10-fold increase in regulatory penalties, Macondo oil spill and greener base oils are key drivers in talks at the Drilling Fluids & Cuttings Management Asia Forum 2011

SINGAPORE (8 February 2011) – The time is ripe for an industry dialogue as Asian governments push to reduce environmental impacts caused by oil and gas exploitation amidst rising world energy demand and increasing exploration in highly difficult environments.

In the wake of the Gulf of Mexico disaster, oil and gas companies expect wide regulatory changes, affecting companies’ operational strategy, especially as safety and environment compatibility records will become a more important factor in gaining access to global reserves.

Top Asian drilling regulators from Department of Mineral Fuels Thailand, Ministry of Natural Resources and Environment Vietnam, Ministry of Environment Indonesia, Marine Environmental Protection Command Philippines and the Central Pollution Control Board India are among the regulators, who will discuss updates in regulations and the possibility of creating a regional standard for effluent guidelines governing drilling fluids and cuttings management at the Drilling Fluids and Cuttings Management Asia Forum on 22-24 February 2011 at the Four Points by Sheraton, Bangkok, Thailand.

Drilling fluids are critical components to drill oil and natural gas wells and on exploration drilling rigs, providing hydrostatic pressure to avoid formation damage and to limit corrosion, but most of them are toxic. The fluids come with any of the three base materials, which are water-based (which can be dispersed and non-dispersed), non-aqueous, usually called oil-based mud (OBM), and gaseous, in which a wide range of gases can be used. The dilemma is materials that show good technical performance and stability at high temperatures are frequently poor biodegraders and those that are the most chemically active can show the highest toxicities.

Asian governments have been vigilant in updating laws and decrees to avoid the devastation caused by drilling fluids and oil spill at the Macondo well in the Gulf of Mexico, especially with the recent concerns that some oil and gas companies tend to care more about profits than solving degradation problems.

“Part of the dilemma is that it's a fact of nature, namely, if a product doesn't breakdown, it's stable. Though I don't like to say it, sometimes it just feels like, especially more so with the majors, they are really not too interested to solve some of these degradation problems,” a drilling fluids expert said in a recent discussion set by the CESE.

In Asia, many environmental management activities in general and for oil and gas exploration in particular have been carried out to address this. At central level, Vietnam Environmental Administration (VEA) (formerly Environment Agency) was established in 2008 at the provincial level and local environmental management authorities had also been established. During a recent interview by the Center for Energy Sustainability and Economics (CESE), Mr Hoang Duong Tung, Director of the Center for Environmental Monitoring, said that the National Technical Regulation on Discharge of Drilling Fluids and Drilling Cuttings for Offshore Oil and Gas Facilities has been newly launched in December 2010 in cooperation with the country’s state oil company, PetroVietnam, which also has an environmental department to address environmental concerns from the increased exploratory activities in the country.

In Thailand, Mr Suparerk Sitahirun, Thailand’s Ministry of Energy’s Director of Mineral Fuels Management Bureau of the Department of Mineral Fuels (DMF) adds that with Thailand’s spend of 1,000,000 million baht for importing petroleum, establishing and maintaining sustainable energy security of the country with great efficiency and made it a priority mission to oversee and promote environmental stewardship and public participation. He will represent Dr Songpope Palachan, Deputy Director General of the Department of Mineral Fuels at the Forum.

Deputy Minister Nelly Hilman, of Hazardous & Solids Waste Management at Indonesia’s Ministry of Environment will further tackle environmental permitting procedures and guidelines governing drilling cutting management, following the boost in investments in oil and gas exploration resulting from the new cost recovery regulation that provides certainty for investors. Indonesia aims to increase its production from 952,000 barrel per day to an approximate of 1.2 million and 1.3 million barrels that it consumes per day.

Following the announcement of potentially up to 10 new sites added to the list of development blocks to be offered to investors as part of the 2010 Philippines Energy Contracting Round (PECR), Commodore Lino Dabi—Commander of the Marine Environmental Protection Command (MEPCOM)—was tasked to ensure that all marine environmental regulations are implemented and enforced and direct MEPCOM towards the achievement of its mission—which is to prevent and mitigate pollution at sea, rivers and tributaries in order to preserve a healthful and well balanced marine environment and resources of the country. All these updates regulations will be unveiled at the Bangkok Forum.

Yet Asia remains to have the highest non-aqueous drilling fluids (NADFs) and oil-based muds (OBMs) discharges, which are effective but highly polluting to the environment, totalling 12,200 tonnes of discharge, 500% more than its North American counterpart at only 2,419 tonnes, according to International Association of Oil & Gas Producers (OGP) October 2010 report. A drilling fluids expert said, “Just formulating a regulation is not good enough. It has to be strictly enforced and there should be watchdogs enforcing the rule.”

To respond to this, Mr Hoang said, “Recently, environmental inspection has been accelerated. The level of environmental penalties has increased 10 times compared to before. Environmental tax was passed by National Assembly in 2010. Environmental Police was established in 2009 and operates effectively.” He added that related laws, government decrees, national technical regulations and policies are constantly building and improving to meet with the real situation. Mr Hoang’s presentation aims to introduce Vietnam's legal framework for environmental protection in oil and gas exploitation.

In Thailand, apart from the regulations promoted by the government, forward-looking oil and gas companies are also in partnership with the government to achieve zero discharge offshore. Coinciding with Chevron’s well known success of improved drilling efficiency in the Gulf of Thailand is the successful reduction in drilling wastes over the same 30 years. A development well that once took 70 days to drill and complete is now done in just 5 days. Drilling fluids waste discharges have been nearly eliminated, while SOC (synthetic fluids on cuttings) percentage is reduced to below 10% and drill cuttings waste quantities have been reduced by 70% from those first “standardized” wells of the early 1980’s. Chevron Thailand will disclose further information on the pros and cons an alternative that they are evaluating for use in Thailand.

Moreover, the concern also springs from the lack of waste handling capacities in developing countries found in more mature oil and gas producing areas. With stricter regulations governing effluent substances for both onshore and offshore especially for challenging well profiles, an alternative environmentally acceptable ester-based fluid has been developed, which can replace OBM as it does not possess its polluting properties. However, a common criticism is that the cost of ester fluids is higher than mineral oil or synthetic petroleum based drilling fluids, reflecting the expense of producing them. Experts familiar with this development argues that the higher cost is offset by technologically superior properties, in particular by an increased rate of penetration, fewer drilling problems, reduced liabilities on spillage, lower disposal cost and superior environmental properties. Thus, considering all related costs, ester carrier fluids will offer a more economical solution.

Although environmental friendly ester-based carrier fluids are available since the early 1990s, the additional cost is deemed unnecessary. “The additional cost to use such system represents less than 2% of the total well cost. It also makes perfect sense to champion the use of renewable and environmentally friendly palm derived products in Southeast Asia since Malaysia is the world's largest producer of palm oil,” vegetable-based fluid proponents point out. They added, “the waste we leave on our seabeds will stay around for a long time and continue to impact us well into the future. Therefore, we must act immediately in order to prevent a public outcry later for our lack of serious attention and responsible action. Good practice and common sense should dictate the use of best available technology at reasonable cost.”

Whilst vegetable ester-based fluids are the least expensive technology in the long run, however many mixers tend to ignore this innovation. “As always on Drilling Fluids, this is more an art than a science. You can write down a musical partiture, but it still will require an artist to play it. All those approaches are correct to some extent, and each artist has its own way of playing the music,” quips a Brazil-based drilling fluids expert.

Indeed, it is about time that an enriching dialogue will allow the drilling players to hit two birds with one stone i.e., making a cost-effective and environmentally compatible drilling fluids solution a reality.

The Drilling Fluids and Cuttings Management Asia Forum is the only government-business forum for leaders in Asian drilling fluids and cuttings waste management, featuring regulations, case studies and high-level dialogues on sustainable development of techniques and technologies for oil and gas exploration. The meeting, which includes CEOs and directors from major international and local industry players, seeks to address current opportunities and challenges in the area of drilling fluids and waste management in Asia. A full-day forum will be supplemented by a pre-forum dedicated informal master class and a post-forum dedicated session on waste management and drilling fluids for special applications.

The Center for Energy Sustainability and Economics (Center for Energy) is an industry research centre (IRC) that works to bring top executives together in communities of learning and practice to act as a catalyst for generating high-value energy business insight and channel top expertise to where the world needs it most. Center for Energy meetings are powered by Arc Media Global, a B2B/G2B integrated international marketing specialist headquartered in Singapore.

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If you'd like more information about this topic, or to schedule an interview with the speakers at the forum, please call Rex Ian Sayson at (+65) 6844 2080 or e-mail Rex at drillingfluids@arcmediaglobal.com

The Center for Energy Sustainability and Economics (Center for Energy) is an industry research centre (IRC) that works to bring top executives together in communities of learning and practice to act as a catalyst for generating high-value energy business insight and channel top expertise to where the world needs it most. Center for Energy meetings are powered by Arc Media Global, a B2B/G2B integrated international marketing specialist headquartered in Singapore.

If you'd like more information about this topic, or to schedule an interview with the speakers at the forum, please call Rex Ian Sayson at (+65) 6844 2080 or e-mail Rex at drillingfluids@arcmediaglobal.com

PO Box 176 Robinson Road, Singapore 900326

This release was published on openPR.