Escolar Documentos
Profissional Documentos
Cultura Documentos
e
l
d
G
l
o
s
s
a
r
y
HELP WANTED: Career Department
DRILLING SLANG
If you want to walk the walk on a drill site, it helps
to talk the talk. Here are some terms and phrases often
heard out in the eld.
ARCHIE ROCK: A word often used to describe a rock thats pet-
rophysically simple. Such rocks usually have little clay, a regular
pore structure and high-salinity water.
WEEVIL: A new, completely inexperienced member of the
drilling crew. The crewmember is stereotyped as prone to making
mistakes and being injured, and typically endures planks played
on them by the drilling crew. Its a label of inexperience, rather
than a derogatory term.
WORMHOLE: A high-porosity, high-permeability channel that
develops when heavy oil is produced simultaneously with sand
(during cold heavy oil production with sand, or CHOPS). Worm-
holes develop in a radical pattern away from the borehole and can
extend 150 m from the borehole.
VUGGY: Containing vigs, which are cavities, voids or large pores
in a rock that are commonly lined with mineral precipitates.
GUMBO: A generic term for soft, sticky, swelling clay formations
that are frequently encountered in surface holes offshore or in
sedimentary basins onshore near seas. This clay fouls drilling tools
and plugs piping, both severed problems for drilling crews.
POWER ENGINEERS, YOURE IN LUCK: OVER THE NEXT DECADE, THE
strongest job demand in the oil sands industry will be for your
job, according to the Petroleum Human Resources Council of
Canada. Power engineers are also one of ve professions that the
Alberta-based recruitment rm Collective Technical Recruitment
has pegged as the most-in-demand in 2014.
Power engineers require certication, or a steam ticket,
and are highly sought-after because their skills are applicable in
jobs across the oil and gas sector. In recent years, the profession
has boomed, thanks to a growing number of in-situ and SAGD
operations. SAGD, in particular, has fuelled a sharp increase in
opportunity for power engineers77 per cent of the power en-
gineering industrys hires comes from SAGD operations. These
steam engineers monitor and regulate the SAGD process, and are
needed for projects including Encanas Foster Lake and Nexens
Long Lake. From the in-situ and upgrading perspective, power
engineers make up about 25 per cent of their hiring activity.
There are four levels of accredited, recognized power engineer-
ing certications. The fourth-class ticket is the entry-level position,
and the highest certication is the rst-class ticket. Power engi-
neers progress through the levels, and their careers, by accumulat-
ing work experiencewhat the industry calls ring timeand
by writing exams at each stage of the process. Steam engineers are
accredited by an additional certicatebut the number of people
earning this certicate from colleges like Fort McMurrays Keyano
College each year cant keep up with the demand. In a bid to help
ease the time pressure on the job, industry and human resources
are working to ensure third-class power engineers are used to their
full potential while technical schools work harder to ll the void.
Collective Technical Recruitment says a perfect storm of
technological advancement and a labour shortage means power
engineers have remained in much the same place as PHRCCs
2012 report.
Common power engineer job titles: Control room operator,
process operator, bitumen plant operator, SAGD operator, in situ
operator, production technician, unit operator.
WCJ_May-Jun_14_p10-11.indd 11 2014-05-01 10:05 AM
Well Construction Journal 12 MAY/JUNE 2014
REPORT
Special
LOCATION: Southwest China
RESOURCE: Oil, conventional and unconventional-
natural gas
SOURCE ROCK: Marine shales
ESTIMATED RECOVERABLE RESERVES: 626 tcf gas,
8.3 billion bbl oil
PRODUCTION: 1.5 bcf/d
MAJOR PRODUCERS: Sinopec, PetroChina,
Royal Dutch Shell
WCJ_May-Jun_14_p12-15.indd 12 2014-05-01 10:06 AM
MAY/JUNE 2014 13 www.cadecanada.com
N EARLY FEBRUARY, PETROCHINA ANNOUNCED A
new nd of 10.9 tcf of technically recoverable
gas in southwest Chinas Sichuan Basin. The
companys report said its one of Chinas larg-
est nds in over a decade.
Half of Chinas technically recoverable gas
reserves a 240-year supply are found in the
Sichuan Basin. It produces about 1.5 bcf/d from
conventional and low-permeability sandstones
and carbonates, and current exploration focuses
on the less-faulted and less-sour southwest quad-
rant. Rock quality compares favourably with
plays like the Marcellus and Barnett, but with
some challenging differences: excessive depth,
intense faulting and complex structure among
them. Generally only the marine Paleozoic
shales of its southwest quadrant are suitable for
exploration thats where PetroChina, Sinopec
and Shell currently focus, and where BP, Chev-
ron, ConocoPhillips, Statoil and Total have all
expressed interest.
Theres oil, too. The Sichuan produces con-
ventional oil from its overlying Jurassic sand-
I
Theres tremendous potential,
and huge challenges, in
Chinas complex shale.
stones, sourced by marine shales. Although
not well-dened geologically, Chinas shale oil
deposits are reported to be waxy and stored in
lacustrine clay-rich shales less friendly to hy-
draulic stimulation.
What the country sorely needs is to develop
its shale reserves. China is the worlds top en-
ergy consumer, and fourth-largest consumer
of natural gas, so is looking to increase its sup-
ply, primarily by replacing emissions-spew-
ing coal in electricity generation. Sixty-nine
per cent of Chinas energy comes from coal,
and it accounts for 47 per cent of the worlds
coal consumption. At this rate, China will
continue to top the world in coal consump-
tion until 2040. But weaning China off coal is
a high priority, as Beijings particulate matter
hit more than 24 times the World Health Or-
ganization-recommended daily limit in Jan-
uary, and China already accounts for 25.5 per
cent of the worlds CO
2
emissions. In order to
reduce these levels, the International Energy
Agency (IEA) forecasts Chinese gas demand
By Graham Chandler
WCJ_May-Jun_14_p12-15.indd 13 2014-05-01 10:06 AM
Well Construction Journal 14 MAY/JUNE 2014
REPORT
Special
will quadruple between 2011 and 2030. China
sits on an estimated 4,746 tcf of risked shale gas
in-place, the worlds largest reserves, and the
government has set an ambitious target for
shale gas production: striving for 5.8 to 9.7
bcf/d by 2020. While annual shale gas con-
sumption is 6.0 tcf and rising, thats still just
four per cent of the countrys total energy con-
sumption. Total 2013 gas production, of which
shale was only a sliver, was 4.3 tcf. Clearly, shale
needs to perform.
After the Sichuan, three basins in the north
round out Chinas ma-
jor shale gas deposits.
The remote Tarim Basin,
with 216 tcf technically
recoverable, has relative-
ly deep shale gas poten-
tial in marine-deposited black shales. Little of it
has been leased or drilled because of its remote-
ness and extreme shale depth. Half of Tarims
conventional oil production comes from hor-
izontal wells, so expertise gained in horizontal
drilling technology could help any future shale
developments.
The Junggar Basin, at 36 tcf, is reported to
have Chinas best shale geology and structure.
Permian source rocks are extremely thick, at
300 metres or more, and continuous, rich, and
over-pressured. Triassic source rocks also appear
prospective. Large shale oil and wet gas leads are
evident but brittle.
The Songliao Basin totals 16 tcf and is Chinas
largest oil-producing region, with thick Lower
Cretaceous source rock. Its organic-rich shales
are of lacustrine origin but rich in clay minerals,
so are over-pressured and naturally fractured.
PetroChina is already producing shale oil com-
mercially in the Songliao.
Risked, technically recoverable shale oil re-
sources in these three basins are estimated at
32.2 billion barrels, out of 643 billion barrels of
risked, prospective shale oil in place.
Tight gas production has contributed, too.
Over the past ve years, the
Ordos basin in north central
China has doubled its gas
production, accounting for
nearly 40 per cent of domes-
tic gas production growth.
Ordos gas is dominated by the Sulige eld,
Chinas largest onshore gas eld.
THE CHALLENGES
Chinas shale deposits are in the infant stag-
es of exploration, and will be considerably more
challenging than their North American coun-
terparts. The hurdles are manifold: tectonic
complexity seems especially certain to compli-
cate and slow commercial development. Similar
issues have dogged Chinas coalbed methane
sector, output of which remains under 0.5 bcf/d
after 20 years of commercialization efforts.
Add to that Chinas service sector, which
In certain basins theres tremendous
potential and the Chinese certainly
are encouraging western companies
to play a role, Michael Wang says.
Chinas shale deposits are considerably
more challenging than those found in
North America.
WCJ_May-Jun_14_p12-15.indd 14 2014-05-05 1:19 PM
www.cadecanada.com MAY/JUNE 2014 15
is not equipped to deal with deep and
long horizontal drilling with multi-stage
fracing. And cost: individual wells are re-
ported to cost $8 to $12 million. An Oc-
tober 2013 analysis by Macquarie Equities
Research reckons for shale success, Chi-
na needs $14/mcf gas prices, or material-
ly lower well capex to US$4.5 million, or
high average [initial production rates] of
around 3.5 mcf/d.
Another issue is data availability. Es-
sential basic geological and well data in-
formation that is publicly available in
western countries is tightly held in China.
And critical water supplies for fracing are
scarce, especially in the north and north-
west. Moreover, other shale reserves are
in densely populated areas, challenging
heavy equipment mobilization. In terms
of infrastructure, PetroChina and Sinopec
control most pipelines. Shale gas in Chi-
na remains just a potential, says Michael
Wang, director of research at IHS Energy.
It may take many years before anyone
can know whether they can have a prot-
able role in China.
THE OVERSEAS HELP
China relies on imports for more than
half of its petroleum needs, although holds
24.4 billion barrels of proven reserves.
Its total oil and liquids production of 4.5
million bpd, the worlds fourth largest, is
all consumed domestically. Production
growth has not kept pace with demand
here, either: in December 2013 it import-
ed 6.3 million bpd, surpassing the U.S. as
the worlds largest crude importer. Imports
could rise to 9.2 million bpd by 2020.
Chinas state-owned oil and gas enter-
prises SOEs have been investing tens
of billions of dollars in resources around
the world (in places like Canada, Nigeria,
Cameroon, Angola, Brazil, Venezuela, Ka-
zakhstan and Mozambique) for the past
decade. Through some of these invest-
ments both small slices and controlling
acquisitions its hoping to absorb tech
expertise in developing unconventional
resources, like shales and the deep water
South China Sea.
Deals with IOCs abound, too. PetroChi-
na has formed a joint venture with Total
Petroleum in the South Sulige area of the
Ordos Basin, as well as with Chevron.
And Sinopec has partnered with IOCs
ConocoPhillips, BP and ExxonMobil for
shale gas research and exploration in the
country. Last year, Sinopec announced
Sinopec Oileld Service Corporation,
which is discussing a joint venture with
Weatherford International. Together with
the Royal Dutch Shell operations in the
Sichuan Basin, these will tap more crucial
shale expertise. And in late 2013, several
major agreements were signed with Russia
to import both oil and gas. Russian SOE
Rosneft agreed to supply 200,000 bpd over
10 years starting this year, and reported-
ly aims to eventually export over a mil-
lion bpd to China. China is also looking
to double its imports from Turkmenistan
and Kazakhstan.
In China there are two primary areas
where Western players can have a role,
says Wang. One is the deep water offshore
in the South China Sea. The Chinese con-
tinue to encourage Western players to ex-
plore for oil and gas in these waters, and
they have been for years. The other is
shales. In certain basins theres tremen-
dous potential and the Chinese certain-
ly are encouraging western companies
to play a role, says Wang. We are see-
ing some North American and European
players there. But I havent seen Canadi-
an companies, although a lot are known
to be skilled operators in recovering shale
gas in the Montney and Duvernay for ex-
ample. So far I think Canadian companies
who can position themselves as experi-
enced in shales may have a role in China.
Of course on the ip side, China has
been looking at LNG investments in Cana-
dian west coast projects including the Kiti-
mat LNG joint venture. In March, Sinopec
approached the B.C. government with a
view to acquiring a 15-per-cent stake in the
proposed Petronas-owned Pacic North-
west LNG Project at Prince Rupert, with
whom it has been negotiating. It may be a
t: both have positions in B.C.s Montney,
and Petronas is seeking nancial partners.
In many ways Chinas SOEs are now
acting like IOCs. In Canada, where many
Chinese companies have signicant unde-
veloped acreage, some are for the rst time
seeking equity partners to develop them.
In October 2013, Sinopec announced
it wants a partner for its wholly-owned
Canadian subsidiary Daylight Energy to
develop shale reserves in the Montney
and Duvernay. As well, after spending $30
billion on Canadian oil and natural gas
assets over the last six years, China is grap-
pling with issues that have long plagued
its North American rivals, including high
costs, operational challenges, First Nations
issues and volatile bitumen prices.
And thats not to mention another bar-
rier. After CNOOCs acquisition of Nexen
in 2012, the Canadian government an-
nounced new rules for the acquisition of
all or part of Canadian oil sands compa-
nies by SOEs, says Brian Bagnell, senior
research associate at Macquarie Securities.
Essentially, the rules require potential ac-
quirers to demonstrate a net benet to
Canada and the acquisition of material
stakes in oil sands companies will only be
allowed under exceptional circumstanc-
es. This has already slowed new invest-
ment from China.
The SOEs focus going forward will
be trying to develop these assets, Wang
says. Future acquisitions will probably be
by private Chinese companies acquiring
smaller Canadian companies.
He says hes seen this in recent visits
to China. We are seeing some emerging
private Chinese companies looking to get
into the Canadian and North American
oil and gas business for example, junior
Canadian E&Ps and some of the depressed
Canadian natural gas companies.
Analysts are mixed as to Chinas chanc-
es of developing a large-scale shale oil and
gas industry. On the one hand, U.S. shale
development took about ve years and on
the other, it didnt face Chinas challenges.
Nevertheless its future energy thrust will
be to maximize its own resources while
continuing to invest globally.
China relies on imports for more than
half of its petroleum needs, although
holds 24.4 billion barrels of
proven reserves.
WCJ_May-Jun_14_p12-15.indd 15 2014-05-01 10:07 AM
ONYX 360 is a mark of Schlumberger. 2014 Schlumberger. 14-BT-0019
Find out more at
slb.com/ONYX360
Only the ONYX 360 rolling PDC cutter revolves 360, using the entire diamond edge to cut the formation, increasing bit
durability. In abrasive sandstones of the Oklahoma Granite Wash, PDC bits that had ONYX 360 cutters placed in the
highest wear areas of their cutting structures drilled 44% faster and up to 57% farther than bits with only xed cutters.
New revolving cutter substantially increases
bit durability and footage drilled.
ROLLING PDC CUTTER
ONYX 360
WCJ_May-Jun_14_p16-19.indd 16 2014-05-01 10:08 AM
MAY/JUNE 2014 17 www.cadecanada.com
Courting Investment
Lessons from a Canadian company searching for investment from China
REPORT
Market
By Lisa Ricciotti
ASSIMO GEREMIA CO-FOUNDER, PRESIDENT
and CEO of Manitok Energy Inc. knows
how to nd gas and oil.
He proved that in 2011, when the
young, Calgary-based companys rst three drills
resulted in three signicant conventional pool
discoveries: two light oil pools and a liquids-rich
natural gas pool. Beginners luck? Not when Mani-
tok continued to beat the odds the following year,
hitting it out of the park with nine well drills that
nearly doubled production. By late 2013, Manitoks
exploration efforts were paying off, with about
4,000 barrels per day, and by April 2014 production
was north of 6,000 bpd.
Ramping up production from zero to more than
6,000 bpd in three short years is a considerable
achievement, but thats just the start of ambitious
growth plans for Manitok. Over the next four or
ve years, Geremia would like to more than triple
Manitoks current production, to 20,000 barrels
of oil equivalent per day. As a big stride toward
that goal, he hopes to add new acquisitions to the
companys properties in southeastern Alberta and
the foothills. He estimates this would bump up
production by 5,000 to 8,000 boe/d.
Geremias game plan is solid and carefully con-
sidered, but he doesnt want to cripple Manitoks
forward momentum with an overly heavy debt
load, and new acquisitions come with hefty price
tags. Luckily, Geremia has played the role of pitch-
man before, progressively broadening Manitoks
nancial search area from Calgary to Toronto and
then New York City. And he even nds many simi-
larities between the two pursuits.
To nd oil and gas, youve got to do your research
and analysis, then youve got to spend money, on
seismic and drilling. It takes time, but if you dont
spend time exploring, you wont get anything, he
says. Finding money is much the same a lot of
work, a lot of digging, a lot of patience.
M
WCJ_May-Jun_14_p16-19.indd 17 2014-05-01 10:08 AM
18 MAY/JUNE 2014 Well Construction Journal
If anything, it will take more
time and more patience than
dealing with Canadian investors,
Massimo Geremia says.
Another similarity: it pays to expand your search
into new territory.
In 2013, Geremia added China the worlds most
populous country, with one of the worlds fastest
growing major economies to his target list of
investment opportunities to investigate. That Sep-
tember, Geremia found himself on a 15-hour ight
to Shanghai for an intense rst-hand assessment of
Chinese interest in Alberta oil and gas investments.
His visit was a whirlwind of meetings, all arranged
pre-departure by a Vancouver investors group with
afliates in Shanghai and Hong
Kong. In total, Geremia spent
two non-stop days pitching in
Shanghai, followed by another
in Hong Kong (and about an
equal amount of time in transit).
Although Geremia had never travelled to China be-
fore, he saw far more hotel and restaurant banquet
rooms than tourist highlights.
I made a lot of presentations at a lot of lunches
and dinners, he says.
Geremia says hed skip a few of the more exotic
dishes next time, but he found the experience
worthwhile, and plans to return this fall. He esti-
mates he met with contacts from 30 different com-
panies state-owned, family-run and private and
found a fair bit of interest. Whether that interest
will translate into real nancial commitment is still
up in the air. Of the 30 groups met, he maintains
monthly contact with three. Over time, many
prospects will fall off the table while a few good
ones stay on. We need to talk to many groups to
nd the two or three interested, who are willing to
participate and take a long-term look at Western
Canada. Once you nd those, you just keep devel-
oping those relationships.
Still, Geremia advises anyone travelling to China
seeking investors to make the most of their time
by meeting as many contacts as possible. Meet
with and talk to anybody and everybody, he says.
But dont waste time on cold calls; every meeting
should be at least warm. Geremia also recommends
having all of your appointments set up in advance
by a person who understands the Chinese market,
who will screen out unlikely leads and ensure no
hot prospects are overlooked.
Geremia also emphasizes that timely follow up is
very important. Those you met will be watching to
see if you do what you said you would. Your actions
once youre back in Alberta are what theyll look at
as they decide whether they will invest their trust
and their funds in your business.
Geremia says it wasnt until the third or fourth
visit to Toronto that Manitok secured investors, and
although management has made ve or six trips to
New York so far, Manitok still doesnt have a major
U.S. shareholder. He doesnt expect things will hap-
pen any faster in China. If anything, it will take
more time and more patience than dealing with
Canadian investors, Geremia notes.
Geremia recognizes that several years ago, Man-
itok was too small to attract Chinese investors.
But with its recent and expected growth, hes con-
dent Manitok will nd the
right t with a Chinese inves-
tor. Were looking for a group
thats interested in coming to
take about a 20-per-cent po-
sition in the company. Thats
big enough to make it meaningful for the investor,
but not large enough that our management will
lose control. The investor would have a seat on
the board and grow with us and be there when the
growth and prots that their 20-per-cent nancing
made possible.
Sounds like a good deal, one that offers a win for
both companies. If youre interested, give Massimo
a call to set a lunch date. Chinese, anyone?
A NUMBERS GAME
Yes, Alberta, there is life in the oil patch after Nexen.
The attraction of Chinese capital to Canadian energy
hit a snag last December when Prime Minister
Harper reluctantly allowed Chinas CNOOC Ltd. to
consummate its courtship of Nexen Inc. with a union
that left China as the controlling partner. But well
have no more of that, Harper warned similar state-
backed suitors, who responded by decreasing the
frequency and intensity of their offers.
When Geremia travelled to Hong Kong and
Shanghai last fall hoping to fan the embers of
investor interest, he found Chinese businesses
had used the cooling-off period productively and
rethought their relationships with Canadas oil patch.
A couple of years ago, Chinese companies were
more inclined to want a 51 per cent controlling
position in Canadas energy companies in return for
their investment, says Geremia. But as a result of
the federal governments take on Nexxen, theyve
realized asking for control could be a deal-breaker.
Now theyre more interested in coming in as a 20- to
25-per-cent partner. If they cant control the asset,
they can still benet from the revenue it produces.
WCJ_May-Jun_14_p16-19.indd 18 2014-05-01 10:08 AM
MAY/JUNE 2014 19 www.cadecanada.com
PROFILE
Member
By Lyndsie Bourgon
Ryan Richardson
B
Its Easy Being Green
Y HIS OWN ADMISSION, RYAN RICHARDSON IS
a dichotomy. After spending eight years
working in directional drilling around
the world, Richardson is also a keen
member of the Green Party and recently began
working in environmental and midstream ser-
vices for Calgarys Secure Energy Services Inc.
I switched to this sector because I wanted
to work and bring my knowledge of the oil
and gas industry together with my passion for
environmental services, says Richardson.
Richardsons personality was indeed split
between his work and his interests, though he
hasnt found it hard to bring them together.
I [was] out on the rigs, drilling holes in the
ground as a directional driller but was also
volunteering for the Green Party, and these
things arent really congruent, he says.
Richardson ran as a member of the Green Party
in the Calgary-Cross riding during the 2004
provincial election. I havent picked a side
Im not throwing stones, but Im working in
the industry and trying to be progressive.
After graduating from the University of
Calgary in 2002, Richardson worked as a
directional driller for various companies both
in Canada and Europe for close to ve years.
While in Europe, he was able to use his drilling
expertise not only in the oil and gas sector but
also while drilling for geothermal wells.
Last August, Richardson started a new gig at
Secure Energy, where he works as a corporate
accounts representative. Secure Energy operates
26 facilities across Western Canada and North
Dakota, and provides environmental and
midstream solutions for major exploration
companies. Until Secure Energys emergence in
this industry, there was very little diversity or
competition amongst similar service providers.
In this way, Richardson equates Secure Energy
to WestJet, and says that he and his co-
workers are invested in the businesss success
and competitive spirit in much the same way
the WestJet employees diversied Canadas
aviation industry.
I chose [Secure Energy] because its a really
exciting space, the innovations surrounding
recycling, says Richardson. We deal with a lot
of the waste that comes from produced water,
throwback water from completions, drilling
mud and drilling cuttings. But a lot of these
things arent just pure waste; they represent a
lot of value.
Richardson says that while the company
continues to grow, he nds it exciting to
witness development and innovation in
environmental solutions.
Still, he hasnt forgotten his oil and gas
roots. After taking the job at Secure Energy,
Richardson became involved in CADE, volun-
teering as its technical chairman. Its keeping
me up-to-date on innovation, he says, of the
benets of staying connected on the oil and
gas side. I enjoy the conversation. Ive had to
explain my work to both sides, but I havent
found it difcult, he says. Thats where a lot
of change happens.
Split between two worlds,
Ryan Richardson is committed
to uniting oil and gas and
environmental services
WCJ_May-Jun_14_p16-19.indd 19 2014-05-01 10:08 AM
Well Construction Journal 20 MAY/JUNE 2014
C
The Patent Riddle
An Edmonton company takes an unconventional stance on patents in China
REPORT
Tech
By Ryan Van Horne
HINA IS THE MOST POPULOUS MARKET IN
the world and an emerging economic
powerhouse, but it remains a riddle for many
foreign companies trying to do business
there. A frequent challenge is the ease with which
Chinese companies infringe on the patents of
foreign companies, and the inconsistent ability of
Chinas courts to stop it.
In September 2013, an Edmonton-based com-
pany got a crash course in the challenges of doing
business in China. Dale Greggs Handle-Tech Ltd.
took a different approach to patent protection one
that has been successful in few cases.
Greggs rm invented a handle designed to pro-
vide safe and efcient hose transportation and ma-
nipulation on oil and gas jobsites. Greggs product
went from conceptual drawing in December 2012,
to working prototype in May 2013, to production
in fall 2013.
Despite being a newcomer, Handle-Tech has
spread its network quickly and sells its product
world-wide through 15 licensed distributors. After
he got his patent, Gregg went on a trade mission to
China last September, looking for the best way to
venture into its market.
China is more concerned about their people, he
says. Once you take your product into China, the
only protection you can get is if the patent is held
by a Chinese company.
Based on advice he got (from people such as
Michael Lam of the Edmonton Economic Develop-
ment Corp.), Gregg decided that relying on patent
legalese wasnt enough. Lam, who also sits on the
Board of Directors with the Hong Kong Canada
Business Associations Edmonton Section, gave him
another idea: he adopted the more practical solu-
tion of seeking out a Chinese partner that could go
to bat for him in a Chinese court.
Dale Greggs Handle-Tech Ltd.
P
H
O
T
O
:
R
Y
A
N
G
I
R
A
R
D
WCJ_May-Jun_14_p20-21.indd 20 2014-05-01 11:57 AM
www.cadecanada.com MAY/JUNE 2014 21
Gregg and Handle-Tech signed an agreement
with a Chinese hose and plastics manufacturer,
giving it the license to distribute Handle-Techs
product in China, Taiwan and Peru. Gregg de-
clined to name the company, which also holds the
Handle-Tech patent in China and is developing
moulds so that it can eventually manufacture
Greggs invention. But his decision to forge a part-
nership this way was strategic.
Companies that think that patents are their only
protection need to rely on lawyers and courts, he
says. Your best protection is to have the product
available. Patents are broken because that product
is not available.
Dan Harris, a patent lawyer at Harris Moure
PLLCs Seattle, Washington, ofce, says this strategy
can work, but its effectiveness
depends on the wording
of the contract. If he doc-
umented this transaction
correctly, then hes probably
right, Harris says. Unfortu-
nately, Ive seen far too many of them documented
incorrectly.
Harris, who writes the award-winning China
Law Blog, has 17 years of experience representing
companies who do business in China.
The reality is that China isnt so great for patent
protection for anybody, Harris says. It matters
who the Chinese company is.
If the partner company is a national govern-
ment-owned conglomerate, it could expect the
protection of the court in a patent case. If its a big
private rm, it would get some protection, but if its
a small private rm that holds his patent, then hes
better off ghting it himself, Harris says. Converse-
ly, the defendant in a patent lawsuit is a key factor.
Generally, we say that if youre suing a private
Chinese company, your chances are pretty good,
Harris says, while suing a government-owned com-
pany is a waste of money given the odds of success.
Gregg says if his Chinese partner is not respect-
ing the patent, or if they attempt to sell it outside
the areas they have permission to, then theyll be
forced to pay penalties. Choosing the right partner
company is important, and Gregg says there are
good partners to be found in China. Im more
worried about the rogue company in China that is
only interested in making money, he says.
Gregg wonders why more companies dont
approach patent protection this way: Its a pro-
tectionist attitude that stops them, he says. They
think that a patent is the end-all and be-all, but its
nothing more than a piece of paper to use after the
damage is done.
Gregg says his partnership provides him realis-
tic patent protection and is a win-win relation-
ship with someone that has an interest in making
sure that everyone is on the up and up. He sleeps
comfortably at night, although he admits Chris
Sherback, his partner at Handle-Tech does not. Im
dealing with somebody that I think I can trust, he
says, Gregg has met their Chinese partner face-to-
face, while his Sherback has not. I think they have
integrity and honesty. Thats a big part of it, if you
dont have that then you dont make a deal.
Harris says that he and his fellow lawyers who
have experience dealing with China groan every
time they hear talk like this,
because its empty rhetoric.
Weve dealt with China,
he says. Every case weve
dealt with started out with
the American being con-
vinced they can trust the Chinese company and
being proven wrong.
He says every company in China is out to
steal intellectual property, and that he believes
most companies in North America are out to do
it, too, but they dont because ramications are
too strong.
For now, Handle-Techs Chinese partner is or-
dering products manufactured in Edmonton, and
Gregg is happy to keep it that way, because he is
only operating at 10 per cent capacity: China is
no longer the cheapest place to manufacture, he
says. The cost of making moulds is also more than
anticipated, which could delay or even torpedo
plans to build the Handle-Tech product in China.
In his book Poorly Made in China, Paul Midler
coins the term quality fade to describe the modus
operandi of Chinese manufacturers.
Chinese factory owners played games, he
wrote. They delivered customers a quality product
at the start of a project and over time withdrew key
ingredients (or else they substituted inferior inputs
for quality ones).
Given Chinese manufacturers long history
of promising one thing and delivering another,
Handle-Tech might be better off to continue pro-
ducing at home to ensure consistent quality.
They dont ever have to actually manufacture,
Gregg said. They may never manufacture; it seems
to be working that way.
Your best protection is to have the
product available, Dale Gregg says.
Patents are broken because that
product is not available.
P
H
O
T
O
:
R
Y
A
N
G
I
R
A
R
D
WCJ_May-Jun_14_p20-21.indd 21 2014-05-01 10:08 AM
Well Construction Journal 22 MAY/JUNE 2014
L
Battlegrounds
Albertas new private surface agreement registry
earns equal measure praise and criticism
REPORT
Industry
By Robin Brunet
ATE LAST YEAR, THE ALBERTA ENERGY REGULATOR
(AER) unveiled a private surface agreement
registry that has landowners and energy
companies in the province split could the
registry be a cure-all for land disputes, or is it an
empire-building exercise that has no teeth?
Unveiled in December 2013, the Private Surface
Agreements Registry (PSAR) is a tool by which
landowners can register surface agreements
made with energy companies operating on their
property. After that, landowners can ask the AER
to intervene if they feel a company is not living
up to the agreement. The new process ensures
a thoughtful and common-sense approach that
will uphold strict environmental standards while
ensuring landowners have more direct control in
how they deal individually with the regulator,
then Environment and Sustainable Resource
Development Minister Diana McQueen (now
Minister of Energy) said at a press conference at
the time.
The PSAR is the latest initiative announced by
the AER, and is part of the second phase of the Re-
sponsible Energy Development Act, which estab-
lished a single regulator for upstream oil, gas, oil
sands and coal projects in the province. The AER
WCJ_May-Jun_14_p22-23.indd 22 2014-05-01 10:09 AM
www.cadecanada.com MAY/JUNE 2014 23
is now responsible for issuing, maintaining and
inspecting all land approvals for energy activities,
under the Public Lands Act. Under Part 8 of the
Mines and Minerals Act, it will also approve and
inspect seismic exploration programs related to
oil and gas in Alberta.
This is a crucial step towards providing full
life-cycle energy regulation and becoming a
best-in-class regulator, says the AERs CEO Jim
Ellis. PSAR will help landowners feel secure that
energy companies will honour the agreements
theyve made.
But all has been quiet since PSARs unveiling,
leaving some observers wondering to what extent
potential beneciaries are either aware of the
initiative or condent about
its effectiveness. Nothing
has been registered under
PSAR as yet but we expect its
only a matter of time before
we see movement, says Ryan
Bartlett, AERs public affairs
advisor. Basically, PSAR
gives landowners an additional means of airing
a dispute, whereas in the past the only venue
they had were the courts a costly and often
frustrating process.
Heres how the registry works: if an operator
breaches an agreement that has been registered
after November 30, 2013, the landowner can
apply to the AER for an enforcement order. Af-
ter the complaint is led, there are ve possible
outcomes: the AER determines that a company
has failed to comply with a term or condition of
the registered PSA and issues an order to comply
under Section 64 of the REDA; the AER doesnt
issue an order to comply, because compliance of
the company has been achieved after the request
is led but before the AER makes a decision
on the request; the AER dismisses the request
because it has no merit; the AER dismisses the re-
quest because the landowner failed to le further
information, documents or materials within the
specied period; or the AER decides that a more
appropriate forum should deal with the matter,
like the court or the Surface Rights Board.
The AER doesnt hold the authority to force
energy companies to comply with the order,
though it can require the company to pay an
administrative penalty. It may also le the ad-
ministrative penalty with the Court of Queens
Bench and have it enforced as a judgment of the
court. Any AER decision is appealable with the
Court of Appeal, and a company may seek relief
if it believes that no terms or conditions of the
agreement have been contravened provided it
can show that the AER has made an error.
Tracy McCrimmon, executive director for the
Sundre Petroleum Operators Group, applauds
the Alberta government for understanding the
frustrations of landowners and streamlining the
processes that enable them to take action. Land-
owners dont have the deep nancial pockets that
companies do, so the courts really arent a viable
option for them. And the reason industry isnt
overly concerned with developments like PSAR is
because very few companies are bad apples and
nobody wants to be associated with them.
Still, not everyone is satis-
ed with the registry and its
promise in particular, the
November 30, 2013, start
date has commenters saying
it creates a two-tiered system
wherein new agreement
holders have more rights
than other landowners. And with very little
actual enforceable power against the complaints,
critics have noted that for any change, landown-
ers would have to start claims before the courts.
Similar concerns have been raised by Alberta
Surface Rights Group president Don Bester, who
told reporters shortly after the PSAR was unveiled
that the AER has no legal grounds to step in if a
breach of contract between a landowner and an
energy company occurs and that if it tried to, it
could be taken to court for interfering. All this
is an empire-building scheme; how many people
do you think its going to take to administrate
this thing? he said.
For the record, the AER says legislation is being
drafted that gives it power to carry out the rules
outlined in the Responsible Energy Development
Act, including the section on the Private Surface
Agreements Registry.
Although PSARs effectiveness remains to be
seen, AERs rapid evolution as a cradle-to-grave
energy regulator is earning high praise, especially
from organizations that had to deal with nu-
merous government bodies prior to its creation.
Instead of four or ve agencies that werent
prone to sharing much information, now there
is only one, and were better off for it, says Mc-
Crimmon. I suspect the AERs commitment to
being a rst-class regulator will compel everyone
to comply with the laws of the land.
PSAR gives landowners an
additional means of airing a
dispute, whereas in the past
the only venue they had were
the courts a costly and often
frustrating process.
WCJ_May-Jun_14_p22-23.indd 23 2014-05-01 10:09 AM
Well Construction Journal 24 MAY/JUNE 2014
Canadian Rig Counts
April 1, 2014
Drilling Down Total Utilization
Alberta 183 388 571 32.0%
B.C. 48 31 79 61.0%
Manitoba 0 17 17 0%
New Brunswick 0 0 0
Newfoundland 0 0 0
Northwest Territories 0 1 1 0%
Quebec 0 1 1 0%
Saskatchewan 12 129 141 9%
Totals 243 567 810 30%
Source: Divestco
NUMBERS
By the
Stats at a Glance
Alberta Rig Counts
April 1, 2014
Drilling Down Total Utilization
Northern Alberta 40 103 143 28.0%
Central Alberta 117 250 367 31.9%
Southern Alberta 16 45 61 26.2%
Totals 173 398 571 30.3%
Source: Divestco
Top 5 Most Active Operators
April 1, 2014
Active
Rigs
Canadian Natural Resources Ltd. 24
Husky Energy 12
Progress Energy 11
Crescent Point Energy 10
Cenovus 9
Source: Divestco
Top 5 Most Active
Drillers in Western Canada
March 27, 2014
Active Total
Precision Drilling Corp. 77 189
Ensign Energy Services Inc. 37 102
Savanna Energy Services Corp. 28 71
Nabors Industries Ltd. 31 64
Trinidad Drilling Ltd. 28 61
Source: FirstEnergy Capital
WCJ_May-Jun_14_p24-25.indd 24 2014-05-01 10:09 AM
www.cadecanada.com MAY/JUNE 2014 25
Canadian Rig Counts
April 1, 2014
Drilling Down Total Utilization
Alberta 183 388 571 32.0%
B.C. 48 31 79 61.0%
Manitoba 0 17 17 0%
New Brunswick 0 0 0
Newfoundland 0 0 0
Northwest Territories 0 1 1 0%
Quebec 0 1 1 0%
Saskatchewan 12 129 141 9%
Totals 243 567 810 30%
Source: Divestco
Alberta Well Licences
Approval issued by the Alberta Energy Resources Conservation Board
Number of Licences Issued Aug. 2013 Sept. 2013 Oct. 2013 Nov. 2013 Dec. 2013
Development 572 564 586 607 781
Exploration 46 25 52 68 55
Source: Alberta Department of Energy
Alberta Spudded Wells
March 2014
Number of Wells Spudded
2012 2013 2014
January 1763 1616 1076
February 2022 1823
March 980 1078
April 276 337
May 374 268
June 518 452
July 702 647
August 785 794
September 784 720
October 781 741
November 707 692
December 670 539
Source: Alberta Department of Energy
Top 5 Most Active Operators
April 1, 2014
Active
Rigs
Canadian Natural Resources Ltd. 24
Husky Energy 12
Progress Energy 11
Crescent Point Energy 10
Cenovus 9
Source: Divestco
Alberta Completed Wells
January 2014
Number of Wells Completed
2012 2013 2014
January 381 381 442
February 718 640
March 717 812
April 672 701
May 486 434
June 254 272
July 488 373
August 199 474
September 524 458
October 692 753
November 750 671
December 692 530
Source: Alberta Department of Energy
Alberta Land Sales
March 2014
Mar. 2014 Dec. 2013 YTD 2014 YTD 2013
Oil and Natural Gas
Land Sales $85.9 million $50.2 million $133.5 million $680 million
Price Per Hectare $818.49 $407.58 $464.87 $316.91
Oil Sands
Land Sales $536,048 $363,260 $1.82 million $28.19 million
Price Per Hectare $232.66 $153.40 $190.89 $192.05
Source: Alberta Department of Energy
WCJ_May-Jun_14_p24-25.indd 25 2014-05-01 10:09 AM
Well Construction Journal 26 MAY/JUNE 2014
DEEPER
Drilling
By Robin Brunet
A Price to Pay
Experts ponder the fallout of the Nexen/CNOOC deal
HE $15.1-BILLION NEXEN INC. SALE TO CHINAS
CNOOC Ltd., approved in December of
2012, was not only the largest-ever overseas
energy company transaction: it also trig-
gered arguments about to what extent our resources
should be controlled by foreign owners. The fear was
that Nexen was only the beginning of mega-deals
that would change the corporate landscape of the
oil sands.
What a difference a year makes. Since Nexen,
foreign acquisitions have been sedate to say
the least. Foreign M&A
activity in Canada plunged
80 per cent in 2013 to
US$10.2-billion, compared
to US$50-billion in 2012,
according to IHS Herold
data. Plus, investment in
CNOOC-backed MEG En-
ergy Corp. was down 1.8 per cent last year, and
other Chinese-backed public companies reported
declines as high as 30 per cent.
Chinas big three state-owned enterprises (SOEs)
CNOOC, PetroChina and Sinopec are said to be
grappling with issues like volatile bitumen prices.
According to one foreign Alberta investment spe-
cialist (who wishes to remain anonymous), theyre
also troubled by the big salaries in Calgary.
Then theres the famous body blow, dealt by
Prime Minister Stephen Harper, who on December
7, 2012 (the same day Ottawa green-lit the Nexen
acquisition), suggested that investments by SOEs
for controlling interests in oil sands companies
would no longer be allowed. When we say Cana-
da is open for business, we dont mean that Cana-
da is for sale to foreign governments, he said at a
press conference.
In a poll conducted last year by the University
of Albertas China Institute, Canadians were asked
what their concerns are about Chinese investment
in Canada. The number one response was that
theyre opposed to foreign investment in general,
followed by fears of the Chinese not meeting
labour and environmental standards, says China
Institute director Gordon Houlden.
The results prompt Houlden to wonder whose
money our energy sector should accept if not
from China. The bottom line is theres no way we
can develop our resources without foreign invest-
ment, he says, adding that our laws regarding the
environment and labour must be abided regard-
less of who the player is.
In a new report for the University of Calgarys
school of public policy, University of Toronto
professor Wendy Dobson states that cutting off
Canadian companies to Chi-
nese bidders, could increase
risk for, and discourage,
private-equity investors who
often see foreign takeovers as
a possible exit strategy, while
potentially sheltering poorly
managed rms from take-
overs, dragging down our economic efciency.
But when all is said and done, Houlden isnt
too concerned about the current investment chill.
Many people predicted this would happen, for
several reasons, he says. First and foremost, the
Nexen deal came towards the end of the commod-
ities supercyle. Also, corruption investigations
within China have made SOEs less likely to go
out on a limb not only in Canada, but in other
nations too.
Houlden views the present climate as A pause
in the ongoing course of things. The Chinese lead-
ership has specied that they want more assets,
not just T-bills, so acquisitions will march on. And
I predict that as their investments in this country
diversify to encompass other sectors, along with
investment from private Chinese enterprises, our
attitude will change. Nothing turns a head around
these days quite like new job opportunities.
Whether Houldens correct in his prognosis, his
parting comment is food for thought: It wasnt
too many years ago when U.S. investment in the
oil sands was a huge controversy, but now theyre
our allies. Time solves a lot of problems. Im opti-
mistic about the future.
T
The number one response was
that [Canadians are] opposed to
foreign investment in general,
followed by fears of the
Chinese not meeting labour and
environmental standards.
For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing
opportunities in the Canadian petroleum industry. As you look to build your business and launch new technologies,
new products and services in the drilling industry, a CADE Sponsorship offers you a cost effective way to deliver your
message directly to the entire membership of the leading industry association for Well Construction Professionals in
Canada.
YOUR SPONSORSHIP INCLUDES:
Ads in Well Construction Journal, full of relevant industry news and
articles, presented in a high quality, well-read magazine
Your logo in the Thank you to our sponsors feature on the CADE
website and in every issue of Well Construction Journal
Your logo on the Thank you to our sponsors display at every CADE
Technical Luncheon
Authorized use of the CADE logo on your website and in marketing
materials
Connect with Canadas Drilling Industry
Become a CADE Sponsor
2014 SPONSORSHIP PACKAGES ARE NOW AVAILABLE
Contact CADE at 403.532.0220 or by email at info@cadecanada.com
www.cadecanada.com
Support CADE by sponsoring our technical lunches, our website and the Well Construction Journal.
Thank You to Our Sponsors
The support of CADE sponsors plays an integral part in our associations success.
Platinum Sponsors
Phoenix Technologies Services
Gold Sponsors
Global Steel Ltd.
NCS Energy Services
Pacesetter Directional
Schlumberger
XI Technologies Inc.
Silver Sponsors
Akita Drilling Ltd.
Baker Hughes
Cathedral Energy Services Ltd.
Ensign
Lory Oilfield Rentals Inc.
Marquis Alliance Energy Group Inc.
Mostar Directional Technologies
Peak Completions
Petrosight Inc.
Precision Drilling
Well Control Group
000WCJ-CADE_Sponsor-FP.indd 1 2014-04-14 10:21 AM WCJ_May-Jun_14_p26-27.indd 26 2014-05-01 10:09 AM
For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing
opportunities in the Canadian petroleum industry. As you look to build your business and launch new technologies,
new products and services in the drilling industry, a CADE Sponsorship offers you a cost effective way to deliver your
message directly to the entire membership of the leading industry association for Well Construction Professionals in
Canada.
YOUR SPONSORSHIP INCLUDES:
Ads in Well Construction Journal, full of relevant industry news and
articles, presented in a high quality, well-read magazine
Your logo in the Thank you to our sponsors feature on the CADE
website and in every issue of Well Construction Journal
Your logo on the Thank you to our sponsors display at every CADE
Technical Luncheon
Authorized use of the CADE logo on your website and in marketing
materials
Connect with Canadas Drilling Industry
Become a CADE Sponsor
2014 SPONSORSHIP PACKAGES ARE NOW AVAILABLE
Contact CADE at 403.532.0220 or by email at info@cadecanada.com
www.cadecanada.com
Support CADE by sponsoring our technical lunches, our website and the Well Construction Journal.
Thank You to Our Sponsors
The support of CADE sponsors plays an integral part in our associations success.
Platinum Sponsors
Phoenix Technologies Services
Gold Sponsors
Global Steel Ltd.
NCS Energy Services
Pacesetter Directional
Schlumberger
XI Technologies Inc.
Silver Sponsors
Akita Drilling Ltd.
Baker Hughes
Cathedral Energy Services Ltd.
Ensign
Lory Oilfield Rentals Inc.
Marquis Alliance Energy Group Inc.
Mostar Directional Technologies
Peak Completions
Petrosight Inc.
Precision Drilling
Well Control Group
000WCJ-CADE_Sponsor-FP.indd 1 2014-04-14 10:21 AM WCJ_May-Jun_14_p26-27.indd 27 2014-05-01 10:09 AM
100% CRACK FREE
& REBUILDABLE
Excellent Casing &
Tool Joint Protection
THE WORLDS MOST TRUSTED HARDBANDING Duraband
NC
www.hardbandingsolutions.com
hbs1200@hardbandingsolutions.com
IMPROVING STANDARDS
On-Site Training for New Applicators
Applicator Testing, Qualifcation & Licensing
SUPPORTING END USERS
Educational Technical Forums
Worldwide Technical Support
Complete Hardbanding Support
WCJ_May-Jun_14_p28-01.indd 28 2014-05-01 10:02 AM