Peak Oil Theory Challenged?

Peak oil theory suggests that the cumulative oil production would reach a peak and start to decline. Many pundits agreed that we are beyond that point. When oil peaked to $140 per bbl, the theory strengthened itself and more speculated that the price would break the $200 barrier.

Since then, oil has plumetted to mid 30's and the father of peak oil theory has also questioned the theory. It's safe to assume that we still have a long way to go before oil becomes a rare commodity.

Meanwhile, Libya might be showing US oil companies the door and announce their intention to nationalize oil.

Also, a note of interest is Tun Mahathir's recent presentation in Sudan on the global economic crisis.

Aberdeen oil man killed in rig fall

An oil man plunged to his death at Keppel Singapore ship yard recently. The rumor mill among rig hands was that his harness malfunctioned and it is the third so far at the yard. It is a stark reminder to all that despite the voluminous safety manuals, it is absolutely important to study these unfortunate incidents and continue to enhance our safety standards. His brother works for us and it saddens us all to see a colleague affected by this traumatic event.

Automated Unmanned Rig

Robotic and AI technology have been widely used in the military. The term "Predator" and "FlightHawk" are synonymous to UAV (Unmanned Aerial Vehicle) and UCAV (Unmanned Combat Aerial Vehicle) respectively. The US Navy is also building unmanned submarines and sooner or later, we might develop the technology to turn Honda's famous Asimo to Mercs for hire. In Aus, an oil co is developing an unmanned drilling rig which sets up on seabed and is remotely controlled by a vessel at sea level. Umbilicals will be attached to deliver power, cement, drilling fluids and such. This is an ground-breaking development for the oil patch.

This is the real Monsoon

Here's a video of the Sarku 2000 in northern Malaysia waters, South China Sea during the monsoon, with 16-ft swells and 40-knot winds.

Drilling Fluid Coordinator

Job opening at Baker Hughes Malaysia for the position of Drilling Fluid Coordinator. Required experience is 6 years in mud engineering. Primary responsibilities are coordinate operations, provide technical support for clients, prepare tender documents & manage training for engineers.

Well Operations Coordinator

Another job vacancy in Qatar with Air Energi, 6 years of experience, primary responsibility as well works/workover/intervention supervisor, responsible for slickline and E-Line ops.

Second National Oil Company

Recently, the Malaysia Malay Chamber of Commerce (Dewan Perniagaan Melayu Malaysia) suggested the creation of a second national oil company to meet the soaring demand in the middle east and other hot spots for oil exploration, development and production. The demand for manpower in the oil patch is not new. It is a worldwide phenomena especially with the coming 'change of guards', whereby the crew with more than 25 years of experience would soon retire. This would leave a big gap for people with between 10-25 years of experience in the field. The gap was developed immensely when a severe downturn in the business in the 80's forced companies to use attrition to lower down operating cost.

Now that oil price is in a very profitable range between USD60-80 per bbl, projects that were deemed uneconomic are now being reactivated and reassessed by hordes of reservoir and drilling engineers. 3rd party services such as Schlumberger are getting their feet wet in field development projects, something unheard of 10 years ago (field development are normally conducted by oil operators, not service providers).

The creation of a second national oil company would not solve the problem of manpower shortage as it would only create a new vacuum. Pinching from other companies would be required to get operations started up and the only incentives it could throw at new prospects is higher salary. Eventually, a higher operating cost would make projects uneconomic if oil companies indulge in a 'bidding' exercise for expertise.

Several new setups like coiled tubing services are being formed locally. The challenge is the same: shortage of manpower. Consultants are celebrating with champaigne and caviar, as their demand for astronomical pay as much as USD2000 per day for an engineer with 20 years of experience is being met without opposition from major operators.

The hysterical hype of oil price surge which started a couple of years ago initiated a massive effort to manufacture rigs and vessels at every yard available. This created another problem. We realized that experienced manpower cannot be manufactured. Because of that, companies pinch manpower from each other and this was rampant. Some rigs are even being supervised by inexperienced personnel. When hiring from manpower companies, some operators unluckily get the bad apples from the crop (anyone with horrendous work ethics and zero initiative but with experience is taking advantage of the situation).

The short term solution is to reprioritize opportunities. It is impossible to evaluate and develop everything under the sun. Management must prioritize opportunities and refocus effort to the most profitable projects. The long term solution is obviously to start educating university students about the industry and recruit more students on campus.

So to the Malay Chamber of Commerce, I really think it's a bad idea.

'International Oil Companies Are the Real Dinosaurs'

The international oil companies are the real dinosaurs, not we at OPEC. The multinationals have changed their philosophy in recent years, but they still have a long way to go. They need to hire and train more local people. And they should invest more in the exploration of fields and in new technologies. They also have to be very gentle with the production profile of every country.

The Collapse of Capitalism and Free Market

1. USD1.2Trillion was wiped off from the US stock market 2 days ago. Main street was furious about the proposed USD 700B bail out plan and the plan was voted out by both Republicans and Democrats. This is the sign of the collapse in America's capitalism and free market built by the super class and untouchable hedge fund managers controlling trillions of dollars worldwide.

2. Unfortunately, the fall will be cushioned by tax payers money eventually because of the Fed's intention to help save the market and avoid another major recession. The super class continues to enjoy their martinis on a 100-ft yatch in Spain.

3. The top 250 companies in the world makes roughly USD14Trillion, more than the US GDP of USD13.2Trillion and EU at USD13.7T. Policies and trade agreements will continue to be dictated by major corporations and congolomerates, not governments. Unlike governments whose authority has boundaries, corporations can pack and leave in this borderless world.

4. Rockefeller, the famous US oil mogul, built an enormous oil monopoly in the form of Standard Oil which was broken up to several companies including Exxon, Mobil, Chevron and others after the US courts charged him for violating the Anti-Trust Laws. The major oil companies were then identified as part of the Seven Sisters. Because of the enormous influence in the cartel, the Arabs decided to form OPEC in 1961 to curb that influence. Now Exxon has 'merged' with Mobil 10 years ago and is raking in almost USD400B of revenue. Lee Raymond retired with a golden handshake of USD357M. Chevron merged with Texaco in 2001.

3. The top 5 oil companies have spent almost USD200M lobbying between 1998 and 2005. Exxon has ties with powerful people in Washington including Former speaker of the house, Illinois rep Dennis Hastert, who later pushed for drilling in the Arctic. Now Sarah Palin, the governor from Alaska and Senator McCain's running mate for the VP race, also is pushing for drilling in the sacred Arctic National Wildlife Refuge.

4. In the months prior to 9/11, Dick Cheney was tasked to re-evaluate the US energy policy. Roughly 300 meetings were held between him and reps from Exxon, BP, Duke Energy, other industry groups including Enron Chairman, who happens to be a strong Bush supporter (Enron filed for bankruptcy in 2001). Cheney then became Halliburton CEO and Halliburton was awarded multi-billion dollar contracts in Iraq for logistics and military supplies. Condolezza Rice was director at Chevron for 10 years before becoming the US Secretary of State.

5. The top 7 companies with more than USD500k political contribution are Goldman Sachs, Citi, UBS, Meryll, Morgan Stan, Lehman, Bear Stearns. We saw earlier the collapse of Bear Stearns and Lehman Brothers. Warren Buffet pumped in capital into Goldman Sachs.

6. Goldman Sach has been a world renowned investment bank since 1889. Its revenue was close to the US70B mark and the average employee salary was USD600k a year. Its CEO has been taking pay checks worth USD 54M and the top 20 executives have been withdrawing close to half of that each. At Lehman Brothers, the average employee salary was close to USD 300k/year.

7. Because of the recent subprime mortgage crisis, Wall Street greed, unregulated hedge funds playing up the market and manipulating oil price, over-compensated CEOs and top executives and other political and business interests, we are seeing the collapse of an intricate global network of investment banks, military-industrial complex, oil companies and politicians (who have background in the same companies involved whether in the board or as CEO).

8. Senator Obama wants to regulate the market if he becomes POTUS and does not believe in the invisible hands that 'correct' the market.

9. We are also seeing a shopping spree by Middle Eastern and Asian funds which are cash-rich. Singapore's Temasek pumped in US5B into Meryll Lynch to keep her afloat. China invested US 3B into Blackstone, a renowned private equity firm in the US and the second biggest in the country.

10. The US and IMF criticized Malaysia for its pegging initiative and strict forex control in 1998. Now they are replicating exactly what Tun Dr Mahathir did by regulating hedge funds (a bill was passed in Congress a few months ago to control the oil price due to speculations) and bailing out drowning companies.

11. It will be interesting to observe how this chain of events will affect us all.

In the oil patch, a rising death rate

From chron.com

Many workers have been killed in Texas, the nation's leading producer of oil and gas

By BETSY BLANEY Associated Press
Sept. 11, 2008, 11:35PMom

SNYDER — Less than two months into the job in the oil fields of West Texas, Brandon Garrett was sliced in half by a motorized spool of steel cable as he and other roughnecks struggled to get a drilling rig up and running.

Garrett's grisly end illustrates yet another soaring cost of America's unquenchable thirst for energy: Deaths among those working the nation's oil and gas fields have risen at an alarming rate, the Associated Press has found.

At least 598 workers died on the job between 2002 and 2007, according to the U.S. Bureau of Labor Statistics. During that period, the number of deaths per year rose by around 70 percent, from 72 victims in 2002 to 125 in 2006 and a preliminary count of 120 in 2007.

The number of people laboring in the nation's oil and gas fields has been soaring as part of a drilling boom that began in 2000-01, but that alone does not appear to explain the rising death toll, since the fatality rate — that is, the number killed relative to the number of workers — also climbed during the first half of the decade.

Many of those deaths have happened in Texas, the nation's largest producer of crude oil and natural gas.

Numerous factors
Experts blame several factors for pushing the toll ever higher in an industry long considered one of the most dangerous in the nation. Among them:

• A dramatic increase in drilling, spurred by record-breaking oil and natural gas prices. The number of workers in oil and gas jobs shot up from 290,000 in 2002 to 428,000 in 2007. In July 2002, 740 land-based oil and gas rigs were operating in the United States; today, there are about 2,000.
• An influx of new workers hired to operate all those rigs. Many of the newcomers are young, inexperienced and speak little English.
• A high-pressure environment where workplace safety lapses are common. Government agencies responsible for enforcing the rules rarely dole out tough penalties.
• Rampant drug and alcohol use among workers, some of whom turn to methamphetamine to get through 12-hour shifts and labor up to 14 days in a row.

Workers at drilling sites are surrounded by heavy machinery that can kill or maim in an instant. About half the workers who die are struck by equipment or are killed in motor vehicle accidents. Others fall from catwalks, are crushed by falling loads, burned in explosions or become tangled in chains and cables.

'Hazardous industry'

"This is a very, very hazardous industry with a very high rate of injuries and fatalities," said Peg Seminario, director of safety and health for the AFL-CIO. "Safety and health problems are not getting the attention they need. With the growing demand for oil and petroleum products, the production pressures are going to increase and the safety and health problems are going to get worse."

Many experienced oil field workers left the industry in the mid-1980s during the oil bust, when a barrel sold for less than $10. Now, with prices over $100 a barrel, many drilling companies are hiring workers with little or no experience.

"A lot of the rig crews are made up of people who were working at Wal-Mart yesterday.Literally," said Mark Altom of the Woodard, Okla.-based Energy Training Council, a nonprofit organization whose programs are recognized by the Occupational Safety and Health Administration.

Hurricane Ike Aftermath

After Gustav touched down, Ike followed suit with a more devastating foot print causing loss of power and massive flood in Texas. 28 platforms out of 3800 platforms in Gulf of Mexico have been completely destroyed as reported by MMS. The Pride Wyoming worth USD 40M has been reported missing. Her last location was 90 miles offshore Louisiana. Ensco 74 is also nowhere in sight. The 1.3 Million barrels per day-production is still shut in while personnel have been remobilized to platforms and rigs. Most operators are now in eval mode to assess the extent of damages, if any, of their assets. The US has indeed managed this well, after incorporating lessons from Katrina and Rita in 2005 and Ivan 4 years ago.

Districts	Lake Jackson	Lake Charles	Lafayette	Houma	New Orleans	Total
Platforms Evacuated	84	113	119	99	83	498
Rigs Evacuated	9	14	14	20	14	71
Oil, BOPD Shut-in	69,367	35,263	160,059	433,645	565,396	1,263,730
Gas, MMCF/D Shut-in	1,200	816	1,211	992	2,012	6,231

After speculators offloaded some USD 39B worth of funds from crude futures market, the price of crude continues to plummet despite Gustav and Ike's touch of god.

DRILLING ENGINEER/ SUPERVISOR IN LIBYA, GERMANY

Job Requirements:

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	Company Name:	Sofomation Pte Ltd.
	Job Category:	Engineer - Petroleum
	Education Level:	Some College
	Req'd Experience:	6+ years
	Desired Expertise:	Drilling Engineering
	Location:	Libya, Germany

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Job Description:

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Opening is in Libya   Overall Job Purpose The incumbent will provide technical support to the Opco?s and new business development teams, including implementation of a step-change in the acceptance and application of new production technologies and work practices for Wintershall operated projects.  Breakdown of Duties: Provide specialist drilling consultancy services to Opco?s and new business development teams;  Review Drilling aspects of new projects as part of the stage gate process;  Plan and execute drilling operations of Single String Ventures (SSV);  Prepare, promote and support implementation of new drilling technology aimed at further improvement of the economics of field development activities in the Wintershall group, including: introduction of new technologies, especially UBD, Casing Drilling, Deep water;  Implementation of innovative work practices;  Generation of cost saving initiatives.  Provide regular advice of worldwide drilling activities to management;  Maintain up-to-date knowledge base on state-of-the-art technologies in drilling discipline and communicate relevant news effectively within own Opco and with peers within the Group;  Liaise effectively with other Opco?s and other departments in the Kassel Central Office;  Adhere to drilling-related company policies and procedures and propose improvements to these policies and procedures;  Assist in the preparation of training and development programmes for both junior and experienced drilling staff.  Person Specification Engineering graduate with at least 8 years relevant international experience in the E&P business, with emphasis on drilling and workover technology, including supervisory, planning and design activities. Essential to be able to work effectively as part of a team, having first-class inter-personal, communication and motivating skills. Fluency in English is a must. Click here to apply.

Gustav Came And Went

After massive offloading by speculators on Wall Street, Gustav came and went without hiking up crude oil price. Oil was below US109 per barrel on Wednesday. Wall Street is still trying to convince the general public that speculation on futures and commodities is not the number 1 culprit for the high oil price. It is supply and demand. There is no supply disruption aside from the small supply closure from the Gulf of Mexico (GOM). Contrary to Wall Street, Iran OPEC Governor has announced that OPEC will reduce supply by 1M barrels per day, stating that the market is "oversupplied". Do you trust the American Wall Street sharks or the gung-ho Persians?

The personnel onboard 100 rigs operating in GOM, after lessons learnt from Katrina, were safely evacuated with all wells secured with 1.3Mbpd production. 13 refineries were shut down.

Meanwhile, Exxon is expected to increase production from Sakhalin-1 in Russia (the world's second biggest oil exporter) to 183kpbd. Oil firms are claiming that high taxation in Russia is dampening future prospects in Sakhalin.

Nigeria has been crowned the biggest producer in Africa at 1.92M barrels per day, dropping Angola to second spot.

For those working in South China Sea worried about piracy and hijacking, it is good to know that the Navy finally deployed one warship to Yemen to "monitor the situation", 2 weeks after the seizure of the first MISC tanker. A second tanker was hijacked 10 days after that.

Talk about immediate response time to national security.

The Arctic, its reserve and of US and Malaysia Oil Consumption

The Arctis was reported to have an estimated 90B barrels of crude and 1,670TCF of Gas. It's categorized as probably the 5th largest reserve in the world now and regarded as Big Oil's final frontier. The problem is that adding crude to our inventory will not solve the problem that peak oil is real and the production of crude will one day be less than demand. The idea to wire up electric cars to the national grid in the US is commendable. However, it is not spared with challenges such as battery size, weight and cost effectiveness. Lithium is probably the best solution for it due to its efficiency to store energy compared to other elements. Scientists and venture capitalists are betting on this as the next Internet, so to speak. As long as politicians are not willing to venture into this and continue to open up area for development especially in sensitive areas such as the Arctic, we're slowly hammering the nails on our coffins.

The US Department of Defense by far is the largest consumer of petrol at 300kbd. There is little public knowledge about the heavy usage of petrol by the men in green to run the huge Naval fleets worldwide, plane runs, etc. To my surprise, I also found out that 70% of total logistics in the military is for fuel deployment! Every $10/bbl increment would make Pentagon take US1.3B from tax payers pocket.

On a different note, despite the apparent addiction to oil by the US, USMC General Zilmer is a proponent for renewable energy technology to be incorporated in military gear and several US bases have utilized solar and geothermal. This should be extended to the public, just like the Internet. British converted from coal to oil before WW1 to increase the quickness of troops deployment. However, that was an era of US3/bbl crude.

The next big user is obviously transportation in the US. There are more than 240 million cars and trucks on the road. There's an average increase of 7% every year in the US from car sales. In other words, Americans (who are the biggest consumer of cheap and imported oil) really don't care whether we're plunging into global warming with excessive carbon emission. The next presidential hopeful is supposedly heavily geared to make this an urgent agenda for the American people and the world by signing the Kyoto protocol and setting a good example as the only superpower left on Earth (whatever that means).

Malaysia has similar problems. Although it is now a net exporter, it's predicted that Malaysia will be a net importer in a few years time. Opening up new blocks in the East would not help keep the consumption level lower than production. How do we curb oil consumption? Obviously, there has to be options for consumers. The alternative fuel has to be easy to be transported and distributed at stations. E85 could be a good bet although it might add pressure to food price. Public transportation has been a buzz word for the last few months following the general election this year. The extension of LRT will take time and before that happens, there is not much that we could do. The challenge is to expand the network in congested KL. Should not be an issue for other cities like JB and Penang. The purchase of buses could help a bit but I reckon it won't be enough. The other answer is to make it expensive for people to drive in the city center and make certain areas exclusive for pedestrians and public transportations only. The rise of 70 cents to the Liter has actually reduced traffic by 30% as reported by Star recently. Adding highways would not help reduce traffic, it merely diverts traffic. Our next bet is also hybrid or electric cars. However, because of the nature of the AP system and the grip by the elite few, the cost of the cars on the road might not be worth it for the regular joe.

Petrodollar spending spree in Middle East

OPEC revenue from oil sales reached USD650B in 2006, an increase of 600% compared to its revenue in 1998, although being offset by a nudge with the weakening of the US dollar. If the weakening continues, OPEC may consider switching to Euro. Iran and Qatar is expected to represent almost 50% of total capital expenditure for oil field facilities and structures in the region. Qatar's North field expansion, which was discovered in 1971, has a total of 30 development phases and is estimated to be the size of the whole Qatari peninsula.

Difficulties emerged when the French government had instructed Total to reduce its spending in Iran after the US sanction was in place in Nov 1979.

Kazahkstan is expected to be the second highest spender next to Iran with 20% of regional spending and estimated reserve of 14 Billion barrels of recoverable oil.

Saudi is expected to spend a cool USD 10B for Manila field with a projected 900,000 barrel-per-day production by 2011. The Gulf Karan is expected to produce 1 bcf/d (billion cubic feet per day) by 2011 also.

Exciting times ahead......but will this keep up with increasing demand?

Iranian O&G Development and Drilling in Alaska

Iran is set to drill another 160 wells by March 2009. That would translate into multi-billion dollar investments, heavy mobilization of equipment and man power and potential growth for the economy. Although Total has pulled out of that race, rest assured that many National Oil Cos will participate in this endeavor.

President of Iran has also proposed the use of a single currency to help combat the ailing US dollar affect on oil price. This is both political and economic. This was also echoed by our former Prime Minister on the use of Euro for the industry.

With Iran set to be the third biggest gas producer in the world by 2020 with an estimated production of 620 billion cubic yards, no wonder it is proposing another setup similar to OPEC but for gas producers. How will this impact the politics of gas? We have seen how former USSR countries were held hostage due to the dependence of Russian gas.

Meanwhile, the US is opening up Alaska and the Arctic National Wildlife Reserve to more development drilling activities. This is totally counter productive as the reserves will not satisfy the growing consumption of gas-guzzling SUVs and others. The US alone consumes 25 million barrels a day and produces only 1/3 of it. Senator Obama is ready to set the tone for a new energy policy if installed as the new POTUS such as the use of E85, lowering carbon emission by investing in R&D and manufacturing of fuel-efficient cars (therefore creating a sustainable competition against the Japanese auto onslaught).