Safety, Efficiency Drive Need for Predictive Maintenance in O&G Industry

Planned shutdowns for maintenance not only cost time and money for assets such as production platforms, pipelines or refineries, but the tearing down and putting back together of equipment for preventive maintenance can actually do more harm than good.

Woburn, Mass.-based Azima DLI, which was recognized as an Energy Innovation Pioneer at IHS CERAWeek 2012, offers monitoring services and tools for predictive maintenance--rather than preventive maintenance--as a means of maintaining equipment and plants and ensuring efficiency, reliability and safety of operations.

By studying the vibrations that a machine emits and comparing it to a baseline vibration signature, vibration specialists can determine when a machine will need maintenance.

The science of vibration analysis and oil analysis and infrared have been evolving over the past 30 years, but the internet has allowed Azima DLI to deliver its machine monitoring services to customers worldwide and a centralized analysis resource for tracking maintenance needs, said Azima DLI CEO Burt Hurlock.

"Azima has sought to assemble the right combination of professional expertise and hardware, software and internet capability," said Hurlock.

Data is gathered through web-based tools, and then compared with the signatures in Azima DLI's diagnostic software library. Pending maintenance requirements are given a risk rating based on a composite risk index, ranging from moderate to extreme, indicating when the machines or plants will need attention and whether these machines are integral to operations.

Companies can then allocate their maintenance needs; the capability of rating risk is especially critical for companies with large operations. If a machine that must be kept in operation goes down, the company can deploy a portable online system to monitor the machine's status until it can be repaired.

The company's machine health maintenance programs offer different levels of services based on an hour of unplanned downtime to reflect the size, complexity and cost of the production operation. Customers can pay as they go for the company's web-based portal monitoring services and tools.

Azima DLI's staff of 40 includes 30 workers dedicated to field services and 10 involved in the management, research and development of analytical software.

The company was created through a series of acquisitions. DLI, which has been around since the late 1960s, was founded in Bremerton, Wash., near Seattle, to provide maintenance for the U.S. aircraft carrier fleet. Azima DLI continues to monitor maintenance for the rotating machinery on board the U.S. Navy's fleet of over 100 ships, including carriers, which is critical for vessels that are out at sea for months at a time.

"Besides maintaining battle readiness, the program is a cost saver for the Navy, with every dollar investment generating twenty dollars in returns," said Hurlock. The technology was designed to be easy to use, as the sailors monitoring the combat readiness of the vessels are typically young and promoted to other job duties after a short time.

Monitoring aircraft carrier equipment – which comprises pumps, compressors and fans – is not that different from rotating equipment in oil and gas industry operations. For the Navy monitoring program, a closed loop machine health monitoring system is used in which a work order is automatically triggered by the system. Hurlock has found that in commercial operations, companies are still more comfortable with people processing the work orders.

Azima DLI's technology also is used in a number of commercial industries, including mining, steel, paper, automotive and manufacturing. One commercial client, Air Liquide, was able to reduce its unplanned maintenance at its 100 plants across the U.S. by 95 percent over a three-year period, saving millions of dollars in cost and unknown savings in avoided lost production.

The company's pitch to the energy industry was initially not well received. Energy companies have previously attempted in-house predictive maintenance programs similar to what Azima offers. However, the implementation of these programs was inconsistent, as they require workers with specialized knowledge and experience to maintain the programs.

"The growing emphasis on health, safety and environment in the aftermath of the Macondo oil spill has companies realizing that predictive maintenance can play an integral role in their safety programs," said Hurlock.

The company's oil and gas customers now include BP and ExxonMobil.

The practice of predictive maintenance itself is mundane, requiring workers to walk around the plant and take gather data, and with fewer man-hours available for personnel to carry out a task deemed non-core, many companies find it easier to outsource predictive maintenance.

Occasionally, something thrilling happens, such as the plant manager for the Atlantis space shuttle called about a compressor that sounded bad and needed to be examined before the launch the next day. Azima DLI's analysts were able to diagnose the problem, allowing the flight to go forward.

"At the end of the day, we're a publishing company," said Hurlock, commenting on the reports of maintenance needs that Azima generates for its clients.

"Predictive maintenance is not a sexy business but Azima's services can make a big impact in maintaining long-term assets on a company's bottom line if they'll listen to us," he added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

US moves forward with Iran oil sanctions

Updated: 13:56, Saturday March 31, 2012

US President Barack Obama has approved sanctions that will target Iran's oil exports.

The White House said it had determined there was enough non-Iranian oil supply worldwide to move forward with sanctions passed by Congress last year that will target financial institutions that do business with Iran's central bank, which channels funds involved in its oil exports.

The US does not import Iranian oil under previous sanctions, but the move will force other countries that do trade with Iran to give up that trade or face sanctions.

'There currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their import of Iranian oil,' the White House said in a statement, pointing to estimates of demand as well as global oil inventories.

The new sanctions are set to go into place on June 28

Oil groups agree on Alaska gas project

ExxonMobil, BP and ConocoPhillips have reached agreement with the state of Alaska to take a significant step forward on a $40bn-plus project to export liquefied natural gas to Asia, resolving a long-running lease dispute that had been holding up progress.

In a joint letter, the chief executives of the three companies said they were "aligned" on a plan to develop the huge gas reserves of Alaska's North Slope, which until now have been stranded without a route to market.

They have agreed on a target of 2016 for making a commitment to a large-scale export project, which they said would require an "unprecedented" investment in the state.

Sean Parnell, Alaska's governor, who has been pushing the companies to do more to develop the North Slope reserves, described the statement as a "historic" event.

The most commercially attractive solution for North Slope gas is to build a pipeline to Alaska's south coast and a plant to produce LNG for fast-growing Asian markets, at an estimated total cost of $40bn-$50bn.

Exxon, BP and Conoco, together with TransCanada, the pipeline group, will now work on identifying a specific project, including a timetable, a route for the pipeline and a site for the LNG plant.

The companies hope to resolve those issues within a year.

An important obstacle has been removed with the end of the dispute over Point Thomson, a large North Slope field that holds about a quarter of the region's gas reserves.

The state had been seeking to take back leases on the field, arguing that the companies there, principally Exxon, BP, Conoco and Chevron, had been too slow to start production. The first development plan was agreed in 1977.

The companies have now promised to start the first commercial production of condensate, a liquid that can be used to make fuels or petrochemicals, by May 1 2016. Chevron has dropped out, assigning its interest to Exxon on undisclosed terms.

There are also two deadlines for the companies to decide on a "major gas sale", a project to sell at least 500m cubic feet of gas per day from the North Slope.

By 2016, they have to commit to such a project or make alternative investments. By the end of 2019, if they have still not given the go-ahead, they would lose some of the leases on Point Thomson.

The North Slope has proven reserves of 35tn cubic feet of gas – about one-eighth of US total reserves – and undiscovered resources estimated at 236tn cu ft.

Almost 90 per cent of Alaska's gas output, which comes out of the ground alongside oil production, is simply reinjected back into the field, because there is no way to sell it.

Exxon and TransCanada have been working on a route to take the gas across Canada to the "lower 48" US states, but the low price of North American gas resulting from the shale revolution makes that option unattractive.

LNG can sell in Japan and China for more than seven times the US benchmark gas price.

The LNG proposal still has to clear commercial and regulatory hurdles.

In their letter, the three chief executives said: "Commercialising Alaska natural gas resources will not be easy. There are many challenges and issues that must be resolved, and we cannot do it alone."

They added: "Unprecedented commitments of capital for gas development will require competitive and stable fiscal terms."

Frank Harris, an analyst at Wood Mackenzie, warned that the plan was not guaranteed "smooth sailing", facing competition in Asian markets from other suppliers such as Australia and east Africa, and possibly political difficulties in the US.

Ed Markey, a Democratic congressman from Massachusetts, has already attacked the plan, saying: "If we export America's natural gas to China, we might as well export our manufacturing jobs with it."

Mr Harris said: "Even though the gas is arguably stranded and therefore LNG is a sensible monetisation option, it is still in the US and therefore highly likely to be impacted by the current uncertainty around export licences and revocation. More clarity on US gas export policy will be needed for buyers to take it seriously."

Energy exports from Alaska have proved contentious in the past. For most of the time since the Trans-Alaska oil pipeline was opened in 1977, there has been a legal requirement for any crude sent through it to be shipped to the rest of the US.

However, there is already a project on Alaska's south coast that sends LNG to Japan.

Copyright The Financial Times Limited 2012.

Total sends fire-fighting ships near N.Sea gas leak

By Henning Gloystein and Muriel Boselli

LONDON/PARIS (Reuters) - France's Total sent fire-fighting ships close to the scene of a gas leak from its North Sea Elgin platform on Thursday as a large gas cloud led to fears of an explosion.

The company said the gas originated thousands of metres below the seabed, which engineers said might mean that a relief well - one possible option to stop the leak - could take months to drill.

Total has not yet found a way to stop the gas leak.

"The bad news is that the leak is continuing and that it reduces the possibility it could be plugged by sand or other material," Frederic Hauge, head of leading Norwegian green group Bellona, which has a team of oil experts monitoring Total's response, told Reuters.

"The good news is that the flow rate of gas coming to the surface is not increasing."

A team of international engineers assembled by the embattled French oil company are drawing up plans to tackle the leak and prevent the flare from coming into contact with the gas cloud, the spokeswoman said.

The platform is currently off limits to the engineers, however, given the toxic and explosive plumes pumping out of the wellhead.

A flare needed to relieve pressure in the platform by purging excess gas has continued to burn less than 100 metres from the leak, and engineers said changes in wind and weather could lead to an explosion.

"The wind is pushing the gas cloud in the opposite direction (from the platform). At this time, the circumstances are rather favourable," Jacques-Emmanuel Saulnier, Total's head of communication at Total said in an interview published on its website.

"A gas cloud is always a fire hazard," he added.

Total kept two fire-fighting ships in a state of readiness outside a two-mile exclusion zone, which was set up to protect marine traffic, a Total spokeswoman said.

The company has also brought in a robot vessel, not yet deployed, to scan the sea bed for signs of spillage, she said.

The leak started on Sunday and forced the evacuation of all 238 workers from the platform, which sits in waters less than 100 metres deep and 240 km (150 miles) off the east coast of Scotland.

Total as well as UK authorities have described the expected environmental impact from the plume of gas and a spreading sheen of light oil on the water as "minimal", although environmental experts said much of the gas "cocktail" would be either flammable or poisonous at close quarters.

PRESSURE SEEN FOR RELIEF WELL

The gas leaking from the platform above sea level is coming out of a pipeline Total sealed off from its main Elgin production reservoirs one year ago, the company said.

"What we know is that the leak is not coming from a well dug by Total but from a naturally occurring pocket of gas located just above one of our wells," Saulnier said.

Total said this formation of rock was about 4,000 metres below the seabed, over a kilometre above its own production reservoir.

The company did not say what caused the gas from this pocket to enter its pipes and how it reached the surface.

Hauge said that because the leak seemed to come from a pocket with less pressure and less volume of gas than Total's main reservoir, "we move from a worst case scenario to a bad case scenario. But this is not a good case scenario as long as gas is leaking."

Jefferies securities and investment bank said, "We expect the field to be shut down for the rest of 2012 even if the leak is swiftly resolved, due to likely stringent inspections of the other wells on the field."

Total warned on Tuesday it could take six months to halt the flow of gas. The company previously stated it hoped the leak would die down from natural causes as reservoir pressure drops.

The depth of the non-producing reservoir that is feeding gas to the Elgin platform via compromised layers of piping suggests, however, there is more gas present rather than less, piling pressure on Total to drill a relief well, an engineer with knowledge of the matter said.

Relief drilling would require boring through 4 kilometers of rock with painstaking mathematical precision, because it must intercept the gas pocket at exactly the right point, requiring constant alterations in course, the engineer said.

The leak, one of the biggest in the North Sea for decades, could well inspire tougher safety regulation in due course, according to experts. Britain's health and safety watchdog said it was considering launching an investigation into the incident, while union officials said the frequency of offshore safety lapses had become intolerable.

Memories are still raw in the North Sea industry of the Piper Alpha platform fire 24 years ago, which killed 167 people in the world's deadliest offshore oil disaster and led to a major regulatory overhaul.

Total's shares were trading around 37.90 at 1510 GMT, down 7.6 percent since the beginning of the week.

Analysts said the French oil major could face costs of up to $10 billion if its North Sea gas leak leads to an explosion and nearly $3 billion if it takes months to fix.

However, Jefferies bank said the data that had emerged on the spill had "further convinced us that the spill consequences should be less than the most pessimistic market estimates and hence that the US$9.7 billion sell-off in the stock since Monday is overdone."

(Additional reporting by Oleg Vukmanovic and Karolin Schaps in London, Sybille de La Hamaide in Paris, and Gwladys Fouche in Oslo; Editing by Jane Baird)

South Sudan Runs out of Time for Oil Transit Alternatives

Ongoing border and oil disputes and the halting of oil production by South Sudan has led to renewed clashes between Khartoum and Juba, the specter of another war and the buckling of South Sudan's underdeveloped economy. 

On 26 March, clashes erupted between the Sudan People's Liberation Army (SPLA) of South Sudan and the Sudan Armed Forces (SAF) in a number of border-area hotspots.

Fighting is ongoing in the states of Kordofan and Unity, the latter home to the main oil field in Heglig, inside South Sudan but claimed by both sides. The government of South Sudan on 27 March claimed to have retaken full control of the Heglig oil field; however, other reports cite SPLA officials as saying that only partial control had been established. The residents of Kordofan largely supported the South in its independence bid, but the territory now technically lies on the Sudan side of the border.

Other disputed territories in Jau, Pan Akuach and Teshwin – inside South Sudan – have also come under attack by Khartoum. South Sudan's oil minister said Khartoum continued to send warplanes inside South Sudanese territory to bomb oil facilities. Among the targets, according to the oil minister, was a compound run by the Greater Nile Petroleum Operating Company (GNPC), part of a Chinese-led consortium. The oil minister also said an oil well in the town of Rubokana, near Bentiu in Unity state, had also been bombed by Sudanese forces.

The renewed clashes come as the leaders of Sudan and South Sudan were scheduled to meet to discuss resolutions to ongoing border and oil disputes in early April – a meeting Sudanese leader Omar al-Bashir has now cancelled. 

An estimated 75% of former Sudan's oil reserves now lie in South Sudan, but the trick is that the refineries and the key pipeline to the Red Sea are in Sudan. At present, South Sudan has no chance of development as long as Sudan holds oil transit hostage.

In January, South Sudan moved to shut down all oil fields on its territory over a dispute with Sudan over transit fees and accusations that Sudan was stealing its oil (to the tune of over $800 million). While Khartoum demands $36 per barrel from South Sudan, Juba is aiming to pay around $1-$6 per barrel and a compromise is nowhere in sight.

The move was a risky one on the part of South Sudan, whose state budget relies almost solely on oil revenues. In response, Sudan seized oil tankers carrying oil belonging to South Sudan.

South Sudan's move to shut down its pipelines is only a minor factor affecting world oil prices, with a reduction in global crude oil supplies of about 350,000 barrels per day. But at home, the move could have more severe consequences, as it leaves South Sudan's budget drained and could spark a socio-economic crisis that will provoke security situations in South Sudan's more volatile areas. It is dangerous not to be able to pay soldiers and police. 

If the newly independent South Sudan can hold out for another couple of years, it may find an alternative to its oil sector problems. Perhaps the most important development towards this end will be the completion of Kenya's massive Lamu port project, which will provide South Sudan with an alternative pipeline and refinery options for its oil, bypassing Sudan. The entire Lamu port project is targeting a four-year completion period, while the pipeline portion of the project to South Sudan will take an estimated 11 months to finish. However, this estimate is highly optimistic, and regardless, South Sudan's economy would likely buckle under halted oil production in less than 11 months.

South Sudan is also exploring alternative pipelines options through Ethiopia, Djibouti and the Democratic Republic of Congo (DRC). But Kenya's Lamu project aside, the construction of an alternative pipeline to any one of these East African destinations would cost South Sudan at least $1.5 billion. And investors are not exactly lining up: security cannot be guaranteed under the current circumstances and so far the risks seem to outweigh the rewards. The most ideal situation would be the creation of a regional grid, but security and regional politics make such an ideal extremely challenging. Right now, Kenya is the best chance, but South Sudan cannot leave its oil shut off for the estimated for too much longer.

Alternatives aside, severing South Sudan from Sudan in terms of oil would not resolve the problems between the two nations, and could reversely lead to an intensification of the conflict. Indeed, South Sudan's halting of oil production has led to the current renewed clashes with Khartoum. Bypassing Sudan entirely would remove the only currency for negotiating peace.  

In the meantime, the US has given South Sudan a boost for its non-oil exports, adding it to a US trade program for developing countries, which will enable the newly independent nation to export to the US duty free.

The GSP (Generalized System of Preferences) will allow South Sudan to export some 4,900 products without paying import duties. The GSP is one step toward membership in the African Growth and Opportunity Act (AGOA), which includes a waiver on import duties for textiles and agricultural products that are not included in the GSP.

The US has also eased sanctions that will open up investment in South Sudan's oil sector.

But geopolitical realities will determine the end game.

The US, China, Uganda and the LRA

While South Sudan has allied itself with the US and Uganda, Khartoum uses the Lord's Resistance Army (LRA) as its proxy to fight battles to ensure that South Sudan's oil – a large share of which makes its way to Chinese markets – is held hostage.

The violent LRA cult-militia – which hides out in South Sudan's northern mountains and in the DRC - is where the battle between Juba and Khartoum could become much more regional and even global in nature.

While China is most interested in ensuring cooperation between Khartoum and Juba, and hence an uninterrupted flow of oil, Beijing will have a difficult time convincing Khartoum to halt its attacks on Juba and to stop using the LRA as its proxy.

China, while it would prefer a stable relationship between North and South, is not going to bail South Sudan out. Diplomatic relations are shaky at best, as South Sudan accuses Beijing of complicity in Khartoum's oil theft. This diplomatic spat has gone as far as to see Juba expel the head of the largest oil company on its territory, the Chinese-Malaysian Petrodar consortium. Increasing anxiety for Beijing, if South Sudan succeeds in finding an alternative route for its oil, it could upset exports to China as favor would likely be given to Western companies.

But the presence of the LRA could change the playing field, bringing the US and a consortium of Sudan's neighbors into the battle. Uganda and the US have recently stepped up the fight against the LRA.

In late 2011, Washington authorized the deployment of around 100 special forces combat troops to help in the fight against the LRA and its fanatical Christian leader, Joseph Kony, whose celebrity status as a kidnapper, enslaver and creator of child soldiers and brutal fighting methods has recently spiraled out of control with help from the ignorance of Hollywood.

Indications that South Sudan is becoming a preferred stage for pursuing the LRA are already surfacing. On 24 March, Uganda, South Sudan, the DRC and Central Africa Republic (CAR), with the backing of the United Nations and the African Union (AU), announced the launch of a join military operation against the LRA inside South Sudanese territory. Some 5,000 soldiers are being deployed. The four countries, significantly, have agreed on the free movement of troops across mutual borders in pursuit of the LRA.

This development, in the end, may be why South Sudan is holding fast against Khartoum, despite the economic and security risks. Getting rid of only one of Khartoum's proxies in this war will not be enough to stop Sudan from holding the South hostage, but it could help generate international aid to keep it afloat under halted oil production.

For now, though, it would appear that Khartoum has the upper hand as it can survive for the time being without South Sudan's oil, owing to its ability to produce enough oil of its own for domestic consumption.

By Jen Alic of Oilprice.com

Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.

NOAA Scientists Confirm BP Oil Spill Harms Dolphins and Deep-Sea Corals

Photo: NOAA

A Barataria Bay dolphin is photographed by researchers, April, 2011.

U.S.-based marine scientists say bottlenose dolphins and deep-sea corals in the northern Gulf of Mexico, where the massive Deepwater Horizon oil spill occurred two years ago this April, are showing signs of severe stress from their prolonged exposure to the polluted water.

The dolphins' ailments include low body weight, anemia, low blood sugar, and symptoms of liver and lung disease, according to biologists working on a post-spill, natural resource health assessment for NOAA, the U.S. National Oceanic and Atmospheric Administration. They report that nearly half of the dolphins they tested in the summer of 2011 have abnormally low levels of the hormones that help with stress response, metabolism and immune function.    

The scientists physically examined 32 live dolphins in the Gulf's Barataria Bay.  One of the aquatic mammals was found dead this past January.  The researchers fear more of the dolphins will die of illnesses related to the 2010 oil spill, the worst offshore oil spill in U.S. history.  During the accident, a damaged British Petroleum well, located on the seabed 80 kilometers off the Louisiana coast, gushed nearly five million barrels of crude oil into Gulf waters before being capped.

Another new NOAA study identifies the BP spill as the source of the contamination that is slowly killing numerous colonies of deep-water corals.  A detailed chemical analysis found a match between oil from the ruptured seafloor well and oil found coating colonies of slowly dying corals, 11 kilometers from the spill site.

The corals the scientists examined were covered in a fluffy, brown, mucus-like substance, and showed signs of tissue damage and severe stress.  

The marine biologists note that in 10 years of research in the Gulf of Mexico, they have never seen deep-water coral dying in this manner.  

Deep-water coral species usually are not harmed in an oil spill, but not even creatures living at depths of more than 1,200 meters were spared the unprecedented magnitude of the BP oil disaster.  However, the scientists say communities of deep-water corals 20 kilometers from the ruptured oil well were clean and thriving.  

NOAA released the preliminary results of the dolphin study on Monday.

The study of the deep-water corals is published in the journal, Proceedings of the National Academy of Sciences.

The Deepwater Horizon oil spill was an environmental and economic catastrophe.  Not only did it kill or threaten the region's vast assortment of flora and wildlife, but the disaster also devastated the livelihoods of many thousands of people who work in fisheries and other businesses dependent on Gulf of Mexico resources.

Some information for this report was provided by AP and AFP.

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More than 200 workers evacuated after leak at gas rigs

Search and rescue teams evacuated 209 people from two gas rigs off the coast of Aberdeen after a leak was reported.

The non-essential workers on the Total E&P offshore platforms were flown to Aberdeen yesterday afternoon after the leak was discovered at 12.15pm.

Aberdeen Coastguard oversaw the evacuation from the Elgin wellhead in the central Graben area, 150 miles from the Scottish city, and said no one was hurt.

Last night, a spokesman for Total said: "Work is continuing to control the gas release which occurred earlier today, and all non essential personnel on the Elgin production platform, along with all personnel on the nearby Rowan Viking drilling rig were evacuated as a precaution.

"Emergency procedures are focusing on the welfare of all personnel involved and in resolving the current situation as quickly as possible."

Staff were initially moved to nearby platforms but were eventually taken to Aberdeen.

Kevin Brown, Aberdeen Coastguard watch manager, said: "We had three rescue helicopters on scene and the assistance of four civilian helicopters aided with the evacuation process.

"The operator is now working to control the release."