What This Global "Texas Standoff" Means for Oil Price

Source: Kent Moors, Oil & Energy Investor  (5/25/12)

"The rising tension between Tehran, on the one hand, and Washington and Brussels, on the other, is still the single most serious geopolitical element impacting the global oil market today."

It's Iran again.

Actually, it has never stopped being about Iran, ever since the West passed heavy sanctions and the European Union decided to end all Iranian crude oil imports beginning July 1.

I know I keep going back to this issue, but it's for one very simple reason.

The rising tension between Tehran, on the one hand, and Washington and Brussels, on the other, is still the single most serious geopolitical element impacting the global oil market today.

And now the matter is finally reaching a head.

This afternoon I'll be on Fox Business to talk with journalist Ashley Webster about the Iranian crisis.

But I thought I would fill you in beforehand.

Here's the gist of what I will be telling Fox this afternoon.

Even After Two Days of Meetings

Two days of meetings have just concluded in Baghdad, between Iran and the six major powers (the five permanent members of the UN Security Council, plus Germany). There was some spin applied in the rhetoric before and after the meetings, but the conclusion is strikingly clear.

Absolutely nothing was accomplished.

The next set of talks is scheduled to take place in Moscow on June 18 and 19, but time is running out.

Iran is now looking at losing one-quarter of its monthly oil exports, with no alternative markets for that oil in sight. That's right—the Chinese have decided against becoming the "importer of last resort" for Iran. And their primary shipping insurers have knuckled under before the sanctions and are no longer covering Iranian crude consignments.

The sanctions have also made it difficult—on purpose—for Tehran to access international banking networks to exchange currency from the sales it does make. That means it costs Iran more to use indirect, and often shadowy, ways of moving money, squeezing even further the profits from sales.

Rather important for a nation whose national budget is dependent upon oil sales for 90% of its revenue. . .

Yet as we approach July 1, the imminent problems are not all on Iran's side.

The EU is Going to Feel the Effects, Too

Eleven EU countries import oil from Iran each month.

For most of them, the transition to other suppliers is a possibility to make up the difference—especially imports from Libya, where oil has come back on line quicker than anticipated.

However, for the three European countries most affected, the situation is quite different. Unfortunately, these three nations are also the three southern-tier EU members (at least for the moment) with the most acute financial problems.

Greece has been importing at least 30% of its oil from Iran monthly; Spain 14%, and Italy 13%.

Saudi Arabia has agreed to make up the volume difference, but only through the first delivery cycle, and without guaranteeing any pricing floor. The EU still has not worked out how it will compensate for deliveries past that, should the embargo last for any length of time.

So what's going to happen?

Iran believes Europe will have to blink first in this ongoing game of diplomatic "chicken." Tehran has a single objective in these talks: play for time.

And, oh yes, stronger sanctions are working their ways through the halls of the U.S. Congress, assuring that the situation for a recalcitrant Iran will only become worse.

Meanwhile, the effect on global oil prices will only become more acute as the embargo kicks in.

Oil may be trading at around $91/barrel (WTI) right now.

But that's temporary.

The only reason we have not seen this rise in prices taking shape earlier is because of the current European sideshows following the French and Greek elections. The Continental angst has created ripples of demand concerns on both sides of the Atlantic, promoting a short-term (and emotionally led) retreat in oil prices.

The pricing reversal in the other direction will follow in lock-step with the collapse in the talks between Iran and the global powers.

Already, my Moscow oil contacts are concluding that nothing of consequence will take place there next month, either. Actually, some think the embargo may even help increase Russian imports to Europe.

Brussels, however, certainly does not want to become more dependent upon Russian oil, since it is already dealing with the problem of being overly reliant on Russian natural gas.

So, what is the likelihood that those talks will collapse? If I were handicapping that eventuality, I would currently put that collapse as a 90% probability. Why? Because both sides have put down demands that the other cannot meet.

During the initial April meeting in Istanbul, the Iranian delegation required that the West suspend their sanctions before Tehran would discuss its nuclear program. While the Vienna-based International Atomic Energy Agency (IAEA) is holding out some hope for a renewed round of inspections, we have been down that road many times before. It is a non-starter. The West will not agree to freeze the sanctions first.

For their part, the U.S. and the EU have laid down three non-negotiable requirements before they will annul the embargo and the sanctions. These require that Iran to:

1. end all purification of uranium (both to the 20% and 3% levels);
2. move all uranium currently purified out of the country; and
3. open up the super-secret and heavily fortified underground installation at Fordo near the sacred city of Qom to full international access.

Iran will never agree to the last two; probably not to the first one either.

Absent the rise of another Neville Chamberlain and another Munich-like appeasement, we have a Texas standoff here.

And that assures increasing tensions, rising volatility in prices and a very interesting summer in the oil markets.

Kent Moors
Oil & Energy Investor

Marcellus Shale Job Program Turns Unskilled Into Shale Workers

PITTSBURGH--Professor Byron Kohut helps hundreds of low-income adults land coveted jobs in the booming shale-gas industry in Pennsylvania. But only the tough need apply, he said.

"If they are not physically capable of working outside, in bad weather, dangerous conditions, I scare them out of drilling," said Kohut, who coordinates a natural-gas job-training course at Westmoreland County Community College, about 40 miles southwest of Pittsburgh. "It's not easy work," Kohut said, adding that people with backgrounds in agriculture, construction and mechanics have a better shot at getting in.

The community college's course, part of a workforce-development program funded by a $4.6 million federal grant, prepares residents in Pennsylvania and neighboring states to compete for the torrent of jobs being generated by natural-gas companies tapping the prolific Marcellus Shale. The multi-state program, called ShaleNET, is trying to fix a mismatch between the rising number of jobs emerging with the shale-gas business in Pennsylvania, Ohio, West Virginia and New York, and the many unemployed, or low-paid, workers who can't be hired by the shale industry due to their lack of basic skills.

Labor demand in the Marcellus Shale, a deeply buried layer of tight rock containing vast amounts of natural gas, has continued to grow despite recent rock-bottom prices for the commodity, in part because the area's highly productive wells, and their proximity to huge markets in the Northeast, allow drilling there to remain profitable.

Almost half of the 400 people needed to drill a single well do jobs that don't require four-year college degrees, including general labor, heavy-equipment operators, and truck drivers. In about four weeks of training, the ShareNET program turns young farmers, construction workers, veterans and carpenters, among others, into certified gas-field workers who know the basics about drilling and controlling a well.

The program's standards are high because, otherwise, students wouldn't be able to compete with more-experienced workers coming from Texas and Louisiana who have a long relationship with the energy industry, said Laura Fisher, senior vice president at Allegheny Conference on Community Development, a non-profit organization that created ShaleNET. The non-profit entity has a long list of applicants, but there are only a few dozen spots available.

While the shale-gas industry has already helped the Pittsburgh region's March unemployment rate of 7.1% to best the nationwide rate of 8.4%, many of the higher-paid occupations--such as tool pushers or pump operators--were going to the newcomers from out of state, Fisher said. Many companies preferred the out-of-state workers because they already knew the basics about safety and were accustomed to working the 12-hour-per-day shifts that are common in the drilling industry, Fisher said.

The ShaleNET program, which has graduated 250 students, along with new industry-community partnerships, is helping to increase the rate of local hires. About 180 students have been hired by 56 companies. The program has also helped about 1,000 people to find jobs in the shale industry through its website or through various partnership it has with federal job-placement agencies, Kohut said. In addition, 13 community colleges, one university and six vocational high schools in the region are starting the same training program.

Labor demand in the Marcellus Shale area is expected to continue to surge in coming years, said Sue Mukherjee, director of the Pennsylvania Department of Labor and Industry's Center for Workforce Information and Analysis.

For instance, jobs for drill operators are expected to grow 84.9% to 2,674 this year from 1,446 in 2010. This compares to 2.6% estimated growth for all type of jobs state-wide in the same period, Mukherjee said.

Mark Madonna, a 24-year-old who until last year worked in construction, was hired in February by Falcon Drilling, a service provider based in Indiana, Pa. He is now a rig ground worker.

Madonna, a single father who didn't attend college, said the training provided by Westmoreland County Community College was "extremely vital" in his getting his new job.

He tried for nine months to apply directly to companies he knew were hiring, but nobody took him seriously until he was admitted to the course. Madonna, like most of his classmates, received a job offer from Falcon Drilling the day after he graduated. "I love physical labor, I love machinery and I love to be working outdoors," Madonna said. "I'm not afraid to work."

His new job pays $12.56 per hour, about the same as he was making when he was building counter tops and cabinets. But the big difference, he said, is that his take-home pay will jump, thanks to overtime, and, in a few months, can almost triple if he gets promoted.

Kohut, who has a doctorate in education, said many of his former students are making significantly more money than he does. The average annual income of a roughneck--a member of the oil rig in charge of handling pipelines and maintaining the rig--is $100,000. That includes overtime, daily stipends and room and board.

"It's a dangerous job, but it pays well," Kohut said.

Copyright (c) 2012 Dow Jones & Company, Inc.

Wastewater Market to Grow as Hydraulic Fracturing Activity Grows Globally

(This article is part 2 of a 3-part series on Fracking Water Treatment.)

The global market for water treatment is expected to reach $9 billion in 2020 as hydraulic fracturing activity increases outside the United States, according to a recent report by Boston-based Lux Research.

The expansion will spur technological innovation and new ways of thinking about water disposal and reuse. However, the field is quickly becoming overcrowded, creating significant risk for new entrants.

Hydraulic fracturing – or fracking – requires between 25,000 to 140,000 barrels of water per well and produces toxin-laced brine that can be over six times as salty as seawater.

The growth in hydraulic fracturing has inspired "a bumper crop of new water treatment startups vying to treat the highly challenging flowback water," said Brent Giles, Lux analyst and lead author of the report "Risk and Reward in the Frack Water Market."

"Fracking represents a significant water treatment challenge – hydrocarbons, heavy metals, scalants, microbes and salts in produced and flowback water from shale gas wells represent a water treatment challenge on par with the most difficult industrial wastewaters," Giles said in a statement.

While the opportunity is large, only a few companies are really positioned to profit, Giles noted.

"Meanwhile, nearly every start-up we talk to is going after frack water, regardless of their technology, and many of them are going to come to grief," Giles commented.

GasFrac, which uses high-pressure propane instead of high-pressure water to fracture gas wells, is posed to disrupt the industry, Lux found in its rankings of key companies on its Innovation Grid based on Technical Value and Business Execution. The technology, which GasFrac has licensed from Chevron, is being tested by oil and gas companies that include Shell, Blackbrush, Husky and Chevron.

"With 300 employees, revenues of $300 million, and $50 million on hand, the profitable company outstrips every water start-up in our lineup, positioned in the 'Dominant' quadrant and earning a 'Strong Positive' Lu Take," said Lux.

Lux found that the companies Ecosphere and Aquamost lead in oxidation technologies to treat wastewater.

Ecosphere was found to be strong in both technical value and business execution, reaching the Dominant quadrant of Lux's Innovation Grid. AquaMost, an early-stage startup, uses catalyzed UV to achieve many of the same results, but also removes metals, and is ranked as high potential on the grid with strong technical value.

WaterTectonics -- which uses high-energy electrocoagulation technology to address heavy metals, biological matter, and hydrocarbons, but leaves salt in place -- meaning is restricted in usage to areas where salt levels are moderate. WaterTectonics reached the dominant quadrant in Lux's ranking due to its long-term alliance with Halliburton.

Water, Energy 'Inexorably Interlinked'

(This article is part 2 of a 2-part series on Fracking Water Treatment.)

Water and energy are inexorably interlinked, with increasing energy demands on water impacting the world's ability to meet its energy needs, said Deloitte consultants Dr. Joseph Stanislaw and William Sarni in a recent whitepaper "No water, no energy. No energy, no water".

In parallel, the need for more and more water in agricultural, industrial and domestic uses requires more energy.

"A constraint in either resource limits the other, and this nexus of supply and demand poses substantial risks for virtually every government and every type of business," said Stanislaw and Sarni.

"While many companies have strategies for human resources, marketing, risk management, etc., very few have energy strategies and water strategies, and even less have integrated energy-water strategies," Stanislaw and Sarni noted.

The competition for energy and fresh water is becoming increasingly acute, with the U.S. Energy Information Administration estimating world energy demand to grow by 53 percent between 2008 and 2035, and many countries extracting groundwater faster than it can be replenished.

This trend will likely continue as the global population is expected to grow by approximately one billion people between 2010 and 2025, with economic development in emerging markets anticipated to catapult 3 billion people into the middle class. By 2030, two out of every three people likely will live in an area of high water stress, and the substantial shortfall between water supply and demand could reach as high as 40 percent.

The effects of climate change also are exerting pressure on the fulcrum of the energy/water relationship.

"The popular consensus regarding freshwater is that when supplies dwindle, we can make or find more of it," said Stanislaw and Sarni. "The reality is that the amount of fresh and accessible water is static, and demands on this finite resource are increasing."

One of the biggest demands on U.S. water supply is the hydraulic fracturing business, said Stanislaw, noting that oil and gas companies are now having to take into account the cost of water into their business and economic models.

However, the increasing demand on water supply was an issue even before the recent shale boom.

"It's only now that people are beginning to focus on it, and realizing they have to make water a part of their social and business calculations," Stanislaw told Rigzone.

This cost is prompting companies to seek out ways to improve the efficiency of water usage through technology to manage water sourcing, enhance treatment processes and safety store and transport water.

Water is also heavily utilized in renewable and other energy resources. The utility sector is heavily water dependent, with most thermal power generation facilities needing significant amounts of water for cooling process, regarding of whether solar, uranium, coal or natural gas are used as the base fuels.

Additionally, water is required to clean and process coal, and the biofuels industry depends on vast amounts of water, Stanislaw and Sarni said.

Reducing water consumption in traditional energy production as well as moving to energy sources that are inherently less water-intensive will be key to managing water resources, Stanislaw and Sarni said.

Some renewable energy options, including wind power and solar photovoltaics (PVs), have smaller water footprints, which gives them an advantage that could trump cost per megawatt in areas experiencing water shortages, including the desert Southwest and New England, said Stanislaw.

"Southern California, Arizona and New Mexico are well suited for rooftop PV projects," said Stanislaw.

California homeowners can get tax deductions when they install up to 7 kilowatts of solar PV equipment on their rooftops.

"It's very easy and very beneficial in that large scale systems aren't needed," said Stanislaw.

The desert southwest has lots of space for large scale solar systems and the transmission infrastructure to move electricity to urban areas.

The northeastern United States is also experiencing a shortage of water due to a serious drought over the past few years, but lacks the transmission grid that is seen in the southwest. Potential does exist for wind power generation in the mountains in Maine, and a potential wind project offshore Maine could offer a solution.

While construction on the Cape Wind project proposed for construction, offshore Massachusetts has been slowed for a decade by opposition from Nantucket residents who say the project will raise power prices and cause aesthetic pollution. Offshore wind capacity proposed for Maine would be located more than 10 miles out from Maine's coast, and stands a better chance of actually being constructed, Stanislaw said.

While technology will play a critical role in reducing water usage and improving efficiency, the public and private sectors also need to establish a water stewardship strategy for addressing the water side of the energy/water equation, Stanislaw and Sarni said, including the assessment of how water usage and potential scarcity can impact internal operations, supply chain business partners, and other stakeholders in the watershed.

Back to Part 1: Ecosphere Offers Chemical-Free Water Treatment for Hydraulic Fracturing

Ecosphere Offers Chemical-Free Water Treatment for Hydraulic Fracturing

(This article is part 1 of a 2-part series on Fracking Water Treatment.)

The hydraulic fracturing process, which unlocked the United States' unconventional resource potential, has also placed new demands on the nation's water supply and created the need for water treatment solutions.

Stuart, Florida-based Ecosphere Technologies, a diversified water engineering, technology licensing and environmental services company, saw potential for its Ozonix water treatment solution in the oil and gas industry as it was searching for a new market for its product in 2008.

"We sought to enter an industry that had the appetite for the type of technology that Ecosphere provided and that had few barriers for entry," said Ecosphere Chairman and CEO Charles Vinick in a recent interview with Rigzone.

The appetite for water in the United States has grown considerably as oil and gas producers hydraulic fracture wells from the Marcellus and other shale plays. As the amount of hydraulic fracturing has increased, concerns also have been raised by government agencies, environmental groups and local citizens over the amount of water used in the process and the impact of the chemicals used in hydraulic fracturing on drinking water supplies.

Since its establishment over a decade ago, Ecosphere has been focused on identifying an environmental challenge facing industrial use of water and inventing and patenting a new technology to respond to that challenge.

These challenges have included inventing a 3-dimensional way to strip paint from ships developed by Ecosphere; the company sold the rights to this intellectual property in 2007 and retains those rights for other applications of paint stripping, such as cars and planes or physical objects such as water towers.

The company also has been involved in providing clean drinking water in disaster responses, as when it provided drinking water for residents in a Mississippi town following Hurricane Katrina in 2005. Ecosphere has provided cost-effective wastewater treatment solutions for a range of industrial, commercial and municipal industries.

The Ozonix Process

The company's Ozonix process can be used to treat water at the front end of the fracking process, eliminating bacteria, biofilms and the food source for microorganisms without the use of biocides.

Biocides have traditionally been used to kill bacteria in fracking fluids prior to the fluids being pumped downhole. This process is done to reduce bacteria that can sour a well, cause corrosion and potentially make the well unusable, said Robbie Cathey, CEO of Arkansas-based Ecosphere Energy Services.

Instead of using liquid chemicals, Ecosphere uses an ozone-based system accompanied by cavitation. Ozone, an oxidant, can easily break down cell walls to destroy bacteria, Cathey said.

The Ozonix process is a single process that runs the water through four zones. Inside the machine, it's four steps, but for operators, it's just one step at a flow rate of 80 barrels per minute or approximately 3,360 gallons per minute.

• In the first zone of the process, ozone, a powerful oxidizing agent, is combined with hydrodynamic cavitation to destroy highly-resistant microorganisms and oxidizes pollutants through the use of high intensity turbulence, sheer and fluid pressure fluctuations. Significant amounts of micro bubbles that implode and release energy are generated through a proprietary mixing process, and hydroxyl radicals are produced with an oxidation potential higher than chlorine.

• In the second zone, the Ozonix process oxidizes iron sulfides and magnesium sulfates by ozone forming iron oxides and magnesium oxides, destroying the environment and food sources upon which bacteria depend for survival.

• In the third zone, acoustic cavitation destroys complex and biorefractory chemicals present in water through the use of sound waves, causing micro bubble collapse. Ultra-sonic transducers generate localized high concentrations of oxidizing species, coupled with higher magnitudes of localized temperatures, pressures and the formation of transient supercritical water to destroy microorganisms. The use of multiple transducers gives a uniform cavitational activity distribution throughout the Ozonix process and increases the extent of degradation/disinfection.

• In the last zone, electrochemical oxidation mineralizes non-biodegradable organic matter and eliminates nitrogen specific in the water. As organic matter is decomposed, electrodes produce hydrogen and residual chlorine which further aids in the oxidation of pollutants and improves water disinfection.

"Ecosphere's advanced oxidation process is very efficient at killing bacteria," said Cathey, adding that Ozonix is cost competitive with traditional chemical treatment.

"Combining ozone with hydrodynamic cavitation, acoustic cavitation and electro-oxidation increases the mass transfer rate of ozone appreciably, five times and substantially above," said Cathey. "Each of these processes increases the mass transfer rate of ozone, meaning less ozone can be used for increased disinfection of the water to the point where we are actually sterilizing it."

More Than 1 Billion Gallons of Water Treated Since 2008

The Ozonix technology has been used by Ecosphere and its licensee, Hydrozonix, to treat more than one billion gallons of water on approximately 500 oil and gas wells since 2008, said Vinick in a March 28 statement.

The Ozonix process is deployed in individual units that are capable of processing a certain number of barrels of water per minute. Ecosphere has deployed 33 Ozonix units to date that are servicing major oil and gas operators conducting hydraulic fracturing around the United States.

The technology can process up to 120 barrels per minute and can be scaled up or down to meet the producer's operations, which can have a larger footprint in areas such as Texas but smaller footprints in plays such as the Marcellus due to multi-pad operations or mountainous terrain.

The company is on track to deliver two Ozonix EF80 units, which are capable of processing up to 80 barrels per minute, to Hydrozonix every quarter, the company reported in its earnings update on May 7.

Six units are deployed by Hydrozonix, and the remaining units are operated by Ecosphere Energy Services. Units deployed by Hydrozonix are operating in the Eagle Ford and Permian Basin plays in Texas and in New Mexico, said Cathey.

O&G Companies Seeking Cost-Effective, Environmentally Friendly Solution

Ecosphere's customers include Southwestern Energy, which is using Ecosphere's technology to treat wells in the Fayetteville play in Arkansas, and Newfield Exploration, which is using the water treatment technology for its Woodford shale assets in Oklahoma. Ecosphere's technology is being used to treat water at up to 120 barrels a minute in the Fayetteville, said Vinick.

"Recycling is the trend driving interest from a cost standpoint and an environmental standpoint," said Cathey about the interest by oil and gas companies in new ways to treat produced water. "Companies also are looking for cost-effective solutions and ways to reuse as much produced water as possible in an effort to minimize the need for fresh water."

As produced water is reused, the need for and difficulty in treating water grows as the level of bacteria and heavy metals present in the water grows.

"Three or four years ago, most operations were using strictly fresh water from ponds, streams, which have fairly low levels of bacteria," said Cathey.

Besides the environmental and cost benefits, companies do not need to transport or store chemicals, helping eliminate heavy traffic and damage to roads leading to drilling sites, and a reduction in carbon dioxide emissions.

"Ozonix reduces costs in two ways by reducing the cost of sourcing fresh water and reducing the cost of disposal for produced and flowback water," said Cathey. "Some customers have reduced the amount of disposal by over 90 percent."

Using the Ozonix process also can reduce the need for deep well injection, which some studies have speculated may cause earthquakes due to the saturation of potential fault lines.

Besides Newfield and Southwestern, Ecosphere has worked with several mid-major and independent companies.

"We've found that folks like Southwestern Energy are very innovative companies that are willing to try new technologies and realize the cost benefits of using Ozonix," said Cathey.

The company in late March announced a letter of commitment with the Blackfeet Nation for Ecosphere Energy Services and Hydrozonix to be the exclusive provider of water treatment services to oil and gas companies targeting the Bakken shale play on the 1.5 million acre Blackfeet reservation in north-central Montana.

Newfield, Rosetta Resources and Anschutz Exploration have all secured mineral rights from the Blackfeet Tribe and are actively drilling vertical and horizontal wells to target plays in the Southern Alberta Basin, including the Bakken, Three Forks, Nisku and Lodgepole formation.

Besides the U.S. onshore exploration and production market, Cathey said Ecosphere feels that the company's technology is applicable for the offshore market. After being laser focused on onshore oil and gas since 2008, the company is in the early stages of growing its technology for use in other energy applications.

"We feel this technology is very applicable to power plants and other industrial applications in which large volumes of water are used. The need to recycle water tends to be an issue in many areas of energy, including power," Cathey noted.

Ecosphere and its majority-owned subsidiary Ecosphere Energy Services were also awarded Frost & Sullivan's 2012 North American Product Leadership Award in Disinfection Equipment for Shale Oil and Gas Wastewater Treatment.

Growing Water Demand Illustrates Need for Water Treatment, Recycling

The need for treating produced and flowback water without harsh chemicals will become more critical as water demand grows worldwide not only for consumption in industry, but as the global population grows and citizens in emerging economies seek the quality of life seen in developed nations like the United States.

While water shortages are being reported in emerging economies such as Africa, water supply issues have been seen in the United States, including the drought that affected Texas last year. The drought, coupled with the demand placed on water supply by the oil and gas industry and other stakeholders such as cattle growers, illustrated how critical an issue water supply has become.

"It's not a new problem, but more of an acute problem as more people place more demands on resources," said Vinick, who joined Ecosphere in 2006 as a director through his 25-year friendships with the family of Jacques Costeau, and has served in executive positions in organizations established by Jacques or his son, Jean-Michel Cousteau, who serves as a director on Ecosphere's board.

These recycling efforts include grey and clear water systems in homes in which water from dishwashers, showers and other appliances can be reused to water lawns or treated for drinking water, depending on the types of soaps used and the right separation systems, Vinick noted.

Continue to Part 2: Water, Energy 'Inexorably Interlinked'

UK Oil and Gas Recruitment: Skilled Staff in Short Supply

The UK oil and gas industry continues to enjoy strong interest from
recent graduates as well as from high school leavers, according to
employers and training bodies involved in the sector. But recent
interviews conducted by Rigzone with key figures involved in UK oil
and gas recruitment also found that challenges remain when it comes to
recruiting more experienced personnel.

"Certainly there seem to be enough graduates and a lot of activity
around apprenticeship schemes which are well oversubscribed," Alix
Thom, skills and employment policy manager at industry body Oil & Gas
UK, told Rigzone.

Thom said that Oil & Gas UK's own industry technician training scheme
– which is managed by training body OPITO and the Engineering
Construction Industry Training Board – is very popular with school
leavers. "I haven't got the figures for this year because the closing
date isn't until the end of this month [April 2012], but last year I
know we had 2,500 applicants for 120 positions so certainly we are
able to attract a lot of people to the apprenticeship scheme," said
Thom, who added that the scheme is completed by more than 90 percent
of those who begin in.

So how about graduate-level entrants to the oil and gas industry?

"From our members we are not hearing that they are having problems
attracting graduates. Again, their graduate schemes are
oversubscribed," said Thom. "However, that doesn't mean we can afford
to be complacent and the industry still agrees that it is very
important to continue to encourage schoolchildren to take STEM
[Science, Technology, Engineering and Mathematics] subjects, and to
help society as a whole understand the importance of the sector and
all the opportunities that are available."

Energize Your Future
Indeed, the oil industry training organization OPITO is keen to ensure
that future generations of workers are aware of the opportunities in
the sector in the UK.

"We're running a raft of initiatives that are absolutely geared to
attracting the future oil and gas workforce," Opito UK Managing
Director Larraine Boorman told Rigzone. "We've set up a new careers
Web site called myoilandgascareer.com. We've also set up a schools
ambassador project called 'It's Your Future'. We're running careers
and lifestyles events called 'Energize Your Future' and we've got an
online interactive competition called 'PetroChallenge'."

The 'Energise Your Future' campaign involves a series of one-day
events in which senior school pupils from a particular region get to
learn about the oil and gas industry and careers within the sector. A
recent event, in Newcastle in the northeast of England, saw more than
500 pupils and 20 oil and gas companies take part.

As the UK's leading oil and gas firm, BP is playing its part in
ensuring young people are aware of the opportunities available to them
in the energy sector.

At the moment, BP is seeing very strong interest from university
leavers for its graduate scheme, with more than 7,000 applications
submitted this year for just 250 UK roles.

"Due to the high volume and standard of these applications, we were
able to fill these positions with some of the brightest and best
students we have ever seen," Emma Judge, BP's head of UK Graduate
Resourcing, told Rigzone.

However, part of BP's success in attracting the brightest graduates is
down to it taking an active part in courting student interest during
their undergraduate years.

"There are often preconceptions that STEM subjects have lost their
appeal amongst university students and that, as a result, the energy
industry in the UK is suffering from a shortage of graduates with the
right mix of skills," said Judge. "However, there is a clear drop off
over the three or four years of a university course in the number of
students that actually want to work with their degree. This is down to
a variety of factors, not least of which is that after three or four
years of studying, students who may initially have had a passion for
their subject simply begin to look for new and different challenges.

"We believe it is critical that employers play a role in maintaining
students' initial levels of interest in their subjects. To this end,
BP is offering over 130 UK students paid internships with BP where we
showcase the exciting and rewarding career opportunities that we can
offer graduates."

Ultimate Field Trip
In the UK, a major center for the global financial services sector,
the attractions of a well-paid career in banking or asset management
can be a strong draw for graduates with strong numerical skills, such
as engineers, who might have ended up in more practical careers in the
energy sector or in industry.

"It is true that BP faces competition from other companies for the
best STEM talent, and this is not just limited to other engineering or
energy companies, but increasingly from banks, law firms and
accountancy firms who also value the special attributes that these
candidates have," added Judge.

"Not only do these students have an excellent technical understanding
of their subjects, but the way their minds have been trained is also
very beneficial to any business they go into – they are logical and
analytical and that is a tremendous asset to any employer. If you
stripped out the demand from consultants and banks there would be
enough STEM talent to go round. Therefore, the challenge for the
energy industry is to convince students that we offer a more
compelling career choice than working for these other professions."

Among initiatives run by BP that are designed to attract the best
graduate talent is the "Ultimate Field Trip" – a competition in which
students are presented with a real-world business challenge and asked
to come up with a practical solution.

"This year we asked students to come up with a design for a zero
carbon dioxide oil refinery," said Judge. "And we will be sending the
winners on six-week paid internships to the Gulf of Mexico and
Trinidad and Tobago, where they will experience first-hand what a
career with BP can offer. The initiative has seen a strong response
from students, with more than 1500 registrations over the past three
years."

Last October, BP also released $2.5 million (GBP 1.6 million) in
scholarship funding to UK students, on top of $9.4 million (GBP 5.8
million) that it made available in 2007. From this fund, the firm
expects to support up to 450 students on STEM courses over the next
few years.

So for now, it appears that the UK oil and gas industry is having no
problems recruiting for entry-level positions. But when it comes to
finding more experienced talent there are issues.

"We do have some significant shortages and there are skills gaps that
are very much an issue for the industry and we are hearing that very
strongly from our members," according to Oil & Gas UK's Thom. "There
are skills gaps in engineering as there are amongst technicians, but
they are at the experienced level: 10-plus years' experience."

Indeed, at the start of April Rigzone reported UK-Norwegian oil junior
Bridge Energy's experience that "in pretty much any professional
discipline in the oil industry, whether you are in London, Aberdeen,
Oslo or Stavanger, the market… is very tight and there's a lot of
competition for 10-15 years-qualified geophysicists, geologists,
reservoir engineers, production engineers, pretty much any discipline
you can name."

Transition Training
Opito's Boorman backs this up. "A recent Opito survey recorded that 66
percent of our contractors and 62 percent of our operators were
experiencing problems recruiting suitable employees in a range of
occupations," she said. "The biggest skill shortage is senior-level
engineers in subject areas like project management, control,
mechanical, subsea, geologists, geoscientists, reservoir analysis. So
… all really senior, experienced roles."

At the technician level, there are shortages of machinists, tool
dressers, electricians, instrumentation technicians, welders, and
liquid and gas flow metering staff.

"Those types of occupations are seeing real skills shortages and firms
are having problems recruiting for those jobs," added Boorman.

One solution has been what Boorman calls "transition training," where
experienced technical staff are recruited from other sectors and
re-trained for the oil and gas industry.

One example is to target former military personnel.

"The military is ideal," Boorman told Rigzone. "And, we've just done a
project here in the North East – a transition training program for
recently-redundant [Ministry of Defence] staff and all of them have
been placed with oil companies."

Boorman continued: "That's working very well, but we've only touched
the surface. We've done a small pilot project that's worked very well
and we're keen to scale that."

ARAB CUSTOMS AND CULTURE

All Arabs share basic beliefs and values that cross national and social class boundaries. Social attitudes have remained constant because Arab society is more conservative and demands conformity from its members. It is important for Western observers to be able to identify and distinguish these cultural patterns from individual behaviors. Although Iraq is a secular country, the traditional Islamic culture predominates, with Qur’anic Law playing an active role in the day-to-day life in the country.

ARAB WORLD VIEW:

An Arab worldview is based upon six concepts: atomism, faith, wish versus reality,

justice and equality, paranoia and the importance of family over self:

·                     Atomism. Arabs tend to see the world and events as isolated incidents, snapshots, and particular moments in time. This is a key psychological feature of Arab culture. Westerners look for unifying concepts whereas Arabs focus on parts, rather than on the whole. It also means the Western concept of cause and effect is rarely accepted by Arabs who may not necessarily see a unifying link between events. They do, however, maintain a long-term memory over actions and events. It is important to point out that it is memory, not necessarily history that is important.

·                     Deep belief in God. Arabs usually believe that many, if not all, things in life are controlled by the will of God (fate) rather than by human beings. What might appear as fatalism initially is more deeply a belief in God's power, sovereignty, active participation in the life of the believer, and authority over all things (business transactions, relationships, world events, etc.).

·                     Wish versus reality. Arabs, much more so than Westerners, express emotion in a forceful, animated and exaggerated fashion. Their desire for modernity is contradicted by a desire for tradition (especially Islamic tradition, since Islam is the one area free of Western identification and influence). Desiring democracy and modernization immediately is a good example of what a Westerner might view as an Arabs “wish vs. reality.”

·                     Importance of justice and equality. Arabs value justice and equality more than anything else. All actions taken by the US will constantly be weighed in comparison to tradition and religious standards.

·                     Paranoia. Arabs may seem to be paranoid by Western standards. Suspicion of US intent in their land and a cautious approach to American forces are a primary example. Some Arabs view all Westerners as agents of the government that may be “spies.” Especially in the ethnically diverse areas, mistrust runs deep amongst these various groups.

·                     Family over self. Arabic communities are tight-knit groups made up of even tighter family groups and most often, apart of tribes. Most Westerners pride themselves on personal accomplishments instead of the typical Arab whose focus is on family pride and honor.

FAMILY:

Arab families are often large and strongly influence individuals’ lives. The family is the

basic societal unit and is very strong and close-knit. Arabs gain status by being born into the right family. A patriarchal system, the father is the head of the family and is considered a role model. Few women work outside the home, though the number has increased with urbanization. Each gender is considered its own social subgroup, interacting only in the home. All activities revolve around family life, and any member’s achievement advances the reputation of the entire family. One’s family is a source of reputation and honor, as well as financial and psychological support. An Arab’s first loyalty is to the family, which cannot be dishonored. Therefore, maintenance of family honor is one of the highest values in Arab society. Since misbehavior by women can do more damage to family honor than misbehavior by men, clearly defined patterns of behavior have been developed to protect women and help them avoid situations that may give rise to false impressions or unfounded gossip.

HONOR:

An Arab’s Honor is cherished and protected above anything else, sometimes

circumventing even the need for survival. Criticism, even constructive criticism, can threaten or damage an Arab’s honor; it will be taken as a personal insult. The Arab must, above all else, protect himself and his honor from this critical onslaught. Therefore, when an Arab is confronted by criticism, you can expect him to react by interpreting the facts to suit himself or flatly denying the facts. Therefore, a Westerner should take a very indirect approach towards any corrective remarks and include praise of any good points.

Similar to this concept is the importance Arabs place on appearances and politeness

regardless of the accuracy of the statement. For example, to questions which require a yes

or a no, such as “Do you understand?” the Arab's preoccupation with appearances and

politeness automatically requires that he answer “yes” whether it is true or not. In the Arab world, a flat “no” is a signal that you want to end the relationship. The polite way for an Arab to say no is to say, “I'll see what I can do,” no matter how impossible the task may be. After the Arab has been queried several times concerning his success, an answer of “I'm still checking” or something similar, means “no.” Such an indirect response also means “I am still your friend, I tried.” Therefore when dealing with Arabs or Iraqis, remember that the “yes” you hear does not always means yes and might mean no.

WOMEN:

Traditional Arab women are subordinate to men in their society. The extent varies by country, and you cannot generalize. The most restrictive conditions exist on the Arabian Peninsula, and the most relaxed conditions exist in Egypt, Syria, and Lebanon. In Iraq, dress codes for women are still conservative with women wearing headscarves in public. Dresses are cut from below the knee to the ankle and blouses cover the shoulder and much of the arm. Women in Iraq do not hold managerial positions and their opinions and input will most likely be ignored. Do not show any type of interest in an Arab woman or female members of an Arab family. Do not photograph them, stare at them or try to speak to them. Do not ask about women, it is considered too personal and rude. It is best to ask about the "family," not a person's wife, sister, or daughter. Men should stand when a woman enters the room. Public displays of affection between the sexes, even foreigners, are unacceptable. Arab society has a basically negative stereotyped impression of Western women as loose or immoral. Female soldiers need to be careful not to reinforce this impression by their dress and conduct.

As a Male, Do:

• Respect the privacy and protected role of Arab women.

As a Male, Do Not:

• Flirt, hit-on, touch, hug, talk in private with Arab Women. IT WILL ENDANGER

THEIR SAFETY. Family members and the average Arab man will threaten a woman if

they witness any casual relationship occurring with a foreigner.

• Try to engage an Arab woman in conversation unless you have been formally

introduced.

• Stare at an Arab woman or maintain eye contact with them.

• Talk in public to professional women, even non-Arab women, except on business.

• Kiss, touch or show affection toward any woman in public, including a non-Arab

woman.

• Ask an Arab direct questions about his wife or other female members of his family.

• Expect an Arab to introduce you to a veiled woman.

If you are a Woman, Do:

• Dress in a manner acceptable to Arabs. Uniforms for US Armed Forces personnel are

always correct. For civilian attire, western clothing is acceptable if it is loose and

covers the neck, arms and legs. Western women are not expected to wear veils.

Wear what would be appropriate within a US compound or facility.

• Expect to be excluded from some stores.

If you are a Woman, Do Not:

• Wear tight or revealing clothing in public. This is considered immodest and undignified

in Arab culture.

• Kiss, touch or show affection toward any man in public.

GREETINGS:

Arab men shake hands very gently and may pull those he greets toward him and kiss

them on either cheek in greeting. Arabs may also hold hands to walk to other locations. If an Arab does not touch someone he greets, he either does not like him or is restraining himself because he perceives the person is unaccustomed to being touched. After shaking hands, the gesture of placing the right hand to the heart is a greeting with respect or sincerity. (For women, placing the right hand over the heart after serving food is a sign of offering with sincerity.) To kiss the forehead, nose, or right hand of a person denotes extreme respect. Shake hands with the right hand only; the left hand is considered unclean. Failure to shake hands when meeting someone or saying good-bye is considered rude. When a Western man is introduced to an Arab woman it is the woman's choice whether to shake hands or not; she must initiate the handshake. Women shake hands only using their fingertips. Do not touch their palm and do not kiss her hand. Women do not kiss a man’s cheek in greeting, it is considered immodest.

GESTURES:

There are gestures used in the Arab world that convey different meanings from those

used in America.

• An Arab may signify “yes” with a downward nod. “No” can be signaled in several ways: tilting one’s head slightly back and raising the eyebrows; moving one’s head back and chin upward; moving one’s head back and making a clicking sound with the tongue; or using the open palm moved from right to left toward the person.

..• “That’s enough, thank you,” may be indicated by patting the heart a few times.

..• “Excellent” is expressed with open palms toward the person.

..• “OK” may be shown by touching the outer edge of one’s eyes with the fingertips.

..• The “A-OK” (forming a circle with the index finger and thumb of one hand) gesture is

    considered obscene by Arabs.

..• The “thumbs-up” is considered obscene by the older, more traditional Arabs. The

    younger generation has taken on the Western identification of saying hello. It is

    recommended that soldiers wave in return.

..• The left hand is considered unclean; the right hand should be used when gesturing.

..• To beckon another person, all fingers wave with the palm facing downward.

..• Other gestures include kissing your own right hand, then raising your eyes and your

     right hand used for expressing thanks.

..• Touching the fingertips of your right hand to your forehead while bowing the head

     slightly, is a sign of deep respect.

..• Placing the right hand or forefinger on the tip of the nose, right lower eyelid, top of the

    head, mustache or beard means “it’s my responsibility,” or “I’ll gladly do it for you.”

..• Hitting the right fist into the open palm of the left hand indicates obscenity or        contempt.

..• Stroking the mustache in connection with an oath or a promise indicates sincerity.

..• Do not allow the exposed sole of your foot/shoe to face a person, it is interpreted as a

    grievous insult, and considered extremely bad manners.

..• It is important to sit properly without slouching. Never sit with one ankle on your other

    leg’s knee, leaving the bottom of your foot pointing at someone. Sit with both feet on

    the floor and palms down on the thighs. Do not slide down or wiggle around     excessively, it is considered very rude.

..• Do not lean against walls or have hands in your pocket when talking.

..• Do not point or beckon someone with the index finger it shows contempt for the    person being pointed at, as if they were an animal.

..• Men stand when a woman enters the room; everyone stands when new guests arrive

at a social gathering and when an elderly or high-ranking person arrives or departs.

HOSPITALITY:

Arabs are generous and value generosity in others. Hospitality toward guests is essential for a good reputation. Arab hospitality requires that refreshments must always be offered to guests. When anything is offered, it is considered polite for the guest to decline at least twice before accepting, and for the host to offer at least three times before finally accepting a guest’s negative response.

As a Guest, Do:

• Arrive on time and expect a meal if you are invited to an Arab home. (Remember that

Arabs usually give approximate times but will welcome guests warmly whenever they

arrive).

• Understand that if a female accompanies you, she may be separated from you during

the visit to join the women in their living area.

• Always use your right hand in eating, drinking, offering, passing or receiving anything.

• Try all different foods offered you. You may ask about a dish that is unfamiliar to you.

• Eat heartedly.

• You may be offered alcohol. Remember General Order #1.

• Take seconds, even if only a small amount. It’s a compliment to your host.

• Compliment your host on the food and wish him always a full table.

• Take your leave promptly after the second or third round of coffee or tea after a meal.

Arabs usually socialize and converse before the meal, not after.

• Thank the host profusely for his hospitality and good conversation.

• Plan to return the hospitality.

As a Guest, Do Not:

• Feel obligated to bring a gift. If you do bring a gift, make it a gift for the children, which is always appreciated.

• Praise too much any of your host’s possessions; he may give it to you. If he does you

are expected to give something in return.

• Be aware that your presence may threaten the safety of your host, take appropriate

precautions.

As a Host, Do:

• Accompany your guest outside the door or gate when he leaves.

As a Host, Do Not:

• Appear anxious to end the visit.

• Ask or expect an Arab to uncover his head.