Energy Here, Energy There

By Patrick Brooks

Like many others who grew up in the harsh Canadian prairies, Jerry George Mikolajczyk knows what it’s like to get his hands dirty while taming the land. An accountant by training, his can-do attitude has gotten him involved in a string of noteworthy projects around the world. And now that he’s been state-side for a few years, his latest project is tapping his energy extraction expertise and flipping it (literally) providing a storage solution for surplus electricity. In a recent conversation with The Hitch, Jerry talks about his early career in the Canadian energy sector, some of his global projects, landing in the United States, and his prediction that Xun Power Corporation will be bringing flywheel energy storage technology to Alberta. 

The family farm near Ashmont, Alberta where nine-year-old Jerry learned to drive a tractor.
Tell us about your early days.

I was born in Edmonton and graduated from Ashmont High School in 1970 with the goal of being an engineer. At that time, the job market was not favorable for engineering graduates, so I decided to work for a few years. My first job was for Pelican Spruce Mills stacking lumber and in short order, I was promoted several times to eventually working as an Edger-man in the mill during the night shift and a split shift during the day as an equipment operator decking trees on the bank of the Athabasca River above the lumber mill.

The job at Pelican Spruce was a seasonal winter job and ended during spring break-up. After that I worked for another lumber mill near Fox Creek, Alberta for a few months and then for several months for Canapipe Construction stringing pipe connecting gas wells in the Stettler-Camrose area and Rocky Mountain House area until winter set in.

In January 1971, I was lured by my pen-pal to visit her in her hometown of Thompson, Manitoba. I arrived there in February 1971 to a freezing temperature of –57˚C! Next day my car broke down and I settled there working for INCO (nickel mine) in the smelter for almost two years before going to Red River College in Winnipeg, Manitoba.

At one point you were a heavy equipment operator and then moved into finance and accounting?

Operating equipment is natural for me, as I grew up on a farm near Ashmont. I learned to operate farm equipment when I was nine years old. After high school, I operated heavy equipment for Pelican, Canapipe, and for a summer at a copper mine in Leaf Rapids, Manitoba.

After a couple of years working in the smelter in Thompson, Manitoba, I decided it was time to continue my education. I took an aptitude test and it indicated that “Clerical” had the highest aptitude score and “Engineering” was a close second. “Clerical” included accounting as well as computers, and after researching universities and colleges, I decided to attend Red River College (RRC) in Winnipeg majoring in Business Administration-Accounting and with a minor in computer programming.

What were the circumstances that brought you to Alberta and getting involved in the oil patch?

My first job, after graduating from RRC with a Business Admin. diploma was with Canadian Bechtel working on Job 9776 – Syncrude and Job 10997 – Athabasca River Bridge, Fort McKay. Bechtel was recruiting at RRC, and I was the only one offered a job from 30 college applicants due to my construction background. At Canadian Bechtel, I did contract auditing and compliance.

Your O&G experience is quite diverse What can you tell us about your Syncrude involvement?

I was employed by Syncrude… twice. Once as Senior Attest Analyst (Operations Auditor) based in Fort McMurray during “Start-Up” in the spring of 1978 (before the first barrel shipped on July 30, 1978) until the fall of 1979. Rule of thumb: “One Year of Start-up experience is equal to four years of normal operations experience!” This is absolutely true as I completed operational audits of all their Mildred Lake operations from R&D, extraction, upgrading, utilities, equipment maintenance, shutdown maintenance, mining, warehousing, camp and administration. My exposure to these operations set the stage for my future career in the oil patch and energy sectors which was invaluable. To be there during start-up operations and actively participate in integrating and streaming them to improve the bottom line, improve internal controls while integrating staff, systems and procedures was priceless! Syncrude had several owners: Cities Service Canada, Gulf Oil Canada, Imperial Oil, the Federal government, the Alberta government, and the Ontario government. Syncrude went from just over 500 employees to over 5,000 employees in a few months, pulling in workers from its three O&G operating companies and hiring new employees which had never worked on an oil sands mining and extraction operation. At that time, Syncrude was the second oil sands mining and extraction company next to GCOS (now Suncor). The challenge Syncrude had was integrating the experience and procedures of three different O&G operating companies along with training new employees to ensure that proper procedures were followed while maintaining internal controls. You had to be there to experience it! A once in a lifetime opportunity, and I am very grateful to have been a member of the Syncrude start-up team.

My second term with Syncrude was from 1989 to 1990 on the “Mildred Lake Feasibility Study” based in Calgary, Alberta. During the economic oil bust in the late ’80s, Syncrude initiated the “Mildred Lake Feasibility Study” leveraging the avail- ability of O&G engineering expertise that became available at that time from another major O&G project that was shelved in 1989.

You were brought in for a Bi-Provincial Upgrader proposal slated for Lloydminster, SK at one point. What came of that project?

I joined the Bi-Provincial Upgrader team in 1987 as Supervisor – Costing, based in Calgary, after working for Commonwealth Construction on the expansion of the Joffre ethylene plant based in Joffre, Alberta. The Bi-Provincial Upgrader project, shovel ready, was shelved in 1989. After a couple of years, Husky Oil pulled the project off the shelf and built a smaller scale upgrader that went on stream in mid-1992.

What about the Kutubu Development Project?

After the Mildred Lake Feasibility Study was completed in 1990, I joined BP Canada (now Talisman Energy) as their Senior Field Auditor. This position gave me carte blanche authority over operational audits in O&G and mining. Yes, BP Canada at that time had two mining operations, gold and copper, and a limestone processing plant. My career as Senior Field Auditor for BP Canada was stellar, resulting in many improvements which directly impacted the bottom line. Cost control is my specialty. BP International heard of the successful results of my operational audits and seconded me to review the Kutubu Development Project (KDP). The KDP was a fast track, one year, one-billion-dollar joint venture between BP International, Papua New Guinea (PNG), BHP and Chevron with severe liquidated damages for non-delivery of oil.

The KDP, which was PNG’s first commercial oil field development, is located in the Southern Highlands of PNG. Oil was first discovered at Kutubu in 1986 and commercial production commenced in June 1992. The KDP comprises a network of wells that produce oil from the Iagifu-Hedinia, Usano and Agogo fields, a gathering system, on-site processing facilities (the Agogo and Central Processing Facilities), supporting infrastructure, a 270-kilometre crude oil export pipeline to the coast and a marine loading terminal in the Gulf of Papua.

My task was to head a team of specialists, consisting of engineers and cost engineers, to evaluate the project as to performance on costing and scheduling. We had a window of four weeks to complete the task and report back to the JV management team. We completed our task, issued the report. The JV management team immediately acted on the deficiencies reported and the KDP was completed on budget and on schedule.

What about the PTT Natural Gas Distribution project?

I was retained by Nova Pipelines of Calgary in 1997 to join the Natural Gas Pipeline Optimization team as the Economics Model Analyst. Nova Pipelines was building a 42″ natural gas (NG) pipeline for PTT (Petroleum Authority of Thailand) in 1997 when PTT retained Nova Pipelines to complete a study on their natural gas offshore and onshore systems to optimize supply of NG to meet growing demand. The study was completed in June 1997. On July 1, 1997, Thailand removed its support of the Thai Baht which caused the Thai Baht to devalue from 25 Thai Baht to 45 Thai Baht to each one US dollar. We were called back to remodel the economics of the pipeline optimization as the demand forecasts for NG were impacted by the devaluation of the Thai Baht. It was a great experience for me to learn the properties of NG and the value of the by-products from the liquids and gasses that come naturally with NG production at the well head. For example, 36%+- of the NG was CO2 (carbon dioxide) from the NG fields of the Gulf of Thailand. The CO2 has value by stripping it from the NG as dry ice thus increasing the BTU value of the residual NG.

From PEI to NB, the Confederation Bridge was costed out by Jerry while he was in Calgary.
What was your role in the Confederation Bridge project?

I was the CFO for SCI Engineers (SCI) based in Calgary. SCI, as the developer and owner, initiated the Confederation Bridge project, formerly called the Northumberland Strait Crossing Project. SCI did all the engineering and project economics in Calgary. I was responsible for the costing and the financial/economic modeling of the project. The award of the project was based on the lowest amount of subsidy the developer and owner would receive during the time frame of ownership, 35 years. The Confederation Bridge became the flagship of P3 projects in North America.

On a fairly regular basis, blue-collar Jerry can be found in and around worksite areas.
Why did you make your way to the US?

I fell in love! As CFO for SCI, I made many visits to SCI’s H3 Viaduct project in Hawaii. On one of them, I met a lovely lady on the leg between San Diego and Honolulu. We dated, I proposed, we got married, and then immigrated to the USA in 1997.

How does an O&G Operations Auditor or Construction Auditor get awarded CFO of the Year — Silicon Valley/San Jose in 2008?

Leadership skills and thorough construction expertise! The Santa Clara Valley Transportation Authority (VTA) retained my services for my expertise in construction, cost control and for my leadership skills. VTA’s budget for capital costs are several times the operating budget of the mature transit authority. The risks are in the various project costs, not the ongoing operating costs. VTA was undertaking the BART extension from Freemont, CA to San Jose, a multi-billion-dollar capital investment and needed to make sure that the government agency was positioned to undertake the investment.

Jerry stands before a one of the wells that Xun owned in Pennsylvania. For a white collar guy, he’s not afraid to get his hands dirty.
Was Xun Energy originally an investment in the well-sites in Pennsylvania in 2013–14?

The company was incorporated in Nevada on December 20, 2007 as Real Value Estates, Inc. In February 2010, there was a change of control of the company with the new shareholders desiring to enter into the renewable energy sector. On March 12, 2010 the Company entered into a Share Exchange Agreement with the shareholders of a private company for the purchase of the private company which had several agreements with Chinese cities and states to install and operate solar power plants.

The transaction did not close, and the Board of Directors changed the course of the Company to focus on O&G. The Company acquired several leases in Kentucky in February 2011 and began a re-work program. The re-work program was short lived with limited success. I became president of the company on June 1, 2011. The company then entered into an agreement to acquire operating wells and proven reserves in West Crockett County in Texas. The purchase agreement did not close on the West Crockett transaction.

The company acquired leases in Venango County, Pennsylvania in August 2012 to develop several shallow depth stripper wells. The first shallow depth stripper well was completed in June 2014. With the world O&G market collapsing in the fall of 2014, the company shut its only operating well and closed its O&G operations.

Xun Power was established to capitalize on the growing need for electricity storage in the US, right?

Yes, from 2006 to 2016 electricity grids in the US literally dumped over USD $446.67 billion of excess electricity (energy) into the ground because of grid inefficiencies due to a lack of energy storage infrastructure. This excess energy is a result of the mismatch between the supply and demand for energy. It is further amplified as renewable energy projects are completed, causing more energy to be produced in non-peak hours, and the grids do not have the storage capacity to capture the energy and as a result are forced to dump the energy into the ground.

Where did the name “Xun” come from?

In Spanish, “X” is pronounced as “S,” hence “Xun” as in “Sun.” The Board of Directors approved the name change to “Xun Energy, Inc.” to reflect the business of generating energy from high efficiency (39%) solar cells.

What can you tell us about the flywheel energy storage technology that you’ve been developing lately?

The technology is nothing new, as it is proven technology. Simply put, the excess electrical energy is converted to kinetic energy in a rotational mode and then back to electrical energy on demand when needed. Flywheels are used in data centers as a back-up bridge between the energy shutdown and the activation of the standby generators, used as re-generative brakes in locomotives and electric cars, and used by the grids for frequency regulation. The model we are developing is designed for grid capacity with a minimum rated release for duration of at least six hours. The rotor, floating on magnetic bearings, is in a sealed vacuum housing with the objective to recycle in a 24-hour period. The flywheel is not meant to be long term storage, rather to cover a time shift from a low demand period to a high demand period.

Are there plans to bring that technology to Canada at some point?

Yes, we plan to work with the Canadian grids to install and operate our units collecting the excess energy and re-injecting the energy as a power producer. As Canada moves more into renewable energy, there will be the timing difference between when Mother Nature (sun, wind and tidal wave) generates the energy efficiently and when the demand will consume the energy.

Do you see energy storage and fossil fuel technology working in tandem?

Petroleum technology will always be necessary as we deplete our fossil fuels. R&D is needed to maximize the efficiency of fossil fuels while mitigating the effects of the consumption of fossil fuels on the environment. Yes, I can see energy storage and fossil fuel technology working in tandem. Energy storage is imperative to maximize fossil fuel technology and efficiency. There are arguments for each case. Bottom line is that it has to make business sense and environmental damage mitigation sense. “Man landed on the moon, it started with a hammer and nail.”