North American Oil & Gas Market: The Outlook for Satcoms in 2012 (Part1)

[Satellite News 12-13-11] The business of finding and producing hydrocarbons in a capitalistic market is a complex one, a constantly changing amalgam of political, economic, regulatory, and physical challenges. The oil & gas industry is a large consumer of satellite equipment, bandwidth, and services, and factors that impact energy companies have an ancillary impact on the satellite industry. What barriers that energy companies face directly or indirectly impact the Satcom Market?  And given the current state of exploration and production on the North American Continent, what is the outlook for satcoms in 2012 and beyond?

   Over the last decade, natural gas has become the darling of the Energy Industry. Horizontal drilling techniques have been developed allowing vast natural gas deposits trapped in shale formations to be unleashed. Natural gas is a clean burning fuel that doesn’t suffer nearly as much environmental baggage as does coal and there is enough supply that natural gas powered cars may become widespread in the not too distant future.

   There are seven major shale plays spread across the United States and the energy industry is quickly expanding into areas such as Pennsylvania, West Virginia, and North Dakota. As is often the case, the telecommunication infrastructure is virtually non-existent in the rural and remote areas and satellite is the technology of choice to supply bandwidth to remote drilling rigs.

   Special chemicals and millions of gallons of water are pumped under high pressure into a natural gas well after it has been drilled. The process, known as fracturing, causes the shale at certain depths beneath the Earth’s surface to shatter, allowing natural gas trapped in the rock to flow into the well casing.

   Fracturing has come under attack from various groups concerned about the possible pollution of underground aquifers. Legal challenges regarding the environmental safety of fracturing could derail or severely slow the development of new natural gas fields. The production of oil from tar sand deposits is also increasing at a rapid pace. Although found in many countries, Canada is blessed with three major deposits of tar sands in the Province of Alberta. Combined, these deposits represent a geographic area larger than the United Kingdom.

   Tar sand formations hold a viscous form of oil, which can’t be produced using conventionally drilled wells. Steam is injected underground into the well in order to reduce the oil’s viscosity and allowing it to flow. Canada has moved ahead of several large oil exporting nations, including Saudi Arabia, to become the largest supplier of crude to the United States.

A large number of pipeline projects are underway in the United States, almost all of them extensions of existing pipeline systems several hundred miles in length or shorter. The notable exception is the Keystone Pipeline Project, which would cut thousand miles across the American continent to deliver crude produced in Alberta to refineries in Illinois, Oklahoma and Texas. The transcontinental project has become a political football and has been delayed many years.

   It has been said that energy companies will go to the ends of the earth in their quest to find oil but it may happen literally. The Arctic Circle makes up 6 percent of the world’s land mass and limited exploration of the region has revealed that both oil and natural gas reserves are waiting there to be tapped. New production techniques will need to be developed to drill and produce oil and gas in the polar region.

   Regulatory hurdles are another major challenge energy companies face in the production of hydrocarbons. After the Macondo Well blowout, the Obama Administration suspended deep-water drilling permits in the Gulf of Mexico for almost a year. Clearly hostile to the Energy Industry, the administration also halted the permitting process for shallow water drilling, effectively shutting down oil exploration in the entire Gulf of Mexico.

   The growing influence of the U.S. Health, Safety and Environment departments within global energy companies cannot be overlooked when discussing important market changes. Safety and environmental issues have always been important within the Energy Industry but HSE initiatives have taken on an even greater role, becoming an integrated part of every business discussion made.

   The emergence of Enterprise Resource Planning (ERP) systems such as SAP, have allowed energy companies to operate more efficiently. Built around a common database, communications between the ERP system and all remote locations is essential to maintain synchronization. Drilling rigs, drill ships, remote work camps, remote refineries and maritime vessels must all have a reliable communications connection with the ERP system.

   “Energy companies and satellite service providers will face a number of new challenges in the future,” Harris CapRock President of Energy Solutions Keith Johnson told Satellite News. “The biggest challenge in the foreseeable future will be dealing with new regulations for offshore drilling being developed by the Bureau of Ocean Energy Management & Regulatory Enforcement. One of the anticipated changes involves the requirement for data replication and storage. Drilling companies must keep logs of important activities that occur on a rig and maintain that data for a period of time.”

   Johnson said his company also is seeing an increased demand for video services to and from drilling rigs. “The use of traditional video conferencing has increased but we are also seeing the wide spread use of video surveillance. The safety of workers on the rig floor is now being monitored by video as well,” he said. “A good example of how important video has become in the Energy Industry was during the Macondo incident. Within a 1.5 mile radius there were 30 vessels and 20 remotely operated vehicles (ROVs) in operation; each ROV was transmitting a video stream back to its mother ship, which then uplinked the video from the ROV.”