OilVoice Magazine | October 2013

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Interview with Paul Edmunds, MD at Island GISWho are the foreign oil & gas companies in US shale plays?

Illinois Basin's New Albany Shale: The next big U.S. horizontal oil play?

Edition nineteen October 2013

Cover image by Clinton Steeds


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1 OilVoice Magazine | OCTOBER 2013

Issue 19 October 2013

OilVoiceAcorn House381 Midsummer BlvdMilton KeynesMK9 3HP

Tel: +44 208 123 2237Email:[email protected]: oilvoicetalk

EditorJames AllenEmail:[email protected]

Director of SalesTerry O'DonnellEmail:[email protected]

Chief Executive OfficerAdam Marmaras

Email:[email protected]

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Cover image by Clinton Steeds

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Adam Marmaras

Chief Executive Officer

Welcome to the 19th edition of theOilVoice magazine. This is another'bumper' edition, with a total of 10articles from our roster of chosenopinion writers. The most read item ofthe month is our interview with PaulEdmunds, MD from Island GIS, whichyou will find inside this edition.

A few years ago we were gettingaround one opinion piece a month. Wenow average 2 per day, and it isgrowing. This thought provokingcontent is one of the main highlightson OilVoice, and we know for a lot ofpeople it's the only reason they stopby. We're always on the lookout formore authors, so if you havesomething to say about the industry(that isn't a blatant sales pitch!) then

we'dlove to have you on board.

Have a great October

Adam Marmaras

CEO

OilVoice
http://c/Users/content/Documents/Magazine/Template/[email protected]://c/Users/content/Documents/Magazine/Template/[email protected]://c/Users/content/Documents/Magazine/Template/[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.facebook.com/oilvoicehttps://www.facebook.com/oilvoicehttp://www.twitter.com/oilvoicehttps://plus.google.com/118419367014120616513/http://www.linkedin.com/groups/OilVoice-3162868http://www.flickr.com/photos/cwsteeds/http://www.flickr.com/photos/cwsteeds/http://oilvoice.com/open/features.aspxhttp://oilvoice.com/open/features.aspxhttp://www.oilvoice.com/about/contact-us.aspxhttp://www.oilvoice.com/about/contact-us.aspxhttp://www.oilvoice.com/about/contact-us.aspxhttp://www.oilvoice.com/about/contact-us.aspxhttp://oilvoice.com/open/features.aspxhttp://www.flickr.com/photos/cwsteeds/http://www.linkedin.com/groups/OilVoice-3162868https://plus.google.com/118419367014120616513/http://www.twitter.com/oilvoicehttps://www.facebook.com/oilvoicemailto:[email protected]:[email protected]:[email protected]://c/Users/content/Documents/Magazine/Template/[email protected]


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Contents

Featured Authors

Biographies of this months featured authors 3Interview with Paul Edmunds, MD at Island GISby Paul Edmunds 6

Insight: why do major projects fail?by David Bamford 8

Uncertain future for Syrian risk premium on oilby Andrew McKillop 12

Discontinuity ahead - oil limits will adversely affect the economyby Gail Tverberg 14

Illinois Basin's New Albany Shale: The next big U.S. horizontal oil play?by Keith Schaefer 20

Who are the foreign oil & gas companies in US shale plays?by Mark Young 25

Foreign investors shun Iraq's emerging civil warby Andrew McKillop 28

Insight: Managing health in the oil and gas sectorby Angela Whitehead 32

Insight: Value of Stress Field Detection technology in early-stageexplorationby George Liszicasz

38

The need for differentiation in UK oil & gas recruitmentby Damien McCawley 43


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Featured Authors

Andrew McKillop

AMK CONSULT

Andrew MacKillop is an energy and natural resource sector professional withover 30 years experience in more than 12 countries.

Gail Tverberg

Our Finite World

Gail the Actuarys real name is Gail Tverberg. She has an M. S. from theUniversity of Illinois, Chicago in Mathematics, and is a Fellow of the Casualty

Actuarial Society and a Member of the American Academy of Actuaries.

Paul Edmunds

Island GIS

For the past 10 years Paul has worked on GIS projects across the Energy andEnvironmental sectors, developing a comprehensive understanding of the

analytical and technical application of this fast changing industry. Paul has aBSc in Geography and an MSc in Geographical Information Systems from theUniversity of Edinburgh.

David Bamford

Finding Petroleum

David Bamford is a non-executive director at Tullow Oil plc and has variousroles with Parkmead Group plc, PARAS Ltd and New Eyes Exploration Ltd,and runs his own consultancy.

Keith Schaefer

Oil & Gas Investments Bulletin

Keith Schaefer, editor and publisher of the Oil & Gas Investments Bulletin.
http://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspxhttp://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspxhttp://ourfiniteworld.com/http://ourfiniteworld.com/http://www.islandgis.com/http://www.islandgis.com/http://www.findingpetroleum.com/http://www.findingpetroleum.com/http://oilandgas-investments.com/http://oilandgas-investments.com/http://oilandgas-investments.com/http://www.findingpetroleum.com/http://www.islandgis.com/http://ourfiniteworld.com/http://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspx


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Mark Young

Evaluate Energy

Evaluate Energy is a leading provider of efficient data solutions for oil & gascompany analysis. Services include annual and quarterly financial data, M&A,worldwide E&P assets, Refinery and LNG databases and an emergingUS/Canadian Shale Gas & Liquids offering.

Angela Whitehead

PetroMall

Angela is an experienced occupational health adviser who has worked in the

field for over 30 years. She has gained experience in a wide range of settingsincluding, engineering, technology, service industries and communications.

George Liszicasz

NXT Energy Solutions Inc.

Mr. George Liszicasz has been the Chairman and Chief Executive Officer atNXT Energy Solutions, Inc., since January 1996 and has been its Presidentsince July 2002. Mr. Liszicasz serves as the President of Energy Exploration

at NXT Energy Solutions, Inc.

Damien McCawley

Simpson Crowden

Managing Partner in London based international Oil and Gas executivesearch and selection company. Over 20 years experience recruiting at seniorto middle management levels around the world.
http://www.evaluateenergy.com/http://www.evaluateenergy.com/http://www.petromall.org/http://www.petromall.org/http://www.nxtenergy.com/http://www.nxtenergy.com/http://www.simpsoncrowden.com/http://www.simpsoncrowden.com/http://www.lunarsafari.co.uk/http://www.simpsoncrowden.com/http://www.nxtenergy.com/http://www.petromall.org/http://www.evaluateenergy.com/


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I

What lies beneathIn Appalachia, geo-hazardsrevealed with new clarity

UNLOCK THE POTENTIAL IN YOUR FIELD | #4 IN A SERIES OCTOBER 2013

OilVoice

KEY TECHNOLOGIES:

HYPERSPECTRAL

MAGNETIC

ACTIVE-SOURCE EM

PASSIVE-SOURCE EM

AREA:Appalachian Basin, Pennsylvania

CUSTOMER:Supermajor

FOCUS:Eco-Assurance

TYPE:Unconventional

KEY INTERPRETIVE PRODUCTS:

Shallow gas geo-hazard detection

Fault detection

Aquifer mapping

Orphaned wellbore detection

Oil seep and gas plume detection

CUSTOMER BENEFITS:

Helps producers protect the integrity of

drilling and completion operations with

detailed data for avoiding geo-hazards

and environmentally sensitive areas.

HIGHLIGHTS

For millions of years, Appalachian gas has migrated

toward the surface along naturally occurring faults.

Frequently, it gets trapped in shallow structures

difcult to see on seismic images. Abandoned and

undocumented wellbores, some a century old,

compound the problem. Drilling into a shallow gaspocket en route to the Marcellus or Utica Shale can

throw a wrench in operations, forcing a producer to set

a string of casing and adding up to $250,000 per well

in unexpected cost. Fracing near an orphaned wellbore

or unknown fault is every operators worst nightmare.

Responsible operators want to know the challenges

they face ahead-of-the-bit, so they can avoid geo-

hazards and design their drilling and hydraulic fracturing programs with utmost regard for the environment. To address

these challenges, NEOS GeoSolutions has introduced Eco-Assurance, a program based on its proprietary Multi-

measurement Interpretation (MMI) methodology. A combination of airborne magnetic, hyperspectral and electromagnetic

(EM) measurements helps to locate orphaned wellbores, reservoir-to-surface fault zones and trapped shallow gas pockets.

NEOS was engaged to conduct a 30-square-mile, basement-to-surface Eco-Assurance survey in Western Pennsylvania.

Airborne-acquired hyperspectral data revealed surface oil seeps and gas plumes, along with wetlands, waterways

and the condition of local botany. Sensors were calibrated to the hyperspectral signatures of hydrocarbons unique to

the area, and anomalies were veried via ground truthing.

Magnetic data helped identify fault zones, orphaned wellbores and other iron-based infrastructure. By overlaying the

magnetic data on top of maps of known infrastructure, like farms, well pads and pipelines, NEOS was able to locate

dozens of previously unknown sites potentially associated with orphaned oileld infrastructure. A comparison of these

sites and the hyperspectral data indicated if any previously unknown sites were also associated with trace hydrocarbons.

EM data provided insight into trapped shallow pockets from the surface down toward the target shale intervals. NEOS used

both active- and passive-source airborne acquisition with proprietary signal processing to generate detailed 3D voxels that

could be analyzed both in cross section and in depth slices. An analysis of the EM and magnetic data suggested that

hydrocarbons had naturally migrated along fault planes into some areas of the near-surface over the course of geologic time.

Cost-effective Eco-Assurance is proving its worth not just in Appalachia, but anywhere E&P activities are ongoing.

Integrating multiple airborne geophysical datasets can inform a road map for environmentally sound and commercially

efcient operations.

To learn more about this project or others in the Unlock the Potential series, visit: www.ThePotentialUnlocked.com

Resistivity slice in a gas dominant area of the near surface.

Oil seeps (green) and gas plumes (magenta) on the surface

are superimposed.


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Interview with PaulEdmunds, MD atIsland GIS

Written by Paul Edmunds fromIsland GIS

Island GIS, a leading independent GIS (Geographic Information Systems)consultancy and provider of innovative and integrated geospatial solutions for the oiland gas industry,recently announcedthat it has been chosen as a Google GEO

Enterprise Partner. Paul Edmunds, Managing Director, Island GIS answers somequestions from OilVoice below.

OilVoice: Good afternoon, Paul. We'd like to thank you for taking the time to answersome questions for us today.

Edmunds: It's a pleasure to be speaking with you.

OilVoice: First of all, congratulations on being selected as a Google EnterprisePartner. We understand that the partnership will focus on enhancing Google's GEOenterprise platform with Island GIS's advanced technology solutions. Could you give

us a brief introduction into the sort of technology Island GIS has to offer and how apartnership with Google will benefit, especially within the Oil & Gas sector?

Edmunds: Island GIS is a leading independent GIS consultancy that providesinnovative and, importantly, integrated geospatial solutions for the oil and gas sector.From a product & services perspective, this means mapping and data management,application software development as well as modelling and analytics.

For companies in the oil and gas sector that are facing significant challenges andincreasing operational and financial risks associated with exploration and production,GIS technology can deliver a real competitive advantage. From specific projects toan enterprise-wide solution, we can provide customers with a real-time operationalpicture of their physical assets and activities, so that they can continually monitorprogress and development, and enable them to make informed decisions faster.

Our partnership with Google provides us with access to huge quantities of data,imaging and cross platform technology, as well as enabling us to provide customerswith Cloud-based services, which makes project management and the delivery of ourGIS solutions incredibly effective.

Essentially, Island GIS's partnership with Google will see us broaden our service

offering and integrate our existing GIS technology and workflows on Google'spowerful Enterprise Platform. In our view, this combined offering will deliver the most
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advanced integrated GIS solutions available, and will genuinely help organisationsmeet the increasing operational and financial risks associated with exploration andproduction.

OilVoice: How does Island GIS compare to other companies providing GIS products

and services? What makes you stand out from the rest?

Edmunds: Primarily, we are in the business of providing customers with solutionsthat deliver against business and operational challenges; it is far more than justselling products. We look for long-term relationships with our customers, where wecan create solutions that are integrated into their business, become part of the waythat they work, and can be scaled as they develop.

To do this, you must combine real industry knowledge of the oil and gas sector withspecialist expertise and understanding of the GIS space and the latest technologies.As well as being a dynamic team, we believe that we have this. Our new partnership

with Google validates this, in conjunction with the tangible results that we havedelivered for our customers, which include Cairn Energy as well as Scottish andSouthern Energy.

OilVoice: You mentioned in a previous press release that the Oil & Gas sector 'lackssenior experienced operations personnel', why do you think this is?

Edmunds: It's based on the real change in dynamics of the oil and gas sector, aswell as the significant expansion and associated opportunities that we are seeing.When this happens, there is only a finite amount of expertise and resource available,and the operational skill-sets that are required, become spread pretty thin.

This is why GIS technology is so critical, as it helps organisations, and the industry,meet this challenge. The transparency that is created on specific projects can bringtogether teams, no matter how dispersed, and enable decision-makers to ensurethat their operations are progressed in the right way. It's about de-risking operationsat the outset, rather than waiting for issues to happen, and then ensuring operationaleffectiveness and financial efficiency throughout the lifecycle of any given project.

OilVoice: You've also mentioned that technology can 'ultimately help companiesbecome more competitive', can you tell us how the use of advanced mapping

technology can benefit a company that engages in its use, over one that doesn't?

Edmunds: As I've mentioned, GIS technology provides companies with unparalleledinformation and insight on the current state of their physical assets and corporateinfrastructure. This knowledge can be harnessed to ensure that projects andoperational activities are developed in the right way, faster, and for less money. It isa compelling proposition when we live and work in a sector that is exposed to morerisk - and opportunity - than we have ever seen before.

OilVoice: Finally, where do you see GIS technology in the next 25 years? And will itbe as important to the industry as it is today?

Edmunds: Well 25 years is a tremendously long time away, and based on


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developments over the past 25 years, we're in a position whereby 'if you can imagineit, it will probably happen'!

From a GIS perspective, and without future-gazing too much, and living within therealms of our current reality, I believe we will see much more integration of

technology. We will see a real collaboration between, and within organisations,where there is access to far more data, bringing together, corporate, industry,technology, as well as academic information and knowledge to create realtransparency and insight and the foundation for development and operationaldecision-making.

In terms of Google, they have the scale and capabilities to create a single, powerfulplatform, from which GIS solutions can be delivered. This is why I believe that IslandGIS and our new partnership with Google, positions us well to not only enhance ouroffering and the solutions that we deliver to our customers, but also to stay ahead ofthe curve and lead progression within GIS technology as the industry develops.

OilVoice: Thanks again for taking the time to answer our questions, Paul. I'm sureour readers will enjoy hearing what you have to say.

View more quality content fromIsland GIS

Insight: why do majorprojects fail?

Written by David Bamford fromFinding Petroleum

Given my own background, I have always been focused on exploring for deep waterfields, especially those with deep water clastic reservoirs how significant are theyto recent global discovery history, which provinces have been especially successful,which regions are seeing the most activity?

Exploitation of these fields once discovered is a further issue, and actually onewhere data, knowledge and insights are much harder to come by.

However, the reality is that such deep water development projects are typically late,(way) over budget, and do not deliver the promised production profile.
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This can lead to dramatically reduced project NPVs, shrunken cash flows, andreserves downgrades.

A Major or a mini-Major can survive such accidents they may not enjoy them but

they are robust.

Smaller companies E&Ps are not; they are fragile, and will invariably see theirshare price hammered in the market place.

At first I thought there might be three root causes of the problem, namely:

1. Under-appraisal of complex reservoirs.2. Inadequate project design and concept selection.3. Lack of QA of project execution.

However, two recent Finding Petroleum Forums,one focussed on FPSO-baseddevelopments,the other specifically on deep water developments, make it clear thatthe above are just manifestations of a problem and that something else is to blame,something else is the root cause.

In particular, the failures and problems are more likely caused by a single factorthe belief that speed is of the essence because reducing cycle times, shorteningtimes between discovery and 1st Oil, inexorably leads toan increase in NPV.

In contrast and in fact, chasing a fast schedule can lead to unintendedconsequences as a significant proportion of NPV is eroded if a project does not meetall targets; poorly defined projects with aggressive schedule targets haveunpredictable outcomes. A significant effort is required to deliver a well-definedproject, from reservoir appraisal through to concept selection and definition, toproject execution.

Small-medium sized companies run great risks with their (debt) capital if they donot access significant Know How in large teams.

An FPSO has become the development option of choice in deep water, especially inthe South Atlantic and SE Asia. In their excellent review, Tanker Operator have

described the burgeoning business opportunities in the FPSO industry.

Time was that FPSOs were seen as the solution when an oil field was small, toosmall to justify a permanent facility. And as the deepwater era began in the Gulf ofMexico, the talk was of spars and tension leg platforms (TLPs). But now, the FPSOis the dominant floating production facility, as evidenced bythe most recent reportfrom International Maritime Associates (IMA).

IMA reports that seventy-four production floaters currently are on order, 40 percentmore than the backlog seen a year ago and more than double the mid-2009 backlog.These include 49 FPSOs, 6 production semi-submersibles, 3 TLPs, 4 spars plus 3

floating liquefied natural gas vessels and 9 floating storage and regasification units.
http://www.findingpetroleum.com/event/FPSOs_the_go_to_development_technology_for_Deep_Water_discoveries/92d4a.aspxhttp://www.findingpetroleum.com/event/FPSOs_the_go_to_development_technology_for_Deep_Water_discoveries/92d4a.aspxhttp://www.findingpetroleum.com/event/FPSOs_the_go_to_development_technology_for_Deep_Water_discoveries/92d4a.aspxhttp://www.findingpetroleum.com/event/FPSOs_the_go_to_development_technology_for_Deep_Water_discoveries/92d4a.aspxhttp://www.findingpetroleum.com/event/Exploiting_deep_water_fields/bed90.aspxhttp://www.findingpetroleum.com/event/Exploiting_deep_water_fields/bed90.aspxhttp://www.findingpetroleum.com/event/Exploiting_deep_water_fields/bed90.aspxhttp://www.tankeroperator.com/BusinessOpportunitiesFPSOReport.aspxhttp://www.tankeroperator.com/BusinessOpportunitiesFPSOReport.aspxhttp://www.imastudies.com/id325.htmhttp://www.imastudies.com/id325.htmhttp://www.imastudies.com/id325.htmhttp://www.imastudies.com/id325.htmhttp://www.tankeroperator.com/BusinessOpportunitiesFPSOReport.aspxhttp://www.findingpetroleum.com/event/Exploiting_deep_water_fields/bed90.aspxhttp://www.findingpetroleum.com/event/FPSOs_the_go_to_development_technology_for_Deep_Water_discoveries/92d4a.aspxhttp://www.findingpetroleum.com/event/FPSOs_the_go_to_development_technology_for_Deep_Water_discoveries/92d4a.aspx


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Brazil dominates actual orders for production floaters, with 28 units, or 38 percent ofthe backlog, being constructed for use offshore Brazil. These statistics demonstratethe clear dominance of FPSOs, if anything showing an increasing trend fromthosereported a couple of years agoby Christopher M. Barton, who reviewing 209developments over a longer period, noted that FPSOs were the preferred choice in

61% of cases whereas spars and TLPs together were 20%, the balance being madeup by production semi-submersibles.

AMI further reports that the number of floating production projects planned worldwidecontinues to grow, with 233 projects planned as of July 2012, up from 196 projects inJuly 2011 and the 122 projects planned five years ago. Brazil tops the list of nationswith planned floating production projects at 55, followed by Southeast Asia with 46projects and 44 planned projects in Africa, other major locations include: Gulf ofMexico 24 projects; Northwest Europe 17 projects; Australia 14 projects;Mediterranean 11 projects; Southwest Asia/India 9 projects.

IMA notes that while the number of planned floating production projects continues togrow, not all of the projects will materialize as actual orders as some discoveriesprove non-commercial to develop or others are nominated as tiebacks or jointdevelopments.

The reasons for this FPSO dominance are not a matter of technology all thetechnologies are basically proven but ultimately a matter of economics. The keydrivers for establishing the type and shape - and ultimately the cost - of a floatingproduction platform include:

Reservoir and petroleum what is the geometry and connectivity; what arethe likely recoverable reserves; what are the rock properties; what are thefluid properties; what is the depth below mud line; is their any salt? These inturn drive choice of:

Drilling & completions strategy: well count, well locations; flow assurance;intervention strategy; dry versus wet trees; leading to a production profile.

Water depth, metocean conditions and distance from shore determine issuessuch as the type of riser; station keeping; whether a pipeline is feasible?

It is straightforward to demonstrate that FPSO option more often than not leads to aneconomically advantaged development, and easy to demonstrate that a really rapid

FPSO development is even more economic.

Delivering the desired, promised, outcome on cost, on time, on target is howeverboth difficult and rare.

View more quality content fromFinding Petroleum
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black gold trading. Both commodities declined in the week to 13 September. Lightcrude then rebounded and erased over 60% of its decline - but gold extended itsdecline, dropping to a five-week low. When we reverse this video, we get a print forthe likely gold-oil trend to end-September, noting the recent decline in crude oil wassmaller than the previous one, suggesting an upcoming larger decline this time.

To be sure, the US Fed's climb down and reversal of policy was an epic policy shift -underlining the real weakness of the USA's long-hailed but never delivered economicrecovery, the weakest in decades now mirrored by Europe's hailed, but neverappeared 'soft recovery'. Outline data from oil demand trackers in Europe, includingPlatts shows the continent's hard decline of oil demand, the long term trend ofshrinking oil demand in place since 2006, is still in place.

Demand-side drivers of oil price decline are so many they almost do not need listing.Like the US Fed which found out that QE is similar to a stay at the Hotel California -you can check out when you like but you can never leave - oil demand contraction is

a long term process in a widening number of developed nations. These start with theEU countries, Japan and Australia, and now include a budding trend in surprisecandidate countries like India, Brazil and China. Oil demand contraction can onlymean lower oil prices - at least for anybody who unfashionably, perhaps, continuesto believe that falling demand means lower prices.

Even the Syrian war - where the estimated 45 000 insurgent Islamic fighters arefunded by Saudi, Qatari, Kuwaiti, and Emirati petrodollars - means the Gulf stateshave to keep pumping oil! Any sudden decline in Mid East oil production would becatastrophic, to be sure, but the Sunni Gulf states will have to keep pumping to payfor their grandiose 'geopolitical adventure' in Syria. Russia and Iran will be certain topick up any customers they can't supply.

View more quality content fromAMK CONSULT
http://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspxhttp://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspxhttp://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspx


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Discontinuity ahead -oil limits will adverselyaffect the economy

Written by Gail Tverberg fromOur Finite World

What will the world economy be like ten years from now? Or fifty years from now? Isit something that we can forecast by looking at the past, assuming that past tendswill continue?

Figure 1

Most economists today seem to think we can rely heavily on past patterns. If we canreally assume that the economy will grow at 3% per year (over and aboveinflationary increases), then in 50 years, GDP (Gross Domestic Product) will be 4.38times as high as it is today. Economists might assume a 3.0% growth rate in a

developed country, like the US, and a higher annual growth rate in a country likeChina, India or Brazil.

It seems to me that this standard view is incorrect. There is a substantial chance of asudden shift toward a less favorable growth pattern (which I refer to as adiscontinuity). This possibility is not obvious though, if a person bases his modelson the growth that took place between 1940 and 2000, as economists today oftenseem to. In this post, I describe an alternate view showing how such discontinuitiescan occur.
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The Current (or Recent Past) Standard View of the Economy

Most economists today seem to believe a whole collection of theories and modelsthat basically support the view that humans (and in particular, politicians and FederalReserve Officials) are in charge of the economy. With this view, natural resources

are not very important. If there is a shortage, either (a) alternatives will take overquickly or (b) prices will rise for a short time, leading to more extraction, therebyeliminating the shortage.

Productivity is expected generally to trend upward. In other words, the expectation isthat there will be increasing output per unit of input. Part of this increase in outputcomes from improvement in technology. This improvement in productivity isexpected to lead to increased profits for companies and higher wages for workers.

If the economy is not performing optimally, demand (that is, the ability andwillingness to buy more stuff) can be increased through deficit spending or by very

low interest rates, or both. For example, deficit spending might be used to give aworker who has been laid off unemployment benefits, so he can buy food, clothing,and other goods and services. (Without money, the laid-off worker has no demand,according to the standard economic definition.) Very low interest rates tend to makea new car or new home more affordable, or might allow an oil and gas producer todrill more wells inexpensively.

Debt, or leverage as it is often called, seems to be seen as beneficial. Debt is seento being able to increase indefinitely. The primary measure of how the economy isfunctioning, GDP, completely ignores debt. For example, if a person goes to collegefor a year, tuition will be part of GDP, whether or not the individual takes out a loan topay tuition, room, and board. If the college builds a football stadium, the amount paidto the contractors for building the stadium is part of GDP, but the loan the collegetakes out to finance the stadium is not considered in the calculation.

Needless to say, if politicians want to increase GDP, the easiest way to do so is toencourage everyone to max out all their credit cards, or do the equivalent withother types of loans. Of course, doing this in the early 2000s helped lead to thesubprime debt bubblenot exactly the effect one wants.

With the foregoing view of the economy, economists can talk about substituting one

energy source for another over a very long time frame. The reason economists canthink in these very long time frames is because the economy is seen to always begrowing, thanks to productivity growth, more human laborers, technology growth,and occasional stimulus, if needed. In this model, there is nothing to challenge thegrowth of the economy, so no turning points are anticipated. Thus, we can undertakevery long projects, such as trying to swap low-carbon energy sources for otherenergy sources.

Discontinuity: Why might economic growth misbehave going forward?

We are aware of many situations in the physical world where there is a sudden

change of behavior. We pull on a rubber band for a while. At first it stretches; then itbreaks. We skate on thin ice for a while. At first the skating goes fine; then we fall


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through the ice, into the water. We throw a ball up in the air. It rises for a while; thenit stops and falls back to the ground.

Another example is a little closer to the economic growth model we are looking athere. Yeast transforms sugars in grape juice into alcohol. Alcohol is in fact a waste

product, made by the yeast, as it metabolizes the sugar. At some point,theconcentration of alcohol in the wine becomes too high for the yeast to survive, andthe yeast die off. Growth of yeast population, instead of continuing to rise rapidly,suddenly turns negative and the population falls to zero.

In a model such as the wine and yeast model, it is not until the pollution levelbecomes too high that the adverse effects are seen. We can encounter somewhat ofa similar problem with our economy, with pollution of various kinds.

A similar turning point can appear with resource extraction of various kinds, such asoil. When we begin extracting resources, the cost of extracting those resources is not

very high. In fact, the cost of extracting the resource may even fall, with greater useof fossil fuels and improved technology. This growing productivity enables a risingstandard of living.

At some point, however, the cost of extraction begins to rise, because the easy-to-extract resource (such as oil) has already been extracted. This higher cost ofextraction may set up negative feedback loops, throughout the economy. This occurspartly because resources must be diverted toward oil extraction, rather than beingused for other productive purposes. From the point of view of the worker, he finds itnecessary to lower his standard of living, because he spends more of his totalincome on the same (or a lesser amount) of oil, leaving less income for otherpurchases.

The original factors of production were land, labor and capital. This simplified modeldid not consider natural resources, or pollution caused in extracting and using thenatural resources, or the role of debt. It also did not consider the fact that we live in afinite world, so that even if growth can go on for a while, there are likely to be barriersat some point. If the economic model economists are using misses importantvariables, it is easy for the model to miss problems that havent come up to date, butcan be expected to come up in the future. The model may have, in fact, worked wellin the 1940 to 2000 period, because resource limits did not start raising resource

prices significantly until after the year 2000.

A related issue is that if economists are overly convinced that their models arecorrect, they may miss seeing important trends that suggest their models areincomplete.
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Figure 2. US Ten Year Average Real GDP growth, based on BEA data.

If we look at the trend line related to US GDP growth (Figure 2), we see that there isa decided downward trend to it. While an estimate of 3% per year going forwardmight have made sense based on the experience through 2000, this estimate seemsincreasingly less likely, based on recent experience. In fact, if experience since 2010were included, it would further emphasize the downward trend. TheIMF projectsthatUS economic growth in 2013 will amount to 1.7%, and for advanced economiestogether will amount to 1.2%.

Besides slower than expected economic growth, there are many other parts of thetheory that are not holding up very well now, either. Wages of the common workerhave not been rising as planned. Oil prices have not come down, even withconsiderable success in US oil production. The Federal Reserve has needed to keepinterest rates very low, and even with that, the economy is limping along. TheFederal Reserve keeps printing money. In fact, it announced today that it is

continuing its Quantitative Easingat $85 billion a month, because the economy is notyet doing well enough to get along without it.

What is Missing in Economic Models

What is missing is a broader view of how the economy really works. The economy isfar more than land, labor, and capital. The economy includes a huge number ofplayersgovernments, businesses, and individuals, each deciding what action totake based on how the system behaves at a given timefor example, what productsand services are available at a given time, at what prices. Resources of manydifferent types play a role in this system, as does pollution, and the cost of mitigating

this pollution. This complex economy has been built up over the years, by thegradual addition of new layers of businesses, governments, government rules, and
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consumers. Unneeded older parts drop out, as new parts are added. A system suchas this is sometimes referred to as aComplex Adaptive System.

There are two parts of this system that play a special role. One part is energyproducts that are needed to make anything happen. These energy products are of

many different types, including oil, natural gas, coal, geothermal energy, capturedwind energy, even food. For example, if goods are to be transported, some sort ofenergy product is needed. It might be oil used to fuel a car or truck. Or it might befood fed to a horse pulling a cart. It might even be food fed to a human being, who isthen able to carry the goods as he walks.

As another example, if heat is to used for some process such as baking, someenergy product is required. It might be heat from burning oil or coal, or it might beheat from the sun captured by asolar cooker. Energy for heat might even come fromfood. For example, a chicken, after eating appropriate food, is able to sit on an eggand provide heat to incubate it.

Another critical part of the system, besides energy resources, is the financial system.The financial system ties everything else together through its pricing mechanism. Byknowing prices, we can tell how society values many very different types ofresources and products (such as a bushel of wheat, a barrel of oil, and an hour of acommon laborers time). Because of its tie to all of the other resources, the financialsystem is likely to be one of the systems that is stressed earliest, if there is a majorchange to the system.

Besides tying the system together, money produced by the financial system alsoacts a pseudo resource. It is not the money itself that has valueit is the fact that itcan be exchanged for a resource of real value, such as a bushel of wheat, a barrel ofoil, or an hour of a common laborers time. When the amount of resources is notexpanding rapidly, printing money can temporarily inject pseudo resources into thesystem, making things temporarily look better than they are. Of course, when thismoney printing stops, the temporary improvement is likely to disappear.

Oil Has Caused Recent Stresses to the Financial System

When recession hits, the financial system gives a hint that this networked system ofbusinesses, governments, consumers, and resources is being stressed. What

causes this stress on the financial system? Recently, evidence seems to suggestthat rising oil pricesare a major contributor. For one thing, economist JamesHamilton has shown that 10 out of the last 11 US recessions were associated with oilprice spikes. He has also directly shown thatthe oil price in the run-up in the 2005-2008 period was sufficient to explain the Great Recession. I have also written anacademic article called,Oil Supply Limits and the Continuing Financial Crisis.

Oil is part of the constellation of energy resources that allows things to happen withinthis complex networked system. It is not easy to substitute away from oil in the shortterm, because the cost of the vehicles and other equipment that we have today isextremely high. If we were to transition to other types of vehicles (say natural gas

operated or electric), the cost of building new fueling stations and vehicles would bevery high, and take many years. Customers would also find the new vehicles
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unaffordable, unless the old ones could be phased out as they wore out.

What Can Go Wrong In This More Complex System?

The problem with this more complex system is that everything depends on

everything else. Things that seem obvious, such as how much oil reserves acompany can expect to extract in the future, no longer are obvious, because theprices of resources can go down as well as up. This happens because prices ofresources depend upon (a) the amount buyers can afford to pay for these resources,as well as (b) how much it costs to extract the resources. If the cost of extractingresources increases, the question is whether workers will really be able to afford thecost of higher-priced resources.

There can also be conflict between the amount of debt outstanding and the amountof products (made from resources) available to repay that debt. There is no limit ondebt issued, but the amount of resources extracted in a given year eventually slows

down, as the inexpensive to extract resources are depleted.

Interest rates on debt are important as well. If interest rates remain very low, interestpayments do not squeeze prospective buyers of goods too much, so they canafford additional goods. But if interest rates rise, then the financial situation changesat many points in the system. The cost of buying homes and cars increases. Theresale value of homes likely drops.

Another issue with the networked system that we are operating in is that shortages inone area tend to get transferred to other parts of the system, stressing the system asa whole. For example, when we discovered a few years ago that oil supply could notgrow as rapidly as desired, we started using food crops (primarily corn and sugar) toproduce ethanol, as a substitute for oil. When we did that, the additional demand forfood tended to raise food prices. Thus the stresses from one part of the system werespread more broadly. This can be a temporary help to oil prices, but it can eventuallylead to widespread system failure.

Because of the interlinkages in the system, we should not be surprised if what lookslike a problem in one part of the systemhigh oil priceshas an adverse impact onother parts of the system. The financial system, since it connects everything elsetogether, would be especially likely to be stressed. Governments, because they act

as a safety system for unemployed workers, would also seem to be at risk.

We have many real-life examples of civilizations that grew for a time, then reachedlimits and collapsed. These civilizations were agricultural civilizations, so admittedlynot exactly like ours. But the symptoms prior to collapse were disturbingly similar tothe symptoms we are seeing today. As I have discussed previously, there was agrowing disparity of wagesbetween the common workers and the elite, andincreasing use of debt. Food prices often spiked. Eventually, it was the inability ofgovernments to collect enough taxes from increasingly impoverished workers thatbrought the system down. Workers also became more subject to disease, becauselow pay and high taxes did not allow for adequate nutrition. The collapse came over

a period of yearstypically 20 to 50 years.
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We dont know exactly what kind of discontinuity we are headed for, but we havesome clues, based on the risks we are facing and on what happened in the past. Thediscontinuity will likely play out over a period of years. Financial systems and politicalsystems are likely to be involved. Because of the networked nature of the system, itwill not be just one type of energy that will be in short supplymore likely, there will

be problems affecting nearly all types of energy.

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Illinois Basin's NewAlbany Shale: The next

big U.S. horizontal oilplay?

Written by Keith SchaeferfromOil & Gas Investments Bulletin

If you were on the hunt for the next big horizontal oil play in the U.S., where wouldyou be inclined to look?

Texas? That makes sense; Texas is the top oil producing state in the country.

California? That also makes sense, California has been a top oil producing state fordecades.

But Illinois? Well, would you believe it has produced 4 billion barrels already, and4Tcf (that would be Trillion cubic feet) of natural gas?

Its true. And now, there are rumblings of something very significant happening againin the Illinois oil patchrumblings of a big horizontal oil play.

Companies in the region are keeping their cards close to their vest, but there is
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enough information in the public domain to know that some oil companies think theIllinois Basins New Albany Shale could hold a sizable shale prize. In fact, Im verysurprised we havent heard a lot more about this basin yet.

History of the Illinois BasinIts Right Under the Industrys Nose

The Illinois Basin is an oval depression thats roughly 60,000 miles in the UnitedStates Mid-Continentsouthern Illinois, southwest Indiana and northwest Kentucky.

Drilling in the Illinois Basin goes back to 1853and like many things, it wasdiscovered accidentally; by drilling that was being done in a search for saltwater.(Early settlers needed saltwater for preserving food and agriculture.)

But it wasnt until the early 1900s that the first Illinois basin oil boom truly occurredwhen well casings were used to manage all the water. (Most retail investors have noidea how much water the oil industry producesitshuge.)

In the 1930s a second boom started when seismic technology became available andhelped to pinpoint oil pools.

This made oil a lot easier to find, and this oil boom lasted through the 1940s and1950s. Production peaked in 1940 at 147.6 million barrels.

After World War II, production rates fell because all of the easy targets had beendrilled. During the boom the Illinois basin was the third largest producing oil basin inthe United States.

Since then production has declined with no new oil targets to drill.

That historical production of 4 billion barrels of oil and 4 trillion cubic feet of natural


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gas was all done with vertical wells in old-style, conventional oil pools; not todaysshale or unconventional plays.

All that oil had to come from somewhere. Underneath all those conventional oil poolsis the New Albany Shaleand oil and source rock analysis indicates thats where

the oil came from. Given the success of all these other shale plays in the US undervery similar geology, those source rocks could provide a re-birth for oil production ina region that has been in decline for more than half a century.

The New Albany Shale Looks Just Like The Bakken

The New Albany Shale is Devonian age and was formed roughly 350 million yearsago in a shallow sea that once covered the eastern half of the United States.

The New Albany Shale was formed at the same time as four other major U.S. oilresource plays that include:

The Williston Basin / Bakken Shale The Anadarko Basin / Woodford Shale The Appalachian Basin / Marcellus Shale The Michigan Basin / Antrim Shale

So it was deposited at the same time as some of the most prolific source rocks inNorth Americathats certainly a great pedigree! If the other source rocks haveborne major horizontal resource plays why wouldnt the New Albany Shale?

A 2002studyestimated that the New Albany Shale was deep enough to havegenerated up to 300 billion barrels of oilthats what the industry calls OOIPOriginal Oil In Place.

With that much oil in place, the New Albany shale has the potential to be anotherbigvery bighorizontal oil playeven if only a small percentage can be recovered.
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That conventional production has comefrom 140,000 wells that were drilled intothe Illinois Basin. 32,000 of those wells arestill producing! The drilling and productionfrom these wells have allowed oil

companies sniffing around the New AlbanyShale to gather a lot of evidence. Theindustry calls that well control.

What these companies and theirgeologists have found has beenencouraging as it has led them to concludethat the best analog for the New AlbanyShale appears to be the Elm CouleeBakken of Montanawhich has produced123 million barrels of oil from horizontalwells so far.

The New Albany and Elm Coulee aresimilar in age, porosity and size. No twoshale plays are exactly alike, but there isgood reason to believe that a shortlearning curve with horizontal wells couldmove the New Albany Shale from being apotential shale oil play to the real deal.

How The Play Gets Proved Up

The New Albany Shale is developing the same as the Bakken, Eagle Ford and otherhorizontal plays.


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First you find a basin that has produced a lot of oil already. Step two: identifythesource rock that still contains huge quantities of oil; usually a bit deeper. Stepthree then is to crack the geological nut and figure out how to get enough of thathuge amount of oil left in those source rocks out at profitable ratesthat requiresfracking.

Step one and step two are already complete for the New Albany Shale. How closewe are to step three is hard to tell.

The companies operating in the region have drilled a few wells, but the results havebeen kept very quiet to date.

Companies dont promote bad results, and good results are kept even quieter sinceletting that information would immediately drive acreage prices through the roof.

What we know for sure is that the oil is in the ground in the New Albany Shale.

Decades of conventional production tells us that.

What we also know is that enormous tracts of land have been leased over the pastcouple of years in the basin and we know that prices per acre have already at leastquintupled over that time.

Someone wants to lock down that land.

Horizontal drilling combined with multi-stage fracturing may again be the miracle thatreleases the oil trapped in the New Albany Shale.

The potential of this play is exciting, and still quite early stage. And I just found theone junior explorer that has some incredible leverage to this new play.

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Who are the foreign oil& gas companies in USshale plays?

Written by Mark Young fromEvaluate Energy

Over the past few years,M&Aheadlines have been dominated by foreign companiesacquiring US shale acreage positions. How has this affected the overall landscape ofthe industry, and which countries, other than the US, exert the greatest influence

over it?

Source:Evaluate EnergyShale Play Database

It is clear that European companies have a great influence on the industry. A veryhigh percentage of the foreign owned lands are split between three companies,powerhouses of global oil and gas: BP, Royal Dutch Shell and Norways Statoil. BGGroup, French major Total and Itailan giant ENI also have interests, but it is theaforementioned group that have made the most significant mark. The other point tonote here is that a high majority of these positions are operated, so their control overtheir acreage is higher. This is something you will not find with the majority of otherforeign investors, who have mainly moved into non-operated positions to gainexperience for their own domestic ambitionssomething Polands PKN Orlen isattempting to achieve inCanadawith itsacquisition of TriOil Resources.

If we now remove the European contingent from the results, we can get a clearer
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picture of the other companies from other countries that have entered the industry.


The high profile, multi-billion dollardealsthat have been struck over the past 18-24months with Chinese and Indian companies made big headlines, and will probablybe among the first things that come to mind when the topic of Foreign owners in USShale is brought up. However, the countries are not very prominent this chart as awhole, and in Chinas case, hardly on the left hand side at all, i.e. the five moreestablished, producing plays in the chart. It is in fact Canadian and, perhaps moresurprisingly, Australian companies that appear to hold the greater influence, andcover a greater spread of the plays on offer.

China, mainly via CNOOC and Sinopec, does have large positions in the moreundeveloped plays, Niobrara, Tuscaloosa Marine and the Utica, but of theestablished plays, it only has a position in the Eagle Ford. Perhaps having arrived abit late into proceedings, the goal for China is to be there at the beginning when thenext big oil play really takes off. India, via four of its own bigger companies (GAIL,Indian Oil Corp, Reliance and Oil India), holds a combined medium-sized position in

the Marcellus and Eagle Ford, but in the whole picture displayed by the above chart,Indian companies acreage holdings are small.

Australian companies have positioned themselves almost exclusively where theproduction is, the plays on the left hand side of the chart. Of course, as the Top 10table below shows, a large proportion of this is made up by BHP Billiton alone.However, it is the other Australian companies that are really interesting, as they area bit different to your typical non-American shale acreage owner, making Australiaa very unique entity in this study.

The Australian companies involved, with the exception of BHP Billiton, are much

smaller than the other companies in the study, and the motivation is solely to boostprofit margins. China and India, for example, are both represented by their biggest
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and arguably more famous companies and there are only a few of them withreasonably large positions (see Top 10 table below). Australia is represented by agrand total of eight companies other than BHP. Six of these are present in the EagleFord, holding roughly 16% of Australian-controlled acreage in the play (~64,000acres), and only one Aurora has a market cap of over US$1 billion, standing the

countries representatives in stark contrast to their Chinese and Indian counterparts.


This report was created usingEvaluate Energys North American shale playdatabase. The shale play database has a comprehensive list of publicly availablecompany acreage holdings, capex budgets, drilling plans and average well costs, aswell as play-related metrics such as production per day and undeveloped land cost

per acre.Evaluate Energyprovides clients with efficient data solutions tooil and gascompany analysis, with its 20+ years offinancial and operating data, and its
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extensiveM&Aand global assets databases.

Notes:

1) The plays included in this study are the Bakken (US), Eagle Ford, Fayetteville,

Haynesville, Marcellus, NIobrara, Tuscaloosa Marine (TMS) and Utica (US). TheBarnett in Texas has not been included, foreign ownership is not high here, andTotal, one of the major foreign players, do not report their acreage position.

2) BP does not report Haynesville acreage, despite having a position in the play.

View more quality content fromEvaluate Energy

Foreign investors shun

Iraq's emerging civilwar

Written by Andrew McKillop fromAMK CONSULT

WIDENING GAPS IN THE OFFICIAL STORY

Iraq's oil and gas potential has been vaunted from the run-up stage to the 2003 war,a war justified or rationalized by Colin Powell's false claims at the UN SecurityCouncil that the country had 'huge stocks' of chemical and biological weapons ofmass destruction. The IEA continues to vaunt Iraq's oil potential as 'OPEC's comingstar', making it a transmitter of upbeat news concocted at Iraq's all-powerful andsecretive MOO or Ministry of Oil, headed by Abdul Krim Luaibi.Today, Iraq suffers from a critical shortage of gas, and therefore electricityproduction. This is due to lack of investment in gas resource development andinfrastructures. Power shortages are themselves also curbing the economy andforeign investment. Iraq desperately needs a huge increase in gas production to fuelpower plants - but like investment in oil, that may not be forthcoming.

Newswires regularly post encouraging news on Iraqi oil, for example Iraq's rising
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rank inside OPEC for oil output. On Dec 28, 2012, Bloomberg reported it jumped twoplaces to No. 2 in OPEC rankings for 2012 - because sanctions-hit neighboring Iranhad dropped three spots to fifth pace. Iraq's rank was also helped by third-placedVenezuela's oil output continuing to decline - as it has, on and off since 1999 for a25% decline in national output over 12 years.

In 2012 Iraq's oil output rose 24% on 2011 to an approximate year-average 3.2 Mbd(million barrels a day), but its chance of repeating the trick for 2013 is zero. Thegrowth of Iraqi output was almost solely due to rising supply from the BP-led Rumailaconsortium operating in southern Iraq, the region producing 67% or more of Iraq'stotal output. Unless Iraq can sweep in more foreign investor funds, and settle risingdisputes and standoffs with the major companies operating in Iraq - and in Kurdistanwith the KRG or Kurdistan Regional Government - 2013 exports will be down on2012.

UNSURE AND UNCERTAIN

The reliability of Iraqi exports is not only at risk due to Iraq's federal centralgovernment in Baghdad refusing to agree to KRG terms on oil revenue and contractissues. The majors, who now ignore Baghdad's strictures on either dealing with orrecognizing the KRG, have firmly reacted to the MOO's attempts to force them tofocus Iraq's southern fields and mount costly exploration programs in 'new andunexplored areas'. Iraq's fourth and largest energy auction since 2003, in May 2012,which was intended to add nearly 1 trillion cubic metres of natural gas and 10 billionbarrels of oil to its huge reserves, flopped in major part due to the MOO writing-inconditions forbidding any deals between the majors and the KRG. The auction'sfinancial terms for company netbacks were also rejected.

Eight 'mega blocks' received no bids at all because none of the 39 approved bidders,including Royal Dutch Shell, BP, Exxon Mobil, Total, Lukoil and Chevron acceptedBaghdad's terms. Apart from the KRG issue, which will not go away, and Iraq'sheavily deteriorated oil infrastructures which need very heavy investment spending,oil executives, off the record, called the MOO's terms on their netback fromproduction 'insanely greedy'. The MOO had set a netback of $5.38-$6.24 per barrelproduced.

Most recently in August 2013, the MOO has re-focused its ire on Shell, blaming the

Anglo-Dutch energy giant for a claimed loss of about 45 million barrels or $4.6 billiondue to under-production, because Shell 'wilfully under-maintained' its infrastructuresat the Majnoon field it operates with Malaysia's Petronas. It also accused Shell of'wilfully under-investing' in this struggling but giant field - with giant spending needsfor rehabilitation and upgrade. Exxon Mobil, at the neighboring regional West Qurna-1 field, has made it plain it wants to abandon the field and sell out, in part due to thecorporation signing a six-block deal with the KRG in October 2011 that incensed theMOO, and poisoned relations with Exxon Mobil.

In a statement e-mailed to AFP following the August 2013 dispute, Shell spokesmanDiego Perez said he could confirm the very poor state of field infrastructures which

'indicated the need for major additional work", explaining the loss of production. Hewent on to state the usually-unmentioned major fear of employee security in Iraq's


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continuing civil war, saying: "The safety of our people and assets remain our toppriority in Iraq'.

CIVIL WAR THREAT

Most foreign oil executives inside Iraq, and oil commentators say that the explosivecocktail of Iraq's unpredictable or 'freewheeling' politics, extreme and intensifyingsecurity concerns in nearly all urban areas, and often outside them, and Baghdad'speremptory rejection of oil company financial demands make it nigh-on impossible torebuild and expand its all-important energy industry. Iraq's economic dependence onoil and gas is however almost total.

According to the UN, in May and June Iraq suffered its highest rate of violent deathssince the so-called 'civil war' of 2007-2008. Many observers say the country is'standing on the edge of an existential precipice'. In 2013, the monthly death toll hasoften attained 1000 and injuries 5 times that.

As previously, the threat is renewed Sunni Salafist car bombing and assassination ofShia Muslims, attacks on Shia mosques and politicians, and bombings of Shia shopsand commerces. In 2007-08, the US Army's "surge'' and a relentless Special Forcescampaign of targeted killings gutted the Iraqi al-Qaeda movement. The militaryaction had an essentially political goal - attack and destroy the 'mid level ranks' of al-Qaeda, limit the insurgents' ability to move in southern Iraq - but did not include apost-struggle 'hearts and minds' campaign, except in highly rudimentary form. WithUS troops gone and facing an Iraqi government that outside the MOO displays afatal combination of incompetence, corruption, under-manning and under-financing,the 'surge' has reversed. The former AQI has been succeeded and replaced by theIslamic State of Iraq and al Sham (ISIS), also operating in Syria and Egypt. After theSyrian war, ISIS forces returning to Iraq could number 45 000 or more.

ISIS and its affiliates want a full scale civil war. Their sustaining objective isunambiguous -- foster a cauldron of chaos breaking down the already-weak anddivided federal government, detaching Iraqis into base-level sectarian alliances, thencreate a shariah-law caliphate.

Sunni extremists, similar to the Muslim Brotherhood in Egypt supporting oustedpresident Morsi can claim that they have been robbed of legitimate power. In the

2010 parliamentary elections, the Sunni-dominated Iraq National Movement of IyadAllawi won most seats, but Shia prime minister Nouri al-Maliki refused to accept theoutcome. Instead, he promised a national unity government with Allawi, and thenreneged on that offer following irreconcilable disputes on oil revenue sharing, as wellas regional sovereignty and the KRG crisis.

Since then, al-Maliki's armed forces have on several occassions directly massacredSunni protestors, as well as promoting or utilising Shia militias and terrorists in tit-for-tat attacks on Sunni communities, mosques, shops and commerces. For foreign oilcompanies, personnel security concerns and costs can only remain high. The oftenirrational decisions, and aggressive actions of the al-Maliki power group, who cannot

be called a 'government', are inevitably most extreme in the oil and gas sector.


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In 2013, its grandiose plan to become one of the world's most powerful natural gasproducers, at a time when there's an increasing global gas glut and prices can onlyerode, signals how far out of line with reality the power clique in Baghdad has drifted.Currently, the country is unable even to produce enough gas to run its domesticpower plants. Electricity rationing on an episodic and unpredictable basis is the rule

in all major urban centers.

THE LIBYA MODEL

Libya's oil production increased even faster than Iraq's in 2012, more than doublingfrom its low point during the NATO war of 2011, as operators including Total and Enireturned to the North African Arab nation after the removal of dictator MuammarGaddafi. This was however not sustainable. The same war unleashed widespreadand continuing Sunni-Salafist extremist insurgency. Libyan oil output fell about 70%in the first 7 months of 2013 to about 0.66 Mbd, close to its wartime low, according tooil minister Abdelbari al-Arusi in a Reuters interview of 27 August.

Highly ironically, due to the Libyan and Iraqi situation, Iran is now seen by risingnumbers of analysts and strategists as the 'new hope' for boosting world oil supply -despite global output, using IEA data, increasing 2.7% in 2012-2013 compared witha global demand increase of less than 1.25%. The major fear causing the hunt fornew output or replacement capacity to cover Iraqi and Libyan risk, is that Iraq'sexport surplus will suddenly fall, and its total output will also shrink, like Libya's, dueto a fatal combination of negative factors intensified by anarchy and civil war.

Iran's output has been in decline since the end of 2008, Bloomberg data shows, andhas accelerated this year as US and EU sanctions were tightened, aimed at curbingthe Islamic republic's nuclear program. Due to far greater social cohesion andpolitical stability in Iran, however, an end to sanctions will rapidly trigger the return offoreign oil majors, unveiling the prospect of Iran's total oil output growing at asustained rate. The extent to which this can cover Iraqi and Libyan risk is presentlydifficult to gauge, but the need for alternate and secure global oil capacity is clearlygrowing.

The message that Iraq is now more than ever 'risk-on' seems unknown to the al-Maliki power group or clique presently and shakily wielding federal power inBaghdad. The federal government is however under fast-rising pressure from

insurgents, and a highly successful political standoff by the KRG, meaning that thepotential for Iraq rapidly ceasing to be 'OPEC's coming star', and falling in OPECoutput rankings can only be high.

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Insight: Managinghealth in the oil andgas sector

Written by Angela Whitehead fromPetroMall

Effective management strategy takes account of all possible risk factors, usesapplicable systems to rate hazards and any associated risks, then developsstrategies to eliminate, minimise and manage the processes.

Dealing with health, requires exactly the same diligence. In potentially high riskenvironments managing the overall health of all individuals needs to be addressed ina clear simple fashion. Individuals working in remote locations which can be subjectto acute climate change and are often required to make critical decisions affectinghealth and safety need to be operating at an optimum level of personal performance.More than any other issue affecting staff this requires guidance from occupationalhealth professionals' very clear parameters and the engagement of the wholeworkforce.

Health at work, does it matter?

Global Health in 2013

As we move forward into the 21st century is there really any need to have a specificfocus on health in the working environment? It is being suggested that children bornin the new millennium may live until they are one hundred and that the standard ofhealth they achieve will exceed anything we consider normal today. Access to qualityhealth care globally is generally increasing and information on how to maintainpersonal health is readily available.

This may well be the case however the hard reality of health statistics available showthat there are still considerable issues to be dealt with. Using global data from theWorld Health Organisation (WHO)1 it is clear there remains a significant burden of illhealth affecting every economy. This does vary and in some regions of the worldmalaria and infectious diseases are still key causes of death, in other areas mortalityis linked closely to conditions associated with lifestyle factors, such as diabetes,heart disease and some cancers.

WHO2 also tracks the health of children and young adults and since the early 1990'sa significant increase has been noted in a range of disorders in this group, includingasthma, diabetes and eczema.

The cost to any national budget of providing even basic health care for individuals
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continues to increase rapidly, not only due to population numbers growing but alsothe sophistication and range of treatments available. It is becoming evident that agrowing proportion of ill health can be directly linked to personal lifestyle factors. Oneof the most pertinent preventable issues is obesity, which is linked to cancer,diabetes, heart and lung disease. Smoking is also still a problem and while it can

directly cause lung disease and cancer is also implicated in cardiac disorders.

Obesity is also rapidly becoming a major concern for many countries. In the USAalmost 40% of the nation can be classed as officially overweight. A recent survey inthe UK noted that up to 30% of children under 16 are overweight.3 What affects thewhole population will be reflected in the working population.

In the maritime environment the number of places in lifeboats is requiring adjustmentdue to the increase in size and weight of people who may need to use them.

Some emergency escape craft may not be viable as the entrance space is not large

enough to allow obese people to enter.

Relevance to business

Organisations in a competitive work environment look to making employment withthem an attractive option, in some countries this includes direct funding, or at least adegree of financial cover for health care for individual and family. There are also themore usual "attractions" of company cars, bonus payments and a host of otherbenefits.

It seems obvious to state that business recruits from the adult population and formany sectors of industry some degree of fitness for task may be required. Oncerecruited staff will require varying degrees of training and then many will enter intosome form of on-going programme to keep skills up to date. In today's flexibly worksituation it is entirely possible staff who are valued may well add additionalqualifications with company sponsorship.

Despite modern technology it is often stated that the real knowledge base of anorganisation is in the minds of its employees, not computer databases.

This comes at a significant cost, for many large organisations staff can often be the

largest budget consideration.

Preventative maintenance of industrial plant and systems is an integral part ofbusiness planning. In this cyber age this also includes sophisticated storagetechniques and fire walls" to prevent attacks by computer viruses which couldpotentially bring a company to a standstill.

It would seem relevant then to look at considering preventative maintenance forindividuals, personal virus prevention, therefore supporting the health of staff whoare such a key part of any organisation.


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Managing health and wellbeing in the work environment

It is important to state that effectively managing health at work is not intended to be areplacement of any national, or country health service already available for staff.

It is based on considering what is required to support staff in carrying out their day today duties, assisting them in maintaining and improving their existing health so theyare performing at an effective level.

It is already clear that while health care is becoming a very sophisticated service notall diseases or conditions can be "cured". Despite the real advances in technologymore young people entering the workplace will have some form of health condition tomanage and more mature staff can be at risk from developing a range of age relatedconcerns.

However many of these issues are now managed on a long term basis in a more

active fashion, individuals work with specialists as a team to take control of theirhealth in more positive, interactive way allowing them to maximise their capabilitiesand remain at work.

As the birth rate decreases and retirement age increases businesses will need to beable to work with larger numbers of individuals with some form of health concern.While this may appear to be a challenge the changing nature of work in themillennium can make this much more achievable.

The changes to technology and ability to connect by phone and computer, virtuallyglobally, means there is far less need for many individuals to be based in onelocation to work effectively. The challenge for business is to be able to look at newways of working perhaps based round flexible hubs where staff congregate on a"need to" basis. A higher degree of personal control over work hours will often allowstaff with health issues manage their conditions more effectively and interact withhospitals and doctors with minimum disruption. It is also suggested that for all staffmore flexibility decreases potential stressors and may increase productivity.

This is not suitable for all roles, there will always be a need for some staff to be in agiven place for a set number of hours.A more proactive position is to consider using the work location to promote good

health, working adults spend a minimum of a third of their life in the workplace.

This can be done at varying levels of commitment, simply by providing health eatingoptions and encouraging staff to be more active is a basic starter. Largerorganisations may support or provide gym membership and individual healthassessments with follow up plans to manage negative lifestyle issues. Remote, orinhospitable locations can have fitness equipment in place with video link trainingcourses.

Building a strategy for health

Many businesses who have clear management plans for finance, human resources,business engagement etc. etc. have difficulty in assessing what their health strategy


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should be.

It is important that the leadership team is involved in this process, have someunderstanding of what is required and that a senior leader is closely involved. Forany lasting success the final outcome should be discussed with and have agreement

at board level.

In some instances planning for safety is considered to also incorporate the plan forhealth. Safety is, of course, a paramount concern but health needs to be assessedon its own merits. This could lead to an overarching plan for managing health andsafety with different streams, inputs and outputs as required.

The size of the organisation will be a factor, for some the process may take a fewdays with some minimal expert external assistance, in other situations this will be alarge undertaking, using internal health staff, or a team of external specialists.

First steps follow the time honoured process of risk assessment, the who, what, why,when and where.

To put it very simplistically:

WHO: is in employment, age ranges, abilities, fit for task? WHAT: are employees doing, the range and nature of tasks? What legal

framework will need to be complied with, health specific? What data do youneed to record, where & how do you store it.

WHY: time to sense check the basic operating process, is there a need forlarge office complexes, is there room for review?

WHEN: is this a global operation communicating over time zones. Do youhave staff who work shifts?

WHERE: do you have staff working, remotely, globally, travelling?

NB. This is not an exhaustive list, merely brief guidance, a full risk assessmentprocess should be conducted by experienced individuals one of whom should have arelevant qualification in occupational health.

In health the "where" is often overlooked: it is relatively easy to access healthsupport in an urban environment, much less so in a remote location which may also

be additionally isolated by weather and local issues.

There will be legal matters to understand, many countries have codes of practice, oremployment laws with health implications which need to be complied with.

Some industries have their own codes of practice and guidelines which are acceptedinternationally. This can be extremely useful, however local interpretation can proveinteresting.

Often close discussion with varying departments may be needed, for example,human resources. Absence from work on a short or long term has an impact on

those staff remaining in the workplace and on the tasks they perform. In the shortterm this is likely to cause minor disruptio