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This episode of the Energy Pipeline is sponsored by Caterpillar Oil and gas. Since the 1930s, Caterpillar has manufactured engines for drilling, production, well service, and gas compression. With more than 2100 dealer locations worldwide, Caterpillar offers customers a dedicated support team to assist with their premiere power solutions.

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Welcome to the Energy Pipeline Podcast with your host, Russell Stewart. Tune in each week to learn more about industry issues, tools and resources to streamline and modernize the future of the industry. Whether you work in oil and gas or bring a unique perspective, this podcast is your knowledge transfer hub. Welcome to the Energy Pipeline.

00:00:52 Russell Stewart
Hey, everybody. Thanks for listening. Today I have two guests from. From Caterpillar today. My guests on the show are Michael Widen Feller, and Nagy Solemn. Nagy. Did I get that right with my Texas accent?

00:01:08 Nagy Salem
Yes, you did.

00:01:09 Russell Stewart
All right, well, I've done it one time. I'll. I'll probably not be able to repeat it, but Michael, you go by Mike and Michael or you're with Caterpillar. Are you here? Are you in Houston?

00:01:27 Michael Wiedenfeller
I am. I'm based in our Houston offices, the CAT Oil and gas headquarters.

00:01:31 Russell Stewart
Okay. And Nagy, you happen to be in Houston today. I think y' all are at some kind of Caterpillar customer conference or something like that. But where are you based out of?

00:01:42 Nagy Salem
I'm based out of the UK Russell.

00:01:45 Russell Stewart
Okay.

00:01:45 Nagy Salem
I'm here for a customer meeting with one of our largest customers from the Middle east over spend some time with our Houston colleagues and going through all our new technologies like the smart Agent management system.

00:01:57 Russell Stewart
Okay. And I think that's what we're going to talk about today. And then I think next month you're going to be at. At a peck representing Caterpillar. Is that right? Correct.

00:02:09 Nagy Salem
Yes.

00:02:09 Russell Stewart
So you'll be in Abu Dhabi and add a peck is November 3rd through the 6th. And I think Caterpillar is going to have a strong presence there. So today going to be. That gives us an opportunity to talk about the Middle east. And that's what I really want to. Want to focus on, to kind of set the stage for that. You guys are experts in what Caterpillar calls their Smart EMS system, is that right?

00:02:42 Michael Wiedenfeller
Yes, sir. Here to sell it.

00:02:43 Nagy Salem
Yep.

00:02:44 Russell Stewart
Okay, well, well, what is Smart EMS?

00:02:49 Michael Wiedenfeller
Smart Engine Management System.

00:02:51 Nagy Salem
Okay.

00:02:53 Michael Wiedenfeller
You go back 40 years, 50 years, drillers would just leave all the engines running. That's the. Having any potential slowdown because we got to stop to turn on an engine is just. It's not worth it. Let's just pay for the fuel. It's such A little concern. But in today's environment, you know, everybody's trying to be more and more cost efficient. For sure, real rigs are more efficient than ever before, but there's also the emissions concern. Right. And if we're consuming less fuel, then we're also putting out fewer emissions. And that is becoming a bigger, bigger priority for everybody, not just people in the West.

00:03:29 Russell Stewart
I think that's a very important point. And we're recording this for the Energy Pipeline podcast, which is, as was explained in the intro, sponsored by Caterpillar Oil and Gas. But because this is such an important consideration for environmental issues, we may simulcast this also on the OGGN HSE podcast.

00:03:52 Nagy Salem
So.

00:03:55 Russell Stewart
That'S. I'm really excited to find out more about that. So let's talk about the Middle East. Nagy, can you tell me about the drilling environment in the Middle East?

00:04:09 Nagy Salem
The drilling in the Middle east is very, very active. The growth there is phenomenal. They are looking at the land and they look at the offshore drilling. It's all across the Middle east from Iraq, Kuwait, Saudi, Oman, Egypt, or even in Algeria from North Africa. So there is a lot of activities going in the Middle east from drilling perspective.

00:04:39 Russell Stewart
Okay, and so what oil and gas drillers, what are the problems they face there? Are they the same as they are anywhere else, or are there things unique about the Middle East?

00:04:54 Nagy Salem
The Middle east, obviously, with the high temperatures, that's also another issue that we have. They have some concerns on. So we're always high specs for the drilling environment there. And also with the national oil companies, there are also a lot of focus on how do we reduce the emissions and also the fuel, because that's also something that the national oil companies are focusing also on.

00:05:23 Russell Stewart
So I'm glad to hear that there is an emphasis in the Middle east on trying to reduce emissions and being environmentally friendly, just like there is here in the States or offshore. Right? Correct.

00:05:37 Nagy Salem
Yes. We've got a lot of countries now in the Middle east are very focused on the impact of the emissions and they've got set goals till 2030 and 2050 on those emissions. So, yes, there are a lot of concerns on that. And we're all working together and trying to reduce that. And that's. This is usually the main topics around edipec.

00:06:02 Russell Stewart
Okay. And of course, they're trying to do this cost effectively. And I have a saying that the oil and gas industry isn't the problem with the environment. The oil and gas industry is going to be the solution to the environment. And one of the reasons they're going to be the solution to the environment is because they're learning how to be more HSE conscious, we'll say. But we used to think that if you were HSE conscious that meant it was going to cost you a whole lot of money. But we're figuring out ways to do this cost effectively, wouldn't you say?

00:06:43 Nagy Salem
Correct. Smart technology can lead to greater efficiency by reduces cost while supporting regional sustainability goals. And that's, that's also one of the main things that we're working on. And by cost effective, we're reducing the fuel cost and also by the new technologies.

00:07:01 Russell Stewart
Okay.

00:07:02 Michael Wiedenfeller
So I'd say for businesses in general, that's the easiest way to go. Be proactive on emissions because everybody always thinks to reduce emissions is to add costs. There's a lot of places where you can improve both at the same time. And business is identifying those and making investments that help not just their financial bottom line, but the global emissions and global atmosphere. So we try to work with our customers to identify where are the easy, low hanging fruits. The classic one across any industry is better insulation. So your cheaper energy bill on keeping the building cool. One that's very specific to oil and gas is gasification. Generally per unit consumed gas is 30% less emissions than diesel. So anytime that you can transition that energy production from diesel to gas, that's a 30% drop in emissions. And there's a lot of places, North America has been this way for a while where gas is cheaper. And so working with clients in the Middle east, more and more are having access to cheap gas. And how can we help you with burning more and more of that gas to be more environmentally friendly while not hurting the financial bottom line.

00:08:21 Nagy Salem
Yeah. For an example, like in Egypt, they're an importer of oil, but again, they've got a lot of abundant gas. They export gas. That's also another way of them producing the emissions is by utilizing the gas.

00:08:38 Russell Stewart
Yeah. And Caterpillar's been a leader in that for a long time now, right?

00:08:45 Nagy Salem
Correct. Yeah. From the dynamic gas blending that we're also been working on and the gas engines. Yes. So we've got a lot of solutions to be able to support our customers and reduce the emissions.

00:08:59 Michael Wiedenfeller
Yeah, have been a leader and continue. We actually in the drilling segment just released our second generation DGB kit in the last year. So that's taking bits and pieces of this proven technology, that proven technology. What we've learned on doing dual fuel over the last couple years and it is the best kit out there in the market.

00:09:19 Russell Stewart
Now, okay, and for the benefit of our listeners, DGB means what?

00:09:24 Michael Wiedenfeller
Dynamic ass blending.

00:09:26 Russell Stewart
Okay. All right.

00:09:27 Michael Wiedenfeller
Or dual fuel, if you're familiar with that concept. So blending both diesel and gas at the same time. So you take a traditional diesel engine that used to burn 100% diesel. We now update the software, add a bit of hardware so you can feed the engine two fuels and it'll combust both together to get its power.

00:09:48 Russell Stewart
Okay, so you combine two fuels, that's gas and diesel or.

00:09:56 Michael Wiedenfeller
Correct. Yeah. So we'll put right before the air goes into the cylinder, we'll inject gas into it and the computer will control to make sure that gas to air ratio is just right. And then when that gaseous air goes into the cylinder, we reduce the amount of diesel put in before the combustion, since there's now, you know, more energy in the air that came in. And so that's what allows for a dual fuel engine to work. A traditional gas engine or like a gasoline with your car will have a spark plug. And so that spark is what's making the combustion happen for the dual fuel, since it was historically a diesel. Diesel actually, when you compress it all the way, will self combust. And so on these dual fuel engines, we can't get to 0% diesel because we still need something there to make the spark. But we're getting near real close.

00:10:49 Russell Stewart
Yeah. And that's very interesting to keep up with that expanding technology. So Nagy, drilling over in the Middle east, is this what we would call conventional drilling or unconventional or what?

00:11:07 Nagy Salem
So we're talking about in the Middle east, commercial drilling. We've got a lot of activities there with the Middle East. I think we're looking at over some like pros, 800 brigs operating there in the Middle east, including Egypt. So there's a lot of drilling going on within, within that part of the world. We've got a lot of drillers from all over the world that would be from the US We've got from China, we've got the local drillers that also operate in there too.

00:11:43 Russell Stewart
And, and so this smart technology is improving upon some of these unconventional methods.

00:11:52 Nagy Salem
Yeah, yeah. So we've just introduced this to the, to edc, so the Egyptian drilling company. And again, they're seeing a lot of benefit from that. We've been working with them over the past year on this and they're starting to implement that within their sleep.

00:12:10 Russell Stewart
So how do the drilling crews react to this? Do they see smart technology as something that they embrace? How does it impact drilling crews?

00:12:22 Nagy Salem
The Drilling crews have been typically would be focused on just keeping all the engines running. That's how they operate. And having the new technologies coming in enhances the crew ability to perform their jobs better. So yeah, there's been some changes with that. There's been a lot of focus on the new technologies, not just from a caterpillar point of view within the drilling industry, but the drilling is hard to adapt to it. It's also the ability to meet the engines from turning basically going on and off. It, it's helping them there too. So it's giving them the confidence. So yeah, it's a bit of a change but yeah, it's taking time but it's supporting their overall movements.

00:13:16 Russell Stewart
And so how do you teach these drilling crews this new technology?

00:13:21 Nagy Salem
How would you go well through? There's been a lot of from our side, from catapult, we've been on the field with them. When we installed that, we've been working with them. We've been getting the dealer engaged on this. There's been a lot of education going on from our side and the dealers. So be able to get them up to that level. And again it's an automated process. So it's allowing them to kind of have the smart engine management manager before them. But there's been a lot of education and support.

00:13:53 Russell Stewart
And so these smart engine management systems, another cost advantage to this thing is it actually, it actually impacts equipment longevity, doesn't it?

00:14:10 Michael Wiedenfeller
Yes. So by turning engines on and off, we can push the engine to its peak or a better thermal efficiency state. So there's a better use of the energy coming in to energy out. And then also with the engines turning on and off means fewer engine hours. And so with fewer engine hours, a lot of the key metrics for like minor overhauls and major overhauls, which can be big out of service events for the engines. So the fewer hours run on an engine over the course of a year means you can have more years between your overhauls or major outage events for your engine.

00:14:49 Russell Stewart
So you see the oil and gas industry in the Middle east expanding this kind of digitalization.

00:14:56 Nagy Salem
Yes, yes, they're definitely taking that on. They see a lot of value on it. They're expanding not just the smart engine management, but also looking at the dynamic gas lending. So they're looking at all the ways that they can save on the fuel. The fuel is actually one of the largest from cost running within the operation of the rig. So from the cost of running and also the missions, they're seeing a lot of that Also would like to also talk about whenever the rigs are also operating that they're using the HMI on that, that they'll be able to allow them provide information to the crew that's easy to read and easy to control. A touchscreen panel which is also Caterpillar is providing that allows them to support the rig whenever they work there or the drilling crew. So with all that technologies and all the sea events we're seeing that it's a no brainer for them that they see a lot of benefits at the moment where we're trying to just keep up with trying to get the dynamic gas blending demand for them and that smart edge of management system. So they're taking it on and these.

00:16:18 Russell Stewart
Systems are, I mean this isn't just one system, this is a variety of systems. And that's one of the things you guys do is go in and try to figure out how to best coordinate all that. Is that right?

00:16:32 Michael Wiedenfeller
Yeah. So the system will work on multiple different engines and so most customers do have just a single type of engine. But as time goes on sometimes you can start to get mixed fleets and you have to keep certain engines together. This removes that requirement.

00:16:47 Russell Stewart
So Nagy, let me go back and let's expand upon something that we talked about a while ago and that is how smart technology impacts equipment longevity and drillers operational goals. You got any numbers on that? You got some specifics on that?

00:17:05 Nagy Salem
Well, the smart engine management for example in the field's been proven to reduce engine running time, for example on the drilling rig up to 25%. It cut fuel consumption up to 10% and improves diesel displacement up to 15%. So that's big numbered when we're looking at with the oil and gas, whenever we're trying to reduce our fuel consumption and again that also ends up reducing their emissions. So these are numbers that have been proven in the field and we're continuously to even see better numbers with some customers in the Middle East.

00:17:50 Russell Stewart
Now is there a way you can actually track these emission reductions?

00:17:56 Michael Wiedenfeller
Yes. New Gen 2 kits, if you get the telematics with it, which they come standard, it's just whether or not you plugged it in, we have dashboards that you can say hey, this is my serial number. This is the time horizon. We'll tell you this because you used Gen 2 or because you used smart EMS. These are the hours reduction on your engines, this is the fuel consumption reduction. So it all gets quantified for you.

00:18:22 Russell Stewart
Okay. So I know Nagy, that you're in Houston and your schedule is pretty cramped here and in fact I'm actually taking up Yalls lunchtime right now to record this podcast and so I really appreciate you guys accommodating me here and I don't want to take up all of your lunch hours. So as we conclude this thing, anything else you want to say about Smart EMS systems? Maybe I didn't ask all the questions.

00:19:00 Nagy Salem
I think from my side, especially the experience I've had with EDC and Egyptian Drill Company in Egypt. The drillers there are seen a lot of benefit from it. They're very excited. They see more benefit actually than what Karakov had advertised before and from that they are looking to implement it quicker than we we actually participated thought that they were going to be doing. So I'm very excited about the Smart Asia management system and also our drillers.

00:19:31 Russell Stewart
In Egypt are okay and that does bring up now you mentioned you've got a strong focus in Egypt. Anywhere else in the Middle East?

00:19:44 Nagy Salem
Well, Egypt is a focus for us because they import oil. Compared to Saudi Arabia or Kuwait, they have a lot of oil. Egypt has a lot of gas. So they've been always focused about how to reduce the oil consumption. So this is where the Smart engine management system was really helping them. And also the dynamic gas blending is the second part of that they're focusing on. We've just got some orders there from them on the dynamic gas blending. Now on Saudi Arabia and the rest of the Middle east, yes there is a lot of focus on the smart engine management system and the Caterpillar technologies. But what we've seen in Egypt was a drive because the oil is imported. So that was a big driver for them to try and reduce their oil consumption.

00:20:37 Russell Stewart
Okay, well guys, again thanks for taking the time. I'm going to give you the rest of your lunch hour back and if you're going to be over in Addipac, be sure and look up Caterpillar's booth. Thanks guys again for taking the time to do this. As always, thanks to everybody out there for listening. Please post us on LinkedIn. Tell your friends to listen to us. We appreciate the nice reviews we get and we'll see you next time.

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00:21:26 Russell Stewart
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