Adrin Shafil is a Drilling and Completions Manager for Petrofac, and is also a contributing writer for NrgEdge. He has a passion for ERD and is always thinking of the next breakthrough idea for the oil and gas industry.
1. Before joining the oil & gas industry, you wanted to work in Silicon Valley, also known as the world-leading tech hub. What was the reason for the career move to oil & gas in Malaysia?
Actually, let’s talk about my previous aspirations, even before my ambitions for Silicon Valley. Since as long as I can remember, I wanted to be a doctor in my teenage years. The practice of medicine excited me, and I was an avid viewer of medical TV dramas such as E.R. Even at the end of high school, when ExxonMobil came knocking on my door during my senior year, I declined a scholarship with them in hopes of pursuing a career in medicine. However, ExxonMobil did not give up. After my exams, they invited me over to East Coast Malaysia, to visit their offices, a trip offshore and their processing plant. This was when I realized that I could achieve so much as an engineer, when I observed the complexity of the machinery and people on site hard at work. So, I took the engineering scholarship, and went to New York.
Fortunately for me though, ExxonMobil did not dictate which field I could sign up for. So, after taking a few introductory engineering classes, I finally chose Electrical Engineering, majoring in Computer Hardware design. So, my years at school were basically filled with tinkering with microprocessor design and assembly language (even more basic than computer science programming).
And yes, my ambition back then was slightly swayed by the allure of Silicon Valley, where I went to a few interviews with Intel, EMC2 and Microsoft, but after some soul searching, I decided to go back to my love for oil and gas, so I decided to join ExxonMobil in Kerteh, and was assigned to be part of the drilling team, and have remained a driller ever since.
2. Other than being a member of SPE, what are your other involvements outside of work and how do you find time to be involved?
I am fairly active with IADC (International Association of Drilling Contractors) as a speaker and committee member, as well as participating in industry technical committees led by PETRONAS. Recently I’ve been appointed as the Vice Chairman for WeDSTeC Committee by MPM Drilling in Petronas, which was a great honour. The WeDSTeC Committee is a drilling technical arm under the main umbrella of PETRONAS CORAL 2.0 industry-wide transformation programme, which stands for Cost Reduction Alliance 2.0.
And of course, my current online activities as a leadership influencer on LinkedIn and NrdEdge have proven to be quite rewarding, where I assist multiple layers of people in the oil and gas and other industries reach their true potential.
All of this are quite time-consuming, but I feel it is my responsibility to give back to the industry and community I live in, so I don’t let the time crunch bother me too much.
3. You graduated in computer and electrical engineering from Cornell University. How important is education in shaping one’s career path?
I believe that in high school or in higher level institutions, we are not actually merely learning equations, systems, rules or previous discoveries. What we learn is to develop our own abilities based on the fundamentals and tools given to us, where we are able to take our own path and succeed.
Another way to think about it is, every 3-5 years, a new job type is created, especially in the world of engineering and technology and it’s almost impossible for anybody to be educated specifically for that future job, that does not exist yet. Even in oil and gas, I believe with automation in the 4th industrial revolution with robotics and internet of things, the traditional draw and calculate engineering type will be displaced by program designers and data scientists. So, the journey of self-improvement and change will never end in the world we live in, so why should we limit our options based on our education when we were 18 years old?
4. Do you think that fresh graduates today are well-equipped to navigate their way in their careers? What are the skills and traits that are important to sustain a long-term career in the oil & gas industry?
I believe fresh graduates need to look beyond what they have already done, and have a vision of the future, while figuring out their place in that future. With the ability to reinvent themselves and have the right tools always for that vision, they can enter any industry with confidence, and specifically for oil and gas, they will be the catalysts for the new direction that O&G needs to move towards to, to catch up with the level of sophistication that can be found elsewhere. For example, the world is moving towards big data analytics, automation and A.I., so it’s almost impossible to think that O&G will not transform in the same way. And how will O&G be after the 4th industrial revolution? I will not be around then to witness those changes but the current new graduates will, so they need to be prepared for that future.
5. What are your thoughts on the concept of work-life balance? Do you think that reaching the top of the tier in your career, means losing that balance?
My personal opinion is a balance is entirely up to the individual’s goals in life. You can be great at something, but it’s impossible to be great at everything. And this applies to work-life. If you achieve an equal split between the two, then if you are happy with that, go for it. However, if you want to achieve greatness in perhaps a top tier position like a CEO of a company, then you have to make a choice. For some people, they are comfortable with their choice and make work-life possible. And for some, they do not differentiate between work or life, as life is both work and family. To each their own.
6. You’ve given talks about extended-reach drilling (ERD) and have mentioned it a number of times in your articles – why are you so passionate about ERD and what are your hopes for ERD technology in the future?
ERD has just a special place in my heart. Just like how architects and construction engineers race to build the next record breaking skyscraper, the same affection is felt for ERD by drilling and completion engineers. ERD represents the epitome of what drilling and completions engineers can achieve with the tools that they have. Right now, the world record is up to 13km in length, and Malaysian record is about 6.5km. Of course, well lengths are all dependent on the basin you are drilling, and there is no point drilling further and further if the well is unable to achieve the business value, but it remains my dream to be able to push Malaysian ERD industry to deeper frontiers. My hope is that technology for ERD escapes the confines of drilling rig limitations by transforming the way the tool’s energy source is received and converted to mechanical energy. Currently, hydraulics, torque, and pull are all supplied from surface by the rig, which then limits the ability to drill further. In other words, the rig has to be more powerful but there is a limit and cost on upgrading rigs. But if we can imagine self-powered bottom hole assemblies (tools downhole used for drilling), with powerful hydraulic pumps, and automated navigation abilities and closed loop corrections, we can definitely see the 20km barrier no longer be a hurdle.
7. You have managed to gain quite a large network on your LinkedIn profile and you’re very active on it. How important has your professional network been in your career journey?
I feel blessed and grateful with the following that I currently have, and I personally would like to help and guide as much as I can, with nothing expected in return. However, the interactions that I have and visibility allowed by LinkedIn, helps to create a personal digital brand for myself. I am a firm believer that branding is as important to a company and as important to an individual’s success.
In the real business world, the way I dress, the way I communicate is my visual professional brand. Online, what I share, what I write and comment, will become permanent virtual content, which will become my digital image, my personal brand and my legacy. The benefits of an excellent digital brand include a wider audience recognition of my abilities, spanning within and beyond my own field of expertise. With proper exposure, possibilities may arise to allow me to discover new things or pursue whatever it is that I’m passionate about.
8. Do you have a role model that you look up to?
I’m sure I’d embarrass my boss if I mentioned him by name, so I won’t. But to me, he is my role model as he embodies the company’s values, inspires me to take action and he never tires from coaching me with the right guidance and nudges for me to succeed. He is truly a leader, not a boss, and I’m glad to be working with him.
9. I’m sure you have accomplished many things in your life. Can you share your most memorable achievement?
My latest challenge was being able to deliver two wells with a lean budget and on a fast track basis, in what we recognize as a difficult time for the industry. Even the best laid out strategies could not be executed without a great team. My team this year was able to work within the business constraints, and with best in class performance, delivered the two wells safely. It was no easy feat as this was considered one of the most complex wells in Petrofac to date! I’m proud of my team and what they have achieved.
10. Was there ever a moment in your career when you were frustrated to the point of giving up? How did you recover from it?
Okay now it is time to be frank. I am a rather ambitious person and have been since I was in grade school. When my teacher asked me what I was going to be in the future, at the young age of 11, I answered confidently, “A Menteri Besar” (State Governor). While I did not choose the life of a politician, I’ve continued to be goal-oriented all my life, so I aim higher and higher at every stage of my career. So, when I don’t achieve what I want, or being told its not currently in the pipeline, of course I get crushed. An example was back in 2007, in my sixth year as an engineer, I was promised the job of a US Engineering Supervisor after completing my stint in the worldwide planning group. When I was told I had to wait for another year, I threw a fit and quit my job with immediate effect. That was not my proudest moment, but it all worked out well in the end, as I had plenty of opportunities with other companies and I would not be where I am now, if I did not make that change. But as I mature in the industry, I realize that opportunities have to be earned and may not be at the time what we want. So, perseverance and the ability to reinvent myself is key, because sometimes the opportunities given may be something entirely new, but I have to be ready for it.
11. What is next in the pipeline for you? Do you have a project you’re working on or would like to embark on?
Currently we have plenty of wells at Petrofac to be drilled, and future developments, that will keep me busy.
12. Finally, what is the one piece of valuable advice you can give to oil & gas professionals who are about to step into the industry?
Be mindful that the current difficulty in the industry may be longer than expected, so what the industry really needs are people with creative and innovative minds, to be able to maintain safety, operational excellence and achieve business objectives even with a tight budget. So, use the tools that you have, the skills that you’ve learnt and be ready to suggest the next change for oil and gas, and prepare to work and make it a reality. There will always be somebody to listen and guide you, but you need to be able to drive yourself to achieve your goals.
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The U.S. Energy Information Administration’s (EIA) latest Petroleum Supply Monthly shows the significant changes in petroleum markets that occurred in April, when most of the United States was under stay-at-home orders to limit the spread of coronavirus. In April, commercial crude oil inventories increased by 46.7 million barrels (10%)—the largest monthly increase in EIA data going back to 1920. U.S. refineries operated at 70% of their capacity, the lowest utilization rate in EIA’s monthly data series dating back to 1985. Demand for finished petroleum products fell to 11.7 million barrels per day (b/d), the lowest level since at least 1981.
April’s crude oil inventory increase is a result of refinery runs falling more quickly than crude oil supply, which is determined by domestic production and imports. U.S. crude oil production in April averaged 12.1 million b/d, a decrease of 669,000 b/d (5%) from March. This decrease represents the largest month-over-month decline since September 2008, when Hurricanes Ike and Gustav hit the U.S. Gulf Coast. U.S. crude oil imports fell by 776,000 b/d (12%) from March to April, further decreasing crude oil supply in the United States.
The combined drop in production and imports was smaller than the decline in gross inputs to refineries, resulting in record increases in crude oil inventories. Based on estimates in EIA’s Weekly Petroleum Status Report, commercial crude oil inventories reached a record high of 541 million barrels in the week ending June 19 and have fallen slightly in the weeks since then.
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Changes in travel patterns resulted in the lowest levels of U.S. demand for finished petroleum products (as measured by product supplied) in decades. Transportation fuels have been affected differently by changes in travel: demand for jet fuel and motor gasoline fell much more than distillate fuel, which is primarily consumed as diesel. From March to April, product supplied of finished motor gasoline decreased a record 1.9 million b/d (25%) to 5.9 million b/d, the lowest monthly value since the mid-1970s.
In the span of two months, U.S. demand for jet fuel fell by more than half, from 1.6 million b/d in February to 691,000 b/d in April. Before April, U.S. jet fuel demand had not been less than 700,000 b/d since the mid-1970s.
Distillate demand fell by 408,000 b/d, or about 10%, from March to April. Although the change in distillate demand was less drastic than the changes in motor gasoline and jet fuel demand, distillate consumption in April 2020 was the lowest in more than a decade.
Exports of natural gas to Mexico by pipeline are the largest component of U.S. natural gas trade, accounting for 40% of all U.S. gross natural gas exports in 2019. EIA expects these exports to increase with the completion of the southern-most segment of the Wahalajara system, the Villa de Reyes-Aguascalientes-Guadalajara (VAG) pipeline. VAG began operations in June 2020, connecting new demand markets in Mexico to U.S. natural gas pipeline exports.
The Wahalajara system is a group of new pipelines that connects the Waha hub in western Texas, a major supply hub for Permian Basin natural gas producers, to Guadalajara and other population centers in west-central Mexico. The Wahalajara system provides U.S. natural gas to meet growing demand from Mexico’s electric power and industrial sectors. With the 0.89 billion cubic feet per day (Bcf/d) VAG pipeline entering service, EIA expects utilization of the Wahalajara system to quickly ramp up, resulting in increased U.S. natural gas exports to Mexico out of western Texas and additional takeaway capacity out of the Permian Basin.
Since 2016, Mexico has been expanding its natural gas pipeline system, which has supported continual growth in U.S. natural gas exports. Most of this growth has been in U.S. natural gas exports from southern Texas after the existing U.S. pipeline infrastructure was expanded and the Los Ramones Phase II pipeline in central Mexico was completed.
Since the Sur de Texas-Tuxpan pipeline was completed in September 2019, U.S. natural gas exports to Mexico reached a record 5.5 Bcf/d in October 2019. U.S. natural gas exports from the border at Brownsville, Texas, to the southeastern state of Veracruz in Mexico averaged 0.6 Bcf/d during the last quarter of 2019, or about 20% of the pipeline’s capacity.
Overall, U.S. natural gas exports from this region have only increased by 0.2 Bcf/d from 2016 to 2019 because of delays in pipeline construction in Mexico. In particular, two regional pipelines were completed in 2017 but have not been used near their capacity:
Source: U.S. Energy Information Administration, Natural Gas Monthly
The Comanche Trail pipeline has been delivering an average of 0.1 Bcf/d of natural gas to Mexico since the San Isidro-Samalayuca pipeline entered service in June 2017. Pipeline operators do not expect flows to rise until the 0.47 Bcf/d Samalayuca-Sásabe pipeline is completed in either late 2020 or early 2021 in Mexico.
The Trans-Pecos pipeline, the U.S. segment of the Wahalajara system, did not transport significant volumes of natural gas until October 2018; it is currently only operating at 10% to 15% of its total capacity. Most of the demand centers are in southern Mexico, waiting to be connected to the VAG pipeline. Three of the project’s four pipelines in Mexico that are currently in-service include
Before the economic impacts and uncertainty associated with COVID-19 mitigation efforts and declining crude oil prices, S&P Global Platts expected U.S. natural gas exports to Mexico to increase immediately by 0.3 Bcf/d to 0.4 Bcf/d on the Wahalajara system. However, given the decreased demand for natural gas in Mexico in response to the economic impact of COVID-19 mitigation efforts, growth is likely to be slower than expected. Beyond these volumes, additional export volumes will be limited by how quickly customers in Mexico can be connected to the pipeline system.
These connections include new natural gas-fired combined-cycle generators and the scheduled 2020 completion of the 0.89 Bcf/d Tula-Villa de Reyes pipeline, which will deliver natural gas to central Mexico. Deliveries from the Wahalajara network are likely to partially displace higher-cost liquefied natural gas (LNG) imports into Mexico’s Manzanillo terminal, which serves markets in Guadalajara and Mexico City.
As U.S. natural gas exports on the Wahalajara system rise and crude oil prices remain low, EIA expects the price at the Waha hub in the Permian Basin, which had been steeply discounted to the Henry Hub national benchmark, to continue to strengthen.
Officially, we are past the half point of 2020 and with that the end of the second quarter. And what a quarter it has been. WTI prices plunged into negative territory (as low as -US$37/b) then recovered to US$40/b as OPEC+ moved from infighting to coordinating the largest crude production cut in history. In between, the Covid-19 pandemic wreaked havoc with the global economy, setting off a chain reaction within the oil world whose full impact is still unknown.
Opinions on a post-Covid oil world are divided. Some voices, the more optimistic ones, think that oil demand could recover to pre-Covid levels within a year or two. The more pessimistic ones think that this will never happen, that Covid-19 has hastened the trend away from fossil fuels to sustainable energy against the backdrop of climate change. Either way, this has thrown a spanner in the works of the giant, multi-billion oil and gas projects that were announced over the past two years as the energy world began to wake up from its post-2015 price crash investment hibernation. Those projects were made at a time when oil prices were at US$50-60/b. Since oil prices are now only at US$40/b, the current value and the future worth of these assets have now declined. Energy companies account for this by adjusting the value of their portfolios in accordance to the projected value of crude: an upward adjustment is known as a revaluation, and a negative one is known as an impairment.
This is a term that will crop up many times over 2020, as energy companies close their quarterly financial books and report their results to shareholders. The plunge in crude oil prices and the uncertain outlook for oil demand means that publicly-traded companies must account for this to their shareholders. Chevron was the first supermajor to book an impairment, in late 2019 when it took a US$10 billion hit to its oil and gas assets. It wasn’t the only one: firms all across the oil chain also reduced the value of their assets, from Repsol to Equinor.
Further impairments were made in April 2020 when the Q1 financial results were announced, mainly in response to the triggering of the OPEC+ price war (which saw crude prices halve from US$60/b to US$30/b) and the Covid-19 pandemic accelerating to a point where over half of the world’s population went into lockdown. But the major impact will come in Q2 2020, when the roil in the oil markets truly began to boil uncontrollably. BP has announced that it may take up to a US$17.5 billion impairment in its Q2 2020 financial results, while Shell has just admitted that it may have to shave US$22 billion from its asset value.
This has roots not just in the depressed demand for energy due to Covid-19, but also the ongoing conversation on climate change. Almost all supermajors have announced intentions to become carbon neutral by the 2050 timeframe. That may be good news for the planet, but it is bad news for the companies’ portfolio. Put simply, it means that some of the assets that they have invested billions in are now not only worth a lot less (due to Covid-19) but they may in fact be worth nothing at all, because climate change considerations mean that they will never be exploited. Challenging projects such as Total’s deepwater Brulpadda discovery in turbulent South African waters or Pertamina/ExxonMobil/Total/PTTEP’s beleaguered and complicated East Natuna sour gas asset in Indonesia may never be commercialised, either because of uneconomic prices or because they run counter to the goal of becoming carbon neutral. The Financial Times estimates that the amount of unviable or stranded hydrocarbon assets could reach as much as US$900 billion; that figure is pre-Covid, and could now become even higher.
There is one supermajor bucking the trend though. The biggest supermajor of all, in fact. Unlike its peers, ExxonMobil has not yet succumbed to impairments. If fact, it has not announced any negative revaluations at all over the past decade, even during the 2015 oil price crash. ExxonMobil claims that this is because it books the value of new assets ‘very conservatively’ and does not ‘adjust values to short-term price trends’, but critics say that it has an ongoing history of vastly overestimating its assets’ value. Along with Chevron, ExxonMobil does not disclose price assumptions in its financials. But unlike Chevron, ExxonMobil has not yielded to climate change through an official emissions target or asset revaluations.
On paper, that will make ExxonMobil look better than its supermajor brothers. But behind the scenes, this reluctance to admit that the future is less rosy than expected could be trouble waiting to be unleashed. Impairments are a necessary reality check: an admission by a company that things have changed and it is starting to adapt. Most have accepted that reality. ExxonMobil seems to be resisting. But even it is not immune. In pre-Q2 2020 results guidance that was just announced, ExxonMobil admitted that it expects to take a hit of some US$3.1 billion and slump to a second straight quarterly loss. In terms of Covid-19 impairments, that’s small. But it is, at least, a start.
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