North Sea supply challenge

By Mike O'Driscoll
Published: Tuesday, 28 February 2012

Supplying the oilfield market is not for the faint-hearted, with the need to have 24/7 ability to cope with sudden changes in delivery schedules or requirements.

For many, the North Sea represents a rather grey, cold, and turbulent expanse of water separating the UK from north-east Europe.

However, for suppliers of bentonite, barytes, and certain other minerals, the North Sea represents a primary market centre - drilling materials for oil and gas exploration.

As of early February 2012, according to Rigzone, there were a total of 97 rigs active in drilling in the North Sea, and at that time the region led the world’s main drilling zones in rig utilisation, at 87.8% (for comparison, the Gulf of Mexico was 78.9%).

Oil companies are constantly drilling to map concessions, evaluate reserves, develop wells, and plan production.

In the mineral logistics chain for this market, specific mineral distributors act as the link between drilling mineral producers and their intermediate end market consumer, the drilling fluid manufacturers.

One example is Cebo International BV, based in Ijmuiden, the Netherlands, which supplies a combined total of over 150,000 tpa of minerals (mainly barytes and bentonite), cement and chemicals for the North Sea drilling market.

These companies source raw material worldwide, bring it to their own facilities, treat, process, blend, store, and then ship the mineral to drilling fluid manufacturers at locations around the perimeter of the North Sea (see supply chain diagram).

The drilling fluid manufacturers formulate their products from such imported additives, and then ship out the drilling fluids to the ultimate end user, the North Sea drilling rigs.

Drilling fluids and cementing are the key components in a cost-efficient and environmentally safe drilling operation (see panel for primary materials required).

However, as an example of a mineral logistics chain, the servicing of the North Sea market with minerals has dynamics like no other supply chain.

Raw material sourcing

Where the real challenges begin are in raw material sourcing. All raw materials used in drilling fluids must meet standard American Petroleum Institute (API) specifications, and that is in addition to any special customer specifications.

For example, barytes, with minimum 4.15 SG, is used as a weighting material in drilling fluids - the deeper the hole, the more barytes is required.

The mineral is also used as a “kill fluid” when high pressures cause kickback, and as liquid ballast in ships to improve their stability.

Key among barytes’ specifications is a low heavy metals concentration to prevent pollution of the environment.

Barytes supplied to the North Sea market is sourced from China, India, Morocco, and the UK. At present there is tightness in supply and prices are firming.

The other key component in drilling fluids is bentonite. The bentonite must have a high montmorillonite content, and thus sodium (swelling) bentonite is required.

When dispersed in water, the mineral forms a colloidal suspension, setting as a thixotropic gel. Its key slurry properties are yield, viscosity, filter cake, fluid loss and plasticity.

These properties enable bentonite to carry cuttings effectively to the surface, and prevent loss of circulation mud through adjacent formations.

Bentonite volumes supplied to oil and gas drilling originate from Mediterranean sources.

In the overall integrated supply chain from mine to North Sea market, as a share of the total cost factor, sourcing raw material takes the largest share.

For example, for the cost of supply of ground barytes, 50-65% accounts for sourcing (purchasing raw material, shipping to the Netherlands), then 20% for value added treatment (processing, storage), and 15-20% for transport onto the final destination.

24/7 supply service

One of the main characteristics of this supply chain, compared to other mine-to-market scenarios, is that the oilfield demands a 24/7 hour service at 365 days/year.

And here’s the killer - it is not always possible by any means to anticipate, and therefore plan in advance, the likely volumes of which materials are required and when.

In essence, while broad estimates of likely drilling activity can be projected, the action of drilling through the earth’s crust means that it is difficult for rigs to accurately predict the nature of the underlying geological formations, such as say, drilling depth, formation pressure and temperature, and circulation losses - all critical factors in volume consumption of drilling fluids.

This means that such oilfield suppliers must invest in suitable storage, handling, processing, and logistics facilities to be able to respond to this intense demand situation at any time.

“Sometimes large volumes are required in short periods of time - during drilling losses - such as 350 tonnes of barytes in bulk in two days, or 1,000m3 brine in 24 hours.” commented Sergio Sarafopoulos, managing director, Cebo International BV.

Other required tasking includes loading of supply boats at the fastest possible rates (for dry bulk or liquid), to enable quick turn-around; special export packaging (double shrink wrap, special strapping, jungle boxes, plywood caps); laboratory analysis; and overall ability to cope with sudden changes in delivery schedules or requirements.


Industry specifications and customer requirements demand a certain degree of further mineral processing prior to supplying the rigs.

Cebo, for example, operates grinding facilities with a production capacity for combined barytes and bentonite products in excess of 200,000 tpa.

Large bagging facilities are also needed of sufficient capacity, such as around 200-300 tpd, as well as a packaging line for 25kg and 50kg bags of some 150 tpd.

Demand for custom-made formulations necessitates facilities for the blending of minerals and additives.

Although most of Cebo’s drilling minerals are supplied to drilling fluid manufacturers’ sites for making up the drilling muds, Cebo also does substantial mixing itself.

An 8,000m3 capacity mud plant at Ijmuiden includes mixing stations and shear units for oil based muds, brines, and standard mud systems.

Equally important are Cebo’s cement dry-blending facilities and silo parks in the UK.

As well the unpredictable nature of rig demand for materials, Sarafopoulos cites the maintenance of consistent product quality as among the greatest challenges in the logistics supply chain.

“There must be no hiccups in regular shipments. There are very tight specifications for end users, and you can never take risks in having low inventories.”

With raw material sourcing accounting for such a large part of costs, Cebo uses its own staff to inspect mineral quality prior to shipping from source. A sound knowledge of freight rates is also beneficial to controlling costs.


Adequate storage facilities are a key part of ensuring prompt response to market demands at any time.

Cebo operates silos in five locations in the Netherlands and Scotland, with total combined storage capacities of 5,000 tonnes dry bulk, 10,000m2 indoor, and 55,000m2 outdoor.

High importance is attached to reducing contamination of different materials in storage, and segmentation of different grades is paramount.

Proppant materials, such as frac sand, require high volume indoor storage, and individual shipments might be as much as 1,000 tonnes per vessel.

Cebo has additional indoor storage for specialised products for the drilling fluids such as caustic soda, calcium chloride, guar gum, and sodium bicarbonate, as well as outdoor storage for commodity products like potassium chloride and salt.

Drilling fluids require big tanks and Cebo has over 100 tanks for different muds (water-, oil-, and brine-based) in storage requiring continuous circulation. Special warehousing also includes drum storage facilities.

One of the main challenges for any North Sea mineral supplier is to minimise the potential of congestion from one silo park to another, since they represent considerable a cost.


Ijmuiden’s proximity to the North Sea enables good access to ports in the UK, Norway, Denmark, Holland, France, and Germany, where the drilling fluid companies have their rig supply plants for onshore and offshore drilling.

At Ijmuiden, Cebo has quayside facilities for the quick turn-around of supply vessels. This includes a 1,200m2 quay and jetty with 15 loading lines for dry and liquid products.

Typical raw material shipments are in the range 1,200-2,000 tonnes, and perhaps going to two or three different ports, with various deliveries to silo parks.

Cebo also owns two specially designed dry bulk vessels with pneumatic self-discharging equipment with the capacity to transport and handle about 150,000 tpa.

Specific handling facilities at Cebo include those for loading proppants, and cold and heated brines, and separate pressure silos for mixed cargoes.

Outlook - Norway buoyant

The main demand drivers of this market are the price of oil and gas, the number of rigs, their utilisation rates, and then operation-specific factors such as drilling depth, formation pressure and temperature, and resultant circulation loss.

At present, the near future is looking good. Although the UK has been slow for the last year and a half, there are new discoveries in Norway, and as long as the oil price is high there will be development of new reserves.

Deloitte’s North West Europe End of Year Review released in January 2012, which analysed trends in exploration and oilfield activity in the region throughout 2011, highlighted a 34% decrease in drilling activity year on year for the UK Continental Shelf (UKCS).

A total of 49 wells were drilled, compared to 74 wells in 2010. This was the lowest level since 2003 and represents a 37% drop on the average number of wells drilled each year for the last decade.

Possible reasons are considered to be the current economic climate, delays in rig availability, and maturity of the UKCS Ð all negative to drilling minerals demand.

The UKCS is subject to some specific factors which have also contributed in part to the decline in drilling activity.

These include the Supplementary Charge Tax imposed in March 2011, that may have affected business confidence, given the lead time required for planning and drilling of exploration and appraisal wells. Although it is thought that the full effect of this tax change may not be evident until from end-2012.

Also, the region’s increasingly complicated geology, with deeper, high-pressure, high-temperature characteristics, means that wells are taking longer to drill than in previous years.

However, the UK trend contrasts with that of the rest of North West Europe, with the Netherlands, Denmark, and Greenland experiencing levels either above or equal to the previous year.

The number of new field start-ups decreased in 2011 compared to 2009 and 2010 for both the UK and Norway. However, the number of field development approvals has risen in both countries with a number of significant projects announced in the UK. These include the BP-operated Kinnoull, Clair Ridge and Quad 204 projects.

In January 2012, Drilling Contractor reported that exploration and potential recovery opportunities remain strongest in the Norwegian sector of the North Sea.

Estimates of recoverable assets for the Avaldsnes/Aldous oil and gas field, discovered on Norwegian Continental Shelf last year, have increased from 1.2bn to 2.6bn bbls, making it potentially the third-largest North Sea find and the largest since the mid-1980s.

Deal activity in 2011 remained positive with a total of 73% of the 118 deals recorded throughout North West Europe taking place in the UK (52%) and Norway (21%).

However, at the end of the day, geology and weather ultimately dictate rig activity whatever the projections and operations schedule, making North Sea mineral supply an exciting business for the likes of Cebo.

As Sarafopoulos observed on rig activity: “Often there’s not more planning than just a week ahead, despite a year plan.”

Cebo International BV

Cebo is a leading European supplier of industrial minerals, chemicals, and services to the oil and gas industry and other industrial markets.

The company supplies a combined total of over 150,000 tpa of minerals (mainly barytes and bentonite), cement and chemicals for the North Sea drilling market.

Cebo was established in the early 1970s by Cementbouw Bindmiddelen & Logistiek BV, and in 1976 was restructured as a 50:50 joint venture with Halliburton Corp., of the US.

In April 2007, Cementbouw sold its 50% stake in Cebo to Greek industrial minerals group S&B Industrial Minerals SA, a major European supplier of bentonite.

Since 2005, Cebo has been the main distributor of Baroid International Drilling Products, a subsidiary of Halliburton, for the European and Eastern region.

The company’s headquarters is in the port of Ijmuiden, the Netherlands, which is also site to Cebo’s main production facilities and logistics centre - smaller operational sites exist also in the UK.

Key oil and gas drilling raw material requirements

High performance drilling fluids are required to:

- cool and lubricate the drill string and bit

- support part of the weight

- remove cuttings, hold in suspension, and transport them to the surface

- control subsurface pressure

- stabilise the well bore

- seal the formation

- prevent circulation fluids loss

Water and oil-based muds and brines, composed of:

- barytes, bentonite

- accessory minerals: attapulgite, haematite, dolomite, gypsum, mica

- mud chemicals, salts, CaCl2 and KCl brines

Proppants used in hydraulic fracturing for well stimulation

- silica sand (frac sand)

- bauxite

- ceramic proppants

Oilwell cements:

- lightweight blends

- pozzolanic content

- rapid hardening

Source: from “North Sea drilling materials & logistics”, Sergio Sarafopoulos, presented at IM Roundtable Moving Minerals, 1 December 2011, Amsterdam.

Find out about the latest trends and developments at the upcoming IM Roundtable: Oilfield Minerals Outlook, 20-21 June 2012, Houston.