Adrin Shafil

Petrofac Drilling and Completions Manager
Last Updated: August 16, 2017
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Drilling & Completions
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During my first month as a young drilling engineer, I was sent for a hitch on a drilling rig at offshore Terengganu. My head was giddy with the vision of the awe I would receive upon stepping on to the semi, and impress people with my genius. After all, I had in my backpack my university TI82 graphing calculator, a thick company issued laptop, Excel pre-installed and I had made a point to read at least 1/3 of the Drilling for Dummies book during the weekend before. I entered the chopper cabin with hopes and dreams, and was sure that this was the start of an illustrious career.


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Unfortunately, my earlier personal euphoria was gutted swiftly when I exited the chopper in a dazed stupor, trying to get my bearings on which was port and starboard, and wondering why nobody can just say left or right. Pointed to the briefing room direction by the HLO, I still managed to successfully go down the wrong set of stairs, while struggling to keep upright on non existent sea legs fighting against the rig sway. After finally being pushed impatiently by a fellow traveler to the right doorway, I sat gratefully in the front row through the safety induction, looking for the nearest waste paper basket in case my digested lunch decides to come up the wrong way. After the last presentation slide, I shook hands with the rig OIM and jolly old rotund medic, who then proceeded excitedly to show me locations of the galley, lifeboats and room. The images of the food being prepared in the galley, and the sight of tightly made top bunk in the four person occupied room, filled my mind with hopes for dinner and a deep slumber. Unfortunately those images were replaced with dread, when I was informed that actually my work shift had started. And like everyone else, especially as a newcomer, I would start my shift with the honour of meeting the drilling supervisor, aka the king of the rig, aka the company man.


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Gingerly swaying in my shiny boots, I walked through the corridors and found the company man's office, eerily situated at the dimly lit end with the door half open. I knocked, and only silence greeted me. I knocked again, and a sudden bravado overcame my senses and I stepped in, because it occurred to me that technically, I was a company man too. Shifting to the middle of the room, my presence continued to go unnoticed by the man in charge. He was just sitting there on a rickety chair, gazing out to the rig floor through the smudged safety glasses and half opaque window. He looked very uncomfortable, hunched in filthy coveralls withered by what I assume to be continuous rig laundry and exposure to mud and sun, but he maintain his slouched posture in deep thought. I tried to calm my nerves and grunted a half swallowed "Hello, I'm Adrin, boss", and waited for him to respond. For another full 5 mins he continued his silent meditation, his deadlocked eyes just continued to stare into space. Then, his cracked lips moved ever so slightly, lisping the words no driller ever wants to hear, "We just stuck pipe". Unfortunately for me, I didn't know how dire a situation that actually was, and with the cheeriest voice I could muster, I said, "Oh good, then I can learn about what stuck pipe is!". He looked up and peered at me through his safety glasses, and gave me the most disgusted grunt. "You are here to learn, right? Then by all means, learn. Get your PPE, I'll show you what a stuck pipe is. I want you to figure out how to get free, and until you let me know how you are able to do that, or we free the pipe, you will spend your shifts on the rig floor. You will only come down for meals and safety meetings. Is that clear, whoever you say you are?".

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Side note: Just for the benefit of non-drillers, during drilling operations, a pipe often with expensive bottom hole assembly (tools, or referred to as BHA) is considered stuck if it cannot be freed from the hole without damaging the pipe, and without exceeding the drilling rig’s maximum allowed hook load.


        So there I was, first week offshore, already incurring the wrath of the company man, and already bought a front row seat on a stuck pipe event. The experience itself, is as interesting as the namesake, a pipe stuck, stationery and unmoving. Most days were spent with me spewing obvious solutions like "pull harder...let's try twisting it...let's pull now because maybe whatever has the pipe in its jaws has tired of holding on to it.." As time passed to days, and into the second week, I saw the mighty top drive pull and jar up and down on the pipe in futility, and over time people started to talk to it, hug it, curse at it, but most of the time stare at it. Somebody actually suggested that we slaughter a black chicken and drip the chicken's blood on to the stick up, but when I took the idea seriously and suggested it to town, I could still recall the cruel laughter on the other line and comments about how the contracting to buy the animal alone would take too long. What i learned though was, once a pipe is stuck, it generally stays stuck. The only recovery was to continue to work on the pipe until we received approval to cut the pipe as deep as we can, and pump cement across the tools downhole and leave it buried. As we had nuclear sources in the tools, it was only until the government gave the approval on the 10th day, could the attempts to free the pipe cease, and I saw wireline tools run to cut the pipe, and the recalcitrant pipe finally was freed without the tools downhole, and cement plugs pumped above the abandoned BHA, tools worth millions of dollars left for the next generation to unearth.


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Pictured: A picture I found online on how other crews help start the well process with prayers or Pooja. I hope that the flowers and belief did help this particular rig stay trouble free. 


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If there is anything that the oil fields ingrain into a man, it's humility. We can try to predict what will occur, be ready with an assortment of fallback plans and equipment, and try to avoid certain conditions that might lead to catastrophe. Unfortunately in drilling, we deal with the unknown. The mystery of the unknown is more prominent in exploration or appraisal drilling, but even in development mode, the formation drilled can throw us a curve ball. Every single meter drilled have different characteristics, but challenges for every single meter cannot be addressed with real time changes, at least not with the technology available now. Apart from managed pressure drilling technology, all wells are drilled with normalised planned parameters, tools, fluids and practices, and the mode is always progressing while avoiding catastrophe. But when stuck pipe occurs, while we can likely deduce that its most likely caused by a deviation, a practice that went wrong, we cannot expel the notion that there is the element of the unknown that the sentences the pipe to its final grave.


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For non-drillers, I often explain a stuck pipe as an earthquake catching our tools. Indeed the simplified metaphor covers the likely causes of stuck pipe. Formation movement, debris, collapse, ruptures, key seats, pressure differentials are what the common man associates earthquakes with, albeit on a much larger scale. Unfortunately, more often than not, a stuck pipe is notched to a mistake made by the drilling crew. But drilling crews are also human. Training, drills, procedures, data analytics and supervision are all available for the driller and crew to make decisions, but just like our normalised parameters, they are often unable to predict and react easily for every single meter drilled. Thus a stuck pipe event will still remain a real catastrophic event, that until our technology catches up with real time response of equipment with real time inflow of data, we will have to put our faith on the team with the right attitude and knowledge to keep us out of trouble.


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However, a stuck pipe event still remains a commercial event. While it does introduce its safety risks with possible flow inside the pipe due to trapped pressure, there are many other drilling incidents that are far worse, often involving immediate injuries, explosive events and death. While any stuck pipe event often brings me back to the memories of my youth, standing across an unmoving stub, full of despair, I would take a hundred stuck pipe events before I would go through the ordeal of having casualties under my watch. Our focus on performance and continued diligence in trouble shooting should never falter, and make we have less stuck pipes in our careers, but more importantly we all stay safe and return to our homes unhurt.

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Venezuelan crude oil production falls to lowest level since January 2003

monthly venezueal crude oil production

Source: U.S. Energy Information Administration, Short-Term Energy Outlook

In April 2019, Venezuela's crude oil production averaged 830,000 barrels per day (b/d), down from 1.2 million b/d at the beginning of the year, according to EIA’s May 2019 Short-Term Energy Outlook. This average is the lowest level since January 2003, when a nationwide strike and civil unrest largely brought the operations of Venezuela's state oil company, Petróleos de Venezuela, S.A. (PdVSA), to a halt. Widespread power outages, mismanagement of the country's oil industry, and U.S. sanctions directed at Venezuela's energy sector and PdVSA have all contributed to the recent declines.

monthly venezuela crude oil rig count

Source: U.S. Energy Information Administration, based on Baker Hughes

Venezuela’s oil production has decreased significantly over the last three years. Production declines accelerated in 2018, decreasing by an average of 33,000 b/d each month in 2018, and the rate of decline increased to an average of over 135,000 b/d per month in the first quarter of 2019. The number of active oil rigs—an indicator of future oil production—also fell from nearly 70 rigs in the first quarter of 2016 to 24 rigs in the first quarter of 2019. The declines in Venezuelan crude oil production will have limited effects on the United States, as U.S. imports of Venezuelan crude oil have decreased over the last several years. EIA estimates that U.S. crude oil imports from Venezuela in 2018 averaged 505,000 b/d and were the lowest since 1989.

EIA expects Venezuela's crude oil production to continue decreasing in 2019, and declines may accelerate as sanctions-related deadlines pass. These deadlines include provisions that third-party entities using the U.S. financial system stop transactions with PdVSA by April 28 and that U.S. companies, including oil service companies, involved in the oil sector must cease operations in Venezuela by July 27. Venezuela's chronic shortage of workers across the industry and the departure of U.S. oilfield service companies, among other factors, will contribute to a further decrease in production.

Additionally, U.S. sanctions, as outlined in the January 25, 2019 Executive Order 13857, immediately banned U.S. exports of petroleum products—including unfinished oils that are blended with Venezuela's heavy crude oil for processing—to Venezuela. The Executive Order also required payments for PdVSA-owned petroleum and petroleum products to be placed into an escrow account inaccessible by the company. Preliminary weekly estimates indicate a significant decline in U.S. crude oil imports from Venezuela in February and March, as without direct access to cash payments, PdVSA had little reason to export crude oil to the United States.

India, China, and some European countries continued to receive Venezuela's crude oil, according to data published by ClipperData Inc. Venezuela is likely keeping some crude oil cargoes intended for exports in floating storageuntil it finds buyers for the cargoes.

monthly venezuela crude oil exports by destinatoin

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, and Clipper Data Inc.

A series of ongoing nationwide power outages in Venezuela that began on March 7 cut electricity to the country's oil-producing areas, likely damaging the reservoirs and associated infrastructure. In the Orinoco Oil Belt area, Venezuela produces extra-heavy crude oil that requires dilution with condensate or other light oils before the oil is sent by pipeline to domestic refineries or export terminals. Venezuela’s upgraders, complex processing units that upgrade the extra-heavy crude oil to help facilitate transport, were shut down in March during the power outages.

If Venezuelan crude or upgraded oil cannot flow as a result of a lack of power to the pumping infrastructure, heavier molecules sink and form a tar-like layer in the pipelines that can hinder the flow from resuming even after the power outages are resolved. However, according to tanker tracking data, Venezuela's main export terminal at Puerto José was apparently able to load crude oil onto vessels between power outages, possibly indicating that the loaded crude oil was taken from onshore storage. For this reason, EIA estimates that Venezuela's production fell at a faster rate than its exports.

EIA forecasts that Venezuela's crude oil production will continue to fall through at least the end of 2020, reflecting further declines in crude oil production capacity. Although EIA does not publish forecasts for individual OPEC countries, it does publish total OPEC crude oil and other liquids production. Further disruptions to Venezuela's production beyond what EIA currently assumes would change this forecast.

May, 21 2019
Your Weekly Update: 13 - 17 May 2019

Market Watch

Headline crude prices for the week beginning 13 May 2019 – Brent: US$70/b; WTI: US$61/b

  • Crude oil prices are holding their ground, despite the markets showing nervousness over the escalating trade dispute between the USA and China, as well as brewing tensions in the Middle East over the Iranian situation
  • China retaliated against President Trump’s decision to raise tariffs from 10% to 25% on US$200 billion worth of Chinese imports by raising its own tariffs; crucially, China has also slapped taxes on US LNG imports at a time when American export LNG projects banking on Chinese demand are coming online
  • In the Middle East, Saudi Arabia reported that two of its oil tankers were attacked in the Persian Gulf, with the ‘sabotage attack’ near the UAE speculated to be related to Iran; with the US increasing its military presence in the area, the risk of military action has escalated
  • The non-extension of US waiver on Iranian crude is biting hard on Iran, with its leaders calling it ‘unprecedented pressure’, setting the stage for a contentious OPEC meeting in Vienna
  • In a move that is sure to be opposed by Iran, Saudi Arabia has said it is willing to meet ‘all orders’ from former Iranian buyers through June at least; Saudi Aramco is also responding to requests by Asian buyers to provide extra oil
  • The see-saw trend in US drilling activity continues; after a huge gain two weeks ago, the active US rig count declined for a second consecutive rig, with the loss of two oil rigs bringing the total site count to 988, below the equivalent number of 1,045 last year
  • There is considerably more upside to crude prices at the moment, with jitters over the health of the global economy and a delicate situation in the Middle East likely to keep Brent higher at US$71-73/b and WTI at US$62-64/b


Headlines of the week

Upstream

  • Occidental Petroleum and Warren Buffet have triumphed, as Chevron bowed out of a bidding war for Anadarko Petroleum; Occidental will now acquire Anadarko for US$57 billion, up significantly from Chevron’s US$33 billion bid
  • The deal means that Occidental’s agreement to sell Anadarko’s African assets to Total for US$8.8 billion will also go through, covering the Hassi Berkine, Ourhoud and El Merk fields in Algeria, the Jubilee and TEN fields in Ghana, the Area 1 LNG project in Mozambiuqe and E&P licences in South Africa
  • BP has sanctioned the Thunder Horse South Expansion Phase 2 deepwater project in the US Gulf of Mexico, which is expected to add 50,000 boe/d of production at the Thunder Horse platform beginning 2021
  • Africa is proving to be very fruitful for Eni, as it announced a new gas and condensate discovery offshore Ghana; the CTP-Block 4 in the Akoma prospect is estimated to hold some 550-650 bcf of gas and 18-20 mmbl of condensate
  • In an atypical development, South Africa has signed a deal for the B2 oil block in South Sudan, as part of efforts to boost output there to 350,000 b/d
  • Shell expects to drill its first deepwater well in Mexico by December 2019 after walking away with nine Mexican deepwater blocks last year

Midstream & Downstream

  • China’s domestic crude imports surged to a record 10.64 mmb/d in April, as refiners stocked up on an Iranian crude bonanza due to uncertainty over US policy, which has been confirmed as crude waivers were not renewed
  • Having had to close the Druzhba pipeline and Ust-Luga port for contaminated crude, Russia says it will fully restore compliant crude by end May shipments, including cargoes to Poland and the Czech Republic
  • Mexico’s attempt to open up its refining sector has seemingly failed, with Pemex taking over the new 340 kb/d refinery as private players balked at the US$8 billion price tag and 3-year construction deadline
  • Ahead of India’s move to Euro VI fuels in April 2020, CPCL is partially shutting down its 210 kb/d Manali refinery for a desulfurisation revamp
  • China’s Hengli Petrochemical is reportedly now stocking up on Saudi Arabian crude imports as it prepares to ramp up production at its new 400 kb/d Dalian refinery alongside its 175 kb/d site in Brunei
  • South Korea’s Lotte Chemical Corp expects its ethane cracker in Louisiana to start up by end May, adding 1 mtpa of ethylene capacity to its portfolio
  • Due to water shortage, India’s MRPL will be operating its 300 kb/d refinery in Katipalla at 50% as drought causes a severe water shortage in the area

Natural Gas/LNG

  • Partners in the US$30 billion Rovuma LNG project in Mozambique now expect to sanction FID by July, even after a recent devastating cyclone
  • Also in Mozambioque, Anadarko is set to announce FID on its Mozambique LNG project on June 18, calling it a ‘historic day’
  • After talks of a joint LNG export complex to develop gas resources in Tanzania, Shell and Equinor now appear to be planning separate projects
  • Gazprom has abandoned plans to build an LNG plant in West Siberia to compete with Novatek, focusing instead on an LNG complex is Ust-Luga
  • First LNG has begun to flow at Sempra Energy’s 13.5 mtpa Cameron LNG project in Louisiana, with exports expected to begin by Q319
May, 17 2019
Shell Eclipses ExxonMobil Once Again

The world’s largest oil & gas companies have generally reported a mixed set of results in Q1 2019. Industry turmoil over new US sanctions on Venezuela, production woes in Canada and the ebb-and-flow between OPEC+’s supply deal and rising American production have created a shaky environment at the start of the year, with more ongoing as the oil world grapples with the removal of waivers on Iranian crude and Iran’s retaliation.

The results were particularly disappointing for ExxonMobil and Chevron, the two US supermajors. Both firms cited weak downstream performance as a drag on their financial performance, with ExxonMobil posting its first loss in its refining business since 2009. Chevron, too, reported a 65% drop in the refining and chemicals profit. Weak refining margins, particularly on gasoline, were blamed for the underperformance, exacerbating a set of weaker upstream numbers impaired by lower crude pricing even though production climbed. ExxonMobil was hit particularly hard, as its net profit fell below Chevron’s for the first time in nine years. Both supermajors did highlight growing output in the American Permian Basin as a future highlight, with ExxonMobil saying it was on track to produce 1 million barrels per day in the Permian by 2024. The Permian is also the focus of Chevron, which agreed to a US$33 billion takeover of Anadarko Petroleum (and its Permian Basin assets), only for the deal to be derailed by a rival bid from Occidental Petroleum with the backing of billionaire investor guru Warren Buffet. Chevron has now decided to opt out of the deal – a development that would put paid to Chevron’s ambitions to match or exceed ExxonMobil in shale.

Performance was better across the pond. Much better, in fact, for Royal Dutch Shell, which provided a positive end to a variable earnings season. Net profit for the Anglo-Dutch firm may have been down 2% y-o-y to US$5.3 billion, but that was still well ahead of even the highest analyst estimates of US$4.52 billion. Weaker refining margins and lower crude prices were cited as a slight drag on performance, but Shell’s acquisition of BG Group is paying dividends as strong natural gas performance contributed to the strong profits. Unlike ExxonMobil and Chevron, Shell has only dipped its toes in the Permian, preferring to maintain a strong global portfolio mixed between oil, gas and shale assets.

For the other European supermajors, BP and Total largely matched earning estimates. BP’s net profits of US$2.36 billion hit the target of analyst estimates. The addition of BHP Group’s US shale oil assets contributed to increased performance, while BP’s downstream performance was surprisingly resilient as its in-house supply and trading arm showed a strong performance – a business division that ExxonMobil lacks. France’s Total also hit the mark of expectations, with US$2.8 billion in net profit as lower crude prices offset the group’s record oil and gas output. Total’s upstream performance has been particularly notable – with start-ups in Angola, Brazil, the UK and Norway – with growth expected at 9% for the year.

All in all, the volatile environment over the first quarter of 2019 has seen some shift among the supermajors. Shell has eclipsed ExxonMobil once again – in both revenue and earnings – while Chevron’s failed bid for Anadarko won’t vault it up the rankings. Almost ten years after the Deepwater Horizon oil spill, BP is now reclaiming its place after being overtaken by Total over the past few years. With Q219 looking to be quite volatile as well, brace yourselves for an interesting earnings season.

Supermajor Financials: Q1 2019

  • ExxonMobil – Revenue (US$63.6 million, down 6.7% y-o-y), Net profit (US$2.35 billion, down 49.5% y-o-y)
  • Shell - Revenue (US$85.66 billion, down 5.9% y-o-y), Net profit (US$5.3 billion, down 2% y-o-y)
  • Chevron – Revenue (US$35.19 billion, down 5% y-o-y), Net profit (US$2.65 billion, down 27.2% y-o-y)
  • BP - Revenue (US$67.4 billion, down 2.51% y-o-y), Net profit (US$2.36 billion, down 9.2% y-o-y)
  • Total - Revenue (US$51.2billion, up 3.2% y-o-y), Net profit (US$2.8 billion, down 4.0% y-o-y)
May, 15 2019