The AuTomATion of An indusTry

By Craig Pelletier

With the ever-increasing demand for global energy and the need to exploit new sources of oil and gas, the upstream exploration and production sector has looked to develop a faster, more precise and safer way to drill for resources. The solution has come in the form of automation. Similar to other industries, such as automotive manufacturing, many activities on drilling rigs are comprised of repetitive tasks that lend themselves to automation. The introduction of automated equipment has helped the drilling community and assisted in continuous improvements to safety and efficiency while operating in difficult environments.Drilling companies continually seek improved efficiency, reduced risk and higher degrees of repeated precision in their operations. These needs have ultimately been the driving force to the current shift in automated drilling systems on today’s rigs. These highly efficient automated systems still require regular human involvement, but offer significant safety advantages and reduced workforce injuries. For example, automated roughneck systems have removed workers from performing some of the most dangerous operations on the rig.Early innovations included labour-saving handling tools, such as pipe spinners, iron roughnecks and power slips. At first, the drilling industry implemented spring-assisted slips to reduce worker fatigue. This gave way to the development of the pneumatic slip and hydraulic slips with interchangeable parts to meet various pipe diameters. With the recent introduction of computers and microprocessors within automated systems, we have witnessed the automation of both pipe handling operations and roughnecks on today’s rigs.Innovative companies – like Alco Inc. – have been a driving force in developing, producing and

maintaining automated roughneck systems. One of these is the SMART Roughneck System, which spins, makes and breaks tubular at a consistent regulated torque. Alco’s SMART Roughneck System was developed by their Flow Control branch and is an industry leading product for increasing torque consistency, worker safety and efficient drilling practices. Alco provides the SMART Roughneck in a hydraulic or electric format to meet their customers’ needs. Alco also carries a line of hydraulic elevators, flapper elevators, pneumatic spiders, pneumatic slips, hydraulic-assisted rod tongs,

tubing tongs and kelly spinners.When asked about the computer integration in the SMART Roughneck System, Alco’s Flow Control Divisional Manager Larry White says: “All of the hydraulic functions are controlled by an industrial PLC (Programmable Logic Controller). This allows exceptionally accurate pressure readings and provides quick response to the hydraulic valves.” “We also have the option of a very user-friendly touchscreen… Our technicians have the ability to access the PLC and troubleshoot problems over the internet from anywhere in the world. Also, with the addition of a touchscreen, the end user can perform a multitude of tasks as well as troubleshooting on their own.”Alco Inc. offers a diverse range of product and services including;

manufactured rigging equipment, handling tools, automated, pneumatic, hydraulic, mobile & electric equipment; product recertification; field service fleets; custom product design and modification for the oilfield, mining and industrial sectors.Come visit our website at www.alcoinc.ca to see what our 65 years of experience and six Central Alberta shop locations can do for you. Or send your email enquiry to us at sales@alcoinc.ca and include Ref# OILNEWS.

‘PeAk oil’ doomsAyers Proved

wrong

Remember “peak oil”?Five years ago, some oil market

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speculators became convinced that the world was nearing the limits of oil production. Sometime soon — the 2010s? the 2020s? — oil production would begin a long steady decline.Think again. World oil production continues to rise. Leading the oil renaissance: the United States. The International Energy Agency predicts that the United States will overtake Saudi Arabia and Russia to become (again!) the world’s leading oil producer by 2017. If the agency’s estimates prove correct, the United States and Canada together will become net energy exporters by about 2030, and the U.S., which uses 20% of the world’s energy, will achieve energy self-sufficiency by the mid-2030s.Predictions that the world would imminently “run out of oil” have been worrying oil consumers since at least the 1920s. They always prove wrong, for reasons explained by the great oil economist M.A. Adelman after the last “oil shortage” in the 1970s:

Oil reserves, Adelman writes, “are no gift of nature. They (are) a growth of knowledge, paid for by heavy investment.”For all practical purposes, the world’s supply of oil is not finite. It is more like a supermarket’s supply of canned tomatoes. At any given moment, there may be a dozen cases in the store, but that inventory is constantly being replenished with the money the customers pay for the cans they remove, and the more tomatoes that customers buy, the bigger an inventory the store will carry.Someday, of course, consumers will decide they want less oil at the current price. Someday we may move beyond oil altogether. When that day comes, the investment will stop — and nobody will ever know or care how much oil remains in the ground.Become a fan of CNNOpinionStay up to date on the latest opinion, analysis and conversations through social media. Join us at Facebook/CNNOpinion and follow

us @CNNOpinion on Twitter. We welcome your ideas and comments.Adelman’s assessment is being corroborated once more, this time in Mexico. Mexican oil production has been declining over the past decade, mostly because of under-investment and mismanagement by the state oil monopoly, Pemex. (On January 31, a deadly tragedy reminded the world of Pemex’s troubles when a methane leak in a Pemex building in downtown Mexico City exploded, killing more than 30 people and injuring 120 others.)In October, Pemex announced discovery of a big new field in the Gulf of Mexico. Newly elected Mexican President Enrique Pena Nieto is urging his country to amend its constitution to allow foreign investment in Mexican oil fields. Experts assess that opening the Mexican oil industryto global investment will revive Mexican oil production and boost Mexico’s economic growth by potentially 2 points a year. Nieto’s

PRI party — the very party that nationalized Mexican oil 80 years ago — is expected to vote this weekend to approve the new policy.Meanwhile, the International Energy Agency is warning oil markets to ready themselves for a “flood” of cheap oil from Iraq. Last year, Iraq for the first time exceeded pre-1990 oil production. The agency expects Iraq eventually to overtake Russia as the world’s second-largest oil exporter.In 1972, the year of the famous “Limits to Growth” report by the Club of Rome, the world produced about 55 million barrels of oil per day. In 2011, the world produced almost 80 million barrels. If today’s prices hold, many experts expect production of 90 million barrels by decade’s end.Our oil problem is not that “we’re running out.” Our oil problem is that we’re producing so much of the stuff that we are changing the planet’s climate.Yet on the environmental front too, there’s reason for optimism. One

of the technologies developed by the oil industry — fracking — has made available vast new supplies of cheap natural gas. Gas has become so cheap that it can be substituted for coal as an electricity-generating fuel. In just eight years, coal’s share of the U.S. electricity market has tumbled from one-half to one third — and still falling. Gas emits only half the carbon per unit of energy of coal. The transition from coal to gas explains why U.S. carbon emissions declined 8% from 2011 to 2012, reaching the lowest level since 1992.Soon the United States and Canada will be producing so much gas that they can export it to Europe, perhaps also to China, helping to cut carbon emissions in those economies as well. No, it’s not the answer to everything: Gas still emits carbon. But it’s an improvement — and that’s how progress comes.Instead of fantasizing about catastrophes (running out of oil) and miracles (a rapid transition to solar power), our energy thinking

needs to emphasize the achievable and the incremental. Convert from coal to gas. Tax gasoline to induce people to live closer to work and to buy more fuel-efficient cars.We can enjoy a rising quality of life with declining energy inputs. Put us on the path to the right kind of “peak oil” — and peak carbon — the peak that comes, not because we find less and less, but because we want less and less.

eric newell remembers selling

The oil sAnds To oTTAwA

“It was a bleak experience in those early days,” former Syncrude CEO saysIn the early 1990s the oil sands industry just consisted of megaprojects and they always needed special government deals [to operate.] But at that time governments could no longer afford that. We had to create the business environment to get the

investors to come back in and get the governments to support it knowing they weren’t going to be asked to provide huge handouts.On September 24, 1991, at the Energy and Mines Ministers Meeting in Halifax we got the approval to create the National Oil Sands Task Force. We got going in 1993 and we produced our vision in May of 1995. That’s when we set the goal – and I used to sweat bullets when I’d say this– that we could triple production from the oil sands. But it would take us 25 years and it would cost between $21 billion and $25 billion in capital projects. At that time, there was zero capital going into the oil sands. People looked at us like we were smoking something funny.We had to start selling the vision. So I was giving speeches all over the country– to anyone who would listen to me. It was a bleak experience in those early days.One of things that worked well is we presented the vision and said if we are successful, here are all

the jobs we’ll create. People really don’t care if Imperial Oil or Shell make a higher profit. But they do care about jobs and royalties and tax payments to governments that support social programs.Everybody always talks about the fiscal regime. We went in and negotiated the generic royalty regime with the Alberta government and brought that in back in 1995. Then the federal tax changes were brought in back in 1996.Looking back, you can see we weren’t very visionary. We tripled production, but it didn’t take 25 years; we did it in eight years. In terms of capital expenditures, projects that have been completed or will be completed over the short term total $140 billion. The task force used to draw the analogy that the oil sands should be the same thing to Canadians as the national railway. This is a big nation-building thing. I still believe that in my heart today. – As told to Darren Campbell“I don’t look over my shoulder,”

Hatfield says. Still, with the majors lurking, companies his size are something of a species at risk. And Hatfield knows it. “I’m sure the time will come when someone will do more than just look at their radar screen,” he says.

ArgenTinA dismisses fAlklAnds voTe,

sAys oil indusTry unfeAsible

A referendum on the fate of the Falkland Islands is a publicity stunt with no legal status, Argentina’s ambassador to Britain said on Monday, warning that oil exploitation around the territory was impossible without better regional ties.The inhabitants of the islands, some 300 miles off the Argentine coast and which Buenos Aires calls “Las Malvinas”, are due to take part in a referendum on March 10-11 to find if they want to remain British.The vote comes as relations between Argentina and Britain worsen over

the territory, where the two nations fought a 10-week war in 1982.“This referendum has no legal grounds. It’s not approved, nor will it be recognized by the United Nations or the international community,” Argentine envoy Alicia Castro told reporters at a briefing in London.“So this referendum is little more than a public relations exercise,” he said.Britain says the islanders have a right to self-determination, and insists they be present at any talks with Argentina over the future of the islands, but Buenos Aires says the matter should only be discussed by two sovereign states.“The Argentine Government has already dismissed the referendum before it has even taken place, a position that runs counter to the universal principles of democracy and self-determination,” a British Foreign Office spokesman said.Argentina sees the Falklands’ roughly 3,000 inhabitants as foreign implants, and has compared

them to Israeli settlers on land Palestinians want for a future state. The referendum is widely expected to confirm the islanders’ wish for the remote territory to remain under British control.“We hope that the outcome of this referendum will demonstrate beyond doubt the views of the people of the Falklands and whether or not they wish to remain a British Overseas Territory,” the Foreign Office spokesman added.Argentina has ramped up its claims to the islands, where oil exploration firms are expected to produce their first oil in 2017, and last month Argentina’s foreign minister visited London but did not meet his British counterpart.Castro said Latin American countries backed Argentina, and warned that oil exploration around the Falklands would be unfeasible without proper links to the South American continent.Regional trading bloc Mercosur, which includes Argentina, Brazil,

Paraguay and Uruguay, has banned Falklands-flagged ships from docking at their ports.“Oil exploration is feasible, but oil exploitation is unfeasible ... Imagine if a spill happens there in some remote islands 8,000 miles from here ... with no proper link to the continent, without doctors, logistics, engineers,” Castro said.Argentine hostility has not deterred oil companies. Rockhopper Exploration has formed a $1 billion partnership with Premier Oil to pump oil from its find north of the islands.

neArly 2 million gAllons of diesel sAved eAch yeAr

using An AnAergiA biogAs uPgrAding

fAciliTy

Anaergia Inc. (www.anaergia.com) today announced that the biogas upgrading facility at Fair Oaks Farms in Indiana is now operational. Anaergia designed, built and now operates the facility

that converts biogas from cow manure into the equivalent of nearly 10,000 gallons per day of diesel fuel for one of the largest milk hauling fleet using renewable natural gas in the United States.Manure collected from 11,000 dairy cows is anaerobically digested to produce a biogas composed of roughly 60% methane. Anaergia cleans, compresses and upgrades the biogas to over 98% methane under a 15 year operations contract that could be extended in the future. The product gas called biomethane, is odorized to form renewable natural gas (RNG) and then further compressed up to 4,000 psig into compressed natural gas (CNG) for vehicle fueling.A fueling station supplies the renewable natural gas to fuel a fleet of 42 milk trucks operated by Fair Oaks Farms and AMP Americas. The renewable fuel avoids the consumption of diesel fuel for their daily milk deliveries that run in excess of 20,000 miles per day across the

Midwest United States. Excess renewable natural gas generated at Fair Oaks Farms that is not used for onsite fleet fueling will be injected into the natural gas grid to offset fossil fuel based consumption by other AMP Americas CNG fueling stations. The project is expected to save millions in fuel costs each year and reduce greenhouse gas emissions of the fleet by roughly 40,000 tons per year or the equivalent of over 7,000 passenger cars.“We believe we are part of the answer by using renewable energy to reduce dependence on imported oil. We’re employing proven technology to solve one of the United States’ biggest economic problems. In addition, we’re combining time-tested fleet management practices to achieve the highest possible productivity” said Mark Stoermann, Project Manager for Fair Oaks Dairy Farm.“The biogas upgrading project at Fair Oaks Farms demonstrates how forward thinking businesses can use proven biogas technologies to

advance environmental sustainability and reduce operating costs,” said Steve Watzeck, CEO of Anaergia Inc. “We are proud to have been selected to build and operate this outstanding example of environmental stewardship for Fair Oaks Farms”.

riversTone increAses overAll

commiTmenT To deePwATer gulf of

mexico venTure wiTh ridgewood energy

To $550 million

Ridgewood Energy Corporation, (“Ridgewood”) a private upstream oil and gas investment company based in Montvale, New Jersey, and Houston, Texas, announced today that an affiliate of Riverstone Global Energy and Power Fund V, L.P., an energy-focused private equity fund managed by Riverstone Holdings LLC (“Riverstone”), will make a strategic investment alongside Ridgewood in a series of deepwater exploration projects located in the Gulf of Mexico. The Ridgewood management team will manage the investments on behalf of the venture. Combined with a similar commitment by an affiliate of Riverstone/Carlyle Global Energy and Power Fund IV, L.P. in 2010, this brings the total Riverstone sponsored fund commitment to the venture to over $550 million.Since its inception in mid-2010, this venture has participated in four significant oil discoveries located in

the Mississippi Canyon and Ewing Bank regions of the deepwater Gulf of Mexico, all of which are currently under development and expected to commence production in 2015 and early-2016. The venture now has an additional seven exploration opportunities being progressed, the first of which will begin drilling in March 2013.

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