The Permian Basin Petroleum Association is a non-profit organization for the promotion of business efficiency and the betterment of Permian Basin oil business through cooperative efforts and the exchange of ideas.
Greetings and salutations! Welcome to my inaugural column for the Permian Basin Oil & Gas magazine. I am excited to bring you stories, reports, and ideas. Some of the ideas will be new to even my safety colleagues. Just the same, I hope to bring you a refreshing look at what’s new and what’s old. So sit back, partake, and join me in the wide world of Safety.
by Dusty Roach
I began my safety career in an odd fashion. I was approached by a regional VP who asked if I’d be interested in being in safety. After already racking up 20+ years in oilfield operations, I less than respectfully declined. He asked, “Why not?” and I indicated that, given everything that I saw from the “normal” safety representatives up to this point, I’d end up running them all off. The safety person showed up on location between 8:00 and 10:00, and then proceeded to spend an hour looking at fire extinguishers, band aids, and eye wash, plus checking for deficiencies in PPE. Then they would score us and drive off for an early lunch. Later in the week, we would receive a report of everything that was wrong, with little or no mention of what was right. I am not diminishing the importance of compliance regarding the audit items. However, I did resent the fact that the safety man didn’t notice the derrickman rode the blocks up to the board or that we were mixing visbestos in the mud hopper without masks.
Additionally, there was no mention that we worked 6-8 or even 12 hours tripping pipe without a break. The safety reps had no idea of the real world battles of what we endured while working in freezing weather, pulling a wet string, and enduring the wind blowing up our backside. So, hearing all of this from me, my boss said, “You’re exactly what I’m looking for; someone who knows the ‘real world’ battles of what the guys in the field are experiencing.” Thus my career in safety began. Ironically, so did my education as to what the real world battles of the safety profession were.
Safety departments do not generate revenue; but safety does keep the “generated revenue” that comes in the front door from going out the back door. Due to lawsuits, insurance costs, fines, or loss of customers, safety has become primarily litigation-driven for the oil industry.
The petroleum industry was founded on risk. Whether it was financial, strategical, or physical risk, money seemed to make the risks palatable. When the fatalities and lawsuits reached a level that was out of control, the government acted on what it saw as a legitimate need to establish standards to gain control of an industry that had no formal standards. Now when most companies say, “Safety’s First,” there’s a running joke that sometimes ensues: “Safety’s first to go!” Granted, if we shut down all operations and parked the equipment, we could eliminate all the risks and accidents, and the revenue. So, Lesson Number One: we need Safety.
Going back to a previous point, as a safety rep I often gave safety meetings where someone in operations tells me, your training is ok but you don’t know the real world. All of a sudden my initial sentiments were now thrust back in my face. Lesson Number Two: Until you’ve had to deliver a death message or had one delivered to you, you might not really know what the real world is either. I’ve experienced both.
For instance, if you’ve not experienced the guttural weeping of a wife, mother, or a child when they receive a death notice that their loved one is not coming back home because their loved one was killed in an accident, then it quickly becomes something that will rest in your mind forever.
It goes to show that all of us that we all have perceptions of what the real world is, based on our experiences. If I were to ask a hundred safety people what the best formula for the ultimate safety program is, I would get close to a hundred different answers and the same would hold true if I asked operations. The bottom line is there is not one single formula or process that fits every line of business in the oilfield. The oilfield is dynamic, ever changing. You cannot mitigate all risk. You can reduce it. You can engineer some of it out. You can have policies and procedures. You can monitor it and enforce it. You can attempt to change behaviors. However, you cannot make all people care enough to be safe. Some people do not comprehend the concept of real danger because they’ve not experienced it firsthand. They don’t recognize danger until it’s too late. Safety is a mindset.
So here is a little known bit of information. In the construction of Mount Rushmore, there were no fatal accidents! This was a 14-year project that was done on the side of a mountain, utilizing explosives while doing art with chisels and yet not a single recorded fatality. I’d bet they were not able to provide a single formal Job Safety Analysis. I am certain there were numerous near misses. This feat was monumental (pun intended), LOL! However, numerous workers died, after the project was completed, from silicosis. This was caused by the dust they inhaled while carving out the granite, according to Jean Patrick.
So the real world will always have risks. It’s our job to continue to refine procedures and strive to make it as safe as possible. It’s our job to care. Never give up.
Teddy Roosevelt said, “I don’t care how much a man knows until I know how much a man cares.”
I look forward to sharing with you on numerous topics with in the future. Remember, it’s not how many hits you make in baseball, it’s how many times you reach home safely!
Permian Basin added rigs for the second straight week, according to Baker Hughes’ July 3 count of active oil and gas drilling rigs. That’s the first two-week gain since April. Permian Basin had 443 rigs (441 previous week, 475 previous year). Also as of July 3, Texas had 463 rigs (464 previous week, 526 previous year), and U.S. had 963 rigs (967 previous week, 1,052 previous year). U.S. lost 5 oil-directed rigs in the holiday-shortened week to a new total of 788.
Permian’s top counties in Texas – Reeves (down 2 to 63) and Midland (down 2 to 42) – both lost rigs, but its top counties in New Mexico – Eddy (up 2 to 54) and Lea (unchanged at 45) – combined were up. Other top counties in Permian as of July 3 included Martin (up 1 to 35), Loving (unchanged at 31), Howard (unchanged at 29), Pecos (up 1 to 22) and Ward (up 2 to 20).
New Mexico returned to No. 2 among states with 102 rigs after a gain of 3 in past week (also 99 previous year) as Oklahoma lost 5 rigs for a new total of 97 (141 previous year). Other leading states include Louisiana with 68 rigs (72 previous week, 57 previous year) and North Dakota with 55 rigs (55 previous week, 57 previous year). Other leading regions include Eagle Ford with 71 rigs (71 previous week, 81 previous year), Marcellus with 59 rigs (58 previous week, 53 previous year), Williston with 55 rigs (55 previous week, 57 previous year) and Haynesville with 51 rigs (53 previous week, 49 previous year).
Houston-based Enterprise Products Partners said Monday it will expand its facilities at the Houston ship channel to increase its ability to export crude oil, liquefied petroleum gas and polymer grade propylene. The new projects will increase LPG loading capacity by an additional 260,000 b/d by 2020Q3 and give Enterprise nameplate capacity to load up to 1.1 million b/d of LPG or about 33 million barrels per month.
Enterprise is adding refrigeration facilities to enable it to load up to an additional 67,200 b/d or about 2 million barrels per monthh of polymer grade propylene. And Enterprise is building an eighth dock at its Houston ship channel terminal with the capacility to load about 840,000 b/d of crude oil. That will increase Enterprise’s nameplate export capacity for crude oil at the Houston ship channel to 2.75 million b/d or about 83 million barrels per month.
A.J. (Jim) Teague, CEO, said, “Our integrated midstream system, including our Houston ship channel terminal, is providing Texas products with access to the highest value markets, including international markets.”
Enterprise added, “Enterprise estimates that by 2025 exports of U.S. crude oil will increase from 3 million b/d to 8 million b/d and the domestic LPG export market will double from 1.4 million b/d to 2.8 million b/d. Much of this growth is being driven by increasing production from the Permian Basin.”
Researchers at Wood Mackenzie said Permian Basin will need additional crude oil takeaway capacity of up to 500,000 barrels per day by the end of the next decade to accommodate increasing production. A moderate overbuild of pipeline capacity is expected in the early 2020s when current pipeline projects are completed. Midstream operators are expected to add about 4 million b/d of new capacity bound for the U.S. Gulf Coast by Dec. 31, 2022 (more than 2 million b/d to Corpus Christi) that will result in 2-to-3 years of overbuild, Wood Mackenzie said.
Analyst John Coleman of Wood Mackenzie added, “We are in the midst of one of the largest crude infrastructure investment booms in U.S. history with much of the investment focused on the Permian Basin. As massive as this current investment wave is, we don’t think the story is yet finished. Additional capacity adds will be needed again by the end of the next decade.”
Development Capital Resources said June 19 its subsidiary initiated a drilling and development joint venture with a private operator in Permian Basin’s Wolfcamp formation. DCR said it will invest $165 million in the joint venture and will participate as a working interest owner in the drilling and completion of identified drilling locations. Drilling has started, DCR said, and will continue through 2020. DCR has offices in Midland and Houston. The DCR subsidiary is capitalized by funds managed by affiliates of Ares Management Corp.
Houston-based Enterprise Products Partners said Tuesday it recently began service of the third train at its Orla cryogenic natural gas processing plant in Reeves County. The completion of the final announced processing unit at Orla increases natural gas processing capacity at the facility to 900 million cubic feet per day and allows Enterprise to produce more than 140,000 b/d of NGLs. Enterprise now has the capacity to process 1.3 billion cubic of natural gas and produce about 200,000 b/d of NGLs in the Permian Basin.
A.J. (Jim) Teague, CEO, said, “And we are not through yet expanding our processing capabilities in the Permian. The Mentone cryogenic natural gas processing facility in Loving County, which will have the capacity to process 300 MMcfd of natural gas and extract in excess of 40,000 b/d of NGLs, is on schedule for completion in the first quarter of 2020.” Orla and Mentone link Enterprise customers to the company’s integrated pipeline network, including the recently completed Shin Oak pipeline and Texas Intrastate natural gas system.
… but someone’s got to create the footprint, build the approach roads, and do all the other site work that must happen before the “real work” gets started. Dirt work is elemental in the Permian Basin.
By Paul Wiseman
They may not move Heaven—although it may seem like it sometimes—but they do move lots of earth to prepare Permian Basin sites for wells, frac ponds, and even wind turbines.
Independent companies like R. R. Huffman Contracting lay the groundwork for operators large and small to drill and produce the hidden minerals. Sometimes that situation leads to panic on the part of the producer, says Ron Huffman, the company’s founder and president.
“There’s only so many of us around that can do this,” said Huffman. “Then they [producers] get in a panic situation and they bring in people from other areas” to do the work, and those companies may not be familiar with the unique conditions in the Permian Basin. “The terrain, the climate, everything else is different here from anywhere else in the world.
“It resembles a sandy beach and a hard rock, all at the same time,” Huffman said.
Demands made on any dirt company, local or imported, can be over the top. Many times the operator will have contracts with drillers and others who, when they have finished one location, need to move to the next location or the operator will owe them money for simply waiting around, if the dirt contractor hasn’t finished the next location in time.
“We’re the easiest ones to push around,” Huffman said, because dirt companies are paid by the job, not on a contract basis. So operators tend to want big jobs done in a big hurry.
For imported dirt companies unfamiliar with the sand and the rock, it can be a challenge to learn the terrain quickly enough to do the job on time and to specifications.
E&P companies often tell Huffman, “We’re going to end up paying $25,000 a day if we don’t have a place for this drilling rig to go. You [Huffman] are telling us it’s going to take 7-9 days to make this pad. We’ve only got four. We’ve got to get this done now,” they will insist, according to Huffman.
Even for experienced local dirt companies, short lead times can bring difficulties. One of the ironies Huffman observes lies in changes in the nature of the pads themselves.
In the old days, “Your locations, generally, were there from 9 to 21 days, that was it,” while drilling one vertical well. “That’s all it had to last. Now, you’re having to keep a rig on a hole for sometimes up to six months,” Huffman said. To make a pad last longer, greater care must be taken in the preparation.
“Number one, if the material in the area won’t satisfy the requirements, you have to go outside that area, sometimes up to 20 miles, to get decent materials to build it out of,” he said, citing the need for caliche in particular. Some caliche washed out or blows away before the six month period is up.
Just the materials transportation issue can cause a job that would have cost $50,000 to cost $250,000, he said.
Another issue is the size of the multi-well pads. “The size of their footprints gets bigger—and bigger—and bigger. They have as many as eight mobile homes on one location now for people to stay in.” There is also space for safety people, pipe racks, multiple spots for the drilling rig and more. “These locations are huge, and when they leave, they are one solid half mile to drive the circumference of.”
Business has yet to slow down for B&N Contractors, says the company’s Permian Operations Manager, Michael Sneed, noting, “We’ve been very lucky.” When asked if that meant most of their clients were still drilling, he answered, “Today….”
The company is busy enough to have looked into subbing out some of their work to other, less busy contractors.
B&N is headquartered in Haynesville, Louisiana. Sneed is at the company’s Pecos, Texas, office, which was established in 2011. In addition to drilling pads, they do other dirt work, including pipelines and more.
Sneed would like to add about 10 people to his workforce, whose current count is about 100. It’s a shortage that he says has pretty much been a constant since 2011. The challenge, as always, is not just to find people, but to find qualified and reliable people—and those with a commitment to safety.
Concerns about commitment to safety have caused Sneed to avoid hiring a number of otherwise seemingly qualified people—but sometimes those high safety standards have actually brought people his way.
“I have a couple of really good guys I’ve hired out here, who came to work for me strictly because where they were working at before was hiring [just] anybody, which made these guys not feel safe where they were working,” he said. The men contacted B&N because they had heard of the company’s safety record.
Of the 100 employees, Sneed says about 25 or so have been with the company for 10 years or more, while the rest average much less, a more or less normal situation in boom times.
The presence of those long-timers has allowed the company to avoid the high cost of using GPS technology in the grading process, although they were actually among the first to use another tool, laser technology. “We’ve had the laser equipment for a year longer than most everybody else has, and the GPS stuff, we’ve veered away from that a little bit,” he said. While they did use GPS, he noted, “We probably won’t do much more of it,” not because it doesn’t produce good dirt work, but because his experienced people “can essentially do the same job without the GPS—so we save a couple hundred thousand dollars per machine by using something other than GPS.” With about 90 “pieces of iron,” as he refers to the machinery, that would be quite significant savings.
Still, Sneed listed hiring as a top concern, noting that only a handful of his employees are from Pecos or elsewhere in the Basin. “I have four people who are local to Pecos and 5-6 guys who are are local to Ft. Stockton. Outside of those 10 people, the closest to here anybody is from is 250 miles. Most of my guys are from over 700 miles away.”
This speaks as much about the lack of jobs elsewhere as it does about their availability in the Permian Basin.
Since they can’t drive 700 miles to and from work in a day, those distant employees work 7-day shifts. While on shift they live either in man camps, in rented trailers, or in their own trailer. The company also rents 12 offsite trailer houses and, “We’re building a yard to put our own trailer houses on—we finally figured out it [the housing shortage] was going to be here for a long time—after eight years I figured I’d give in. We have about 20 guys in RVs,” along with a rent house and the aforementioned personal RVs.
Some of their clients have parked trailers on pad sites to allow workers to stay there overnight instead of driving extended stretches of dangerous highways after a long day’s work, which Sneed says he greatly appreciates. Much of B&N’s work is around Orla and Mentone, tiny towns in Loving County, a county which counts only a few dozen permanent residents on its census.
Sneed himself used to live in Pecos, but found rent in Midland was half of what he paid in Pecos, so he moved to Midland and found it cheaper to drive a 200 mile round trip every day than to live in Pecos.
Being situated at one end of one of the most crowded stretches of highway in America—U.S. 285 between Pecos and Carlsbad, N.M.—has presented other challenges. The road is being widened, with work expected to be finished in 2020. In the meantime, as with any road project, it gets worse before it gets better.
With equipment that is 1-2 feet wider than the narrow construction lanes, Sneed’s crews have to take long detours to move from one site to another—sometimes traveling 200 miles or more for a 15-mile net relocation. Sneed says they spend a lot of time on the phone with TXDOT planning workable routes.
B&N is committed to its future in Pecos, with plans to build a new yard, training facilities, and more living quarters for its employees. The goal is twofold—to make the company more attractive to good employees and to give back to the community, Sneed said. Right after they opened the Pecos office in 2011, Sneed said the Pecos community was hesitant to embrace them, fearing they would be another company that left as soon as there was a downturn. “After the people here decided we weren’t leaving,” they embraced B&N with open arms.
In boom times, the moving of dirt—while not easy—is the least of a company’s concerns. Demanding work schedules combined with unemployment rates of barely two percent combine to make the job of hiring and keeping employees a very high priority.
The Lone Star State and its south-of-the-border neighbor have a relationship built on, among other things, energy. There is a dynamic there that is changing and, in some ways, becoming more reciprocal than in earlier times.
By Paul Wiseman
Trade between Texas and Mexico has always been sort of a tap dance, starting with the fact that Texas owes its existence to its immediate southern neighbor. During the years of the Republic of Texas—1836-1845—Mexico refused to trade with the Republic at all because it considered the new nation as not a separate entity, just a renegade territory that would soon be returned to the fold.
As we are now less than 20 years shy of the bicentennial of that separation, the two share a lot of economic interests, with energy being high on the list.
A bit of recent history would be a good starting place. Mexico nationalized its oil production in 1938 after about 40 years of what it considered foreign intrusion. Petroleos Mexicanos, or Pemex, was the result.
As is often the case, nationalization creates its own set of issues. Using profits as a sort of government piggy bank instead of reinvesting them into exploration and development is common to most nationalized oil companies, and Pemex is in that category The company is more than $100 million in debt as as a result of this piggy banking.
Mexico currently ranks 11th, globally, in production, as of 2018 figures. Since its peak in 2004, annual production has dropped by about 50 percent. A 2018 report by international bank HCSB ranked Texas, if it were still a country, at number three in production. The report credited the Permian Basin and the Eagle Ford with the majority of the output. If Texas and Mexico were still one, those numbers would be even higher.
In 2013 the Mexico government instituted Energy Reform, in which it amended the constitution to reintroduce foreign investment, with those changes taking effect in 2014. “They basically opened the market for competition—not only in oil and gas but also in electricity,” said Kent Williamson, director of Refining and Marketing, Latin America, for research firm IHS Markit.
“Most of the changes in the oil and gas side of things have been on the two ends of the spectrum,” he continued. “There have been quite a few foreign companies entering the upstream, E&P, production side of things [but] this obviously takes years to develop, especially the offshore wells.” So there has been only limited progress in increasing production levels.
In midstream, pipeline theft has been a huge issue that the new President, Andrés Manuel López Obrador, or AMLO, has vowed to fight. Along with that, most refineries are greatly in need of repair/upgrades, and many are running at about 25 percent capacity due to the drop in domestic production. This has created export opportunities for Texas, which will be detailed later in this article.
On the downstream end, Williamson has seen 30-40 new retail brands spring up in Mexico since 2014.
López Obrador has promised to invest the equivalent of $3.9 billion in Pemex, including $200 million in tax relief. Some kind of investment is greatly needed because Pemex is the world’s most heavily indebted oil producer, public or private.
This spring, Pemex CEO Octavio Romero announced plans to triple the number of wells drilled in 2019 over 2018 numbers, to about 506. The expectation is for those wells to yield 300,000 barrels per day in new output by 2022.
Many experts doubt, even with the influx of cash, that Pemex has the budget or expertise to accomplish this lofty goal.
There are also concerns that López Obrador, a vocal opponent of the 2013 energy reforms, could undo them. Williamson said it would be hard to reverse them on paper, but that they could be de facto undone by simple inaction.
“We don’t think he and his administration are going to reverse it completely, but they definitely have thrown a shadow over things with some of their words and actions. They [previous administration] changed the constitution [so] to totally reverse it they would have to change the constitution, and his party controls both houses of the legislature, but it’s not enough [to reverse the constitutional changes]. They would have to get some other parties to go with them.”
In the first quarter of 2019 Moody’s and other credit agencies downgraded Pemex’s credit rating, revealing that they consider the company to be in dire straits, Williamson noted. “The administration realizes that Pemex is in dire straits. They are $100 million in debt, with a lot of that due in the next 2-3 years, so they need investors. They’re not publicly traded, but they regularly put bonds out there and they need that money to reverse the decline in their crude production, to invest in their refineries and infrastructure and other things.” So while Lopez Obrador has made some threats about cutting off outside investment, Williamson also sees a pragmatic side of the new leader that may temper the actual implementation of such policies. “It seems pretty far-fetched that he would totally reverse everything.”
With refineries down and gasoline pipeline theft yet to be controlled, Mexico has been importing both light crude and refined products from the Texas Gulf Coast in recent years. And, said Williamson, gasoline consumption in the United States appears to have peaked in 2018 and diesel consumption is expected to do the same in the next year or two, so Gulf Coast refineries are feeling the need to boost exports to places like Mexico to stay at peak productivity.
Said Williamson, “Their refineries are in bad shape and they’re not suited for the relatively heavy sour crude slate, so they don’t make enough gasoline and diesel, and they put out a higher fraction of heavy fuel oil. So this new president, AMLO, has said they’re going to produce more gasoline and diesel, reduce imports from the United States, and they’re also going to build a new refinery.”
U.S. imports of oil from Mexico have decreased in recent years, according the U.S. Energy Information Administration (EIA). This is due to a combination of factors, the top two of which involve increasing production in the United States and falling production south of the border. Said Natalie Kempkey, economist, Office of Integrated and International Energy Analysis at the U.S. Energy Information Administration, “The United States has increased production from offshore and from the shale boom,” and production in Mexico has been falling since its 2004 peak.
“U.S. refineries are complex, so they can handle heavy and light [crude], which works really well for Mexico, because they [United States] can take their [Mexico’s] heavy crudes, refine it, then export it to Mexico as refined products. That’s why Mexico really wants to export that crude. Their refineries were not built to handle heavy crude.”
Much of the refined product headed to Mexico is gasoline and distillates. Most of the volume goes across the Gulf by tankers, with some going by pipeline and by rail, although exact numbers on each type of transportation are not available. Pipelines in the country are limited by the mountainous terrain, Kempkey said.
Natural gas is even more of an import issue for Mexico. “Ninety percent of their natural gas comes from the United States,” Williamson stated. Since these imports have become a politically sensitive issue, Williamson wonders if Mexico plans to reduce the use of gas for electric power generation and burn instead the too-abundant heavy fuel oil, which would negatively impact their carbon and other environmentally-sensitive emissions.
As of January 2019, the United States has been a net exporter of natural gas for 12 consecutive months, with much of that export going to Mexico in pipelines and as compressed natural gas (CNG) and liquefied natural gas (LNG). The U.S. Energy Information Administration Natural Gas Weekly Update 4/3/19 reports, “U.S. pipeline exports of natural gas to Mexico in January 2019 were 4.8 Bcf/d, a year-on-year increase of almost 0.4 Bcf/d. Much of the year-on-year growth is attributed to increased U.S. exports out of the Permian Basin in western Texas as new pipelines and natural gas-fired power plant projects within Mexico entered service. In addition, several existing pipelines in southeastern Texas completed expansions during the past 12 months, increasing cross-border capacity.”
Kempkey added, “We’ve been shipping natural gas to Mexico, mostly through pipelines—that’s the main way to do it—and we expect that amount of pipeline gas to increase as more natural gas infrastructure on the Mexico side comes online. A lot of that has been delayed so we haven’t seen that happen yet, but we do expect there to be an increase. We’ve also been shipping it through LNG from the Gulf Coast. Mexico was the number one importer of U. S. LNG, at the beginning (of LNG exports)…” but with the construction of more export terminals we’ve seen them fall to number two and South Korea has become number one.” She added that South Korea is the number one importer of U.S. LNG in the world.
Some gas is transported by truck in the form of compressed natural gas (CNG).
Williamson believes a proper balance of international energy trade can be a positive thing. That way, various grades of crude go where they can be processed, and the refined products go where they’re needed. Some of that is already happening in North America.
Most cyber threats come, unintentionally, from within.
By Paul Wiseman
“We have met the enemy, and they are ours.” Admiral Oliver Perry, September 1813
“We have met the enemy, and he is us.” Walt Kelly, as quoted in a Pogo poster, April 1970
The average person receives 12 spam emails per day, totaling 4,000 per year. About 156 million spam emails go out each day, with about 10 percent of them making it through spam filters. A blog by internet security firm AGARI includes their observation that, “IT Governance reports that once the emails have made it past filters, 8 million are opened, 800,000 recipients click on the links, and 80,000 of them unwittingly hand over their information to criminals.”
As scary as these statistics are, IT experts across the board agree, including Prabhu Tamilarasan, who is director of technology at SOTAOG, an oil and gas oriented digital technology firm headquartered in Houston. He notes, “…the weakest part of any system is usually the users.”
Adds Zedi Solutions’ Corporate Risk and Compliance Manager, Dean Greenhorn: “I personally think that the largest threat today is our people, compared to our systems.” Greenhorn says phishing schemes—where the recipient is asked to enter personal data such as bank or credit card accounts and passwords—“have become dramatically more prevalent over the past couple of years and will only become worse in the future.” This is because, “You’re just delegating your [hacking] work to someone else.”
This threat even has a name: the people firewall.
Some of the data breaches are due to carelessness, said Tamilarasan. “People use easy-to-remember passwords, reuse passwords, write them down, or share accounts with others.”
As much of a threat as phishing is to individuals, the dollar amounts increase dramatically when phishers get access to corporate accounts. In 2018 the FBI estimated corporate exposure had reached $12.5 billion. That amount does not include the man hours required to sort through and delete emails that do not achieve their goal.
When an email is compromised, its damage, much like Pandora’s famous box, greatly exceeds the immediate act. Said Greenhorn: “Email, hands-down, is our biggest method of communication. So when an attacker can leverage our exact email signature, [when] he can understand the contact network, including who talks to whom, and [when] he can put together an email chain that seems relevant,” the spammer can create a much more deceptive email. In a particular instance Greenhorn noted that the spammer had copied the company’s web address with one letter difference—close enough to get past a significant number of people.
Often it’s even more insidious, Greenhorn said. For example, if a domain name contains the letter “m,” a spammer can create one with the combination “rn” that is hard to distinguish from an “m.” Reading this sentence in print makes that point clearly.
That email was requesting a wire transfer to the hackers’ own account. “In some organizations that might be just part of business,” Greenhorn said, “whereas in other organizations, maybe not so much.” For a company that does not often do wire transfers, that would be a red flag. “When you flood an entire organization, it’s really easy—it only takes one person who doesn’t understand to escalate that and actually get the job [of theft] done.”
This scenario brings to mind the classic terrorist truth that the target has to fend off dozens or hundreds of attacks to be successful, while the terrorist only has to get through once to claim victory.
Finding that “weakest link” is much easier for a cyber-criminal than trying to hack directly into a system, get past a firewall and a security system—an operation that could take months or longer if attempted from outside.
Greenhorn listed other common intrusions, including “SQL injection attacks, cross-site scripting, denial of service, man in the middle, zero-day exploits, and internal employee threats (sharing confidential data, disgruntled).”
Both Tamilarasan and Greenhorn cite training as the best prevention. Greenhorn recommends including cyber security in the training of all new employees and that companies create a culture of security, with regular reminders to stay diligent.
Companies cannot afford to be lackadaisical about online security, Greenhorn contends. “Regardless of whether you’re in a private cloud or a public cloud, if you don’t have a security program in place and are not currently evaluating yourself against best practices, you’re no better off. That’s because security involves all company information, your people, processes, and technologies. These include:
Employee security awareness
Information security needs to be at board level knowledge, moving towards a cybersecurity culture
Protect your remote access into the network
Keep your software and hardware technologies up to date
Up-to-date network segmentation methods to reduce breach/attack spread
Outside providers are often called on to create spam awareness campaigns and to alert employees to the latest attacks because there is too much for an oil company itself to keep up with. The outside security company can also launch faux spam attacks to learn how many employees open suspicious emails—and which ones may need to be retrained.
One of the costs of defending against attacks, ironically, is in spam filters themselves. Filters with too-stringent settings can capture legitimate emails which, if not located by the intended recipient and retrieved, can lead to lost business, uncorrected problems, or other costly issues..
Tamilarisan noted that, while rare, some cyber attacks can occur for competitive reasons. “In oil and gas operations, threats come from competitors seeking after sensitive production data that would provide them an advantage. Hackers can also target automation control systems in order to affect production, or cause damage. This could be done for financial gain, political statements, exposure, or sometimes just to cause mischief.”
Greenhorn added, “There are ways you can take on more of a competitive advantage by hacking in and doing some sort of an attack that hinders production and those kinds of things. But especially for last year and this year, really the majority of things I’ve seen is that it doesn’t really even matter what the industry is, it’s just ‘How good are your employees? How quickly can I just get some money from you?’”
“With the automation tools that are available today, it’s just way too easy” to hack in from any country around the world, Greenhorn said.
Part of the challenge lies in improving security without compromising the flow of legitimate business processes, said Pini Huber, Senior VP of global sales for Israeli security startup Terafence LTD. According to their website, Terafence has developed a “firmware/microchip solution for cyber security connectivity.”
Employees are not the only threat in this realm, said Huber. Other threats lie in the growing network of programmable logic computers (PLCs) that control automation, along with—and this may come as a surprise—security cameras. Huber calls these “the digital weak links.”
In an email interview, he explained, “Cyber threats today to operational areas are increasing because of the lack of real ability to protect the real assets of enterprises and infrastructure—the processes themselves and the end equipment.
“The industry’s tendency toward… smart infrastructure—Industry 4.0—raises the immediate need for stronger network security and data transfer solutions. These smart enterprises will need to be able to remotely monitor and control the various processes and use the Internet and cellular network on a large scale. IP addresses, MAC (media access control), etc. are fertile grounds for strong cyber crime opportunities.”
No longer simply “dumb” pieces of equipment that simply send data through a network, security cameras “today are powerful computers with high resolution features, various applications (such as face recognition), the possibility of high quality zoom, and so on at relatively cheap prices.”
Huber said the fact that thousands of these cameras are active and on the network 24/7 makes them a readily available target for hackers. But again, the human element contributes to their vulnerability.
“Usually, these cameras are installed with the user name and password set by the manufacturer,” he continued, adding that most cameras are not monitored for malfunctions or hacks because most companies don’t realize their vulnerability. All this adds up to an open invitation to hackers, especially those involved in industrial espionage.
Huber says Terafence’s VSECURE product provides a hardware buffer between cameras and the receiving device, which allows the video to flow into the system while preventing unauthorized hacking into the camera—which would then allow access into the system as a whole. “Hidden spyware is automatically filtered,” he said.
Is it worth being on the web at all?
One might ask if uploading field data to the web is worth the risk. But not putting data online is even more costly, said Tamilarasan. “The benefits of immediate, always-available information outweigh the risks, but these risks can be mitigated through secure coding best practices, as well as basic security training for users. Keeping data on premise is possible but it requires a much larger investment in people, infrastructure, and time.”
The other question is whether the time and expense involved in erecting firewalls and doing ongoing training is worthwhile. It might be argued that none of that makes money; it just keeps a company from losing money.
Greenhorn disagrees. “Realistically, if you do get your security program up to a point where you do have a lot of integrity, theoretically, you can generate quite a bit more business.” Possible business partners may be more inclined to do business with a company whose security track record they are comfortable with than one where there are questions. He noted that this is similar to the way business partners view a company’s onsite safety record.
Like the Internet as a whole, there is plenty of good and bad to be found. Security experts unanimously warn the industry of the need for greater diligence—first with employees and second with software and hardware defenses—to protect information and the ability to keep operating.
The last downturn helped shift people’s mindsets. Weatherford’s latest project in Odessa shows what that change looks like.
By Paul Wiseman
“We’ve been in the Permian Basin for decades,” said Weatherford International’s Karen David-Green, “and this new facility allows us to consolidate 10 product lines under one roof. It also shows that we intend to always have a presence in the Permian Basin.” David-Green is Weatherford’s senior VP of stakeholder engagement and its chief marketing officer.
Out of 105 total acres at 710 S. Faudree Road, just south of I-20, 75 are currently developed with a network of buildings and open spaces. The facility is home to about 740 employees.
Expanding their product line over the decades through acquisitions, the company had amassed more than 50 separate locations in the Basin. The new facility will consolidate 21 of those locations, said David-Green. The ultimate goal is to get down to three in this area.
“Not only will this streamline our operation, with a single phone number and dispatch,” said David-Green, “it will create efficiencies in training, and will allow more cross-training, which is good for everyone.
“Plus,” she added, “with all our technicians in one place they can collaborate.”
The front of the facility is visible here in this moment shortly after the ribbon cutting.
Weatherford is looking to hire 80-100 people in jobs that include roles as crane operators, field technicians, engineers, human resources (HR), and accounting, among others, said Ellen Chin, Weatherford’s senior VP and chief human resources officer. Hiring so many people is no simple task, since every other business in the Permian is hiring, and many are seeking help in those same positions.
When asked how Weatherford can separate itself from the pack, Chin said, “When we hire someone, we want them to stay for their whole career. We present them challenges that can help them develop as a technician or into leadership.” With locations around the world, she noted, opportunities for promotions abound.
The company’s Western Hemisphere President, Mark Swift, acknowledged that one of the reasons for aggregating and cross-training is to mitigate the pain when downturns occur.
“If you want to get away from the boom-and-bust cycle, or minimize the disruption it brings to your business, you don’t want to go through training all these people and having them contribute, then having to let them go,” Swift said. Having everyone in one place means that when the activity in one product or service line is low, some people in that area can easily be moved to a busier line in the same building. “I don’t want to let people go—I want to give them a future and a career.”
Currently the company brings in employees from other, less-busy locations. Some work on a rotating basis and others move here, but all receive a housing allowance to help with the boom-town cost of living, Swift said. Weatherford also keeps a number of man-camp rooms on permanent rentals so they’re available as needed.
Weatherford’s bucking unit at their new facility southeast of Odessa.
Addressing recent news involving the company’s bankruptcy filing, Swift was quick to say Weatherford sees the Permian as a long-term investment. “To me, [the Permian] is the center of the U.S. oil and gas universe, and it has been for almost 100 years. We’ve been here for a long time, we’re going to stay here through thick and thin. I think our investment here shows our commitment to the Basin.
“We’re going to build out some more to the north end where we’ve got some more land. We’ll build that out next year,” he added.
In discussing new technology Weatherford has developed, Swift said he’s seeing Permian producers becoming more open to upgrades, especially since the downturn of 2015-16. “The downturn helped shift people’s mindsets. So if there’s a silver lining to that last downturn, which was pretty brutal, it’s that people stepped back and said, ‘We’ve got to do something different.’”
Of particular pride for the company is its bucking unit, which they say is the largest in the region. It’s capable of makeup and breakup of joints in pipes ranging from 5-inch to 20-inch diameters. It handles clamp pressures of 0-1,300 psi and breakup pressures as high as 50,000 psi. Personnel noted that the unit and its operators—it just needs one person at any one time—is available 24/7.
Weatherford expects to host gatherings at the facility on at least an annual basis to showcase new equipment and technology.
Paul Wiseman is a freelance writer in Midland.
This wireline truck was situated inside the main building.