Countries around the world are preparing for the U.S. sanctions on Iran to drop. In most cases, these preparations consist of finding ways to secure supplies from other oil exporters. Not only can it be challenging to locate a dependable supply channel for oil in the quantities required, taking oil grade into account can complicate matters even further. Not all oil pumped out of the ground is the same.
Finding Substitutes for Iran’s Oil
The US West Texas Intermediate is light crude that comes with low levels of sulfur contamination. Termed “sweet oil,” it is considered valuable because it tends to be readily refined into light distillates such as gasoline. Such oil isn’t well-suited to every type of application, however. Middle distillates such as diesel and aviation fuel are typically best extracted from heavy, sour crude, which is the kind that Iran pumps. When oil-importing countries around the world need to refine crude into gasoline, they look to the U.S. Heavy crude is important for other uses, however.
How Much Oil Will Be Lost?
Most of Iran’s oil exports used to go to Asia and Europe. Sanctions imposed by the previous administration came with waivers for some countries; there are none on the horizon now, however. Importers such as France and the Netherlands have stopped buying from Iran at this point, as has India.
Iran, the third-largest producer of oil in the world, exported 2.5 million barrels a day until renewed threats of sanctions came about. Now, however, Iran’s buyers are ending their agreements with that country and are arranging for alternatives. Iran’s exports fell by a million barrels a day in September.
Russia, Saudi Arabia & Iraq?
The heavy crude that Iran pumps is also to be found in Russia and in some countries in the Middle East. Russia is able to raise production by 300,000 barrels a day, and Iraq has a quarter of a million barrels in spare capacity. Saudi Arabia, in theory, is able to jack up production by two million barrels a day, and has promised to do so. Their production capacity has never been raised to those levels before, however. There is some uncertainty to do with their reach for peak capacity.
While American oil wells do not produce the heavy crude of the Middle East, drillers still benefit from this state of affairs. With significant portions of Russian and Middle Eastern capacity diverted to meeting demand for the middle distillates, supplies fall short for the lighter distillates. A state of tight supply raises prices. American producers are able to step up production by a million barrels a day to take advantage of these prices. According to the Energy Information Administration, this is likely to be key as a stabilizing influence as well, far into 2019.
Stepping Up the Game
According to Sigma Drilling Technologies, manufacturer of pulsation dampener solutions, mud pump pulsation dampener equipment and other gear critical to efficient drilling operations, drillers that run tight operations may be best positioned to take advantage of the rapid rise in demand that will take shape over the next few months. Any downtime for rig maintenance, even the routine kind, is likely to result in much revenue sacrificed. It’s important for rig maintenance crews to investigate new, innovative solutions.
Sigma Drilling Technologies offers drillers a flow-through fixture named The Assassin®. It is a design that offers internal baffling technology and rearranges acoustic signatures. Not only does this save on maintenance costs, it helps kill high-frequency energies generated in these systems that often result in damage. Investing in such equipment helps rigs run longer without the need for repairs.
The Charge Free Conversion Kit®, another product by Sigma, is a retrofit that turns gas-charged dampeners into designs that require virtually no maintenance. The Charge Free Dampener, which is one more innovatively designed product, helps reduce dependence on unreliable bladders.
High levels of reliability are a great asset in tight markets. For anyone in charge of designing or maintaining a drilling rig, high-efficiency, low-maintenance designs are likely to be more profitable than ever before.
