BOOK REVIEW-1

Robert Kiyoski is world famous for his book Rich Dad Poor Dad. Although he has written several other books also, Retire Rich Retire Young is a fabulous read. The take away from the books are wonderful. Therefore, I am tempted to share some of the key points of the book which would help young professional to navigate their career.

Some key points

  1.   Your most expensive advice is the free advice you receive from your financially struggling friends and relatives.

  2.  Try to achieve a life free from paychecks and fear of loosing paycheck.

  3.   Find your calling. Do something which make you happy and others happy.

  4.   Leaders take on challenges others are afraid off. Be a hero, act like one.

 5.   Most people cannot do business because they don’t have people skills. Warren Buffet the only book which has helped him throughout his carrer is “How to make friends and influence people- Dale carnegi”

 6.  The richest people in this world look for expanding their network. The rest of people look for making more money.

  7.   Forbes magazine defines rich as a person who earns more than $1 million per year.

  8.   Do something little daring everyday. This will keep you young.

 9.  Universe believes in law of generosity. “Give and thou shall receive”

 10.  One of the best way to be successful is to have a network of successful people.

  11.    Your economic power is the square of number of people in your network.

  12.       It’s not your Boss’s job to make you rich.

 13.   Seminars are more useful than official degrees. As degrees  are meant to make you a better employee.

  14.      “ Learning is the single most important tool for people, teams and companies that want to get fast and stay fast in the new economy” 

  15.      If you want become rich , try to learn things and do them for free for others.

  16.        Live your life not your resume

  17.       Believe you can become rich.

  18.       Create Assets and business

   19.   People, who take risk, prosper more.

   20.     Retire Rich, Retire young.

COMMON TERMS USED IN E&P INDUSTRY

There few terms associated with reservoir. These terms are often perplexing. Let’s try to decode them today-

a) GOR- Gas Oil Ratio-It is a volumetric ratio of gas produced at STP to that of oil produced at STP.

b) API gravity- Oil gravity is defined by API gravity.

API= 141.5/DENSITY-131.5

API for water is 10. API for heave curde oil is <25

API for a good crude oil is between 35-45

c) Consider following diagram to understand Dew point and bubble point

d) Wet Gas-Wet gas is a gas which is accompanied by larger fraction of hydrocarbon i.e. C2-C6. These higher hydrocarbons sell at premium price. Remember we gas does not mean accompanied by water.

e) Gas Condensate-

Gas condensates are valuable commodity and there is an incentive to extract them while producing gas. Thus reservoir pressure is so maintained in order to keep these condensates above dew point. Once all the condensates have been produced, gas is produced.

f)    Wobbe Index-It is a measurement of the quality of gas. It is defined as-

Energy Density/(Relative density of the gas)^0.5

WI has advantage over calorific value as heating per unit varies with density. All the contracts of gas are done in terms of WI.

g) Solution Gas- The gas dissolved in the oil is called solution gas. The ratio of volume of gas dissolved per volume of oil is GOR.

h) Dip- The earth’s sub surface is not purely horizontal in layers. The angle sub surface layers make with horizontal is called dip.

i)     Permeability-  It is the way in which pores of rocks are connected  to each other. Better the permeability better the oil and gas reservoir since extraction will be easier.

j)     Porosity- It is the carrying capacity of the rock or in other words how much liquid or gas a reservoir can hold. More the porosity  better is the reservoir.

k)  Isochore- a line connecting areas which are formed at the same time.

l)     Isopach- a line connection areas of same thickness.

m)                 PVT analysis- Once the field has been producing, the pressure and temperature changes which drastically change the fluid properties of the reservoir. Thus, a thorough knowledge of reservoir condition id required to effectively produce from the reservoir. So a study of Pressure, Volume and Temperature (PVT) of the reservoir fluids have to be done in order to make field development plan.

Skimming – It is separation of water from oil.

Stripping-Removal of heavy hydrocarbons from oil and gas via separators mainly

Consulting firms in Oil and Gas Industries.

DeGolyer and MacNoughton

One of the most recognized firm in oil gas. It is also arbitrator to famous Relaince Energy Vs Indian Government case.

http://www.demac.com/

 Wood Mackenzie

Wood Mackenzie is another respectable name in Energy. Wood Mackenzie provides 360 degree energy solutions to various organizations.

http://www.woodmac.com/public/home

IHS CERA

Recently merged with CERA (Cambridge Energy Research Associates) is a leading advisor in the energy and power industry to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors—oil and refined products, natural gas, and electric power—on a global and regional basis.

www.ihs.com

Gaffney and Cline

One of the most trustworthy firm in technical consulting. ONGC’ s Mumbai offshore field has lot of inputs from this firm.

http://www.gaffney-cline.com/

Halibuton Consulting

Haliburton is a big name in service provider industry. Haliburton Consuting

http://www.halliburton.com/en-US/ps/consulting/default.page?node-id=h8cyv98u

Schlumberger Business Consulting

http://www.sbc.slb.com/

Douglas Westwood

Douglas-Westwood, an independent employee-owned company, has been described as “top energy research group” by the Financial Times and a leading provider of energy business strategy, research and commercial due-diligence services on the global energy services sectors. It has offices in Canterbury, England; Aberdeen, Scotland; Singapore; and New York, USA and has completed more than 650 projects and provided products and services to over 400 clients in 70 countries.

www.douglas-westwood.com

Bain & Company

Bain’s corporate strategy projects include portfolio optimization—informed by Bain's proprietary insights on the breakdown of the energy value chain and classic Bain strategy cases for a deregulating sector. Bain's utilities clients include electricity or nuclear power companies, gas companies, large utility conglomerates, water utilities, gas distribution companies, and e-business exchanges.

www.bain.com/bainweb/home.asp

McKinsey & Company

McKinsey serves many of the world's most important oil companies in North America, Europe, Latin America, the Middle East, and Asia. McKinsey’s electric power & natural gas practice serves incumbents and new entrants in this rapidly expanding and liberalized sector. McKinsey helps clients deal with issues related to organization, including restructuring, skill-building, and top team management; operations, including capital investment, cost reductions, performance improvement, and networks and logistics; and strategy, including mission, sales, economics, and procurement.

www.mckinsey.com

Boston Consulting Group (BCG)

BCG's energy and environment practice helps companies navigate the increasingly complex business environment. BCG works with the full range of players in the industry: international energy companies, major integrated oil and utilities companies, global power developers, and emerging energy traders and merchants.

www.bcg.com

Booz and Company

Booz Allen has worked with an array of the world's leading energy companies in every category of the business—upstream oil and gas, downstream refining petrochemicals, trading, distribution, and retail, and gas and power, including electricity and gas distribution. Among the firm's clients are global oil companies, local and regional utilities companies in Europe, the United States, and Latin America, petrochemical manufacturers, financial investors, and policy makers.

www.booz.com

PIRA Energy Group

PIRA Energy Group, founded in 1976, is an international energy consulting firm specializing in global energy market analysis and intelligence. PIRA offers retainer client services, as well as customized consulting, on a broad range of subjects in the international crude oil, petroleum products, natural gas, electricity, coal, biofuels, and emissions markets.

www.pira.com/default.htm

Accenture

Accenture’s energy group has been a part of the industry for many years. Its experience spans the entire value chain, including upstream, downstream, oil service, and pipeline companies. Accenture collaborates with leading energy companies to help them meet competitive challenges and shape solutions that advance their journey to high performance.

www.accenture.com/us-en/industry/energy/Pages/energy-index.aspx

Arthur D. Little

Arthur D. Little has worked with all the world's major oil and gas companies in areas including upstream oil and gas, downstream refining and distribution, gas and power, and transportation. Among the firm's clients are the global energy companies, investors, law firms, and policy makers. ADL employs industry specialists and professionals with firsthand knowledge and experience in the oil and gas industry.

www.adlittle.com/energyutilities.html

A.T. Kearney

A.T. Kearney has 350 consultants specializing in energy and process and utilities industries. A.T. Kearney formulates innovative strategies to address challenges relating to oil and gas, oil sands electricity, water, multi-utilities and technical service providers in every global segment, as well as in local markets.

www.atkearney.com

Charles River Associates (CRA)

CRA provides expert economic and business consulting services on almost every aspect of the electricity industry to a wide range of clients, including industry organizations, investor-owned utilities, generators, power pools, transmission companies, distribution companies, competitive retailers, and companies from other industries, regulators, and governments.

www.crai.com

Capgemini

With more than 12,000 consultants dedicated to energy, utility, and chemical projects across Europe, North America, and Asia Pacific, Capgemini uses industry-specific experience to address business problems. Capgemini serves the business consulting and information technology needs of 15 of the top 15 worldwide utilities and all five of the publicly held oil and gas “super majors.”

www.capgemini.com

Concentric Energy Advisors (CEA)

CEA offers industry-specific advisory services related to hard assets for clients throughout the energy and water industries which include corporate and asset divestitures, corporate and asset purchases, M&A opportunity reviews and transactions, and portfolio optimization reviews and transactions.

www.ceadvisors.com

Deloitte

With more than 2,500 oil and gas professionals worldwide, Deloitte’s oil & gas practice is focused on providing audit and enterprise risk services, tax services, consulting services, and financial advisory services to companies in all segments of the oil and gas industry.

www.deloitte.com

London Economics International (LEI)

LEI is a global economic, financial, and strategic advisory professional services firm specializing in energy, water, and infrastructure. The firm has advised private sector clients, market institutions, and governments on privatization, asset valuation, deregulation, tariff design, market power, and strategy in virtually all deregulated markets worldwide.

www.londoneconomics.com Updated 7/14 3

NAVIGANT Consulting

The Navigant team helps clients to deploy and integrate renewable energy, energy storage, and other emerging technologies; understand the potential of Smart Grid; and to address consumer and regulatory demands. Its professionals also bring significant technical expertise in Disputes & Investigations, Economics, Financial Advisory, and Management Consulting.

www.navigant.com

PFC Energy

PFC Energy is a global consulting firm specializing in the oil and gas industry. PFC works worldwide to provide in-depth analysis and forward-looking scenarios which provide the foundation for strategy development, investment evaluation, and commercial decisions at the global and regional level. Its areas of expertise include market dynamics, geopolitics, economics & country risk, integrated strategies, upstream oil & gas, mid-and-downstream gas, downstream oil, services sector strategies, and complex networks.

www.pfcenergy.com

Poten & Partners

Poten & Partners, a global broker and commercial advisor for the energy and ocean transportation industries, provides unparalleled access and insight into worldwide commodity and shipping markets.

www.poten.com

Rapidan Group

The Rapidan Group, based in the Washington, DC area, is an independent energy market and policy research firm that advises senior asset managers and executive decision-makers on energy market and policy risks and opportunities.

www.rapidangroup.com

Roland Berger Strategy Consultants

Roland Berger Strategy Consultants is a privately-owned global strategy consulting firm with 49 offices in 35 countries. The consultancy has nearly 1,700 employees and about 200 partners. The company's industry expertise includes energy, energy equipment and the oil industry as well as a wide variety of other industries ranging from aerospace to telecoms.

www.rolandberger.com

Synapse Energy Economics

Synapse Energy Economics, specializing in energy, economics, and environment, provides research, testimony, reports, and regulatory support to consumer advocates, environmental organizations, regulatory commissions, and state energy offices.

www.synapse-energy.com

RESERVOIR

At the heart of petroleum exploration is the RESERVOIR of oil and gas. No matter what we do in E&P industry the reservoir is the focal point of the entire decision making. In the coming blogs I will highlight how magnificently the reservoir properties and financial decision making are linked. But today lets focus on reservoir.

Three parameters define the reservoir-

1.   Depositional environment

2.   Structure of reservoir and

3.   Diagenesis

Reservoir rocks with some exceptions are generally sedimentary rocks.

There are 2 main categories of sedimentary rocks

a) Silicicalstic or the clastic- eg sand stones- Fields of North sea and Mehsana

b) Carbonates-eg calcium carbonate – Fields in Saudi Arabia and Bombay offshore

The characteristics of these sedimentary rocks vary according to their depositional environment. This effects their porosity, permeability and saturation capacity etc.

1.   Depositional Environment

Depositional environment can be defined as a area with a typical set of physical chemical and biological process which result is specific type of rocks. Depositional environment has a very strong correlation with production characteristics.

2.   Structure

The earth surface is always in motion. The rocks are continually compressed and stretched, resulting in deformities. Faults and folds are formed in the subsurface can act as good  trap for oil and gas.

In carbonate reservoir generally natural fractures are looked for oil and gas. Fractures are considered pool of oil and gas thus drilling is done in natural fracture as much as possible.

3.   Diagenesis

The term diagenisis describes all chemical and physical process affecting sediment after deposition.

This includes

a) Effect of pH

b) Effect of oxidation

c) Overburden pressure/ compaction

d) Cementation, dissolution and replacement of rock particles.

Diagenesis thus affects the permeability and porosity of the reservoir.

Energy Manager

There is a very important aspect of energy industry apart from the technical stuff, and that is Energy Finance and Project Management. Today’s manager in oil and gas industry must know how the money is flowing in their industry, in their organization and their projects.

Any energy company at the end of day is group of projects bundled together. So if you can handle projects well you can handle the company as well. As a good manager you should have working knowledge of-

a) Technical aspect (this includes geology, drilling etc.)

b) Energy Finance (basic)

c) Project Management (basic)

d) People Management (advance)

In a recent survey it has been found that 75% of projects in oil and gas industry do not deliver what they promise. This results in extra cost, extra time and loss of resources.

I have already been writing about technical aspect of oil and gas industry, I will soon start a series on Energy Finance and Project Management, which will cover the basics.

SAFETY AND ENVIRONMENT

HSE (Health Safety and Environment) plays a key role in working of oil industry. HSE is critical when it comes to exploration, production and other operations. HSE is important because –

a) It helps in getting funding form Banks. Company with good track record in HSE get funded easily.

b) The assets of the company with good HSE get insured easily.

c) HSE improves efficiency.

It is very important to understand that HSE can only be implemented when n employees have a active attitude towards safety. In most of the places it has been observed that only the top management in their speeches and written communication emphasize the need for safety. The ground work and incentive for safety is missing in most of the cases is missing.

You may not know this fact but the most hazardous operations in oil and gas operation is helicopter transfers of crew. As a result almost all companies make offshore training of personnel a must.

Risk is generally assessed and tackled in following ways-

Environmental Impact Assessment (EIA)

The objective of an EIA document is to document potential physical, biological, social and health effect of a planned activity. This enables the decision makers to determine whether an activity is acceptable or to look for alternatives. Generally EIA is carried out by a third party in order to eliminate biases. EIA is a type of pre-mortem project audit. EIA helps in early consultation with stakeholders which maximizes the chances of success of the project.

How Oil and Gas formed??

https://www.youtube.com/watch?v=0PrSZMOCn

Oil and Gas Exploration

Once Company has obtained requires the right over a certain field, exploration activities begin as per Minimum Work Program as outlined in the agreement at time of bidding. This generally included seismic surveys, remote sensing, few wild cat wells etc.

Usually, there are these few techniques are applied for exploration-

1.   Gravity and Magnetic Surveys

2.   Remote sensing

3.   Seismic

4.    Wild cat wells

1.   Gravity and Magnetic Surveys

Gravity surveys are based on difference in the gravity of the material. Based on the concept that different material will have different density and thus will have a different gravitational pull. For example gravitational pull from igneous rocks will be more than that of sedimentary rocks.

In magnetic survey magnetic properties of rocks are exploited. In general basement and igneous rocks are relatively highly magnetic. This helps in distinguishing subsurface sedimentary rocks from others.

2.   Remote Sensing

Remote sensing is done through aerial satellites. This looks for any seepage on the surface, any out crop of reservoir rocks, faults etc. Even these days Gravity and magnetic surveys can be done satellites.

3.   Seismic

This includes 2D, 3D seismic survey. Seismic surveys are based on the concept of sound waves generated from source on the surface and reflected back from sub surface layers. The two main things measured in seismic is velocity of the waves and density of the rocks. Geophysicts these days look for Acoustic Impedance (AI) which is the product of density of rock and velocity of wave passing through it.

Seismic data is collected by blasting in the ground to create sound waves. The reflected sound waves are collected by devices known as Geophones. In sea Air gun is used to create sound waves and Hydrophones collect the reflected sound waves form the sub surface. It is worthwhile to note that cost of seismic survey on land is 4-5 times than that on the open sea.

3D surveys are more expensive than 2D surveys. But 2D surveys cover large area compared to 3D surveys. So generally on a virgin land first 2D survey is done and then 3D is done where there is strong potential for hydrocarbon.

4D seismic surveys are done mainly on mature fields. A fourth factor i.e. time is introduced. 4D seismic survey is 3D survey taken over a period of time (generally 1 year). 4D gives information about the movement of fluid in the reservoir and how reservoir is behaving over a period of time.

4.   Wild Cat well

A wild cat well is drilled in an area where there is no or little previous knowledge of sub surface. Geologist, based on initial seismic, magnetic and gravity analysis, release the location of 3-4 drilling wells in the area. With drilling exact sub surface information is obtained through coring and analyzing the cuttings from the bottom.

Seismic Interpretation

Now days geophysict and geologist prefer reading the seismic data in terms of acoustic impendence (AI). The geo scientist stich the data obtained from all the above mentioned sources with the help of softwares such as PETRAL, LANDMARK etc to draw the first picture of the oil field. This picture is further refined as more information pours in. 

Risk and Sustainability

There has been conventional wisdom that ERM or risk management is a subject of finance officers and auditors. IRR, Cash flow, DCF, Options etc were few of the tools to asses risk. But now a mango tree, a well, a lake etc have also been added to the risk assessment equation.

Consider the following facts-

1.   Companies who have added sustainability in their ERM , enjoy 16.5 % premium in market valuation.

2.   Companies that downplay or ignore sustainability run a serious risk—sooner or later, they are likely to encounter avoidable problems with regulators, investors, ornon-governmental organizations, or inflict lasting damage to their reputation because of questionable operating practices.

3.   Banks were thought were clean till 2008. After 2008 the perception about banks have changed just because of their poor risk policy.

4.   Standards in statutes and rules, such as Sarbanes-Oxley, Dodd-Frank, Solvency II, Basel III, and ORSA have come into picture to enforce risk management.

If companies have to prosper in long term they have to incorporate sustainability in their curriculum. Whether it is bank lending a loan to a mining company in Africa, or a manufacturer reduces its carbon emission, a factory hiring local people and a company planting trees as a CSR activity, companies can no longer ignore the importance of environment and communities in their BUSSINESS PLAN.

Sustainability leaders recognize a symbiotic relationship between the market for their products and their roles in society at large. Integrating sustainability into ERM puts companies in control of their destinies, enabling them to be proactive and forestall stakeholder pressures that might otherwise pose a threat to existing operations or future growth.