Well Construction Journal - May/June 2014

The official publication of the Canadian Association of Drilling Engineers

MAY / JUNE 2014

PM#40020055

The bid to develop Chinas challenging shale reserves

On Solid GroundAlbertas new surface agreement registry splits the province

PLUSOil on Ice The Oilpatch Classic heads into its second decade

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www.cadecanada.com may/june 2014 3

The official publication of the Canadian Association of Drilling Engineers

DEPARTMENTS

4 PRESIDENTS MESSAGE

6 THE DRAWING BOARD Editors note, members corner, news and notes, technical luncheons

10 STUDENT PROFILES19 MEMBER PROFILE 24 BY THE NUMBERS26 DRILLING DEEPER

FEATURES

12 CHALLENGING SHALE Chinas bid to develop its shale reserves

17 LOOKING EAST Learning lessons from a Canadian company courting investment from China

20 PATENT PROTECTION An Edmonton company tackles patents in China

22 LAW OF THE LAND Albertas new private surface agreement registry splits the province

The mandate of the Canadian Association of Drilling Engineers is to provide high-quality technical meetings and to promote awareness on behalf of the drilling and well servicing industry. With more than 500 members from more than 300 companies, CADE represents a broad spectrum of experience in all areas of operations and technologies. Through CADE, members and the public can learn about the tech-nical challenges and the in-depth experience of our members that continue to drive the industry forward. For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry.

CANADIAN ASSOCIATION OF DRILLING ENGINEERS1100, 540 - 5 Avenue SWCalgary, AB T2P 0M2Phone: 403-532-0220Fax: 403-263-2722

www.cadecanada.com

PRESIDENT: Jeff ArvidsonPAST PRESIDENT: Robert Jackson

WELL CONSTRUCTION JOURNAL EDITOR: Christian Gillis

WELL CONSTRUCTION JOURNAL IS PUBLISHED FOR CADE BY VENTURE PUBLISHING INC.

10259 105 StreetEdmonton, AB T5J 1E3Phone: 780-990-0839Fax: 780-425-4921

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MAY/JUNE 2014

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Well Construction Journal 4 may/june 2014

HILE I HESITATE TO TOUCH ON THE MARKET access and public perception topic once again, it seems to be such a recurring theme in the news and industry discus-

sions that I feel it warrants further discussion.Many of us in the engineering field regularly

make decisions that require us to balance prior-ities. Whether the choice is between different fluid types, downhole tools or rig types, if you look over the full project there is no perfect choice. For example, if you choose an oil-based drilling fluid over a water-based one, it will likely provide you excellent inhibition and lubricity, but if you run into losses your costs will be much higher. If you dont experience losses, the drill cuttings will still need to be shipped to landfill for disposal (at an additional cost as well). I could provide a great number of examples here, but I think the majority of CADE members know exactly what Im talking about and deal with these types of decisions daily. I feel that the understanding of this reality is lacking in the general public, and its primarily the fault of the mainstream media and politicians.

Protestors against the oil sands in the U.S. often make the implicit suggestion that there exists some perfect transportation fuel, or at least a perfect form of oil. This ignores the fact that oil sands crude has only six per cent higher emissions, but comes from a country where the public owns the resource, workers are protected and well paid, and the environmental impacts of work are consid-ered and weighed against the economic benefits. Protestors make it sound as if there is a type of oil with Canadian-style worker and environmental protections, but zero emissions. In reality, most of the oil that would be displaced by increased Ca-nadian bitumen shipments would be from places without these protections, primarily Venezuela and Nigeria. They also ignore the fact that heavy crude from California has equal or higher emissions to Canadian bitumen. When one considers the true pros and cons of these options, the choice is clear. Canadian bitumen is a much better option.

Slightly higher emissions in the oil sands wouldnt make a real difference in total U.S. carbon dioxide emissions. Canada provides about 18 per cent of total U.S. crude imports and production. An increase of six per cent of the emissions on this vol-ume, applied to the 31-per-cent of emissions from transportation, means that switching all Canadian exports of oil to bitumen would increase CO2 emis-sions in the U.S. by one-third of a per cent. All the lobbying and efforts that are put forth to block oil sands pipelines seem to ignore this math. If the goal is truly to reduce carbon emissions in the U.S., the math shows the right way to do it: 38 per cent of emissions come from electrical generation, and 45 per cent of electricity generated in the U.S. is pow-ered by coal. Switching away from coal to natural gas provides a 53-per-cent reduction in emission per kWh, at similar cost and reliability. Overall, this could reduce U.S. emissions by nine per cent 27.5 times the potential maximum impact of additional bitumen imports.

Meanwhile, crude oil continues to be shipped by train in ever-increasing quantities. Again, if the Keystone XL pipeline protestors were sincere, they would be looking at approving the pipeline (to reduce emissions from transportation of crude), switching from coal to natural gas for electricity generation and switching personal and commercial vehicles to natural gas.

To summarize, the imperfect choices for our main customer are between: Canadian bitumen (and a six per cent increase in CO2 emissions), or bitumen from somewhere with lower environmen-tal standards and delivered by tanker; the most ad-vanced pipeline ever built (with the associated land disturbance), or delivery via rail with its associated risks and emissions; and expending huge amounts of time and energy fighting a pipeline that would have at most a marginal impact on emissions, or making the relatively painless switch to natural gas for electrical generation, and cause a real material reduction in emissions. The answers are clear when we look at the facts with an open mind.

W

MESSAGEPresidents

Balancing Priorities Theres no perfect oil, but Canadian bitumen is a better option

Jeff Arvidson CADE President


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Balancing Priorities Theres no perfect oil, but Canadian bitumen is a better option



BOARDThe Drawing

President Jeff Arvidson 403 232-7100Past President Bob Jackson 403 615-9504Secretary Tammy Todd 403 613-8844Technical Chair Ryan Richardson 403 984-6644Membership Chair Andy Newsome 403 532-0220Education Chair Linden Achen 403 539-9338Social Chair Dan Schlosser 403 531-5284WCJ Editor Christian Gillis 403 265-4973Sponsorship & Marketing Christy Delaney 403 828-0844IT Chairperson Matt Stuart 403 605-3790Administrator Kali Charron 403 532-0220

CADE Executive Team 2013/2014

E X E C U T I V E T E AM

E D I T O R S N O T E

A Promising 2014 Continues HEARD IT WAS BREAK UP, BUT EVERYWHERE I GO people are talking about how busy they are and all of the work going on. Second quarter rig numbers seem to be running much higher than anticipated, and

although the winter was cold, it ended rather quickly for Alberta standards. The first week of May has companies getting fired up in eastern Alberta and Saskatchewan, but were also seeing road bans coming off already in central and western Alberta, and companies getting back to work six to ten weeks earlier than last year. The third and fourth quarters are already looking more promising than last year, and the extra work this spring is keeping crews and personnel working and sharp. This will go a long way with efficiencies and should help reduce safety incidents.

I want to take this opportunity to let everyone know that the annual CADE golf tournament is booked again for a third season, and will take place at Bearspaw Country Club on September 15. You can expect to see an email about hole sponsorships and registration in the next few weeks.

Our 2014 technical luncheon presentations are also continuing through the spring. Please watch for email announcements, check the website for upcoming topics

Iand dates and dont hesitate to contact us if you have any ideas for upcoming topics or issues youd like to see presented at the luncheons or in print. We are looking for topics that tie into our journal focus for each month. We at CADE hope our membership will participate and continue to make these events interesting and successful. If you have any issues youd like to see covered, please email me and we will do our best to get the story.

Dont forget, we would like to publish any of your information and announcements on new products, new technologies and senior personnel changes. Please forward any announcements to us, as we would be excited to run them in our new feature section.

We appreciate your continued support, and look forward to seeing you at the upcoming luncheons.

CHRISTIAN GILLIS, EditorCanadian Well Construction [email protected]


may/june 2014 7 www.cadecanada.com

MEMB E R S C O R N E RWELCOME NEW MEMBERS

BARRY BEIERBACHALI DEHGHANIPERKIN ELMERMOHAMED RIDHUWANUDDIN SUJAVUDINKERRY SHERMANRANDY SMITHCAM THIESSEN

WHY BECOME A CADE MEMBER?

As of 2014, the Canadian Association of Drilling Engineers (CADE) has been active for 39 years. With more than 500 members from more than 300 companies, CADE represents a large spectrum of experience in all areas of operations and technologies.

For drilling and completions spe-cialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadi-an petroleum industry. The skills and knowledge obtained by your partici-pation in CADE will benefit you and your employer, with direct applica-tion to your professional career.

CADE offers various means for members to connect and share their insights. Monthly technical luncheons are held with topical industry presentations. Other mem-bership benefits include our monthly publication Well Construction Journal and a membership directory, which is the whos who of the Canadian drilling industry.

Our website cadecanada.com is an excellent focal point for industry events, blogs and other news. We are also active on LinkedIn and Twitter.

WHO CAN BECOME A CADE MEMBER?

CADE members can be anyone em-ployed in the drilling and completions industry or anyone who is interested in the industry.

Typical members include drilling and completions engineers, geologists, technical personnel, sales personnel and students. Student memberships are available to any post-secondary

student interested in learning more about drilling and completions.

Please feel free to share information about CADE with all the people in your organization who are interested in the drilling and completions indus-try.

CADE MEMBERSHIP RENEWALS

CADEs membership year is from September to September. During the summer, CADE members will receive an email and link for the renewal process on our website.

Please remember the benefits of be-ing a CADE member include APEGAs professional development hour, stay-ing abreast of technological and in-dustry advances, drilling conferences and a great opportunity to network. Thank you for your support.

CADE MEMBERSHIP CHANGES

Log on to cadecanada.com to be-come a member or to update your contact information.

WCJ_May-Jun_14_p04-09.indd 7 2014-05-05 1:21 PM


BOARDThe Drawing

N EW S A N D N O T E S

Enbridge offers pipeline emergency training for 911 dispatchersENBRIDGE ENERGY PARTNERS AND MIDCOAST ENERGY Partners recently announced the launch of their new online pipeline emergency training program for 911 dispatchers located along Enbridges onshore pipe-line systems in Canada and the United States.

The training was developed in partnership with the National Emergency Number Association (NENA), and includes standards put forth by NENA and a publication called Pipeline Emergencies. The training program includes 3-D interactive graphics that help dispatchers understand how to best react to a pipeline incident. It also covers the basics of crude oil and natural gas extraction and transmis-sion pipeline operations, and features real-life sce-narios that help dispatchers recognize risk factors

in pipeline emergencies and how to contact and guide operators and first responders.

We are committed to providing emergency responders of all disciplines with the training and information they need to initiate a safe and effec-tive response to a pipeline incident, said Cynthia Hansen, senior vice president of Enterprise Safety & Operational Reliability for Enbridge. The new Dispatch Module will provide emergency respond-ers in the U.S. and Canada with valuable training where and when they need it and at no cost.

The 911 Dispatcher Module is part of the En-bridge and Vector Pipeline Emergency Education Responder Education Program, an online portal launched in Canada last spring.

Oilympics Oilpatch ClassicIN 1994, FOUR OIL SANDS WORKERS IN CALGARY decided to start an industry-wide, week-long hockey tournament. It was March, and what better way to tackle the never-ending winter than some friendly competition and an excuse to raise a bit of money for charity? Now, 20 years later, that event has grown to become one of the oil and gas industrys biggest annual events: The Oilpatch Classic. The tournament is run by nine staff and a large roster of volunteers, and over the years the event has raised more than $5 million for various charities in the province and across Canada.

The event has even expanded outside of just hockey, and is now dubbed the Oilympics. A whole roster of events, including golf tourna-ments and a Stampede party, are now held each year, with those proceeds going to charity as well. The Oilympics organizers try to focus their giving on childrens charities, but they have also donat-ed to organizations including the Huntington

Society of Canada and Parkinson Alberta.Two years ago, the Oilpatch Classic took on

another challenge the Oilympics team arranged a hockey marathon, which was dubbed the Worlds Longest Hockey Game, held during the Oilpatch Classic tournament. The teams in the challenge played for 246 hours straight at a rink in Chestermere, and both events raised more than $2 million in donations.

This years tournament took place from March 16 to 20, and helped boost the total do-nations up to $5.5 million in the tournaments 20-year history. The Division A winner was Ca-nadian Energy Services, with Triumph Tubulars taking Division B. As with previous years, the tournament party was held at the Metropolitan Conference Centre, which has even named their new Oilympics Lounge after the tournament.

Not sure if thats a good thing, says Ryan Knievel, one of the tournaments staff organiz-ers. But well take it as a compliment.


T E C H N I C A L L U N C H E O N S

Luncheon TicketsMEMBERS: $47.50 (plus GST)NON-MEMBERS: $55 (plus GST)FULL TABLES OF 10: $475 (plus GST)STUDENT: $20 (plus GST)

Save the Date: May 21, 2014Topic: Understanding the Borehole: Physics to demystify and greatly improve the drilling of horizontal wellsPresenter: Dr. Eric Maidla

Eric Maidla is the vice-president of Slider, a Schlumberger business unit involved in automation of the directional drilling process and the aim to enhance drilling efficiency. He is an author of over 50 papers, publications and books, and has been granted five patents with another one pending. His presentation will cover the challenges and opportunities of weight-to-bit transfer in horizontal wells by understanding and managing friction.

GST REGISTRATION #R123175036Visit www.cadecanada.com for all ticket purchases

Save the Date: June 11, 2014 Topic: Wellbore Placement Accuracy: Do you know what you dont know? Presenter: Brian Varcoe

In this talk, Varcoe, P. Eng, Drilling Engineering Manager at Mostar Directional Technologies Inc., will focus on issues in wellbore placement. Varcoe will explore topics and issues including what questions to ask your horizontal well directional provider, MWD roll test acceptance, potential azimuth error due to insufficient NM spacing, MWD qualifier acceptance and magnetic field effects on downhole tools.

Enbridge offers pipeline emergency training for 911 dispatchers



APHAEL ABOORVANATHAN WORKS AS A RESERVOIR ENGINEER with ConocoPhillips Canada. Raphael has more than two years of operations experience in heavy oil exploration and production in Alberta, with a heavy focus in developing in-

novative alternate well startup technologies for steam-assisted grav-ity drainage (SAGD) systems. Aboorvanathan has led mature con-ventional oilfield development and devised enhanced oil recovery schemes for Devon Canada in collaboration with the University of Calgary. He has previous field experience working as a production engineering student for Apache Canadas conventional gas assets. He has authored a paper in thermal transient modelling for heat transfer in heavy oil reservoirs and is greatly passionate about the challenges presented by this field of work.

Aboorvanathan holds a bachelors degree in chemical engineer-ing and a minor in petroleum engineering from the University of Calgary. In his spare time, Aboorvanathan enjoys giving back to the community by volunteering with a local seniors home and tutoring high school science and math. He enjoys riding his bike, music and reading.

Young TalentHighlighting tomorrows best and brightest

Student PROFILE

Raphael AboorvanathanChemical EngineeringUniversity of Calgary

R

TTallis MacDonald

Petroleum Engineering Technology SAIT Polytechnic

ALLIS MACDONALD GREW UP IN VICTORIA, B.C., WHERE SHE figured oil and gas came from a gas station. After her sister graduated from SAIT Polytechnic as a petroleum engineering technologist, she started to learn more about the industry,

and became intrigued about everything from exploration and pro-duction to the economics of oil and gas.

MacDonald made the move from Victoria to Calgary to start SAITs Petroleum Engineering Technology program just like her sister. She was always interested in engineering but never knew what area she wanted to study. She was drawn to petroleum engineering because it encompasses so many other engineering disciplines.

When she graduates, MacDonald hopes to work in the field to learn about oil and gas from cradle to grave. She plans to don a pair of coveralls, get her hands a little dirty and learn from square one about oil and gas outside of her studies in the classroom.



THE DRIVE FOR POWER ENGINEERS

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HELP WANTED: Career Department

DRILLING SLANG

If you want to walk the walk on a drill site, it helps to talk the talk. Here are some terms and phrases often heard out in the field.

ARCHIE ROCK: A word often used to describe a rock thats pet-rophysically simple. Such rocks usually have little clay, a regular pore structure and high-salinity water.

WEEVIL: A new, completely inexperienced member of the drilling crew. The crewmember is stereotyped as prone to making mistakes and being injured, and typically endures planks played on them by the drilling crew. Its a label of inexperience, rather than a derogatory term.

WORMHOLE: A high-porosity, high-permeability channel that develops when heavy oil is produced simultaneously with sand (during cold heavy oil production with sand, or CHOPS). Worm-holes develop in a radical pattern away from the borehole and can extend 150 m from the borehole.

VUGGY: Containing vigs, which are cavities, voids or large pores in a rock that are commonly lined with mineral precipitates. GUMBO: A generic term for soft, sticky, swelling clay formations that are frequently encountered in surface holes offshore or in sedimentary basins onshore near seas. This clay fouls drilling tools and plugs piping, both severed problems for drilling crews.

POWER ENGINEERS, YOURE IN LUCK: OVER THE NEXT DECADE, THE strongest job demand in the oil sands industry will be for your job, according to the Petroleum Human Resources Council of Canada. Power engineers are also one of five professions that the Alberta-based recruitment firm Collective Technical Recruitment has pegged as the most-in-demand in 2014.

Power engineers require certification, or a steam ticket, and are highly sought-after because their skills are applicable in jobs across the oil and gas sector. In recent years, the profession has boomed, thanks to a growing number of in-situ and SAGD operations. SAGD, in particular, has fuelled a sharp increase in opportunity for power engineers77 per cent of the power en-gineering industrys hires comes from SAGD operations. These steam engineers monitor and regulate the SAGD process, and are needed for projects including Encanas Foster Lake and Nexens Long Lake. From the in-situ and upgrading perspective, power engineers make up about 25 per cent of their hiring activity.

There are four levels of accredited, recognized power engineer-

ing certifications. The fourth-class ticket is the entry-level position, and the highest certification is the first-class ticket. Power engi-neers progress through the levels, and their careers, by accumulat-ing work experiencewhat the industry calls firing timeand by writing exams at each stage of the process. Steam engineers are accredited by an additional certificatebut the number of people earning this certificate from colleges like Fort McMurrays Keyano College each year cant keep up with the demand. In a bid to help ease the time pressure on the job, industry and human resources are working to ensure third-class power engineers are used to their full potential while technical schools work harder to fill the void.

Collective Technical Recruitment says a perfect storm of technological advancement and a labour shortage means power engineers have remained in much the same place as PHRCCs 2012 report.

Common power engineer job titles: Control room operator, process operator, bitumen plant operator, SAGD operator, in situ operator, production technician, unit operator.



REPORTSpecial

LOCATION: Southwest China

RESOURCE: Oil, conventional and unconventional-natural gas

SOURCE ROCK: Marine shales

ESTIMATED RECOVERABLE RESERVES: 626 tcf gas, 8.3 billion bbl oil

PRODUCTION: 1.5 bcf/d

MAJOR PRODUCERS: Sinopec, PetroChina, Royal Dutch Shell



N EARLY FEBRUARY, PETROCHINA ANNOUNCED A new find of 10.9 tcf of technically recoverable gas in southwest Chinas Sichuan Basin. The companys report said its one of Chinas larg-

est finds in over a decade.Half of Chinas technically recoverable gas

reserves a 240-year supply are found in the Sichuan Basin. It produces about 1.5 bcf/d from conventional and low-permeability sandstones and carbonates, and current exploration focuses on the less-faulted and less-sour southwest quad-rant. Rock quality compares favourably with plays like the Marcellus and Barnett, but with some challenging differences: excessive depth, intense faulting and complex structure among them. Generally only the marine Paleozoic shales of its southwest quadrant are suitable for exploration thats where PetroChina, Sinopec and Shell currently focus, and where BP, Chev-ron, ConocoPhillips, Statoil and Total have all expressed interest.

Theres oil, too. The Sichuan produces con-ventional oil from its overlying Jurassic sand-

I

Theres tremendous potential, and huge challenges, in Chinas complex shale.

stones, sourced by marine shales. Although not well-defined geologically, Chinas shale oil deposits are reported to be waxy and stored in lacustrine clay-rich shales less friendly to hy-draulic stimulation.

What the country sorely needs is to develop its shale reserves. China is the worlds top en-ergy consumer, and fourth-largest consumer of natural gas, so is looking to increase its sup-ply, primarily by replacing emissions-spew-ing coal in electricity generation. Sixty-nine per cent of Chinas energy comes from coal, and it accounts for 47 per cent of the worlds coal consumption. At this rate, China will continue to top the world in coal consump-tion until 2040. But weaning China off coal is a high priority, as Beijings particulate matter hit more than 24 times the World Health Or-ganization-recommended daily limit in Jan-uary, and China already accounts for 25.5 per cent of the worlds CO2 emissions. In order to reduce these levels, the International Energy Agency (IEA) forecasts Chinese gas demand

By Graham Chandler



REPORTSpecial

will quadruple between 2011 and 2030. China sits on an estimated 4,746 tcf of risked shale gas in-place, the worlds largest reserves, and the government has set an ambitious target for shale gas production: striving for 5.8 to 9.7 bcf/d by 2020. While annual shale gas con-sumption is 6.0 tcf and rising, thats still just four per cent of the countrys total energy con-sumption. Total 2013 gas production, of which shale was only a sliver, was 4.3 tcf. Clearly, shale needs to perform.

After the Sichuan, three basins in the north round out Chinas ma-jor shale gas deposits. The remote Tarim Basin, with 216 tcf technically recoverable, has relative-ly deep shale gas poten-tial in marine-deposited black shales. Little of it has been leased or drilled because of its remote-ness and extreme shale depth. Half of Tarims conventional oil production comes from hor-izontal wells, so expertise gained in horizontal drilling technology could help any future shale developments.

The Junggar Basin, at 36 tcf, is reported to have Chinas best shale geology and structure. Permian source rocks are extremely thick, at 300 metres or more, and continuous, rich, and over-pressured. Triassic source rocks also appear prospective. Large shale oil and wet gas leads are evident but brittle.

The Songliao Basin totals 16 tcf and is Chinas largest oil-producing region, with thick Lower Cretaceous source rock. Its organic-rich shales are of lacustrine origin but rich in clay minerals, so are over-pressured and naturally fractured. PetroChina is already producing shale oil com-mercially in the Songliao.

Risked, technically recoverable shale oil re-sources in these three basins are estimated at 32.2 billion barrels, out of 643 billion barrels of risked, prospective shale oil in place.

Tight gas production has contributed, too. Over the past five years, the Ordos basin in north central China has doubled its gas production, accounting for nearly 40 per cent of domes-tic gas production growth.

Ordos gas is dominated by the Sulige field, Chinas largest onshore gas field.

THE CHALLENGESChinas shale deposits are in the infant stag-

es of exploration, and will be considerably more challenging than their North American coun-terparts. The hurdles are manifold: tectonic complexity seems especially certain to compli-cate and slow commercial development. Similar issues have dogged Chinas coalbed methane sector, output of which remains under 0.5 bcf/d after 20 years of commercialization efforts.

Add to that Chinas service sector, which

In certain basins theres tremendous potential and the Chinese certainly are encouraging western companies to play a role, Michael Wang says.

Chinas shale deposits are considerably more challenging than those found in North America.

WCJ_May-Jun_14_p12-15.indd 14 2014-05-05 1:19 PM


is not equipped to deal with deep and long horizontal drilling with multi-stage fracing. And cost: individual wells are re-ported to cost $8 to $12 million. An Oc-tober 2013 analysis by Macquarie Equities Research reckons for shale success, Chi-na needs $14/mcf gas prices, or material-ly lower well capex to US$4.5 million, or high average [initial production rates] of around 3.5 mcf/d.

Another issue is data availability. Es-sential basic geological and well data in-formation that is publicly available in western countries is tightly held in China. And critical water supplies for fracing are scarce, especially in the north and north-west. Moreover, other shale reserves are in densely populated areas, challenging heavy equipment mobilization. In terms of infrastructure, PetroChina and Sinopec control most pipelines. Shale gas in Chi-na remains just a potential, says Michael Wang, director of research at IHS Energy. It may take many years before anyone can know whether they can have a profit-able role in China.

THE OVERSEAS HELPChina relies on imports for more than

half of its petroleum needs, although holds 24.4 billion barrels of proven reserves. Its total oil and liquids production of 4.5 million bpd, the worlds fourth largest, is all consumed domestically. Production growth has not kept pace with demand here, either: in December 2013 it import-ed 6.3 million bpd, surpassing the U.S. as the worlds largest crude importer. Imports could rise to 9.2 million bpd by 2020.

Chinas state-owned oil and gas enter-prises SOEs have been investing tens of billions of dollars in resources around the world (in places like Canada, Nigeria, Cameroon, Angola, Brazil, Venezuela, Ka-zakhstan and Mozambique) for the past decade. Through some of these invest-ments both small slices and controlling acquisitions its hoping to absorb tech expertise in developing unconventional resources, like shales and the deep water South China Sea.

Deals with IOCs abound, too. PetroChi-na has formed a joint venture with Total

Petroleum in the South Sulige area of the Ordos Basin, as well as with Chevron. And Sinopec has partnered with IOCs ConocoPhillips, BP and ExxonMobil for shale gas research and exploration in the country. Last year, Sinopec announced Sinopec Oilfield Service Corporation, which is discussing a joint venture with Weatherford International. Together with the Royal Dutch Shell operations in the Sichuan Basin, these will tap more crucial

shale expertise. And in late 2013, several major agreements were signed with Russia to import both oil and gas. Russian SOE Rosneft agreed to supply 200,000 bpd over 10 years starting this year, and reported-ly aims to eventually export over a mil-lion bpd to China. China is also looking to double its imports from Turkmenistan and Kazakhstan.

In China there are two primary areas where Western players can have a role, says Wang. One is the deep water offshore in the South China Sea. The Chinese con-tinue to encourage Western players to ex-plore for oil and gas in these waters, and they have been for years. The other is shales. In certain basins theres tremen-dous potential and the Chinese certain-ly are encouraging western companies to play a role, says Wang. We are see-ing some North American and European players there. But I havent seen Canadi-an companies, although a lot are known to be skilled operators in recovering shale gas in the Montney and Duvernay for ex-ample. So far I think Canadian companies who can position themselves as experi-enced in shales may have a role in China.

Of course on the flip side, China has been looking at LNG investments in Cana-dian west coast projects including the Kiti-mat LNG joint venture. In March, Sinopec approached the B.C. government with a view to acquiring a 15-per-cent stake in the proposed Petronas-owned Pacific North-west LNG Project at Prince Rupert, with

whom it has been negotiating. It may be a fit: both have positions in B.C.s Montney, and Petronas is seeking financial partners.

In many ways Chinas SOEs are now acting like IOCs. In Canada, where many Chinese companies have significant unde-veloped acreage, some are for the first time seeking equity partners to develop them. In October 2013, Sinopec announced it wants a partner for its wholly-owned Canadian subsidiary Daylight Energy to develop shale reserves in the Montney and Duvernay. As well, after spending $30 billion on Canadian oil and natural gas assets over the last six years, China is grap-pling with issues that have long plagued its North American rivals, including high costs, operational challenges, First Nations issues and volatile bitumen prices.

And thats not to mention another bar-rier. After CNOOCs acquisition of Nexen in 2012, the Canadian government an-nounced new rules for the acquisition of all or part of Canadian oil sands compa-nies by SOEs, says Brian Bagnell, senior research associate at Macquarie Securities. Essentially, the rules require potential ac-quirers to demonstrate a net benefit to Canada and the acquisition of material stakes in oil sands companies will only be allowed under exceptional circumstanc-es. This has already slowed new invest-ment from China.

The SOEs focus going forward will be trying to develop these assets, Wang says. Future acquisitions will probably be by private Chinese companies acquiring smaller Canadian companies.

He says hes seen this in recent visits to China. We are seeing some emerging private Chinese companies looking to get into the Canadian and North American oil and gas business for example, junior Canadian E&Ps and some of the depressed Canadian natural gas companies.

Analysts are mixed as to Chinas chanc-es of developing a large-scale shale oil and gas industry. On the one hand, U.S. shale development took about five years and on the other, it didnt face Chinas challenges. Nevertheless its future energy thrust will be to maximize its own resources while continuing to invest globally.

China relies on imports for more than half of its petroleum needs, although

holds 24.4 billion barrels of proven reserves.


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Courting Investment Lessons from a Canadian company searching for investment from China

REPORTMarket

By Lisa Ricciotti

ASSIMO GEREMIA CO-FOUNDER, PRESIDENT and CEO of Manitok Energy Inc. knows how to find gas and oil.

He proved that in 2011, when the young, Calgary-based companys first three drills resulted in three significant conventional pool discoveries: two light oil pools and a liquids-rich natural gas pool. Beginners luck? Not when Mani-tok continued to beat the odds the following year, hitting it out of the park with nine well drills that nearly doubled production. By late 2013, Manitoks exploration efforts were paying off, with about 4,000 barrels per day, and by April 2014 production was north of 6,000 bpd.

Ramping up production from zero to more than 6,000 bpd in three short years is a considerable achievement, but thats just the start of ambitious growth plans for Manitok. Over the next four or five years, Geremia would like to more than triple Manitoks current production, to 20,000 barrels

of oil equivalent per day. As a big stride toward that goal, he hopes to add new acquisitions to the companys properties in southeastern Alberta and the foothills. He estimates this would bump up production by 5,000 to 8,000 boe/d.

Geremias game plan is solid and carefully con-sidered, but he doesnt want to cripple Manitoks forward momentum with an overly heavy debt load, and new acquisitions come with hefty price tags. Luckily, Geremia has played the role of pitch-man before, progressively broadening Manitoks financial search area from Calgary to Toronto and then New York City. And he even finds many simi-larities between the two pursuits.

To find oil and gas, youve got to do your research and analysis, then youve got to spend money, on seismic and drilling. It takes time, but if you dont spend time exploring, you wont get anything, he says. Finding money is much the same a lot of work, a lot of digging, a lot of patience.

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If anything, it will take more time and more patience than

dealing with Canadian investors, Massimo Geremia says.

Another similarity: it pays to expand your search into new territory.

In 2013, Geremia added China the worlds most populous country, with one of the worlds fastest growing major economies to his target list of investment opportunities to investigate. That Sep-tember, Geremia found himself on a 15-hour flight to Shanghai for an intense first-hand assessment of Chinese interest in Alberta oil and gas investments.

His visit was a whirlwind of meetings, all arranged pre-departure by a Vancouver investors group with affiliates in Shanghai and Hong Kong. In total, Geremia spent two non-stop days pitching in Shanghai, followed by another in Hong Kong (and about an equal amount of time in transit). Although Geremia had never travelled to China be-fore, he saw far more hotel and restaurant banquet rooms than tourist highlights.

I made a lot of presentations at a lot of lunches and dinners, he says.

Geremia says hed skip a few of the more exotic dishes next time, but he found the experience worthwhile, and plans to return this fall. He esti-mates he met with contacts from 30 different com-panies state-owned, family-run and private and found a fair bit of interest. Whether that interest will translate into real financial commitment is still up in the air. Of the 30 groups met, he maintains monthly contact with three. Over time, many prospects will fall off the table while a few good ones stay on. We need to talk to many groups to find the two or three interested, who are willing to participate and take a long-term look at Western Canada. Once you find those, you just keep devel-oping those relationships.

Still, Geremia advises anyone travelling to China seeking investors to make the most of their time by meeting as many contacts as possible. Meet with and talk to anybody and everybody, he says. But dont waste time on cold calls; every meeting should be at least warm. Geremia also recommends having all of your appointments set up in advance by a person who understands the Chinese market, who will screen out unlikely leads and ensure no hot prospects are overlooked.

Geremia also emphasizes that timely follow up is very important. Those you met will be watching to see if you do what you said you would. Your actions once youre back in Alberta are what theyll look at as they decide whether they will invest their trust and their funds in your business.

Geremia says it wasnt until the third or fourth visit to Toronto that Manitok secured investors, and although management has made five or six trips to New York so far, Manitok still doesnt have a major U.S. shareholder. He doesnt expect things will hap-pen any faster in China. If anything, it will take more time and more patience than dealing with Canadian investors, Geremia notes.

Geremia recognizes that several years ago, Man-itok was too small to attract Chinese investors. But with its recent and expected growth, hes con-

fident Manitok will find the right fit with a Chinese inves-tor. Were looking for a group thats interested in coming to take about a 20-per-cent po-sition in the company. Thats

big enough to make it meaningful for the investor, but not large enough that our management will lose control. The investor would have a seat on the board and grow with us and be there when the growth and profits that their 20-per-cent financing made possible.

Sounds like a good deal, one that offers a win for both companies. If youre interested, give Massimo a call to set a lunch date. Chinese, anyone?

A NUMBERS GAME

Yes, Alberta, there is life in the oil patch after Nexen. The attraction of Chinese capital to Canadian energy hit a snag last December when Prime Minister Harper reluctantly allowed Chinas CNOOC Ltd. to consummate its courtship of Nexen Inc. with a union that left China as the controlling partner. But well have no more of that, Harper warned similar state-backed suitors, who responded by decreasing the frequency and intensity of their offers.

When Geremia travelled to Hong Kong and Shanghai last fall hoping to fan the embers of investor interest, he found Chinese businesses had used the cooling-off period productively and rethought their relationships with Canadas oil patch.

A couple of years ago, Chinese companies were more inclined to want a 51 per cent controlling position in Canadas energy companies in return for their investment, says Geremia. But as a result of the federal governments take on Nexxen, theyve realized asking for control could be a deal-breaker. Now theyre more interested in coming in as a 20- to 25-per-cent partner. If they cant control the asset, they can still benefit from the revenue it produces.



PROFILEMember

By Lyndsie Bourgon

Ryan Richardson

B

Its Easy Being Green

Y HIS OWN ADMISSION, RYAN RICHARDSON IS a dichotomy. After spending eight years working in directional drilling around the world, Richardson is also a keen

member of the Green Party and recently began working in environmental and midstream ser-vices for Calgarys Secure Energy Services Inc.

I switched to this sector because I wanted to work and bring my knowledge of the oil and gas industry together with my passion for environmental services, says Richardson.

Richardsons personality was indeed split between his work and his interests, though he hasnt found it hard to bring them together. I [was] out on the rigs, drilling holes in the ground as a directional driller but was also volunteering for the Green Party, and these things arent really congruent, he says. Richardson ran as a member of the Green Party in the Calgary-Cross riding during the 2004 provincial election. I havent picked a side Im not throwing stones, but Im working in the industry and trying to be progressive.

After graduating from the University of Calgary in 2002, Richardson worked as a directional driller for various companies both in Canada and Europe for close to five years. While in Europe, he was able to use his drilling expertise not only in the oil and gas sector but also while drilling for geothermal wells.

Last August, Richardson started a new gig at Secure Energy, where he works as a corporate accounts representative. Secure Energy operates 26 facilities across Western Canada and North Dakota, and provides environmental and midstream solutions for major exploration companies. Until Secure Energys emergence in this industry, there was very little diversity or competition amongst similar service providers. In this way, Richardson equates Secure Energy to WestJet, and says that he and his co-

workers are invested in the businesss success and competitive spirit in much the same way the WestJet employees diversified Canadas aviation industry.

I chose [Secure Energy] because its a really exciting space, the innovations surrounding recycling, says Richardson. We deal with a lot of the waste that comes from produced water, throwback water from completions, drilling mud and drilling cuttings. But a lot of these things arent just pure waste; they represent a lot of value.

Richardson says that while the company continues to grow, he finds it exciting to witness development and innovation in environmental solutions.

Still, he hasnt forgotten his oil and gas roots. After taking the job at Secure Energy, Richardson became involved in CADE, volun-teering as its technical chairman. Its keeping me up-to-date on innovation, he says, of the benefits of staying connected on the oil and gas side. I enjoy the conversation. Ive had to explain my work to both sides, but I havent found it difficult, he says. Thats where a lot of change happens.

Split between two worlds, Ryan Richardson is committed to uniting oil and gas and environmental services



C

The Patent Riddle An Edmonton company takes an unconventional stance on patents in China

REPORTTech

By Ryan Van Horne

HINA IS THE MOST POPULOUS MARKET IN the world and an emerging economic powerhouse, but it remains a riddle for many foreign companies trying to do business

there. A frequent challenge is the ease with which Chinese companies infringe on the patents of foreign companies, and the inconsistent ability of Chinas courts to stop it.

In September 2013, an Edmonton-based com-pany got a crash course in the challenges of doing business in China. Dale Greggs Handle-Tech Ltd. took a different approach to patent protection one that has been successful in few cases.

Greggs firm invented a handle designed to pro-vide safe and efficient hose transportation and ma-nipulation on oil and gas jobsites. Greggs product went from conceptual drawing in December 2012, to working prototype in May 2013, to production in fall 2013.

Despite being a newcomer, Handle-Tech has spread its network quickly and sells its product world-wide through 15 licensed distributors. After he got his patent, Gregg went on a trade mission to China last September, looking for the best way to venture into its market.

China is more concerned about their people, he says. Once you take your product into China, the only protection you can get is if the patent is held by a Chinese company.

Based on advice he got (from people such as Michael Lam of the Edmonton Economic Develop-ment Corp.), Gregg decided that relying on patent legalese wasnt enough. Lam, who also sits on the Board of Directors with the Hong Kong Canada Business Associations Edmonton Section, gave him another idea: he adopted the more practical solu-tion of seeking out a Chinese partner that could go to bat for him in a Chinese court.

Dale Greggs Handle-Tech Ltd.

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Gregg and Handle-Tech signed an agreement with a Chinese hose and plastics manufacturer, giving it the license to distribute Handle-Techs product in China, Taiwan and Peru. Gregg de-clined to name the company, which also holds the Handle-Tech patent in China and is developing moulds so that it can eventually manufacture Greggs invention. But his decision to forge a part-nership this way was strategic.

Companies that think that patents are their only protection need to rely on lawyers and courts, he says. Your best protection is to have the product available. Patents are broken because that product is not available.

Dan Harris, a patent lawyer at Harris Moure PLLCs Seattle, Washington, office, says this strategy can work, but its effectiveness depends on the wording of the contract. If he doc-umented this transaction correctly, then hes probably right, Harris says. Unfortu-nately, Ive seen far too many of them documented incorrectly.

Harris, who writes the award-winning China Law Blog, has 17 years of experience representing companies who do business in China.

The reality is that China isnt so great for patent protection for anybody, Harris says. It matters who the Chinese company is.

If the partner company is a national govern-ment-owned conglomerate, it could expect the protection of the court in a patent case. If its a big private firm, it would get some protection, but if its a small private firm that holds his patent, then hes better off fighting it himself, Harris says. Converse-ly, the defendant in a patent lawsuit is a key factor.

Generally, we say that if youre suing a private Chinese company, your chances are pretty good, Harris says, while suing a government-owned com-pany is a waste of money given the odds of success.

Gregg says if his Chinese partner is not respect-ing the patent, or if they attempt to sell it outside the areas they have permission to, then theyll be forced to pay penalties. Choosing the right partner company is important, and Gregg says there are good partners to be found in China. Im more worried about the rogue company in China that is only interested in making money, he says.

Gregg wonders why more companies dont approach patent protection this way: Its a pro-tectionist attitude that stops them, he says. They

think that a patent is the end-all and be-all, but its nothing more than a piece of paper to use after the damage is done.

Gregg says his partnership provides him realis-tic patent protection and is a win-win relation-ship with someone that has an interest in making sure that everyone is on the up and up. He sleeps comfortably at night, although he admits Chris Sherback, his partner at Handle-Tech does not. Im dealing with somebody that I think I can trust, he says, Gregg has met their Chinese partner face-to-face, while his Sherback has not. I think they have integrity and honesty. Thats a big part of it, if you dont have that then you dont make a deal.

Harris says that he and his fellow lawyers who have experience dealing with China groan every

time they hear talk like this, because its empty rhetoric.

Weve dealt with China, he says. Every case weve dealt with started out with the American being con-

vinced they can trust the Chinese company and being proven wrong.

He says every company in China is out to steal intellectual property, and that he believes most companies in North America are out to do it, too, but they dont because ramifications are too strong.

For now, Handle-Techs Chinese partner is or-dering products manufactured in Edmonton, and Gregg is happy to keep it that way, because he is only operating at 10 per cent capacity: China is no longer the cheapest place to manufacture, he says. The cost of making moulds is also more than anticipated, which could delay or even torpedo plans to build the Handle-Tech product in China.

In his book Poorly Made in China, Paul Midler coins the term quality fade to describe the modus operandi of Chinese manufacturers.

Chinese factory owners played games, he wrote. They delivered customers a quality product at the start of a project and over time withdrew key ingredients (or else they substituted inferior inputs for quality ones).

Given Chinese manufacturers long history of promising one thing and delivering another, Handle-Tech might be better off to continue pro-ducing at home to ensure consistent quality.

They dont ever have to actually manufacture, Gregg said. They may never manufacture; it seems to be working that way.

Your best protection is to have the product available, Dale Gregg says. Patents are broken because that

product is not available.

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Battlegrounds Albertas new private surface agreement registry earns equal measure praise and criticism

REPORTIndustry

By Robin Brunet

ATE LAST YEAR, THE ALBERTA ENERGY REGULATOR (AER) unveiled a private surface agreement registry that has landowners and energy companies in the province split could the

registry be a cure-all for land disputes, or is it an empire-building exercise that has no teeth?

Unveiled in December 2013, the Private Surface Agreements Registry (PSAR) is a tool by which landowners can register surface agreements made with energy companies operating on their property. After that, landowners can ask the AER to intervene if they feel a company is not living up to the agreement. The new process ensures

a thoughtful and common-sense approach that will uphold strict environmental standards while ensuring landowners have more direct control in how they deal individually with the regulator, then Environment and Sustainable Resource Development Minister Diana McQueen (now Minister of Energy) said at a press conference at the time.

The PSAR is the latest initiative announced by the AER, and is part of the second phase of the Re-sponsible Energy Development Act, which estab-lished a single regulator for upstream oil, gas, oil sands and coal projects in the province. The AER



is now responsible for issuing, maintaining and inspecting all land approvals for energy activities, under the Public Lands Act. Under Part 8 of the Mines and Minerals Act, it will also approve and inspect seismic exploration programs related to oil and gas in Alberta.

This is a crucial step towards providing full life-cycle energy regulation and becoming a best-in-class regulator, says the AERs CEO Jim Ellis. PSAR will help landowners feel secure that energy companies will honour the agreements theyve made.

But all has been quiet since PSARs unveiling, leaving some observers wondering to what extent potential beneficiaries are either aware of the initiative or confident about its effectiveness. Nothing has been registered under PSAR as yet but we expect its only a matter of time before we see movement, says Ryan Bartlett, AERs public affairs advisor. Basically, PSAR gives landowners an additional means of airing a dispute, whereas in the past the only venue they had were the courts a costly and often frustrating process.

Heres how the registry works: if an operator breaches an agreement that has been registered after November 30, 2013, the landowner can apply to the AER for an enforcement order. Af-ter the complaint is filed, there are five possible outcomes: the AER determines that a company has failed to comply with a term or condition of the registered PSA and issues an order to comply under Section 64 of the REDA; the AER doesnt issue an order to comply, because compliance of the company has been achieved after the request is filed but before the AER makes a decision on the request; the AER dismisses the request because it has no merit; the AER dismisses the re-quest because the landowner failed to file further information, documents or materials within the specified period; or the AER decides that a more appropriate forum should deal with the matter, like the court or the Surface Rights Board.

The AER doesnt hold the authority to force energy companies to comply with the order, though it can require the company to pay an administrative penalty. It may also file the ad-ministrative penalty with the Court of Queens Bench and have it enforced as a judgment of the court. Any AER decision is appealable with the

Court of Appeal, and a company may seek relief if it believes that no terms or conditions of the agreement have been contravened provided it can show that the AER has made an error.

Tracy McCrimmon, executive director for the Sundre Petroleum Operators Group, applauds the Alberta government for understanding the frustrations of landowners and streamlining the processes that enable them to take action. Land-owners dont have the deep financial pockets that companies do, so the courts really arent a viable option for them. And the reason industry isnt overly concerned with developments like PSAR is because very few companies are bad apples and nobody wants to be associated with them.

Still, not everyone is satis-fied with the registry and its promise in particular, the November 30, 2013, start date has commenters saying it creates a two-tiered system wherein new agreement holders have more rights

than other landowners. And with very little actual enforceable power against the complaints, critics have noted that for any change, landown-ers would have to start claims before the courts.

Similar concerns have been raised by Alberta Surface Rights Group president Don Bester, who told reporters shortly after the PSAR was unveiled that the AER has no legal grounds to step in if a breach of contract between a landowner and an energy company occurs and that if it tried to, it could be taken to court for interfering. All this is an empire-building scheme; how many people do you think its going to take to administrate this thing? he said.

For the record, the AER says legislation is being drafted that gives it power to carry out the rules outlined in the Responsible Energy Development Act, including the section on the Private Surface Agreements Registry.

Although PSARs effectiveness remains to be seen, AERs rapid evolution as a cradle-to-grave energy regulator is earning high praise, especially from organizations that had to deal with nu-merous government bodies prior to its creation. Instead of four or five agencies that werent prone to sharing much information, now there is only one, and were better off for it, says Mc-Crimmon. I suspect the AERs commitment to being a first-class regulator will compel everyone to comply with the laws of the land.

PSAR gives landowners an additional means of airing a dispute, whereas in the past the only venue they had were the courts a costly and often

frustrating process.



Canadian Rig Counts April 1, 2014

Drilling Down Total Utilization

Alberta 183 388 571 32.0%

B.C. 48 31 79 61.0%

Manitoba 0 17 17 0%

New Brunswick 0 0 0

Newfoundland 0 0 0

Northwest Territories 0 1 1 0%

Quebec 0 1 1 0%

Saskatchewan 12 129 141 9%

Totals 243 567 810 30%Source: Divestco

NUMBERSBy the

Stats at a Glance

Alberta Rig Counts April 1, 2014


Northern Alberta 40 103 143 28.0%

Central Alberta 117 250 367 31.9%

Southern Alberta 16 45 61 26.2%

Totals 173 398 571 30.3%Source: Divestco

Top 5 Most Active OperatorsApril 1, 2014

Active Rigs

Canadian Natural Resources Ltd. 24

Husky Energy 12

Progress Energy 11

Crescent Point Energy 10

Cenovus 9Source: Divestco

Top 5 Most Active Drillers in Western CanadaMarch 27, 2014

Active Total

Precision Drilling Corp. 77 189

Ensign Energy Services Inc. 37 102

Savanna Energy Services Corp. 28 71

Nabors Industries Ltd. 31 64

Trinidad Drilling Ltd. 28 61Source: FirstEnergy Capital



Canadian Rig Counts April 1, 2014


Alberta 183 388 571 32.0%

B.C. 48 31 79 61.0%

Manitoba 0 17 17 0%

New Brunswick 0 0 0

Newfoundland 0 0 0

Northwest Territories 0 1 1 0%

Quebec 0 1 1 0%

Saskatchewan 12 129 141 9%

Totals 243 567 810 30%Source: Divestco

Alberta Well LicencesApproval issued by the Alberta Energy Resources Conservation Board

Number of Licences Issued Aug. 2013 Sept. 2013 Oct. 2013 Nov. 2013 Dec. 2013

Development 572 564 586 607 781

Exploration 46 25 52 68 55Source: Alberta Department of Energy

Alberta Spudded WellsMarch 2014

Number of Wells Spudded

2012 2013 2014

January 1763 1616 1076

February 2022 1823

March 980 1078

April 276 337

May 374 268

June 518 452

July 702 647

August 785 794

September 784 720

October 781 741

November 707 692

December 670 539Source: Alberta Department of Energy

Top 5 Most Active OperatorsApril 1, 2014

Active Rigs

Canadian Natural Resources Ltd. 24

Husky Energy 12

Progress Energy 11

Crescent Point Energy 10

Cenovus 9Source: Divestco

Alberta Completed WellsJanuary 2014

Number of Wells Completed

2012 2013 2014

January 381 381 442

February 718 640

March 717 812

April 672 701

May 486 434

June 254 272

July 488 373

August 199 474

September 524 458

October 692 753

November 750 671

December 692 530Source: Alberta Department of Energy

Alberta Land SalesMarch 2014

Mar. 2014 Dec. 2013 YTD 2014 YTD 2013

Oil and Natural Gas

Land Sales $85.9 million $50.2 million $133.5 million $680 million

Price Per Hectare $818.49 $407.58 $464.87 $316.91

Oil Sands

Land Sales $536,048 $363,260 $1.82 million $28.19 million

Price Per Hectare $232.66 $153.40 $190.89 $192.05Source: Alberta Department of Energy



DEEPERDrilling

By Robin Brunet

A Price to Pay Experts ponder the fallout of the Nexen/CNOOC deal

HE $15.1-BILLION NEXEN INC. SALE TO CHINAS CNOOC Ltd., approved in December of 2012, was not only the largest-ever overseas energy company transaction: it also trig-

gered arguments about to what extent our resources should be controlled by foreign owners. The fear was that Nexen was only the beginning of mega-deals that would change the corporate landscape of the oil sands.

What a difference a year makes. Since Nexen, foreign acquisitions have been sedate to say the least. Foreign M&A activity in Canada plunged 80 per cent in 2013 to US$10.2-billion, compared to US$50-billion in 2012, according to IHS Herold data. Plus, investment in CNOOC-backed MEG En-ergy Corp. was down 1.8 per cent last year, and other Chinese-backed public companies reported declines as high as 30 per cent.

Chinas big three state-owned enterprises (SOEs) CNOOC, PetroChina and Sinopec are said to be grappling with issues like volatile bitumen prices. According to one foreign Alberta investment spe-cialist (who wishes to remain anonymous), theyre also troubled by the big salaries in Calgary.

Then theres the famous body blow, dealt by Prime Minister Stephen Harper, who on December 7, 2012 (the same day Ottawa green-lit the Nexen acquisition), suggested that investments by SOEs for controlling interests in oil sands companies would no longer be allowed. When we say Cana-da is open for business, we dont mean that Cana-da is for sale to foreign governments, he said at a press conference.

In a poll conducted last year by the University of Albertas China Institute, Canadians were asked what their concerns are about Chinese investment in Canada. The number one response was that theyre opposed to foreign investment in general, followed by fears of the Chinese not meeting labour and environmental standards, says China

Institute director Gordon Houlden.The results prompt Houlden to wonder whose

money our energy sector should accept if not from China. The bottom line is theres no way we can develop our resources without foreign invest-ment, he says, adding that our laws regarding the environment and labour must be abided regard-less of who the player is.

In a new report for the University of Calgarys school of public policy, University of Toronto professor Wendy Dobson states that cutting off

Canadian companies to Chi-nese bidders, could increase risk for, and discourage, private-equity investors who often see foreign takeovers as a possible exit strategy, while potentially sheltering poorly managed firms from take-

overs, dragging down our economic efficiency.But when all is said and done, Houlden isnt

too concerned about the current investment chill. Many people predicted this would happen, for several reasons, he says. First and foremost, the Nexen deal came towards the end of the commod-ities supercyle. Also, corruption investigations within China have made SOEs less likely to go out on a limb not only in Canada, but in other nations too.

Houlden views the present climate as A pause in the ongoing course of things. The Chinese lead-ership has specified that they want more assets, not just T-bills, so acquisitions will march on. And I predict that as their investments in this country diversify to encompass other sectors, along with investment from private Chinese enterprises, our attitude will change. Nothing turns a head around these days quite like new job opportunities.

Whether Houldens correct in his prognosis, his parting comment is food for thought: It wasnt too many years ago when U.S. investment in the oil sands was a huge controversy, but now theyre our allies. Time solves a lot of problems. Im opti-mistic about the future.

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The number one response was that [Canadians are] opposed to foreign investment in general,

followed by fears of the Chinese not meeting labour and

environmental standards.For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry. As you look to build your business and launch new technologies, new products and services in the drilling industry, a CADE Sponsorship offers you a cost effective way to deliver your message directly to the entire membership of the leading industry association for Well Construction Professionals in Canada.

YOUR SPONSORSHIP INCLUDES: Ads in Well Construction Journal, full of relevant industry news and articles, presented in a high quality, well-read magazine

Your logo in the Thank you to our sponsors feature on the CADE website and in every issue of Well Construction Journal

Your logo on the Thank you to our sponsors display at every CADE Technical Luncheon

Authorized use of the CADE logo on your website and in marketing materials

Connect with Canadas Drilling IndustryBecome a CADE Sponsor

2014 SPONSORSHIP PACKAGES ARE NOW AVAILABLEContact CADE at 403.532.0220 or by email at [email protected]

www.cadecanada.com

Support CADE by sponsoring our technical lunches, our website and the Well Construction Journal.

Thank You to Our SponsorsThe support of CADE sponsors plays an integral part in our associations success.

Platinum SponsorsPhoenix Technologies Services

Gold SponsorsGlobal Steel Ltd.

NCS Energy Services

Pacesetter Directional

Schlumberger

XI Technologies Inc.

Silver SponsorsAkita Drilling Ltd.

Baker Hughes

Cathedral Energy Services Ltd.

Ensign

Lory Oilfield Rentals Inc.

Marquis Alliance Energy Group Inc.

Mostar Directional Technologies

Peak Completions

Petrosight Inc.

Precision Drilling

Well Control Group

000WCJ-CADE_Sponsor-FP.indd 1 2014-04-14 10:21 AMWCJ_May-Jun_14_p26-27.indd 26 2014-05-01 10:09 AM

For drilling and completions specialists, CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry. As you look to build your business and launch new technologies, new products and services in the drilling industry, a CADE Sponsorship offers you a cost effective way to deliver your message directly to the entire membership of the leading industry association for Well Construction Professionals in Canada.

YOUR SPONSORSHIP INCLUDES: Ads in Well Construction Journal, full of relevant industry news and articles, presented in a high quality, well-read magazine

Your logo in the Thank you to our sponsors feature on the CADE website and in every issue of Well Construction Journal

Your logo on the Thank you to our sponsors display at every CADE Technical Luncheon

Authorized use of the CADE logo on your website and in marketing materials

Connect with Canadas Drilling IndustryBecome a CADE Sponsor

2014 SPONSORSHIP PACKAGES ARE NOW AVAILABLEContact CADE at 403.532.0220 or by email at [email protected]

www.cadecanada.com

Support CADE by sponsoring our technical lunches, our website and the Well Construction Journal.

Thank You to Our SponsorsThe support of CADE sponsors plays an integral part in our associations success.

Platinum SponsorsPhoenix Technologies Services

Gold SponsorsGlobal Steel Ltd.

NCS Energy Services

Pacesetter Directional

Schlumberger

XI Technologies Inc.

Silver SponsorsAkita Drilling Ltd.

Baker Hughes

Cathedral Energy Services Ltd.

Ensign

Lory Oilfield Rentals Inc.

Marquis Alliance Energy Group Inc.

Mostar Directional Technologies

Peak Completions

Petrosight Inc.

Precision Drilling

Well Control Group

000WCJ-CADE_Sponsor-FP.indd 1 2014-04-14 10:21 AMWCJ_May-Jun_14_p26-27.indd 27 2014-05-01 10:09 AM

100% CRACK FREE & REBUILDABLEExcellent Casing & Tool Joint Protection

THE WoRLDs MosT TRUsTED HARDBAnDIngDurabandNC

[email protected]

ImProvIng STandardS on-Site Training for new applicators Applicator Testing, Qualification & Licensing

SuPPorTIng End uSErS Educational Technical Forums Worldwide Technical Support

Complete Hardbanding Support


Documents

Well Construction Journal - May/June 2014