Shell Nigeria Exploration and Production Company Ltd (SNEPCo) has announced the start-up of production from the Bonga Phase 3 project.
Andrew Brown, Shell’s Upstream International Director, said: “This new start up is another important milestone for Bonga, adding valuable new production to this major facility.” Bonga Phase 3 is an expansion of the Bonga Main development, with peak production expected to be some 50,000 barrels of oil equivalent. This will be transported through existing pipelines to the Bonga floating production storage and offloading (FPSO) facility, which has the capacity to produce more than 200,000 barrels of oil and 150 million standard cubic feet of gas a day.
The Bonga field, which began producing oil and gas in 2005, was Nigeria’s first deep-water development in depths of more than 1,000 meters. Bonga has produced over 600 million barrels of oil to date. The Bonga project is operated by SNEPCo as contractor under a production sharing contract with the Nigerian National Petroleum Company, which holds the lease for OML 118, in which the Bonga field is located. SNEPCo holds a 55% contractor interest in OML 118. The other co-venturers are Esso Exploration & Production Nigeria Ltd (20%), Total E&P Nigeria Ltd (12.5%) and Nigerian Agip Exploration Ltd (12.5%).
The Bonga North West development began producing vital energy resources in August 2014. The field is located around 120 km off the coast of Nigeria in the Gulf of Guinea at a depth off more than 1,000 meters (3,300 feet). All six wells (four oil producing and two water injection wells) are now completed and on stream, contributing more than 40,000 barrels of oil equivalent at peak annual production. This is transported by a new undersea pipeline to the upgraded Bonga floating production, storage and offloading facility.
Fugro Scout, the new 83-metre geotechnical drilling vessel, has completed its maiden project in the Middle East. Since its maiden project in the Persian Gulf it has been successfully deployed in the Arabian Sea and the Red Sea, completing several geotechnical and geophysical survey scopes for various clients. The vessel is currently in transit to The Netherlands to execute a geotechnical survey for an offshore windfarm in the Dutch sector of the North Sea.
The new vessel is specifically designed to address the varied demands of both the shallow and deep water survey markets. With a twin tower drilling derrick over a centrally located moon pool, the Fugro Scout supports automated pipe and tool handling equipment to promote safe drill floor operations. A large soil laboratory provides a unique open plan working environment for geotechnical operators; other equipment includes both downhole and seabed sampling and testing systems rated for 3,000 meters water depth. The vessel is equipped with a dynamic positioning station holding capability (DP2) and is built to Comfort Class COMF-V(3) standards with quarters for up to 60 operational staff.
Like the Fugro Voyager drillship, the new Fugro Scout vessel represents a further advancement in marine technology and enables Fugro to standardize its global operations. A range of specialist equipment and subject matter experts enables Fugro to help customers reduce the risks associated with wells and subsea infrastructure.
On 2 October 2015, Statoil acquired First Oil’s 24% equity share in the UK license for the Alfa Sentral field for USD 15 million.
Alfa Sentral is a c.60 mmboe gas and condensate field planned to be developed as a tie-back to the existing infrastructure for Sleipner on the Norwegian Continental Shelf (NCS), which Statoil operates. Alfa Sentral will therefore increase the utilization of the Sleipner facilities.
“Statoil has set ambitious goals for future activity, production and value creation. This transaction demonstrates the potential on both the UK and Norwegian side of the Continental Shelf. The acquisition of this Alfa Sentral license increases the resource base and strengthens our efforts to further develop the Sleipner area towards 2030", says Mette Halvorsen Ottøy, senior vice president for the operations south cluster in Development & Production Norway (DPN).
Through this transaction Statoil has taken a 24% interest in UK Continental Shelf (UKCS) license P312 which, with license PL046 on the NCS, comprises the Alfa Sentral field. Statoil is the operator in PL046 with a 62% holding.
As a result, Statoil has increased its equity holding in a high priority project in a core area, deepening its presence on both the NCS and UKCS. The transaction is expected to close by the end of 2015.
Concept selection for the Alfa Sentral project was passed in September 2015. Negotiations to unities the field will commence shortly. A final investment decision is planned for late 2016 with production start-up in 2020.
The emergence of the floating liquefied natural gas (FLNG) concept has seen an unprecedented focus on development activity and has reinforced the commercial interest in these facilities. However, as the industry strives to make the concept a reality, in addition to the already formidable risks present in conventional projects, a plethora of distinctive risks associated with FLNG have now been added to the mix, with little industry experience to learn from.
Simply adapting risk and safety concepts of land-based LNG developments is not the solution, believes Suba Sivandran, Head of Oil and Gas at BMT Fluid Mechanics, a subsidiary of BMT Group. Suba highlights the unique safety concerns which need to be considered and provides insight into the benefits of using Computational Fluid Dynamics (CFD) to complement physical modelling through Wind Tunnel Testing and ensure oil and gas operators have confidence that the design is fit for purpose in all operating conditions.
Growing demand for natural gas as a clean-energy alternative to traditional fossil fuels has resulted in unprecedented innovation in the global offshore LNG industry. In the last ten years alone, producers have made rapid efficiency improvements within the value chain, first through the use of re-gasification vessels and then floating storage and re-gasification units (FSRU). FLNG represents the latest development in this fast-moving industry sector.
Floating above an offshore natural gas field, the FLNG facility will theoretically produce, liquefy, store and transfer LNG and potentially liquefied petroleum gas (LPG) and condensate at sea before carriers ship the product direct to market. Although this approach has its benefits, it also presents its own challenges. When considering the design and construction of the FLNG facility, every element of a conventional land-based LNG facility needs to fit into an area a fraction of the size, whilst maintaining appropriate levels of safety and giving increased flexibility to LNG production. Furthermore, the offshore environment and associated metocean conditions, including wave motions, can create significant challenges.
Advantages of FLNG units include a reduced use of materials, land and seabed and therefore, cost and a reduced impact on coastal habitats by avoiding pipelines, dredging activities and jetty construction. In addition, the flexibility of the concept allows for a gas field to be exploited and then theoretically, it can be simply moved to another location, rather than having to be decommissioned. Owners must anticipate future requirements and deliver long-term performance, which in turn, places even greater pressure on ensuring optimum design and asset integrity management of the facility.
As the number of proposed FLNG facilities increase to meet the demand for transportation of gas reserves stranded in remote offshore locations such as South East Asia and Africa, it is essential that the safety risks are fully understood within the concept design phase. These risks relate to: metocean conditions; impact on marine environment; possible likelihood and consequence of fire and explosion; security and evacuation and in-service maintenance. The effective management of all of these risks should involve a quantitative assessment to help optimise the design, incorporate mitigation measures and devise hazard and management strategies.
The greatest opportunities to reduce risks are during the initial hazard assessment stage within the conceptual design phase whereby an inherently safer design can be achieved. Once a more detailed design has been agreed, there may be limited scope to apply hazard avoidance methods. The offshore oil and gas industry is increasingly moving towards a more proactive approach to risk mitigation and away from a reactive approach. A formal safety assessment or safety case approach is a structured way of handling risks. Through an initial hazard assessment, hazards are identified and measured qualitatively. Certain hazards that are deemed to have the potential to cause a major accident event (MAE) are then taken forward to the consequence assessment stage where these hazards are then assessed quantitatively. In the final stage, hazards are quantified in terms of risk to personnel, environment and asset through techniques such as a Quantitative Risk Assessment (QRA) so as to demonstrate everything has been done to ensure that risks are reduced to as low as reasonably practicable.
Within the consequence assessment stage, Computational Fluid Dynamics (CFD) can be used as a design tool to achieve an inherently safer design. Through assessment of gas releases and fire scenarios and natural ventilation of the FLNG process topsides, recommendations can be made concerning process equipment arrangement and mitigation and prevention strategies. Optimisation of the process topsides layout can be achieved to ensure less congestion and less confinement. This can include physical separation of major components containing hydrocarbons and where necessary, the introduction of barriers (e.g. blast walls) to prevent the escalation of risk should a hazard be realised. CFD should be seen as a design tool used to design for scenarios that are credible whilst following a risk-based approach.
Wind tunnel testing can also help ensure we are designing for safety. Over the last six years we have carried out testing on seven FLNG designs to assist designers in understanding potential mean forces and moments acting on a FLNG vessel. Wind and current measurements can be combined to determine heeling moments for a stability analysis and wind forces and moments are also necessary inputs to analyses of the mooring and thruster systems. Similarly, operations within the offshore industry are becoming more complex and riskier due to ship sizes and vessels finding themselves in close proximity of one another. As such, it is important to understand the aerodynamic proximity effects associated with side-by-side operations through the use of wind tunnel testing.
Wind tunnel testing and advanced techniques such as CFD can play an integral role in helping to refine the design of an FLNG vessel. CFD should never be seen as a replacement to physical modelling, but rather a complement and the key is being able to interpret and understand the results of theory and experiment.
Bringing the two techniques together, the risks surrounding helicopter operations, which present another common MAE in offshore oil and gas, can be greatly reduced by using CFD and wind tunnel testing. Two of the biggest impacts to helideck environmental conditions are turbulence and hot turbine exhaust. Wind turbulence generated from airflow over obstructions such as the process topsides and turbine exhaust can significantly increase the risk involved with helicopter approach and landing.
Standards such as CAP 437 Standard for Offshore Helicopter Landing Areas and NORSOK C-004 Helicopter Deck on Offshore Installations provide guidance and a prescriptive approach to Helideck Operations and Helideck Design. Using CFD and wind tunnel testing together we can optimise helideck location and determine the best compromise between conflicting requirements so as to identify helicopter operating limitations likely to be imposed due to turbulence, downdraft or hot gases. With the CFD model validated against the wind tunnel testing, we can then rapidly run simulations testing further scenarios and optimise the design such as estimating the likely helideck downtime.
Developing advancement and most importantly, commonality in the methodology that combines reliable testing and simulation-based prediction of 3D wind fields and forces acting on large scale offshore vessels and floating production systems is key. Such an approach will provide operators and designers of these structures with the opportunity to drive forward these designs with ever increasing reliability and efficiency.
In today’s current economic climate when it may seem tempting to take short cuts and save on capital expenditure, optimising design early on in a project can help to not only reduce risks to personnel, environment and asset but also reduce costs by avoiding conservatism. A thorough approach to design and a clear understanding of the risks present to an FLNG project can also be used to increase confidence with investors and financial institutions. Taking a risk based approach to design will ensure there won’t be any nasty surprises further down the line.
RigNet, Inc. (NASDAQ: RNET), a leading global provider of remote managed offshore communications solutions, telecoms systems integration services and collaborative applications to the oil and gas industry, announced that it has signed an agreement with Inmarsat to offer Fleet Xpress, the maritime version of its Global Xpress service, to the oil and gas maritime sector. The agreement will enable RigNet to extend high-speed communications to offshore service and supply vessels within the oil and gas industry across the globe.
“RigNet differentiates itself in the oil and gas industry by providing fit-for-purpose technologies to help our energy customers operate remotely in a more productive, efficient and safe manner,” said Mark Slaughter, RigNet’s CEO and President. “The addition of Inmarsat’s Fleet Xpress to our energy maritime offerings will enable RigNet to deliver a high degree of service and functionality to this important sector of the oil and gas market.”
“We are continually looking to strengthen our partner network through working with organizations that have the length and breadth of experience, industry knowledge and commitment to best service the market”, commented Ronald Spithout, President, Inmarsat Maritime. “With the launch of Fleet Xpress, the world’s first hybrid Ka/L-band mobile satellite system, we are committed to driving innovation and bringing a new high-speed broadband service that will re-define maritime connectivity. By working with organizations such as RigNet, we can extend our market reach and open up new possibilities to the maritime community, offering competitive and innovative solutions.”
The aim of the development of 20,000 psi technology is to qualify the equipment required to develop future offshore fields with design pressures above 15,000 psi and temperatures above 250˚ F. These design pressure and temperature requirements result in line pipe wall thickness requirements as much as 1.9-in. for 8 to 10-in. diameter risers. This is beyond what the industry has already qualified and installed to date for fatigue sensitive deepwater risers.
The scope of the program will incorporate test pipe specifications, procurement and qualification of new welding and AUT procedures and comprehensive fatigue testing that will include the effects of sour service conditions. In addition, the project scope includes the development of feasible marine riser system configurations for a number of different host vessels.
Nuri Saglar, 2H project manager, said, “We will be pushing the boundaries of current pipe manufacturing and fabrication processes in the program, and we look forward to supporting Chevron in developing a fit-for-purpose welded riser joint for the next generation of high pressure, high temperature (HPHT) field developments.”
Ricky Thethi, 2H vice president, added, “We continue to be focused on the HPHT arena. Securing the Chevron production riser 20,000 psi qualification program further strengthens our HPHT project experience, which already includes drilling and completion/workover riser systems.”
Registration totals exceeded expectations as 13,500 global exploration and production professionals gathered at the Society of Petroleum Engineers (SPE) flagship event the Annual Technical Conference and Exhibition (ATCE) at the George R. Brown Convention Center in Houston over three days last week 28-30 September.
“2040: The Journey and the Destination—Diverse Perspectives” was the Opening General Session theme on Monday. ATCE 2015 General Chairperson, Gustavo Hernández-García, director of operations for PEMEX E&P, introduced a distinguished panel of industry experts who discussed current trends and the recent challenges faced by the oil and gas industry. However, discussion stressed the resilience of the industry, the continued importance of fossil fuel energy to the world economy, and reassurance the industry will come through a difficult period and be stronger. Panel member Scott Tinker, director of the Bureau of Economic Geology said the energy mix has changed little in the past 35 years. “It’s driven by security. Is energy affordable, available, reliable, and sustainable? A lower price over a long time extends the future of oil.” He adds, “I continue to believe that energy is the greatest industry on the planet. It underpins everything.”
2015 President Helge Hove Haldorsen focused his comments on “the new normal.” At the Opening General Session he said, “We need to continuously adapt, strengthen, and reinvent our industry because oil and gas will be needed for decades to come.” On Wednesday he wrapped up his presidential term saying, “We will see what the new normal will be.”
Nathan Meehan began his term as SPE 2016 president with his vision stating, “We are on a mission to educate and provide safe, affordable energy to improve people’s lives.” Meehan said his priorities for the year ahead will focus on stressing public benefit; mentoring the next generation; sustainability; as well as health, safety, and environmental issues.
The more than 400 technical presentations provided break-through and improved efficiencies for best practices for the oil and gas industry. The 500 exhibits offered promising new and enhanced products and services. Networking opportunities were expanded due to the Open Access Day on Wednesday where more than 400 people took advantage of the complimentary registration. The conference featured more than 45 technical sessions, 34 training sessions, and young professional and student events and activities.
Some new features of the conference included the ENGenious program, which resulted in standing room only presentations from innovative technology companies. Another new feature was the opportunity to access live-stream and virtual sessions for those who could not attend the conference.
Participating in ATCE were engineers, operators, scientists, managers, and executives involved in all aspects of the global petroleum industry. ATCE offered unique opportunities for people at all career levels - including young professionals and students - to meet industry experts, network with peers, and access new technologies.
ATCE 2016 will be held in Dubai 26-28 September at the Dubai World Trade Centre.
ABS, the leading provider of classification services to the global offshore industry, has granted Mitsui Engineering & Shipbuilding Co. Ltd. (MES) approval in principle (AIP) for a floating production, storage and offloading (FPSO) vessel design and an epoch-making construction concept.
This work is the result of an ABS/MES joint development project that began in March 2015. The "noah-flex modular design" for the FPSO and the flexible construction procedure, "noah-flex modular construction," were granted AIP on 15 September.
"ABS is working with industry to develop and employ new technologies," says ABS Chairman, President and CEO Christopher J. Wiernicki. "To effectively support Class of the Future, ABS has to provide the services the industry needs to make adjustments as operating conditions and markets change. Granting AIP to new technologies is an essential element of that future."
"ABS is one of the world's leading classification societies with excellent technology and a wealth of know-how in the offshore industry," says MES General Manager Dr. Taketsune Matsumura. "MES recognizes that ABS is our dependable partner and plays an indispensable role in developing and realizing such an epoch-making concept as our "noah-FPSO Hull."
The noah-flex modular construction processes consists of multiple steps that take place in parallel to shorten the construction time efficiently, with keel laying marking the commencement of construction. The first step of the project is FPSO design and hull construction, including propulsion and relevant machinery equipment/systems, which will be carried out by MES, Japan while construction of the oil storage component takes place at another yard, outside Japan for example. Following this process, the topside facilities will be subsequently/simultaneously fabricated in the different/the same shipyard and installed on the elongated hull, after which the completed FPSO will move to the specified operation site for hookup and commissioning.
The FPSO design will be reviewed for compliance with the ABS Rules and applicable International/National Regulations to make sure the unit is in full compliance, particularly when executing transits from one shipyard to another during construction.
"ABS recognizes that working with industry to advance technology is critical," says ABS Special Advisor Ken Tamura. "Engaging in this project with Mitsui provided ABS the opportunity to help shape the future of vessel construction."
Willard Marine, global leader in the manufacture of mission-proven boats, was awarded a contract to provide the National Oceanic and Atmospheric Administration (NOAA) with three aluminum Hydrographic Survey Launch Ships.
The three 28-foot Hydrographic Survey Launch Ships (HSLs) will be used on the coastal waters of the United States to conduct oceanographic surveys with hull-mounted and towed sonar units. A Cummins QSC8.3 engine capable of 510 HP with a ZF Marine 305-2 transmission will be used to power the boats. Outfitted to support traditional manned survey operations, the HSLs will offer additional flexibility to add unmanned autonomous capability. Two Willard Marine HSLs will be built for the 208-foot NOAA ship Thomas Jefferson, and an additional Willard Marine HSL will be built for the 231-foot NOAA ship Rainier, reported by NOAA to be one of the most modern and productive hydrographic survey platforms of its type in the world.
Using advanced sonar technology, the crews of the Thomas Jefferson and Rainier conduct hydrographic surveys for the primary purpose of updating NOAA’s suite of nautical charts. Commercial shipping, commercial fishing and recreational vessels all rely on accurate NOAA nautical charts for safe navigation of coastal water in the United States.
“For 35 years, Willard Marine has built dependable, mission-proven vessels for American and international government agencies around the world,” said Ulrich Gottschling, president of Willard Marine. “NOAA has been procuring fiberglass SOLAS rescue boats from Willard Marine since 2004, and we are proud to continue serving them with larger, aluminum survey ships to support their very important charting responsibilities,” Gottschling added.
The customized HSLs for NOAA are derived from a former SeaArk Marine commercial boat design that Willard Marine acquired the licensing rights to last year. The HSLs are scheduled to be delivered to NOAA in Fall of 2016.
Deep Down, Inc. (OTCQX: DPDW) ("Deep Down"), an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services announced it has received the largest order in the company's history valued at $13 million directly from a super-major operator.
This order includes one phase of new systems and equipment to be delivered in 2016 for installation in the Gulf of Mexico. The project is structured to ensure a continuous cash-positive position for the company.
Ron Smith, Chief Executive Officer of Deep Down, Inc. stated, "Receiving an order of this magnitude, during the current industry downturn, is a major vote of confidence in our ability to continue providing innovative solutions for our customers. We are humbled by the trust placed in us and are well prepared for the work ahead."
Aker Solutions has been awarded a contract from Murphy Sabah Oil Co., Ltd. (Murphy) to deliver the subsea production system for the Rotan deepwater natural gas development offshore Malaysia.
The delivery includes hardware for four subsea wells, a hub manifold, in-line tees, a connection system and production control system. First deliveries are scheduled for the second quarter of 2016. The contract will be booked as part of the company's third-quarter order intake.
"We're very pleased to team up with Murphy on this important development," said Ravi Kashyap, country manager for Aker Solutions in Malaysia. "We look forward to continuing the good cooperation we've built over several years having worked with Murphy on other projects in this strategically important region."
Aker Solutions has worked with Murphy on the Kikeh oil and gas project, the first deepwater development in Malaysia, and the Siakap North-Petai oil and gas development, a tieback to Kikeh. Both fields are in Block K offshore East Malaysia at the easternmost state, on the island of Borneo.
The American Heart Association has recognized Danos for its commitment to employee health and wellness. The company was named a Gold-level Fit Friendly Worksite for offering employees physical activity support, healthy eating options and promoting a wellness culture.
Danos employees benefit from a variety of health and wellness initiatives, including an on-site gym that can be accessed by employees 24/7. The gym offers treadmills, elliptical trainers, stationary bikes and free weights, along with men’s and women’s locker rooms with shower facilities. The company’s new 61,000-square-foot facility also includes the Bayou Market, which offers healthy, affordable options for busy workers like soups, salads and sandwiches prepared fresh daily.
Danos also sponsors a number of local events, like half-marathons, 5K races and triathlons, and even pays the entry fee for employees who participate. Company-wide fitness challenges build teamwork and improve employee health.
“Danos is a family company, so we believe in putting our employees and their health first,” said Paul Danos, executive vice president. “We’re proud to offer a workplace that supports a healthy lifestyle.”
NYC-based PIRA Energy Group Reports that global oil stocks will draw less than normal in 4Q15, increasing the inventory excess. U.S. commercial crude stocks built the week ending September 25th to a new record high. In Japan, crude runs dropped, but imports stayed sufficiently low to contain crude stock change. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
European Oil Market Forecast
Global oil stocks will draw less than normal in 4Q15, but the demand for inventory should set a floor for prices, limiting deterioration in the first half of the quarter. PIRA expects prompt crude prices to actually rally with stock draws later in the quarter but a sustainable rally will have to wait on physical balances substantially tightening in 2016. Gasoline cracks are declining seasonally. For middle distillates, high stocks will linger into next year capping diesel cracks. European refinery margins were the best in many years over the summer but are now coming off.
Bearish Storage Risks Ahead of Structurally Tighter Balances
Thanks to hot-weather-aided gas-fired electricity generation and tepid sequential production growth, concerns over storage congestion have diminished for the remainder of the injection season. Yet, bearish Henry Hub price risks persist in the near-term landscape; in particular, Producing Region stocks are still headed to an all-time end-October high.
Western Grid Market Forecast: September 2015
Strong cooling loads helped maintain California prices near July/August levels despite weaker gas prices. Mid-Columbia and Palo Verde markets both declined month-on-month. In the Northwest, below normal temperatures sapped late summer cooling loads while hydro output and net imports from BC held up well, supported by much above normal precipitation in the province. In the Southwest, seasonal cooling load declines reduced the call on less efficient generation and implied heat rates tumbled.
Coal Pricing Sinks Further on Softening Global Demand Growth Prospects
Physical coal prices again moved lower over the past month with weak macroeconomic data coming out of China, softness in the oil market, and generally unsupportive fundamentals. So long as China’s thermal coal imports decline year-on-year, it will be difficult for FOB Newcastle prices to rally. Both CIF ARA (Northwest Europe) and FOB Richards Bay (South Africa) prices also fell this past month, with slack demand from India driving the latter price lower. While Pacific Basin balances have the potential for tightening, weaker import demand in Europe and robust supply will keep Atlantic prices weak relative to Pacific.
European Electricity Markets Scorecard
The short-term pricing picture remains heavily tied to the French nuclear availability. Lower French nuclear availability adds a layer of risk, especially since colder weather is expected from the middle of the week. In addition, Belgium's nuclear output is now set to stay closer to 2014 levels, which is to say that we expect no change in the total Belgium net imports through the balance of the year. The increase in the NTC with Spain is also broadly bullish, but flows have been typically volatile in 4Q15, depending on Spanish wind conditions.
U.S. Crude Stocks Grind Higher W/W
U.S. commercial crude stocks built the week ending September 25th to a new record high, a level 167.3 million barrels over 2014 levels. Crude stocks had the highest surplus of the year. Demand growth has begun to sputter, with the latest four weeks of adjusted demand basically flat year-on-year. Gasoline demand and jet demand - possibly driven by accumulations for non-commercial uses - remain strong performers. Refinery turnarounds will continue to dominate crude balances for the next few weeks, although not enough to cause containment issues.
India Presses Forward with Gas Price Reduction
The Indian government reduced the price of the locally-produced natural gas by 18% for six months beginning Thursday (Oct-1), following a global slide in commodity prices. This is the second six-month revision since November when the government introduced a gas price formula linking it with international prices following demands from the industry that prices were too low to incentivize producers. Following the introduction of the formula, the prices went up by a third, but fell about 8% in the first revision in April.
Aramco Pricing Adjustments for November- Lower for Asia and the U.S., Europe Higher
Saudi Arabia's formula prices for November were released. Significant discounts were extended for Asian pricing, more modest cuts to the U.S., while European prices were mostly raised. The more generous terms to Asia suggest a desire to encourage more Asian refiner liftings, especially with imminent 2016 contract discussions. Pricing fundamentals in Asia suggested a less aggressive stance could have been taken. Refining margins in Asia had strengthened over the month, as had the economic incentive of running Saudi crude against competing grades.
Sluggish Tone of September U.S. Jobs Data Is Potentially Worrisome
The U.S. employment situation report for September was discouraging in key respects. The reported pace of job growth decelerated sharply in recent months, and the sluggishness was widespread across major industries. The unemployment rate was flat month-to-month, but a fall in the labor force participation rate was disappointing. As for GDP, the underlying pace of growth was probably decent in the third quarter, even though the drag from the trade and inventory sectors was substantial. Outside the U.S., August industrial production in Japan and Brazil had negative implications for growth.
Gas Regional Basis Monthly, September 2015
Mother Nature proved to be no match for gas market bears despite a valiant effort on her part in the form of record-breaking CDDs this month. Even so, many cash price markers, including Henry Hub are near, if not at, new lows for the year. And headwinds remain that could warrant even lower prices. In the South, the Producing Region set record highs for injections in both September and October last year, yet end-October storage still only reached 1,120 BCF — the lowest level since 2008. With September refills set to rival last year’s record, and stocks already nearing record highs, refills need to be upwards of 1 BCF/D lower than a year ago this October.
Asia-Pacific Oil Market Forecast
The global oil surplus has not materially diminished. PIRA’s 4Q15 balances now show a smaller commercial stock draw in the three major OECD markets than our previous estimate. The forecast draw is less than normal. Global economic weakness, centered in Asia, is a growing concern.
U.S. Ethanol Prices Increased During September
U.S. ethanol values rose during most of September as the market tightened, with inventories falling to the lowest level of the year. Manufacturing margins fell early in the month, though some improvement was achieved the last week of the month.
Pricing Parity Between Regions Strongly Implies More European Buying in 4Q/1Q
At this week's PIRA Client Seminar in New York, we will take an expansive look at the short and long-term outlook for LNG gas balances in the broader context of the global gas market. It is a story that will be making buyers smile and sellers looking for answers to difficult questions in the years to come.
U.S. July 2015 DOE Monthly Revisions
DOE released its final monthly July 2015 (PSM) U.S. oil supply/demand data today. July 2015 demand came in 430 MB/D higher than what PIRA had carried in its monthly balances. Compared to the DOE weeklies, total demand was lowered 253 MB/D. Total demand for July '15 versus July '14 (PSA) grew 696 MB/D, or 3.6%, which maintained similar growth from June. End-July total commercial stocks stood at 1,273.5 MMBbls, lower than the PIRA's assumption for end-July by 13.9 MMBbls, with product lower by 10.2 MMBbls. Compared to the weekly preliminary data, DOE lowered total commercial stocks 0.4 MMBbls. While both crude and product remain in excess relative to last year, the crude excess grew only slightly, while the product excess fell a more significant 8.6 MMBbls.
U.S. Coal Market Forecast
U.S. Consumer stocks of both natural gas and coal are poised to remain above comfortable target levels (especially for the latter), with downside weather risks a notable concern for this coming winter given prospects for continued El Niño conditions through early 2016. This poses downside price risks for gas, and thus coal over this coming winter.
Japan Data Show Storm and Holiday Impacts
Two weeks of data were reported due to the string of holidays September 21-23. Japanese crude runs dropped both weeks, but imports stayed sufficiently low to contain crude stock changes. Gasoline demand was disappointing driven lower by a typhoon and then displayed only modest holiday uplift, with stock builds for both weeks. Gasoil demand was much higher in the first week, and then sharply lower. Kerosene stocks drew marginally the first week, on continuing good seasonal demand and then compensated with a sizable stock build on lower demand. Refining margins are strong and supported by a late-season resurgence in gas cracks.
Weather-adjusted Balances Fueling Renewed Downward Price Momentum
In spite of a major leg-up from September CDDs, more than 30% above normal, PIRA’s balances show considerable weakness in weather-adjusted gas-fired electrical generation along with further weakness in the industrial sector.
Harvest Low Chatter
Every year around this time we hear the seasonal traders talking about harvest lows. Last year it happened on October 1st for both corn and soybeans, so the short memories are still intact.
International Coal Markets Scorecard
Coal prices continue to test new lows last week, with the temporary lifting of the Fenoco rail ban in Colombia and weaker oil prices pressuring the coal market lower. There has been a decided lack of bullish developments in this market, with very limited upside for demand (with considerable downside if China’s imports continue to implode), and not enough supply coming off the market. The gas and oil markets are not providing any support for coal prices either, with input costs for coal producing dragging valuations lower.
Global LPG Weekly Scorecard
Recent fundamentals developments in global LPG, including price issues, international arbitrage, trade flows, petrochemical margins, operating rates, spot and forward feedstock preferences, as well as the divergent regional weather influences.
Europe experienced a constructive pace of economic growth during 3Q15, according to recent activity and confidence indicators. Credit data also improved markedly, as the European Central Bank’s aggressive policy easing has begun to bear fruit. But the economic outlook has become somewhat uncertain recently, due to several worrisome developments. The list of concerns includes possible negative spillover effects from emerging market weakness, volatility in financial markets, and declining long-term inflation expectations.
Global Equities Rebound W/W
Global equity markets largely advanced the week ending October 2nd. In the U.S. equity market, materials and energy led the way. They had previously been two of the biggest laggards. Housing was the weakest performer and declined. Internationally, all the tracking equity indices advance strongly, other than Japan, which was neutral. On the week, the international equity tracking indices outperformed the advances made in the U.S.
PIRA is not in the business of calling harvest lows, but we certainly respect the seasonality of these markets. Corn has held up better than beans for the loud chorus promoting a bottom, but corn has most definitely benefited from a wheat market that has led the way on many occasions over the past two weeks. Corn remains stuck between soybean weakness and wheat strength, not a great trading environment.
U.S. Ethanol Output Up/ Stocks Down
U.S. ethanol production rose 6 MB/D the week ending September 25 to 943 MB/D, rebounding from a 19-week low. Inventories declined by 118 thousand barrels to 18.8 million barrels, slightly lower than stocks at the same time last year.
European Gas Price Scorecard
Russian exports in September were the second highest of the year and will move higher as the weather becomes colder. With the ruble weakened and prices falling in dollars, the incentive for Russia to export as much gas as possible is both a strategic and financial imperative. Russian gas prices are more or less dead even with spot prices, although some buyers seem to have a discount to current NGC and Gaspool levels.
S&P 500 Higher at Week End
The S&P 500 declined on a weekly average basis. However, a strong performance on Friday allowed the market to close higher on a Friday-to-Friday basis even in the wake of a weak employment report. Volatility was higher, while high yield credit (HYG) and emerging market credit weakened (higher yields). Overall, commodities declined again, but ex-energy was flat. With regard to currencies, many of the emerging Asia currencies continued to weaken against the U.S. dollar, as did the Brazilian real and British pound. The Russian ruble strengthened.
The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
Oil prices have stabilized in the $45-50 range over the last month, however, performances of major oilfield stocks have continued to suffer. According to analysis undertaken by DW, decline of a further 8% has been seen through September, down 39% year-on-year.
As E&P firms start to plan for 2016, the current oil price is driving expectations of further cutbacks in industry investment. Drillers have borne the brunt of oil price decline since June 2014. Declining rig utilization has been compounded by industry-wide cost deflation which has hit all companies reliant on providing services to the oilfield. According to DW’s World Oilfield Services Market Forecast total OFS expenditure has declined 36% over 2014-2015, while onshore and offshore drillers have seen an average of 57% and 51% of their value been wiped off stock markets respectively.
The oilfield equipment sector, however, appears to be faring better, with average stock performance declining only 20% according to DW analysis. Falling input prices, particularly steel, has led to an ability to better accommodate the tightening of operator purse strings.
Exposure to multiple upstream segments has aided the majority of manufacturers, particularly those involved in subsea manufacturing. The current subsea hardware backlog is high at $13.4bn (due to a significant number of contracts being agreed in the years preceding oil price decline) and this will take some 18-24 months to work-through, by which time we may see a raft of new orders if oil prices recover.
Manufacturers with capabilities outside of upstream oil and gas have fared better still, with healthy activity remaining in both midstream and offshore production systems. According to initial outputs from DW’s World Oilfield Equipment Market Forecast, only a 4% decline in midstream spend is expected in 2015, compared to 26% in upstream equipment. A detailed analysis of some 60 categories of equipment spend is due to be launched later this month. We will continue to follow the sector with keen interest.
Damen Marine Components (DMC), the oldest company in Damen Shipyards Group, has celebrated its 150th anniversary . DMC has grown from a very small shipyard established in Gorinchem in 1865, to become the largest nozzle builder in the world.
Via a live satellite link, around a 1,000 customers, employees, suppliers and colleagues, at its three main locations in Hardinxveld (the Netherlands), Jiangyin (China) and Gdańsk (Poland), will toast this historic occasion simultaneously.
Although DMC’s own roots were established in 1865 when Jan van de Giessen set up a business from a small wharf in the ‘Kalkhaven’, the history of shipbuilding in the area actually dates back to the 14th century. DMC itself was officially founded 10 years ago, when two Damen Group members were merged - Van de Giessen and Gdansk Engineering Works. GEW was actually the first company Damen Shipyards ever acquired outside of the Netherlands.
Looking back over the years, DMC Managing Director, Steef Staal told the audience how, above all, he believes DMC’s success is because it ‘has become a partner to its clients, rather than just a supplier’. “We help our clients and work together with them.”
Just in the last decade alone, DMC has nearly tripled its turnover to €36m and this has been possible due to Damen Shipyards’ willingness to invest in cutting-edge equipment and innovative production processes.
DMC has three large spinning machines, which are able to manufacture nozzles up 7.5 m in diameter. “Perhaps there is another builder out there able to make these spectacular nozzles but I am not aware of it!” He adds that it is not just about the spinning machines alone but crucially, the novel manufacturing technique deployed, which means that nozzles are made with only a single weld on the inner side.
As well as the vast range of top quality nozzles and rudders, DMC also manufactures shipbuilding constructions such as tailor-made stern sections for thrusters, crane foundations and crane arms.
Following on from the celebrations surrounding the 150th anniversary, DMC is also set to celebrate again, as it opens a second major production site in China in Jiangyin on November 27.
Damen has built this new production plant from scratch. At 11,000 sq m, the facility is nearly double its existing site at Suzhou. The facility will have its own spinning machine and state-of-the-art equipment including grinding and sanding robots and will see employee numbers grow to 120. The facility services Asia and the Middle East and US west coast.
“And as an employer in China, I would also like to stress that nearly all of our people have been with us from the early days. Damen takes care of our employees so we don’t see the rapid turnover of staff other companies do.”
Aart Vogelaar, General manager, Damen Marine Components Jiangyin Co., Ltd, comments: “At Suzhou we could not expand anymore so we decided to seek out another production plant. Jiangyin gives us expansion possibilities and it is also very close to our major customers, which have facilities in this area. This makes it very cost effective as we can deliver right on their doorstep.
“The new site will of course, be the usual Damen high quality and have quick delivery times. The new facility also allows us to broaden our offering with other products such as winches and thruster tunnels.
“Just as we did 10 years ago, Damen has again invested millions in China. This is not the easiest time here and I think this move shows the courage of Damen and how it takes the long-term view.”
Over the next few years, the Gdańsk site is also set to see a further 4,000 sq m added. In October, another, larger spinning machine is set to be operational. DMC Gdańsk already has a spinning machine able to manufacture nozzles of a diameter of 4.3 m, but the new one can handle nozzles up to 7.5 m. “Based on numerical data, we can programme any shape or profile required. Clients have found that such quality nozzles are not possible through traditional building methods. This is unique technology and I think it is reflective of Damen - the best ideas to get the quality required and the best technical solution.”
Steef concludes: “Jiangyin and the new, larger spinning machine in Gdańsk are just some of the latest investments of Damen, but DMC is continuously developing new equipment and fine-tuning its production methods. We continually aim to lower the number of labour hours and make processes as efficient as possible. We are making sure we are ready for the future.
“In the meantime on this very special occasion, I would like to thank all our customers, suppliers, partners and all our other relations for their cooperation, loyalty, faith and adherence during all these years. Without the fantastic colleagues in Jiangyin and Suzhou, Gdansk and Elblag and of course, Hardinxveld and Gorinchem, life would be dull and DMC unknown to you all. They are the spirit of our company. Together with our customers and suppliers we form one big Damen family!”
Aqueos Corporation, a premier subsea service provider for the offshore oil and gas sectors of the Gulf of Mexico and the Pacific West Coast, receives a prestigious safety award from a major Offshore Oil & Gas operator.
This distinguished award was presented to Aqueos President and CEO, Ted Roche, during a recent Safety forum and recognizes Aqueos Corporation for “Safety Excellence” for working over 505,592 hours without a recordable injury. “This is evidence of the hard work and commitment of our offshore personnel, a supportive and talented project management and administrative staff, and steadfast senior management all working as a focused team,” comments Ted Roche.
Roche further commented, “We attribute a large part of our success to continuous improvement, communication, and remaining focused on our core value of safety. Even in these difficult market conditions, the team at Aqueos looks forward to continued managed growth without sacrificing our core values.”
Aqueos Corporation, with offices in Broussard, LA and Ventura, CA, provides marine construction and specialty subsea services, including a complete range of commercial diving, remotely operated vehicles (ROV’s) and vessel-related services primarily to the offshore oil and gas markets.
The renaming completes the integration of key UK specialists - Fugro Seacore, Fugro Engineering Services, EM Drilling, Fugro Loadtest, Fugro Instrumentation & Monitoring and Fugro Aperio.
Renamed to reflect the depth and diversity of its offering, Fugro GeoServices Ltd employs close to 600 staff and undertakes seven key activities: nearshore geotechnical, offshore geotechnical, marine installation, onshore ground investigation, cone penetration testing, geophysics and instrumentation and monitoring. The company also has geotechnical laboratories and carries out a range of built environment surveys and testing.
Fugro GeoServices works worldwide undertaking site investigation and marine construction support projects-in challenging conditions.
The restructure is in line with Fugro’s continued integration of its global capabilities ‘without boundaries’ to deliver world class multi-service projects more efficiently in challenging market conditions.
The company works offshore and on land providing engineering and geotechnical services for clients in the energy, infrastructure and mining sectors worldwide. Projects include the Kribi port development (Cameroon), BP’s Azeri oilfield (Azerbaijan) and Flamanville nuclear power plant (France). Significant UK projects include Hinkley Point nuclear power station, Gwynt y Môr and Walney offshore wind farms, HS2, as well as the Garden Bridge, Shard and Thames Tideway projects in London.
Marcus Rampley, MD of Fugro GeoServices, said: “Our group delivers an amazing range of services to many sectors; we drill some of the biggest diameter holes in the ocean floor and test the foundations of the world’s tallest buildings, we inform the designers of offshore wind projects, tunnels and pipelines and we measure, test and monitor existing infrastructure throughout its lifecycle. We are making it easier for clients to contact us and work with us, and believe that restructuring as Fugro GeoServices makes us better able to deliver the complex multi-disciplinary projects that we are respected for.”
Dynamic Industries, Inc., a leading fabrication and service provider to the global Oil, Gas and Energy industries, announced that its specialty craft division, Dynamic Construction Services (DCS), has been awarded a key contract to provide fabrication, topsides installation and hookup services for a deepwater subsea tie-back in the Gulf of Mexico. Dynamic’s Harvey facility will be responsible for the fabrication scope as well as mobilization and management of offshore crews.
Matt Oubre, President of DCS said, “Dynamic is very excited about being awarded this high visibility project. We are confident that the focus on our Core Values – Safety, Quality, and Productivity – will allow us to successfully complete this project and pave the way for similar projects in the near future.”
West Africa, Mexico, Caribbean, South America and the Middle East.
Expanding global inspection, repair, maintenance (IRM) and light construction company Harkand has united its African presence under the leadership of Doug Fieldgate as Africa General Manager.
Doug has 23 years of experience in the African Oil and Gas market primarily focused on West Africa – he will be based in the North America and Africa operations headquarters in Houston and will lead the company’s continued expansion into the region working closely with its consortium partners.
The assignment of a general manager for Africa follows Harkand’s successes in the region including the recent contract award by Technip in Ghana providing survey services and the one year contract for a major oil and gas operator to deliver ROV, project management, engineering and technical support services in Nigeria.
The company is focused on continuing its growth in Africa to incorporate the complete Harkand solution for the clients in the region including diving, ROV, survey and inspection services as well as project management and engineering activities.
In order to achieve this rapid expansion whilst maintaining focus on delivery and safety, Doug will draw on his considerable in-region experience to create a cohesive offering for operators throughout the African oil and gas sector, building on the vast experience and knowledge base derived from Harkand’s existing centers of excellence in the Gulf of Mexico and the North Sea.
Harkand is committed to maintaining a robust local content position focused on skills transfer and training in any location it establishes a presence in Africa and is working closely with local, established organizations to ensure this goal is obtained. The company is dedicated to sharing knowledge, nurturing technology transference and indigenization of the workforce in any location it establishes a presence in Africa – this will support the region’s ability to grow independently and add value to the gross domestic product (GDP) and social enrichment.
Chief executive officer John Reed said: “Our strategic expansion into Africa will strengthen our ability to respond to the needs of our clients. Doug’s in-depth knowledge of the region and our successful collaboration with our local partners will ensure we achieve this goal in the various countries with a coordinated resilience.”
Mathieu Guillemin, non-executive director of Harkand and managing director at Oaktree Capital Management, added: “The expansion into Africa is another success in our overall strategy and we look forward to the continued progress. Financial strength is key for continuing to pursue the strategy and Oaktree stays committed to Harkand during the downturn in this cyclical market.”
Harkand provides offshore vessels, ROVs, diving, survey services, project management and engineering to the oil and gas and renewables industries. Headquartered in London with continually expanding operations bases in Aberdeen, Houston, Mexico, Nigeria, and Ghana, Harkand aims to be the leading subsea IRM and light construction contractor globally.