................................
184
Other states ...........................
50
Total
8,746
1
OGJ estimate. 2Revised. Source: Oil & Gas Journal.

US CRUDE PRICES
Alaska-North Slope 27 .........................................
Light Louisiana Sweet ...........................................
California-Midway Sunset 13 ..............................
California Buena Vista Hills 26 ...........................
Wyoming Sweet .....................................................
East Texas Sweet ...................................................
West Texas Sour 34 ..............................................
West Texas Intermediate........................................
Oklahoma Sweet....................................................
Texas Upper Gulf Coast .........................................
Michigan Sour .......................................................
Kansas Common ...................................................
North Dakota Sweet ...............................................
WORLD CRUDE PRICES

OPEC reference basket
Rotary rigs from spudding in to total depth.

Definitions, see OGJ Sept. 18, 2006, p. 46.
Source: Baker Hughes Inc.
IHS PETRODATA RIG COUNT
12-16-16
/gal
Spot market product prices

No. 2 Distillate
Motor gasoline
Low sulfur diesel fuel
(Conventional-regular)
New York Harbor ......... 162.30 New York Harbor .........
Gulf Coast .................. 154.50 Gulf Coast ..................
Los Angeles ................
Motor gasoline
Kerosine
jet fuel
(RBOB-regular)
New York Harbor ......... 151.50 Gulf Coast ..................
165.00
161.80
168.00
151.00
Propane
No. 2 heating oil
New York Harbor ......... 156.50 Mont Belvieu .............. 62.90
US Gulf of
Mexico. . . . . .
South
America
Northwest
Europe. . . . .
West
Africa. . . . . .
Middle
East. . . . . . .
Southeast
Asia. . . . . . .
Worldwide. . . .
48
35
72.9
50
44
38
86.4
106
84
55
65.5
69
51
24
47.1
171
162
115
71.0
76
678
32
458
43.22
43.32
41.97
45.20
43.63
44.95
42.42
42.14
44.25
39.37
40.72
47.25
41.69
45.13
48.94
49.91
49.74
48.24
43.98
45.64
45.13
43.83
0.15
0.80
0.54
1.15
US NATURAL GAS STORAGE1
Marketed
Marketed
supply
Marketed utilization
of rigs contracted rate (%)
104
90
829
47.87
48.26
46.79
50.83
48.74
49.37
47.30
47.04
48.13
42.36
45.20
51.19
45.98
49.79
Source: OPEC Monthly Oil Market Report.

DEC. 23, 2016

Total
supply
of rigs
$/bbl
Wkly. avg. 12-23-16
52.14
Mo. avg., $/bbl
Oct.-16
Nov.-16
OPEC reference basket.......................

Arab light-Saudi Arabia .......................
Basrah light-Iraq .................................
Bonny light 37o-Nigeria........................
Es Sider-Libya ......................................
Girassol-Angola....................................
Iran heavy-Iran.....................................
Kuwait export-Kuwait ...........................
Marine-Qatar........................................
Merey-Venezuela ..................................
Minas 34o-Indonesia ............................
Murban-UAE .........................................
Oriente-Ecuador ...................................
Saharan blend 44o-Algeria ...................
Other crudes
Fateh 32o-Dubai ...................................
Isthmus 33o-Mexico .............................
Brent 38o-UK ........................................
Urals-Russia ........................................
Differentials
WTI/Brent .............................................
Brent/Dubai..........................................
Includes state and federal motor fuel taxes and state

sales tax. Local governments may impose additional taxes.
Source: Oil & Gas Journal.
12-16-16
/gal
12-23-16
$/bbl*
43.57
48.39
45.35
53.98
49.20
46.75
44.25
49.25
49.25
43.00
41.25
48.50
40.75
*Current major refiners posted prices except N. Slope lags 2 months.

40 gravity crude unless differing gravity is shown. Source: Oil & Gas
Journal. Data available at PennEnergy Research Center.
REFINED PRODUCT PRICES
25
522
565
328
6
27
107
1,452
16
61
72
371
1,146
79
398
200
3,683
90
20
227
46
9,441
42.1
67.6
12-16-16
East....................................
Midwest..............................
Mountain ............................
Pacific ................................
South Central
Salt ................................
Nonsalt...........................
Total US .............................
Total US2 ............................
12-9-16
12-16-15 Change,
bcf
810
865
894
1,007
1,071 1,055
230
244
199
302
312
350
1,248
1,314 1,324
363
388
377
884
927
947
Sept.-16
3,597
Sept.-15
3,806
3,822
Change,
%
3,717
3,622
2.6
%
(9.4)
(4.5)
15.6
(13.7)
(5.7)
(3.7)
(6.7)
(5.9)
Source: EIA Weekly Petroleum Status Report.

78
170102ogj_78 78
Source: IHS Petrodata

Data available in PennEnergy Research Center
Working gas. 2At end of period.

Source: Energy Information Administration
12/28/16 4:10 PM
STATISTICS
PACE REFINING MARGINS
US Gulf Coast
Composite US Gulf Refinery..............
Mars (Coking) ..................................
Mars (Cracking) ...............................
Bonny Light ......................................
US PADD II
Chicago (WTI)...................................
US East Coast
Brass River ......................................
East Coast Comp .............................
US West Coast
Los Angeles (ANS) ............................
NW Europe
Rotterdam (Brent) ............................
Mediterranean
Italy (Urals) ......................................
Far East
Singapore (Dubai) ............................
WORLDWIDE NGL PRODUCTION
Oct.
Nov. Dec.
Dec.
2016 2016 2016
2015
Change
$/bbl
Change,
%
11.13
11.46
8.48
7.96
9.01 9.31
9.67 10.06
7.41 8.03
5.35 4.48
8.62
9.50
6.11
5.00
0.69
0.56
1.92
(0.51)
8.0
5.9
31.4
(10.2)
10.15
7.73
7.26
9.35
(2.08)
(22.3)
9.25
10.76
8.78
10.54
6.50
8.56
8.15
9.35
(1.65)
(0.79)
(20.3)
(8.4)
13.22
10.33 10.68
22.57
(11.89)
(52.7)
9 month
Change vs.
average
previous
Sept.
Aug.
production year
2016
2016
2016
2015
Volume
1,000 b/d %
119
760
302
3,420
200
129
757
320
3,399
202
110
779
308
3,472
198
216
217
215
5,232
5,024
5,082
186
61
340
63
348
69
109
691
330
3,225
209
1
88
(22)
247
(11)
0.6
12.7
(6.7)
7.6
(5.3)
219
(4)
(1.7)
4,783
299
6.2
333
55
15
14
4.4
26.0
3.73
4.10
1.56
2.02
(0.46)
(22.9)
5.31
5.66
3.06
3.45
(0.39)
(11.3)
Norway.................................
United Kingdom ...................
Other Western
Europe ...............................
11
(3)
(24.5)
(57.2)
Western Europe .............
254
411
426
400
26
6.6
Russia .................................
Other FSU ............................
Other Eastern
Europe ...............................
792
170
731
170
784
170
716
157
68
13
9.5
8.6
16
16
15
15
3.0
3.87
6.89
3.30
7.72
(4.41)
Source: Jacobs Consultancy Inc.

US NATURAL GAS BALANCE

DEMAND/SUPPLY SCOREBOARD
Sept.
Total
YTD
Sept.
Aug. Sept. 2016-2015 YTD 2016-2015
2016
2016 2015 change 2016
2015
change
bcf
DEMAND
Consumption ...................
Addition to storage ..........
Exports ............................
Canada .........................
Mexico ..........................
LNG ...............................
Total demand ..................
1,957
351
202
61
124
17
2,510
2,218
286
212
55
130
27
2,716
1,909
435
163
60
100
3
2,507
48
(84)
39
1
24
14
3
20,576 20,467
2,327 2,899
1,668 1,307
556
523
1,003
765
109
19
24,571 24,673
109
(572)
361
33
238
90
(102)
SUPPLY
Production (dry gas) ........
Supplemental gas............
Storage withdrawal..........
Imports ............................
Canada..........................
Mexico ...........................
LNG................................
Total supply .....................
2,159
5
88
237
234
0
3
2,489
2,242
5
162
261
253
0
8
2,670
2,249
5
63
209
203
0
6
2,526
(90)
0
25
28
31
(3)
(37)
19,914 20,244
43
44
2,283 2,414
2,261 2,047
2,195 1,976
1
1
65
70
24,501 24,749
(330)
(1)
(131)
214
219
(5)
(248)
4,360
3,717
8,077
4,361
3,453
7,814
4,360
3,329
7,689
4,365
3,622
7,987
Eastern Europe ..............
978
917
969
887
82
9.2
Algeria .................................
Egypt ...................................
Libya....................................
Other Africa .........................
Africa..............................
498
202
50
104
958
507
202
50
82
841
504
202
50
132
888
519
201
50
137
908
(14)
1
0
(5)
(19)
(2.8)
0.3
0.0
(3.9)
(2.1)
Saudi Arabia........................
United Arab Emirates ..........
Other Middle East ................
Middle East.....................
1,830
658
740
3,228
1,830
655
742
3,227
1,829
608
739
3,176
1,813
581
721
3,115
16
28
18
61
0.9
4.7
2.5
2.0
Australia..............................
China...................................
India ....................................
Other AsiaPacific ...............
AsiaPacific ...................
TOTAL WORLD .................
63
12
122
152
349
10,999
63
12
122
151
348
10,767
56
12
122
151
342
10,883
52
12
102
164
331
10,423
4
0
20
(13)
11
460
7.9
0.0
19.1
(7.7)
3.3
4.4
Totals may not add due to rounding.

Source: Oil & Gas Journal.
OXYGENATES
Sept.
Aug.
YTD
YTD
2016
2016 Change
2016
2015
Change
1,000 bbl
NATURAL GAS IN UNDERGROUND STORAGE

Sept.
Aug.
July.
Sept.
2016
2016
2016
2015
Change
bcf
Base gas
Working gas
Total gas
Brazil ...................................
Canada................................
Mexico .................................
United States ......................
Venezuela ............................
Other Western
Hemisphere .......................
Western
Hemisphere..................
2,477
95
2,572
Source: DOE Monthly Energy Review.

Fuel ethanol
Production ..................
Stocks .........................
29,876
20,605
MTBE
Production ..................
Stocks .........................
1,493
1,068
31,669 (1,793)
21,042 (437)
1,412
848
81
220
271,150 261,712
20,605 18,904
13,234
1,068
11,152
714
9,438
1,701
2,082
354
Source: DOE Petroleum Supply Monthly.

US COOLING DEGREEDAYS
New England ................................................................
Middle Atlantic .............................................................
East North Central........................................................
West North Central .......................................................
South Atlantic ..............................................................
East South Central .......................................................
West South Central.......................................................
Mountain ......................................................................
Pacific ..........................................................................
Sept.
2016
62
115
131
139
352
321
430
175
125
Aug.
2016
240
312
296
268
485
460
549
306
232
Sept.
2015
87
136
127
168
296
236
424
232
194
% change
(28.7)
(15.4)
3.1
(17.3)
18.9
36.0
1.4
(24.6)
(35.6)
US average*............................................................
220
362
224
(1.8)
Total degree days YTD

2016
2015
560
419
803
591
719
607
928
802
2,069
1,814
1,625
1,429
2,474
2,254
1,396
1,338
954
956
1,357
1,203
% change
33.7
35.9
18.5
15.7
14.1
13.7
9.8
4.3
(0.2)
12.8
*Excludes Alaska and Hawaii.

Source: DOE Monthly Energy Review. NOTE: Data has been revised to conform to modified data format provided by source.
170102ogj_79 79
79
12/28/16 4:10 PM
MARKET
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WHERE THE INDUSTRY GOES TO CLASSIFY
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170102ogj_80 80
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170102ogj_81 81
81
12/23/16 10:32 AM
MARKET
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PR OD UCT S & E Q UIP MEN T
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ECH Epichlorohydrin 78 KTPY

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82
170102ogj_82 82
12/23/16 10:32 AM
ADVERTISING SALES
ADVERTISERS INDEX
US Sales
COMPANY NAME
Mike Moss, (713) 963-6221, mikem@pennwell.com.

Mike McManus, (713) 963.6254, MMcManus@
pennwell.com.
Stan Terry, (713) 963-6208, stant@pennwell.com.
Grace Jordan, (713) 963-6291, gracej@pennwell.com
Australia / New Zealand

Mike Twiss, Miklin Business Services, Unit 15,
3 Benjamin Way, Rockingham, Western Australia 6168;
Tel +61 8 9529 4466, Fax +61 8 9529 4488
Email: miklinbusiness@bigpond.com
ARC Advisory Group
Ariel Corporation
Boehler Welding GmbH
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Greatwall Drilling Company
P8
Topsides
13
C3
www.topsidesevents.com
Veolia Water Technologies

05
17
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07
02
www.gwdc.com.cn
Halliburton
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Stefy Picoitti Thompson, Tel: +33(0)4 94 70 82 63; Cell:

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IMP Group Ltd
Germany / Austria / Northern Switzerland /

Eastern Europe / Russia / Former Soviet Union
Offshore Mediterranean Conference
15
www.energy.gov.il
Sicking Industrial Marketing, Kurt-Schumacher-Str. 16,

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www.omc.it
Italy
Pennwell Custom Pubs
Ferruccio Silvera, Viale Monza, 24 20127 Milano Italy;

Tel:+02.28.46 716; E-mail: info@silvera.it
PAGE
PNEC
www.voestalpine.com/welding
C & J Energy Services
France / Belgium / Spain / Portugal /

Southern Switzerland / Monaco
COMPANY NAME
www.pnecconferences.com
www.arielcorp.com
Jim Klingele, (713) 963-6214, jimk@PennWell.com

1455 West Loop South, Suite 400, Houston, TX 77027
Stan Terry, (713) 963-6208, stant@pennwell.com
19
www.arcweb.com/events/arc-industry-forumorlando
Brazil / South America
Canada
PAGE
Pennwell Books
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roym@pennwell.com
Japan
e.x.press sales division, ICS Convention Design Inc.
6F, Chiyoda Bldg., 1-5-18 Sarugakucho, Chiyoda-ku,
Tokyo 101-8449, Japan, Tel: +81.3.3219.3641, Fax:
81.3.3219.3628, Masaki Mori, E-mail: Masaki.Mori@
ex-press.jp
This index is provided as a service. The publisher does not assume any liability for errors or omission.
China / Korea / Singapore / Asia-Pacific

Michael Yee, 19 Tanglin Road #05-20, Tanglin Shopping
Center, Singapore 247909, Republic of Singapore; Tel: 65
9616.8080, Fax: 65.6734.0655; E-mail: yfyee@singnet.
com.sg
United Kingdom / Scandinavia / Denmark /

The Netherlands / Middle East
Graham Hoyle, 10 Springfield Close, Cross, Axbridge,
Somerset BS26 2FE, Phone: +44 1934 733871 Mobile:
+44 7927 889916, grahamh@pennwell.com or ghms@
btinternet.com
West Africa
Dele Olaoye, Flat 8, 3rd Floor, Oluwatobi House, 71
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Tel: +234 802 223 2864; E-mail: dele.olaoye@q-she.com
OGJ Reprints
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Manager; 866.879.9144 ext 194, Fax: 219.561.2023;
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Custom Publishing
Roy Markum, Vice-President/Custom Publishing, roym@
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Marketing Solutions
Should you need assistance with creating your ad,
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www.ogj.com
83
170102ogj_83 83
12/28/16 4:10 PM
THE EDITORS PERSPECTIVE
Iranian oil output

has surged since the
easing of sanctions
by Bob Tippee, Editor
To the surprise of many outsiders, Iranian oil
production has roared back since the easing of
international sanctions in January.
According to the International Energy
Agency, Iranian output climbed through the
presanctions level of 3.6 million b/d by May
and reached a monthly average of 3.72 million
b/d in November.
Sanctions imposed in 2012 had cut output
by 1 million b/d.
The comeback refutes earlier doubts that
the Islamic Republic could sustain a production
increase once floating storage was exhausted.
In fact, says a research note from Arab
Petroleum Investment Corp. (APICORP), Iran
had been preparing oil fields for the end of
sanctions since mid-2013.
With help from China National Petroleum
Corp. and Sinopec Group, National Iranian Oil
Co. has been refurbishing and debottlenecking
production equipment and drilling and working
over wells.
As expected, the first Iranian supply surge
came from limited onshore storage and tankers,
which held more than 40 million bbl at the of
2015, according to APICORP.
But production has risen since January, too.
About 250,000 b/d is from new fields in the
West Karun region. One of those fields, South
Azadegan, was on early production before sanctions ended. Output from Azar field increased
to 67,000 b/d from 27,000 b/d.
Most of the post-sanctions increase occurred in mature fields operated by NIOC
such as Marun, Gachsaran, and Ahwazwhich
absorbed most of the cuts and represented
75% of Irans presanction capacity.
APICORP says Iran has recaptured much
of the market share it lost in Europe and has
increased exports to Asia. While sanctions
were in place, Iranian oil went mainly to China,
India, Japan, and South Korea.
APICORP thinks Iran, with mature-field
decline rates of 6-12%, has reached near-term
production limits.
In the medium term, however, capacity will
increase in West Karun fields such as Yadavaran, North and South Azadegan, and North
and South Yaran.
But reaching Irans production target of 5
million b/d requires foreign investment and
technology.
Favorable terms under the [new] international petroleum contract and Irans ability to
assure a stable political landscape, APICORP
says, will both be necessary for further capacity growth.
(From the subscription area of www.ogj.com,
posted Dec. 16, 2016; authors e-mail: bobt@
ogjonline.com)
84
170102ogj_84 84
WATCHING GOVERNMENT
Nick Snow
Washington Editor
Obamas record at Interior

A presidential administrations conclusion inevitably produces retrospectives. Words like legacy are used
when the reviews are favorable.
Others that are less flattering appear
more likely when it comes to Barack
Obamas presidency and the oil and
gas industry.
When it comes to the US Department of the Interior, which probably
has more direct impact than any other
on US producers, it looks now as if
several changes in the last 8 years,
under secretaries Ken Salazar and
Sally Jewell, will be long-lastingand
not just because theyre beyond the
Congressional Review Acts reach.
Salazar arrived in early 2009 from
the US Senate with clear concerns
that the federal onshore oil and gas
leasing process was flawed. He
quickly canceled leases in Utah that
the US Bureau of Land Management had awarded toward the end of
2008 because he felt the underlying
resource management plan had been
prepared hastily a few weeks earlier.
He favored a more deliberate
approach that provided opportunities for public involvement sooner in
the process. A BLM official later said
DOI and BLM were never so naive to
expect this to completely stop leasing
opponents lawsuits, but improve the
governments chances of winning in
court. This apparently has worked.
Producers nevertheless point to
onshore production rates from tight
shale formations on federally managed land that failed to climb in contrast to dramatic growth on state and
privately held acreage during the US
oil and gas production renaissance.

BLMs single biggest triumph in
the Obama years was working with
state agencies, oil and gas producers,
conservationists, outdoor recreation
groups, and other stakeholders to
keep the greater sage grouse from
being federally listed as a threatened or endangered species during
Jewells tenure. It showed how diverse
interests can work together to reach a
common goal.
Changes after Macondo

Offshore, the Obama administrations oil and gas legacy obviously
was shaped in late April 2010 by the
Macondo deepwater oil well blowout and subsequent spill into the
Gulf of Mexico. It accelerated the
US Minerals Management Services
restructuring into separate agencies
with noncontradictory purposes. Most
importantly, it compelled the oil and
gas industry to develop the capability
and resources to cap and better contain offshore leaks, and work to create
much safer operating conditions.
The White Houses climate emphasis the past few years regrettably
stifled offshore oil and gas opportunities and research, culminating with
Obamas removal of US Arctic and
most of its Atlantic Outer Continental
Shelf from future leasing.
A failure to let offshore geophysical
contractors shoot 3D seismic along
the Mid-Atlantic OCS is only one of
several obstacles that could hurt future administrations. Ending Arctic oil
and gas research is another.
12/28/16 4:10 PM
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ICE BRENT / NYMEX LIGHT SWEET CRUDE

US INDUSTRY SCOREBOARD 1/2

Latest week 12/16

WTI CUSHING / BRENT SPOT

Refining, 1,000 b/d

Crude runs to stills

Latest week 12/16

Stocks, 1,000 bbl

ICE GAS OIL / NYMEX HEATING OIL

Supply, 1,000 b/d

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB

Product supplied, 1,000 b/d

TOTAL PRODUCT SUPPLIED

PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU

NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3

Note: Monthly average count

BAKER HUGHES RIG COUNT: US / CANADA

Dec. 221 Dec. 231

available 2Reformulated gasoline blendstock for oxygen blending

10/16/15 10/30/15 11/13/15

12/25/15 10/14/16 10/28/16

Note: End of week average count