ExxonMobil announced on Thursday, January 12, 2017, positive results from its Payara-1 well offshore Guyana. Payara is ExxonMobil’s second oil discovery on the Stabroek Block and was drilled in a new reservoir. The Payara-1 well targeted similar aged reservoirs that were proven successful at the company’s Liza discovery.
“This important discovery further establishes the area as a significant exploration province,” said Steve Greenlee, president of ExxonMobil Exploration Company. “We look forward to working with the government and our co-venturers to continue evaluating broader exploration potential on the block and the greater Liza area.”
The Stabroek Block, located approximately 120 miles offshore Guyana, is 6.6 million acres (26,800 square kilometers). It is equivalent in size to 1,150 Gulf of Mexico OCS blocks and contains multiple prospects and play types. Esso E&P Guyana Ltd is the operator and has a 45 percent working interest, while Hess Guyana Exploration Ltd has 30 percent interest and Nexen Petroleum Guyana Ltd has 25 percent interest. Image courtesy. Hess
The well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Limited, and encountered more than 95 feet (29 meters) of high-quality, oil-bearing sandstone reservoirs. It was safely drilled to 18,080 feet (5,512 meters) in 6,660 feet (2,030 meters) of water. The Payara field discovery is about 10 miles (16 km) northwest of the 2015 Liza discovery.
In addition to the Payara discovery, appraisal drilling at Liza-3 has identified an additional high quality, deeper reservoir directly below the Liza field, which is estimated to contain between 100-150 million oil equivalent barrels. This additional resource is currently being evaluated for development in conjunction with the world-class Liza discovery.
“These latest exploration successes are examples of ExxonMobil’s technological capabilities in ultra-deepwater environments, which will enable effective development of the resource for the benefit of the people of Guyana and our shareholders,” Greenlee said.
Drilling on Payara began on Nov. 12 with initial total depth reached on Dec. 2. Two sidetracks have been drilled to rapidly evaluate the discovery, and a well test is underway to further evaluate the successful well results. The well data will be analyzed in the coming months to better determine the full resource potential.
The Veolia and Peterson partnership has been awarded two platform decommissioning contracts for recycling at their facility in Great Yarmouth. With an aim of reaching 96% recycling rates the work to recycle materials and assets is expected to begin in Spring 2017 when the platforms arrive onshore.
Great Yarmouth decommissioning facility
The contracts include the onshore receipt and disposal of offshore materials and several assets for a major gas producer. The work will cover disposal options for a number of production complex and surrounding satellite platforms currently located around 40 miles off the coast of Great Yarmouth. Recycling is expected to start this year and will take around four years to complete.
Recovering these platforms at the end of their operational life is essential. Now using the new facilities the valuable materials that they contain can be carefully extracted and returned to industry for re-use, and where possible assets that have further operational life can be sold. This, in turn, helps boost the sustainability of the industry.
Simon Davies, Decommissioning General Manager of Veolia said: “The industry has been looking for collaboration and these new contracts show collaboration in action right down the supply chain. Our partnership has worked well at a number of sites and projects over the last ten years, and we are very pleased to secure the first important contracts into Great Yarmouth.”
Ron van der Laan, Regional Director, Peterson added: “We have been working hard on this development since 2013. These contract awards are a significant milestone and step towards establishing Great Yarmouth as a centre of excellence for decommissioning in the Southern North Sea”.
The partnership has been providing onshore decommissioning services for over 10 years. Set up to cover the full decommissioning of platforms the services include decontamination, deconstruction, waste management and environmental services together with associated integrated logistics, marine and quayside services. To date the joint venture has recovered over 80,000 tons of offshore materials and achieved ‘excellent’ environmental assessment ratings in the process. The new works will help create approximately 10 new jobs, with further expansion and employment as the projects develop.
Supported by Peel Ports Great Yarmouth, Local Enterprise Partnership, Great Yarmouth Borough Council and Norfolk County Council the new decommissioning site at Great Yarmouth Outer Harbour aims to establish Great Yarmouth as the centre for decommissioning, and to expand to meet the growing need for this type of work.
Fugro has been awarded a contract from INPEX Operations Australia Pty Ltd (INPEX) for subsea services to be executed across the Ichthys facilities in the Timor Sea, located approximately 220 kilometers from the coast of Western Australia. INPEX is Japan’s largest oil and gas exploration and production company.
The five year contract encompasses field operations support, inspection, repair and maintenance (IRM) services and will run for five years, with options to extend. Fugro will provide all services through its office in Perth. The work will be performed under Fugro's QHSE system, which is in accordance with industry leading QHSE and operational standards.
Mark Heine, Divisional Director Marine and member of the Board of Management: “We are pleased to have secured this long term contract, supporting vessel utilization in the current challenging oil and gas market. This IRM contract fits well within our asset integrity business line, which centers around inspection and monitoring services, supporting optimal utilization and longevity of our clients’ infrastructure.”
In connection with the Award in Predefined Areas (APA) for 2016 Statoil has been awarded interests in 29 exploration licenses on the Norwegian continental shelf (NCS), 16 of these as operator, and 13 as a partner.
“The NCS is the core of Statoil’s business, and we are pleased with the awards in the 2016 APA round, which will allow us and the industry to continue exploring for profitable, high-value prospects. Combined with the numbered rounds the annual licensing rounds are the authorities’ main instrument for helping maintain exploration activities on the Norwegian continental shelf. New discoveries are needed in order to offset the declining production on existing fields on the NCS,” says Jez Averty, Statoil’s senior vice president for exploration in Norway and the UK.
Photo credit: Statoil
The award is on a level with APA 2015, when a record number of licenses were awarded. This year’s offer includes one commitment well, PL894, in the Norwegian Sea. Statoil is partner with an interest of 40 percent, Wintershall is the operator with an interest of 40 percent and Petoro is partner with 20 percent. The license includes a work commitment to drill an exploration well within three years of the award. A potential discovery will have a follow-up potential and may add important additional volumes to Aasta Hansteen. The award illustrates Statoil’s intensified search for new resources in the Norwegian Sea.
Over the past two years we have replenished our portfolio with interesting prospects. This is reflected in the exploration plan we have published for 2017. There we focus on the Barents Sea after high quality awards in the 23rd round and APA 2015. The awards in the APA 2016 round bolsters our position in the Norwegian Sea,” Averty says.
“Our commitment to the Norwegian Sea is demonstrated by the oil and gas discovery in well 6608/10-17 Cape Vulture, announced earlier. This license was awarded in APA 2015, and the well completed within one year of award. This is in line with our ambition to quickly clarify the prospectivity acreage we are awarded,” Averty says.
To meet customer demands, Trelleborg’s offshore operation collaborated with SubC Partner to design, manufacture and test a Distributed Buoyancy Module (DBM) for installation by a Remotely Operated Vehicle (ROV) on to an FPSO’s 12 inch production riser in a steep wave configuration. By having an ROV installable DBM, Trelleborg and SubC Partner were able to successfully execute a world first offshore project, which succeeded in replacing buoyancy modules on a live riser, without shutting oil production.
In floating production scenarios, pipelines such as flexible risers, cables and umbilicals are often required to be held subsea in specific geometric configurations to prevent over utilization of the system. To achieve this, one favored method is to attach discreet buoyancy modules to the outside of the pipeline. This process is usually done topside prior to the installation of the riser itself. Until now it has not been possible to attach the buoyancy on a live riser; the riser would have to be disconnected to perform the operation, causing production to stop, requiring expensive setups and significant cost in downtime.
SubC Partner works with its customers to lower cost of energy by developing innovative engineering solutions and executing well planned and efficient offshore campaigns. In this instance, to enable fitment of buoyancy on a live riser, a bespoke suite of ROV tools was developed by SubC Partner, while Trelleborg engineered a new type of buoyancy module.
Andy Smith, Customer Group Manager at Trelleborg’s offshore operation in Skelmersdale, says: “A variety of installation features and precise datum points had to be built in to the buoyancy modules to provide a known and repeatable interface between ROV installation tooling and the DBM components. Dimensional tolerances on a buoyancy element shell are generally intrinsic to the roto-molding manufacturing process. Attaining the stringent tolerances required for this project was made a success through collaboration between design, suppliers and tooling engineering.”
Lars Wigant, Director & Partner at SubC Partner commented: “Installation of the new ROV installed DBMs was a complete success. We were able to safely remove and install multiple modules in a very limited timeframe. We look forward to the next opportunity where we can use this field proven design on another project.”
Subsea Distributed Buoyancy Modules are typically used between a subsea structure and a surface vessel or platform. The clamping solution allows the DBMs to be fitted at any point along the length of the pipeline and the buoyant load must not migrate or degrade over the design life of the product. The two main functions of the DBMs are to provide uplift and maintain location along the riser.
The internal clamp to riser interface was based on a hinged version of Trelleborg’s ‘type 2’ friction clamp with nylon segments and rubber pads for added compliance The clamp had no loose components and the tightening mechanism was redesigned to suit the ROV interface. During testing, clamp performance was excellent, achieving a slip load in excess of 33 kN at ‘end of life’ condition and in prototype testing the hinged crossbars within the design meant that the fastener tightening was tolerant of a variance in tightening sequence.
In addition, buoyancy element fasteners, the mechanism that holds the two buoyancy halves together, had to be captive. To accomplish this, Trelleborg opted to make use of a bolted flange tightening system instead of circumferential securing straps and tensioners. This presented a challenge by increasing the risk potential for buoyancy element misalignment when elements were paired. To overcome this bespoke ‘floating’ nuts and bolts were used. The ‘floating’ nuts self-aligned upon engagement, ensuring every buoyancy element was aligned correctly and secured.
Cyberhawk Innovations, a world leader in aerial inspection and survey using Unmanned Aerial Systems (UAS), otherwise known as drones, has welcomed Oil & Gas UK’s new guidelines on the use of drones in offshore environments.
Cyberhawk played a key role in the drafting of the ‘Unmanned Aircraft Systems Operations Management Standards and Guidelines’, which were produced by Oil & Gas UK in conjunction with a working group. As well as Cyberhawk, this group included duty holders who have used UAS, industry and aviation safety experts and a limited number of additional UAS operators.
Cyberhawk were the first company to operate UAS in the North Sea back in early 2012, and has been one of the most significant contributors to the development of the guidelines.
Photo credit: Cyberhawk
Company founder Malcolm Connolly, the only person in the working group with first hand experience of operating UAS offshore, said: “The creation of these guidelines marks a step-change for the offshore inspection industry and reflects the fact that the vast majority of oil and gas operators, both offshore as well as onshore, are now using UAS. This has driven the need for an industry specific set of standards.
“The UK offshore sector already boasts stringent safety and operating standards for other areas of aviation. The introduction of these guidelines marks an important milestone within the sector and a recognition that adoption of UAS technology will continue to grow with a clearer set of guidelines to work to.
“Training and competency play a key role in the new guidelines, as does the reliability of equipment being used and the track record and experience of the UAS operator in question. These guidelines significantly exceed the current minimum requirements set out by the UK CAA for general commercial UAS operations, which is a crucial factor in allowing the continued use of drones to improve the offshore inspection industry.
“We are particularly pleased that Oil & Gas UK sought to involve the UAS operators themselves, which we believe has made a fundamental impact when compared with other industry specific UAS guidelines which have been produced elsewhere.”
Cyberhawk has been recognised at both the 2012 and the 2016 Oil & Gas UK Awards, where its UAS inspection solutions were named winners of the SME Business Innovation and Efficiency category.
Health, safety and environment director at Oil & Gas UK, Mick Borwell, said: “[UAS] technology is particularly attractive for its use in improving safety. For example, sending unmanned aircraft instead of people into confined spaces to conduct inspections reduces risk, and is also effective and efficient.
“The guidelines have evolved from lessons learned in recent years and provide information about best practice, procedures and the certification needed to be compliant with UAS regulations. They are an important piece of work addressing the application of a new technology to the offshore environment which will help to ensure operations on the North Sea remain as safe as they can be.”
Subsea 7 S.A. (Oslo Børs: SUBC, ADR: SUBCY) has announced that one of its wholly owned subsidiaries has made an offer to acquire the 50% shareholding in Seaway Heavy Lifting Holding Limited currently owned by K&S Baltic Offshore (Cyprus) Limited. The terms of the offer are binding on Subsea 7 until 1 July 2017. During this period the Works Council representing the employees of Seaway Heavy Lifting in the Netherlands will be consulted in compliance with Dutch law.
Photo credit: Seaway Heavy Lifting
Jean Cahuzac, CEO, said: "Subsea 7's strong market position in offshore energy services is complemented by Seaway Heavy Lifting's expertise in three areas of offshore activity: renewables, heavy lifting operations and decommissioning of oil and gas assets.
We believe that this acquisition will allow us to strengthen Subsea 7's position in businesses where we expect increased activity and opportunities for long term growth.
Seaway Heavy Lifting is a specialist offshore contractor and operates two world-class heavy lift vessels. It employs approximately 550 employees and is headquartered in the Netherlands.
Seaway Heavy Lifting is a joint venture in which Subsea 7 currently holds a 50% interest. If the offer to acquire the remaining 50% is accepted, Seaway Heavy Lifting would become a wholly owned subsidiary of Subsea 7.
Subsea 7 is offering an initial consideration of USD 279 million on completion and deferred consideration of up to USD 40 million to be paid by the end of the first quarter 2021 on condition that certain performance targets are met. The considerations will be funded from Subsea 7's existing cash resources.
As at 31 December 2015 Seaway Heavy Lifting had net assets of USD 413 million, including net debt of USD 4 million. Selected financial information for Seaway Heavy Lifting was included on pages 67 and 68 of Subsea 7's 2015 Annual Report and Consolidated Financial Statements, which is available to download.
On 14 December 2016, A2SEA’s Sea Installer completed the installation of 32 MHI Vestas 8MW turbines at DONG Energy’s Burbo Bank Extension in the Irish Sea.
“The installation of the 32 MHI Vestas 8MW turbines has progressed seamlessly. Again, A2SEA is first mover, this time by handling the currently largest offshore wind turbine in the market. The installation was completed safely, and in accordance with the installation plan thanks to the well-planned and professional co-operation with our partners on the project, MHI Vestas and DONG Energy. Furthermore, I am very proud of the excellent work performed by all our dedicated employees both onshore and offshore. They make the difference,” says Jens Frederik Hansen, CEO at A2SEA.
Claus Bøjle Møller, Project Director at DONG Energy, said, “We are delighted at the completion of this major milestone in the project. It follows on from first power generation in November. This is the first time the 8MW turbines have been installed offshore, so it is an exciting time for the entire industry. By using more powerful turbines we are able to bring down the cost of providing clean, renewable energy to homes around the UK.”
COO of MHI Vestas, Flemming Ougaard, acknowledged the importance of the first complete installation of a project. “The installation of the first V164-8.0 MW offshore project, represents a major milestone in the history of MHI Vestas, as well as our business partners,” said Flemming Ougaard. “I am proud of the commitment and excellent work of the entire installation team at MHI Vestas and the team from A2Sea and DONG Energy who worked with us on this project. Now our focus turns to the commissioning of the turbines and bringing them into full operation, prior to handing the project over to DONG Energy.”
SEA INSTALLER’s next project is turbine installation on the 580MW Race Bank in the UK for DONG Energy. Installation is planned to start in Early May 2017.
Burbo Bank Extension is owned by DONG Energy (50%) and its partners PKA (25%) and KIRKBI A/S (25%).The wind farm has a total capacity of 258MW and is situated 7 km off the coast of Liverpool Bay. The wind farm is expected to be fully commissioned in Q1 2017 and will provide green energy for well over 230,000 homes in the UK.
For more information, click here.
Leading global deck machinery specialist, ACE Winches, has secured a spooling contract with Oceaneering for Shell’s Prelude Floating Liquefied Natural Gas (FLNG) project.
The contract will be the first time ACE Winches’ newly developed 500te reel drive system is used. The tool is an upgrade of its existing 400te system that has been engineered and manufactured at ACE Winches facilities in Aberdeenshire. The product range has been developed for high tension spooling and the deployment and recovery of subsea products such as umbilicals, risers and flow lines, flexible pipelines, power cables, telecommunication cables, tubing, wire ropes and mooring lines. It can accommodate a gross weight of 500te.
Alfie Cheyne, CEO, ACE Winches commented: “We are thrilled to be utilising our new 500te reel drive system for this contract with Oceaneering. As our clients projects continue to venture to even greater depths, we understand the need for this equipment to operate in harsh conditions and as a result, have developed it to ensure we are accommodating the ever growing needs of the oil and gas industry.”
The scope of work will see ACE Winches spool 4400m of umbilical, with a diameter of 229mm on to a 12.2m reel. The weight of the umbilical is the heaviest Oceaneering has ever spooled with a total weight of 426te.
ACE Winches modified its existing 400te reel drive system to meet the client’s specific requirements with an added base frame and packers to allow the 12.2m reel to be spooled on the quayside.
Chris Waller, engineering manager, commented: “ACE Winches has invested heavily in the design and manufacture of reel drive systems and we are excited to be expanding our capabilities to allow for 14m maximum flange diameter and a 500te load.”
ACE Winches also supplied a total of 10 qualified commissioning engineers and technicians to assemble the ACE 500te reel drive system quayside, before operations started, with a further six operating technicians providing a 24 hour service to complete the first phase of spooling.
The patent pending 500te system consists of two towers that disassemble into eight modules for easy transportation. The towers use a slave and master configuration, with two gear boxes in each drive hub.
Schlumberger announced the acquisition of Peak Well Systems, a leading specialist in the design and development of advanced downhole tools for flow control, well intervention and well integrity.
The addition of Peak’s mechanical and remedial solutions for cased-hole well intervention strengthens the Schlumberger Production Services portfolio with a broader offering of mechanical services to its global customers.
“In the past few years, Peak has developed a portfolio of flow control technologies that are recognized as some of the leading products in the industry largely due to their simplicity, performance, reliability and ease of retrievability,” said Hinda Gharbi, president, Wireline, Schlumberger. “Bringing Peak technologies into our existing Production Services portfolio will give us the opportunity to offer our customers fully integrated well intervention solutions on electric line, mechanical slickline or digital slickline.”
Nigel Avern, chief executive officer, Peak Well Systems, added, “Schlumberger’s acquisition of Peak is extremely positive news for both companies and for the industry in general. We have been working closely with Schlumberger on several collaborations and initiatives during the past year and what has become clearly apparent is our compatibility. This is a natural fit for both companies and one which will ultimately benefit our customers.”
Peak Well Systems designs and manufactures advanced downhole tools that isolate, extend well life, restore well integrity and enhance well performance with SIM* retrievable bridge plugs and disruptive technologies such as the SIMULTRA* plug, which is a high performance retrievable bridge plug capable of providing HPHT and gas tight (ISO 14310:2008 – Grade V0) zonal isolation, even in sour gas conditions.
Existing Peak customers will continue to have access to the full range of Peak’s well intervention products, and will now benefit from a wider distribution network and world-class service delivery platform offered by Schlumberger, in all global markets.
Schlumberger acquired Peak from growth equity investor Summit Partners and the company's founders and management team.
*Mark of Schlumberger
For more information, click here.
Danos’ 367.5-acre integrated services complex located in Amelia, La., is now an officially recognized Foreign Trade Zone (FTZ) by U.S. Customs and Border Protection (CBP). It will be the ninth FTZ located in the state of Louisiana and one of only 179 active FTZs in the country.
FTZs are secure areas within the United States that are considered to be outside of U.S. Customs territory for tariff purposes. Located in or near CBP ports of entry, they are the United States' version of what are known internationally as free-trade zones. The FTZ program was designed to promote American competitiveness by encouraging companies to maintain and expand their operations in the United States.
FTZs provide businesses with a way to defer, eliminate or reduce federal import duties when bringing foreign materials into the country. This makes U.S.-based companies more competitive in export markets and encourages multinational firms to establish U.S.-based operations which bring additional foreign investment. Currently, more than 2,700 companies utilize the program.
“With this new status, Danos can offer customers a duty-free storage and staging location for materials imported from abroad,” said Eric Danos, executive vice president of Danos. “Because the FTZ site is integrated with both Danos’ fabrication facility and material management center, we are able to integrate projects in a unique way that is providing increased value to our customers.”
There are two types of foreign-trade zones - General Purpose Zones and Subzones. Danos’ Amelia facility is a subzone of the general purpose FTZ No. 124 in Gramercy, La. The grantee is the Port of South Louisiana.
Danos was approved for FTZ status after a lengthy application and review process lasting approximately 12 months. Beginning at the local level, Danos obtained letters of endorsement from all local taxing authorities, developed the necessary management procedures and systems, and created a security plan. The Foreign-Trade Zones Board of the U.S. Department of Commerce ultimately approved the company’s application on Tuesday, Dec. 20, 2016.
Finalists for the 2017 Offshore Achievement Awards, sponsored by TAQA, were announced on Friday January 13, 2017.
Hosted by the Society of Petroleum Engineers (SPE) Aberdeen Section, the annual awards recognize some of the industry’s most innovative technology developments as well as talented individuals and exceptional large and small company performance.
This year’s shortlist comprises a wide cross-section of the offshore sector, with companies large and small, spanning a variety of sub-sectors, represented.
Categories including Innovator, Emerging Technology and Young Professional have proven popular with entrants this year. For the first time in 2017, organisers have also introduced an additional stage of shortlisting for this Young Professional category, which will see each finalist take part in a filmed interview with a panel of industry judges. From there, three finalists will be selected before the winner is announced on the night.
Ian Phillips, chairman of SPE Aberdeen and chief executive of the Oil and Gas Innovation Centre, said: “The sheer quality and variety of entries we have received this year reflects everything that is great about our industry, particularly our ability to adapt to a volatile economic environment. It’s clear that the UK’s oil and gas operators and service companies have truly risen to the challenge, in particular developing some of the world’s most advanced technology whilst remaining as cost effective as possible.
“As ever, our expert industry judging panel has spent a significant amount of time judging each entry before selecting the strongest contenders. I would like to congratulate all those who have been shortlisted for the 2017 awards, and I look forward to celebrating the winners at the ceremony in March.”
Last year’s OAA winners
Winners at the 2016 award ceremony included Interventek Subsea Engineering for Emerging Technology, Tendeka for Great Large Company and Dan Purkis of Well-SENSE was recognised for his Significant Contribution to the oil and gas industry.
Donald Taylor, acting managing director for TAQA Europe said: “It is reassuring to see so many companies and individuals taking the time to share their success stories and enter into the awards this year. The quality of the entries, particularly those shortlisted, demonstrates how much the industry is still driving forward, finding innovative solutions and efficiencies against a persistently challenging background.”
The 2017 Offshore Achievement Awards finalists are:
Innovator (sponsored by OGIC)
- Delphian Ballistics
- Enpro Subsea
- M-FLOW Technologies
Emerging Technology (sponsored by Nexen)
- M-FLOW Technologies
- PlanSea Ltd
Safety Innovations (sponsored by Offshore Europe Partnership)
- Cape plc
- Cyberhawk Innovations
- Churchill Drilling Tools
- Cyberhawk Innovations
- JDR Cable Systems Ltd
- Decom North Sea
- Maersk Oil/Amec Foster Wheeler/Bilfinger Salamis
- Wood Group
Outstanding Skills Development Programme (sponsored by Heriot Watt University)
- Fabricom Offshore Services
Young Professional (sponsored by BP)
- Marianne McKevitt - BP
- Richard Eckersley - Nexen Petroleum U.K. Limited
- Mandy Johnstone - N-Sea
- Sam Lisney - Petrofac EPS West
- Richard Turner - RS Clare & Company Ltd
- Natalie Jackson - Shell U.K. Ltd
Please note that each of the above will be invited to take part in a filmed interview session with a panel of impartial judges. From there, three finalists will be selected and the winner will be announced on the night.
Above and Beyond
- Mandy Marriner – JDR Cable Systems Ltd
- Bob Banks - Petrofac EPS West
- Sam Lisney - Petrofac EPS West
- Sharon Robertson – Wood Group PSN
Great Small Company (sponsored by Wood Group PSN)
- Churchill Drilling Tools
- Enpro Subsea
- Step Change Engineering
Great Large Company
- Aker Solutions
- JDR Cable Systems Ltd
- Wood Group
Significant Contribution (sponsored by Aker Solutions)
- Announced at the ceremony
More than 500 industry professionals are expected to attend the awards ceremony, taking place at the Aberdeen Exhibition and Conference Centre (AECC) on Thursday, March 23,2017. For more information and booking details, click here.
Large U.S. Stock Build
Another large reported commercial stock build of 13.4 million barrels last week with EIA re-benchmarking likely substantially contributing to the build. Four major products saw a big 12.7 million barrel inventory build while NGL stocks were down sharply again as refiners pumped up runs to the highest weekly level in years with refinery turnarounds about to start. Crude imports surged to over 9.0 MMB/D reflecting crude oil delayed by Gulf Coast fog and tax issues. This week’s data should return to normal but continued relatively high runs will lead to large light product builds while crude inventories should slightly decline.
Supply Weakness Aiding NYMEX Volatility
The moderate recovery that has taken place this week suggests a growing awareness of emerging structural tightness. Despite milder weather unfolding in January, U.S. balances remain tight, with the year-on-year storage deficit remaining largely intact relative to end December.
As the French Market Enters a Critically Tight Week, Spanish Market Stays Bullish
The French market will see its system adequacy severely tested this upcoming week, as demand is expected to shatter the previous highs reached this winter. Even with all the interconnectors importing at full capacity (11.7 GW), France might be looking at a shortfall of roughly 4 GW at the time of maximum demand on Jan. 19, which might trigger the need to implement exceptional measures to balance the system. Frigid weather conditions are also expected to affect most of Western Europe, with Spain also seeing very bullish short-term power prices.
U.S. Ethanol Prices and Margins Plummet the Week Ending January 6
RIN prices declined but recovered after assurances that the Trump Administration will support the RFS. Brazil became a net exporter of ethanol in the fourth quarter. European ethanol and manufacturing margins surged.
California Prices Jump, While Ontario Market Program Launches
CCA prices are up sharply with the new auction floor, but regulatory uncertainty limits the upward potential of prices. The upcoming lawsuit hearing could result in a decision prior to the next auction in Feb. This, along with fossil units’ operational concerns, have drained interest in longer-term hedging. Particularly strong hydro generation in 2017 should displace gas-fired generation, but despite allowance surpluses, regulated emitters will still need to procure instruments for compliance with 2017 emissions. Offsets are a wildcard – sources are on track to use only about half of allowable offsets and environmental justice concerns could result in usage restrictions. The start of Ontario’s cap and trade program have not seen trades and carbon prices, but a cost of carbon is already being reflected in wholesale power. Free allowance allocation and the first Ontario auction in Mar. could jump start trading.
Industrial Momentum Is Rolling, While Negative Risks Stay in Check
The expected growth-enhancing and reflationary policy stance of the Trump administration, or Trumponomics, has boosted U.S. growth prospects. But by attracting global capital flows into the U.S., Trumponomics has the potential to destabilize financial market conditions in emerging economies. So far, emerging markets have exhibited resilience, but the situation will have to be carefully monitored. Most key economies reported better-than-expected manufacturing data in recent days, and year-on-year growth in global industrial production accelerated sharply in November.
Coal Prices Rebound on Atlantic Basin Rally
The seaborne coal market rebounded markedly this week, particularly in the Atlantic Basin. Both CIF ARA and FOB Richards Bay forwards increased by more than $4.00/mt across the forward curve, bringing 1Q17 prices to their highest point since early November. A more tepid rise in FOB Newcastle prices this week, coupled with a sharp drop last week has seen 1Q17 FOB Newcastle prices fall well short of the highs painted earlier this month as well as fall below FOB Richards Bay and CIF ARA. Cold temperatures in Europe, rising Atlantic Basin exports into the Asian market, and the anticipation of the Chinese demand slowdown for the Lunar New Year were all factors in the pricing dynamics of the past week.
Argentina Wet Again
At the risk of being repetitive, and after going over the January WASDE a few more times, PIRA reiterates our opinion that there’s no story in corn until the acreage estimates hit the market with the Prospective Plantings report on March 31st. Both corn and wheat are in “follow modes” at the moment. Where there is a real story is in soybeans, and weekend rains in Argentina are once again on everyone’s radar.
Holiday Tide Rolled In, Now Rolls Out
Japanese crude runs rebounded 80 MB/D back to near peak levels, while crude imports fell back sufficiently to draw crude stocks 0.2 million barrels. Finished product stocks, however, built a whopping 5 million barrels, as demand fell sharply into the New Year. Significant builds were seen in all the products other than naphtha. Both finished product and crude stocks remain in significant deficit to year-ago levels (about 10%, or a combined 18 million barrels). Margins declined on the week, with all the product cracks other than naphtha giving ground. Still, margin levels remain healthy.
Russian Gas Flows Freely in the Face of Extreme Cold, but so Is Power Demand
In past years, it would be reasonable to expect a ramp down of gas deliveries from Russia on the order of 25-mmcm/d in the face of extreme cold in the East – this year has proven to be a surprise exception. Temperatures in Moscow have been as cold as 16 degrees below normal or -30°C, but Russia has proven to be a reliable supplier in the face of the bitter cold. Traditionally, this turn down of exports has been part of a policy to prioritize domestic demand over contractual demand in Central and Western Europe. Temperatures in Moscow have reached lows not seen for around 5 years – however, deliveries to Europe have only increased in the face of that cold. So instead of a 25-mmcm/d turn down, we are seeing a 25-mmcm/d ramp – a swing of 50-mmcm/d is certainly a welcomed surprise.
Stress Still Low
The S&P 500 was fractionally changed on the week. Financial stresses remain very low, with volatility falling. The U.S. dollar has generally been easing of late against many currencies. However, it has continued to strengthen noticeably against the Turkish lira and Mexican peso. Globally, euro interest rates have begun to rise, along with those in the U.K. The Baa bond yield has continued to fall after a protracted rise. Mortgage rates have begun to ease slightly.
Weather Adjusted Loads Showing Signs of Life
Loads in the East soared by 8% year-on-year during December as heating degree days for the contiguous U.S. rose by 35% year-on-year, which also led to higher power prices year-on-year in all markets. Forecasts for second half of January are bearish and loads for the full month may decline. Gas production continues to struggle even with start-up of new Appalachian pipeline capacity, which should offer price support if weather returns to normal. The largest gain is expected in Ontario where prices will also reflect carbon costs. However, incremental coal-fired generation during 1Q, and a combination of lower cooling loads and new gas-fired and renewable capacity will result in downward pressure on implied heat rates.
U.S. Coal: 2016 Year in Review and 2017 Outlook
Few years in recent memory were more turbulent for the U.S. coal market and arguably none was so difficult for producers as 2016. As we enter 2017, the outlook for production and prices is more constructive overall, though not by a large margin.
European Carbon Price Volatility on Weather, New Volumes, Policy
Expectations of relatively flat prices for European Carbon (EUAs) in 1Q17 reflect near-term higher power sector carbon demand (driven by colder weather and continued French nuclear outages) against the backdrop of otherwise poor fundamentals and continued market oversupply. With a continued lack of clarity on what European policymakers are thinking regarding post-2020 market reform, negotiations in the coming months have the potential to move the market in either direction.
A surprise yield cut in soybeans and a larger-than-expected acreage cut in winter wheat were the main highlights of Thursday’s reports and while one market exhibited a large reaction, the other did not.
U.S. Ethanol Production and Stocks Higher
U.S. ethanol production started 2017 at a record high 1,049 MB/D, up 6 MB/D from the previous week’s record. Inventories soared in most of the country, rising 1.3 million barrels to 20.0 million barrels. Despite the increase, however, stocks were still 1.3 million barrels lower than this time last year. Ethanol-blended gasoline manufacture continued to plummet, dropping 365 MB/D to a 53-week low of 8,033 MB/D.
More Canadian Crude Shipments Off West Coast Likely as Trans Mountain Expansion Meets B.C. Gov't
On Jan. 11, B.C. premier Christy Clark announced that Kinder Morgan’s Trans Mountain Expansion project has meet its five conditions including providing British Columbia with a fair share of the project’s fiscal and economic benefits. This helps pave the way for completion of the project to increase access for Canadian crude to West Coast/Asian markets. The province granted an Environmental Assessment Certificate for the B.C. portion of the project but added 37 conditions over and above the 157 conditions recommended by the NEB and adopted by the federal cabinet. Kinder Morgan committed to paying $25-50 million annually (based on heavy crude shipments) to fund local environmental projects. This risks setting a precedent that may undermine the chances of success for the Energy East project.
Global Equities Post a Positive Week
On the strength of international equity performance, global equities posted a positive week. All the international tracking indices posted solid gains, with emerging markets, China, Latin America, and emerging Asia doing the best. The U.S. market was marginally changed. Consumer discretionary and retail outperformed, while energy was the weakest, down 2% on the week.
Europe Snubs LNG in Favor of Pipeline as Gas on Gas Competition Heats Up
Until this week, European buyers have shown little interest in securing incremental LNG cargos in the face of surging gas demand and with a few exceptions such as Greece and Turkey, it’s not clear that this is set to change in the coming months in any sustainable way.
January Weather: The U.S. Warm; Europe and Japan Cold
At midmonth, January looks to be colder than the 10-year normal by 7% for the three major OECD markets with oil-heat demand stronger than normal by 400 MB/D. The markets are roughly 2% colder on a 30-year-normal basis.
Indonesian Ceramics Industry to Receive Lower Gas Price
The Indonesian government is set to lower the price of gas for the ceramics industry this year as mandated by Presidential Regulation No. 40/2016 on gas prices. The Industry Ministry has given priority to the ceramics sector for the gas price cut as it is one of the fastest growing industries [in the country], said Industry Minister Airlangga Hartarto in a statement. “The national ceramics industry has been performing well with sales growing by 10-15% with a volume of 385-402-mmcm/d” he said during the launching of a new ceramic firm owned by publicly listed PT Arwana Citramulia in Mojokerto, East Java, on Monday.
Tanker Rates Likely to Decline in 2017
After a strong finish in 2016, tanker are rates expected to weaken substantially in 2017 as OPEC and non-OPEC production cuts are implemented during 1H17.
Cash LPG Prices Strong in Asia
Cash LPG prices in Asia strengthened as cold weather in North Asia is improving demand. Refrigerated propane cargo prices in the Far East were called near $502/MT which was 1% higher week-on-week. Cash butane was called at a $60 premium to C3. Propane Far East Index futures for cargoes arriving in February, which are trading at a $36/MT discount to cash, suggests that the market may in fact be softer than recent cash deals suggest.
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.
As President Obama leaves the Oval Office on Friday, he leaves a legacy of mixed fortunes for the energy industry. While many in the business have been vocal critics of the 44th President and some of his more controversial legislations, there have been a number of positive aspects that occurred under the current administration. When Obama took office in January of 2009, domestic crude production was just 5.1 mmbbl/d, exports of crude oil were not permitted, and the US was importing over 9.8 mmbbl/d of crude. As President-Elect Trump takes office, he will inherit an energy industry with over 8.7 mmbbl/d of domestic production, over 600 kbbl/d of crude exports, and under 7.1 mmbbl/d of imports. In addition to the usual swings of the highly-cyclical energy business, there have been some dramatic shocks during the Obama presidency. Following the Macondo disaster, the administration enacted a moratorium on deepwater drilling in the Gulf. The moratorium impacted operators and service companies by making the process of applying for new permits much more difficult. Costs spiraled making many projects uneconomic. While other plans, such as federal fracking restrictions, failed to leave a lasting impact, the President has passed through a number of controversial rulings that may create further challenges for the industry. The Clean Power Plan, the denial of Energy Transfer’s permits to complete the Dakota Access Pipeline and the blocking of Keystone XL will likely be overturned by the incoming administration. However, the blocking of Atlantic and Arctic drilling may have a more lasting effect.
For the most part it can argued that the energy industry has thrived over the last eight years. With a nominated cabinet that includes some of the industry’s biggest supporters, many in industry see Friday’s inauguration of President-Elect Trump as an opportunity to continue some of the positive factors from the Obama’s presidency without some of the restrictions.
Jacob Halevy, Douglas-Westwood Houston
Valhall and Hod have passed one billion barrels of oil equivalents (oil, gas and NGL) produced, more than three times what was expected at the opening of the field in 1982.
Hod, which produces via Valhall, has delivered over 75 million barrels of oil equivalents and this is more than twice the estimated oil at field start-up in 1990.
Valhall’s oil and gas is produced from chalk reservoirs sitting ~2500 meters below seabed in the southern part of the North Sea.
The activity level on the field has been high, with almost continuous drilling since start-up. Seismic and well technologies are key leavers for developing the field. The current well stock comprises 55 active wells out of a total of nearly 150 productive wells drilled since field discovery. 18 seismic 4D seabed surveys have been acquired since 2003.
“In 1995, work was performed with the goal to extend the field lifetime and recover more than one billion barrels of oil equivalents. We have now achieved this goal 15 years ahead of what was thought at the time. Our new ambition is to further produce at least another 500 million barrels of oil equivalents”, says Eldar Larsen, Senior Vice President of Operations in Aker BP.
Valhall is and has been a big and important workplace. Thousands of jobs are directly and indirectly dependent on field operations. Our goal is safe and profitable production from Valhall for several decades ahead.
ExxonMobil announces its development of cMISTTM technology, which dehydrates natural gas using a patented absorption system inside pipes and replaces the need for conventional dehydration tower technology. This “in-line” technology could be deployed at both land-based and offshore natural gas production operations.
The new technology, developed and extensively field-tested by ExxonMobil, more efficiently removes water vapor present during the production of natural gas. Removing water vapor through the use of dehydration technology, typically accomplished using large and expensive dehydration towers, reduces corrosion and equipment interference helping to ensure the safe and efficient transport of natural gas through the supply infrastructure and ultimately to consumers.
cMIST reduces the size, weight and cost of dehydration, resulting in reductions of surface footprint by 70 percent and the overall dehydration system’s weight by half, which has significant added benefits on offshore applications.
“By leveraging our industry-leading experience with upstream applications, our researchers were able to create this advanced natural gas dehydration technology, which represents a step-change in operational efficiency and a significant reduction in footprint,” said Tom Schuessler, president of ExxonMobil Upstream Research Company.
ExxonMobil’s cMIST technology relies on a proprietary droplet generator to break up conventional solvent into tiny droplets that become well dispersed in the gas flow thereby increasing the surface area for the absorption of water from the gas. This is followed by an inline separator that coalesces the water-rich glycol droplets and moves them to the outside wall of the pipe for effective separation from the dehydrated natural gas. The water-rich glycol is regenerated using a conventional system and is sent back to the droplet generator to be used again. The droplet generator uses the energy from the flowing natural gas to create droplets of the right size.
ExxonMobil has licensed cMIST technology to the Chemtech division of Sulzer, a leading player in separation technologies, to facilitate deployment across the oil and gas industry.
“We are proud to have been selected as worldwide exclusive licensee of the cMIST technology, which includes our patented compact HiPer™ inline separator,” said Torsten Wintergerste, president of the Chemtech division. “We look forward to servicing the oil and gas industry with this unique technology, allowing for much needed reductions in capital expenditures for both greenfield projects and existing facilities seeking brownfield debottlenecking opportunities. cMIST technology complements the Sulzer line of compact multi-phase separation technologies and will maximize benefits available to oil & gas operating companies around the world.”
ExxonMobil’s Houston-based Upstream Research Company and New Jersey-based ExxonMobil Research and Engineering division develop a range of innovative technologies aimed at producing energy more efficiently. The two organizations employ more than 1,000 PhD scientists and engineers.
VAALCO Energy, Inc. (NYSE: EGY) (“VAALCO” or the “Company”) have announced that the Avouma 2-H well on the Avouma Platform offshore Gabon is back on production after utilizing a hydraulic workover unit to replace a failed Electric Submersible Pump (ESP) system. The well is currently producing at a stabilized rate of 2,700 barrels of oil per day (BOPD) gross, or 730 BOPD net to VAALCO. With the addition of the two recent workover wells, total Company net production is currently averaging 4,600 BOPD.
Photo courtesy: VAALCO
As previously announced, the ESP systems failed in both the South Tchibala 2-H and the Avouma 2-H wells on the Avouma Platform this past summer. Prior to temporarily shutting in the Avouma 2-H well after the ESP system failed, the well was producing approximately 2,400 gross BOPD or 650 BOPD net to VAALCO. Following completion of workover operations on the South Tchibala 2-H, previously described in a press release dated December 21st, workover operations on the Avouma 2-H were completed and the well was put back on production. The entire operation was conducted safely and efficiently with no injuries or threats to the environment. All personnel and equipment utilized during the combined operations on the two wells have been demobilized. The detailed inspection of the failed ESP components continues and it is expected that the cause of the failures will be determined during the first quarter of 2017. Monitoring of ESP operation and production optimization procedures continues for both wells.
Cary Bounds, VAALCO’s Chief Executive Officer commented, “Following the successful workover of the South Tchibala 2-H well, we are pleased to have also restored production from the Avouma 2-H well at a higher rate than when it went offline this past summer. We have once again demonstrated our ability to safely and successfully conduct well interventions utilizing a hydraulic workover unit. Our net production has risen to approximately 4,600 barrels of oil equivalent per day, our highest rate since early summer 2016. We are pleased to begin 2017 with an attractive combination of strong production volumes and higher oil prices.”
AccessESP, a leading provider of rigless electric submersible pump (ESP) conveyance solutions for the worldwide oil industry, has showcased its rigless ESP conveyance system in the industry’s first pump swap for an operator on the North Slope of Alaska.
In two days, through a live well intervention, the AccessESP system enabled retrieval of the existing ESP pump and the install of a newly optimized ESP pump using only a slickline unit, lubricator and a crane, marking the industry’s first ESP pump swap on a commercial well. Surface diagnostics determined that the Access375 permanent magnet motor was fully functional, therefore replacement was not required, thus reducing operational time and costs.
In this case, the ESP pump had not failed but was proactively replaced with an optimized pump. This would be cost prohibitive using a workover rig, requiring the replacement of the entire conventional ESP system. To resize a conventional ESP pump, the operator would mobilize a workover rig, kill the well, pull the tubing and ESP and then replace the ESP and rerun the tubing. The costs associated with the intervention and downtime inherent in this approach can be substantial. However, by utilizing a standard slickline unit, lubricator and crane, the AccessESP rigless conveyance system reduces the cost, time and risk associated with ESP resizing.
Greg Nutter, vice president operations, AccessESP, said, “In this project, the operator saved approximately $2 million in workover costs by using our slickline deployed system. Our system allows the operator to replace only the ESP pump, leaving the permanent magnet motor in the well. This pump replacement demonstrates our system is a flexible and reliable choice for operators looking to optimize production and reduce downtime and associated costs.”
Forum Energy Technologies, Inc. has revealed that it has designed, manufactured, tested and delivered its 350th rotational torque (RT) torque machine to TAM International, a globally recognized downhole inflatable packer leader.
The torque machine, or bucking unit as it is commonly referred, was manufactured at the Forum AMC facility in Aberdeen, UK. This represents the sixth unit that TAM has purchased from Forum in three years, and is a testament to TAM’s growth plans, as well as their trust in Forum’s equipment and global support network. The machine will be used to make up or breakout downhole completion and drilling tools with premium threaded connections.
David Neill of TAM International (left) receives a plaque from George Hendry, business development manager for Forum AMC, recognizing the purchase of the 350th RT torque machine.
The machine can work autonomously to achieve a pre-determined amount of rotational torque and provides an auditable report for thread inspectors, drilling contractors or casing crews. After delivery, Forum will provide TAM with maintenance and support from equipment specialists in Aberdeen and Singapore.
James Bement, Forum’s Senior Vice President of Drilling Technologies, said: “Our equipment has gone through many improvements over the past 27 years, and our 350th machine provides customers with the latest software to meet the increasing demand on make-up inspection criteria. Among other improvements, our new hydraulic power unit (HPU) is capable of improved cycle efficiencies of up to 68%, and reduces energy consumption by up to 31%. We look forward to continuing our partnership with TAM in other locations, and to seeing the next 350 machines take on our customers’ challenges.”
After witnessing and signing off on the factory acceptance test for the new unit, David Neill, TAM International, remarked: “Another quality product from a quality company. Having experienced the numerous operational benefits of Forum’s torque machine at TAM International’s Aberdeen facility, we’re pleased to add this new machine to our new Australian base in Roma.”