Oceanicasub V Designed, Built, and Operational to do the Job

A state of the art dive-support vessel is a marvel of modern technology and design. Seldom has this been more evident than in the Oceanicasub V delivered in February 2017 to her Brazilian owner Oceânica.

Oceânica provides subsea services to the petroleum company Petrobras. The Oceanicasub V is the second in a pair delivered from the Arpoador Shipyard in Guarujá, Brazil.

The 43 by 9.3-meter vessel was designed by Incat Crowther in cooperation with the shipyard and owner.

Builders believe that allying shallow diving to a wide range ROV performance, all contained in a light DP 2 vessel, will establish a new benchmark in subsea operations, reducing costs, increasing work flexibility and safety compared with the previous existing concepts.

10OceanicasubV SunSetPhotos courtesy of Cummins Marine

For such a vessel, choice of engine power and propulsion method is of paramount importance. For reliable power the owners chose four Cummins QSK19M main engines and coupled them to ZF 2000 gearboxes driving Hamilton HM521 water jets. With each of the four engines delivering 660 HP, the vessel, at just under 500 Gross Tons, has a maximum speed of 12,5 knots and a cruising speed of 10 knots. The jets eliminated the danger that propellers can present for divers.

However, the primary function of the four jets, along with three 150 kw Intermarine bow thrusters, is to provide precise and safe station keeping when divers are working below. The vessel is also fitted with a Kongsberg DP2, Hipap, Spot Track and Radius systems to automatically hold position as well. Zero speed stabilizer fins are also installed to reduce roll and make the working deck safer for crews.

Electrical power for the bow thrusters and a variety of deck cranes and winches is provided by three Cummins QSM11-powered 300 ekW gensets as well as a Cummins 6BT5.9-powered 92 ekW emergency genset. The vessel is also equipped with a hyperbaric chamber, Caviblaster, dive bell, one ROV for 1,500m and one for 300m, ROV A-frame and every conceivable piece of equipment required to handle a wide range of subsea tasks.

Accommodation is provided for 36 people including divers, dive support staff and ship’s crew. The wheelhouse has fore and aft controls with excellent visibility down to the working deck and up for those times that the boat is working near an offshore rig.

In the hull the main engines and jets are arranged in two pairs, port and starboard, with the three QSM11-powered gensets forward of the propulsion engines. Forward of the engine room an auxiliary machinery room contains, among other equipment, the main switchboard, five compressors, the ROV power pack, and three water makers. Forward of that, six 4-person cabins, with a head in each cabin, share a companionway and stairs up to the main deck.

The main deck cabin includes a large galley and pantry forward on the starboard side with two dinning areas, one of which can double as a meeting room. Aft of the galley and mess area, a large TV room provides for relaxation to port with an office and laundry room to starboard. Aft of the office is a workshop and aft of the TV room is the dive operations office with a separate computer room and access to the main deck.

Just aft of the main deck house are two A-frames, one for a dive bell and one for the ROV. Both can extend over the starboard side while on the port side is the hyperbaric chamber. An open work area aft supports port and starboard deck cranes.

Above the main deck house, and just below the wheelhouse, a mid-deck cabin contains two single berth cabins for the captain and a charterer’s representative. Two 4-person and one 2-person cabin, all with their own head, are also located on this deck.

The Vessel is classified by RINA C + Special Service, DYNAPOS AM/AT R, DIVING SUPPORT, AUT-CCS, Unrestricted.

From design, to build, to delivery and operations, this vessel, and its earlier delivered sister-ship, is a celebration of experience, thought and practice. No doubt it will be a model for dive support vessels worldwide.

L&N Scotland Introduces New Synthesis System to the Subsea Market

Specialist subsea manufacturer, L&N Scotland has expanded its product portfolio with the launch of its named Synthesis system. In accordance with the company’s review and development program, L&N Scotland has introduced its latest product and service offering to combat the current constraints faced by subsea operators during product integration stages.

By definition Synthesis is the combination of components or elements to form a connected whole. The new system, designed and developed by L&N Scotland, showcases a significant advancement in the application of small-bored tubing packages, by offering a fully commissioned package complete with a pre-manufactured and “ready-to-fit” kit of parts, through a single purchase order.

Whilst conventional methods for obtaining a complete subsea system, have commonly required operators to procure all component parts through multiple suppliers and purchase orders, Synthesis provides an alternative solution that eliminates the complexity associated with these traditional methods.

11LNScotland 3D model of Synthesis being implemented onto a SDU A 3D model of Synthesis being implemented on a SDU

Synthesis compromises of a full turnkey support package complete with all small-bored tubing lines staged in reverse fitment order, along with all line and assembly sequence documentation for ease of installation. Utilising L&N Scotland’s diverse service offering, coupled with its subsea design engineering experience and robust supply chain, the company has the unique ability to group all of its services to deliver an intelligent purchasing model for subsea operators.

By implementing these services, such as early design engineering engagement, Synthesis ensures that product design and execution models are optimised and routed bespoke to any subsea structure. As a result, Synthesis can be deployed across a full breadth of subsea applications ranging from Manifolds, X-trees, SCMBs, UTAs and SDUs.

The extensive experience and innate product knowledge, held by L&N Scotland’s engineering team in the field of subsea applications, has been essential in the development of Synthesis and having successfully delivered and installed this package for major subsea operators, L&N Scotland predicts a much wider market potential for this new offering.

Commenting on the launch of Synthesis, L&N Scotland’s Managing Director, Craig Finnie said: “L&N Scotland is continuously looking at ways in which we can evolve our product and service range to address the difficulties which our clients face during product integration. Through our investment into the research and development of Synthesis, we have managed to significantly improve project integration processes, whilst allowing our clients to procure a fully executed system ready for operation, through the placement of one purchase order.

“This bespoke solution not only provides the necessary project cost and timescale reductions requested by the industry, but also facilitates a more efficient and streamlined manufacturing process, whilst maintaining the quality and integrity of the client product. We are delighted to bring Synthesis to the global subsea market, in which we can deliver a substantial solution for operators in the form of a rationalised supply chain.”

L&N Scotland has grown to become a market leader in the provision of subsea engineering and manufacturing solutions to customers worldwide. The company, which holds 20 years’ of professional subsea experience, delivers an array of services worldwide including specialised welding, design engineering and manufacture services, as well as innovative product integration capabilities for the oil and gas industry.

L&N Scotland 2017 Achievements and Accreditations
ISO 9001:2015 and ISO 3834-2

Charter Rate Reduction of CGG’s Operated Fleet

Reflecting its commitment to focus on competitiveness and strict operational and financial costs management, CGG is pleased to announce that it has agreed in principle with its longstanding partner Eidesvik and its Nordic lenders to establish a new ownership set-up for its operated fleet.

This new set-up is based on the creation of a new Company that will possess the five vessels currently owned by CGG and cold-stacked (Geo Coral, Geo Caribbean, Geo Celtic, CGG Alize and Oceanic Challenger), as well as the two vessels co-owned by CGG and Eidesvik (Oceanic Vega and Oceanic Sirius). This new Company, to be jointly owned by CGG and Eidesvik in equal parts, will also hold all the outstanding debt related to those vessels and should be operational at the beginning of the second quarter of 2017.

12CGG SiriusOceanic Sirius. Photo courtesy CGG

CGG will continue to charter the Oceanic Vega and Oceanic Sirius from the new Company and will charter the Geo Coral (from the second quarter 2017 onwards), Geo Caribbean and Geo Celtic vessels, as the charters of other vessels it currently operates expire. CGG will thus continue operating a five 3D vessel fleet with the same maritime and seismic operational management.

The charter rates, that have been agreed as part of this set up, combined with the recently revised charter rate of the Oceanic Champion, as announced on March 14, will enable CGG to substantially reduce charter costs. The new contractual terms have been mainly obtained through the re-profiling of the reimbursement schedule of the debt related to the vessels coupled with an extension of the vessels employment commitments.

The implementation of this new maritime set-up will also result in a reduction of CGG gross debt amount by $182.5m corresponding to the principal amount of the Nordic loan at April 1st 2017.

Jean-Georges Malcor, CGG CEO, said “After the implementation of our marine Transformation Plan, launched at the end of 2013, which led to a sharp decrease of our internal cost base, our objective was to further improve our competitiveness by renegotiating the charter costs for our operated fleet. Today’s agreement in principle with our Nordic lenders, combined with the strengthening and extension of our partnership with Eidesvik, will allow us to reach this goal by leading to a further reduction of our marine operational cost and will also allow us to reduce substantially our financial costs via the externalization of the existing Nordic loan.”

ODE Provides Engineering Support for Horne and Wren Decommissioning Project

13Horne Wren NUI International engineering and operations support services contractor ODE, an integral part of the DORIS Group, has successfully completed a key workscope for Scaldis Salvage & Marine Contractors. This contract was to provide engineering support for the removal of the topsides and jacket from a Normally Unattended Installation (NUI) as part of the decommissioning project for the Horne & Wren gas fields in the Southern North Sea.

Operated by Tullow Oil, Horne & Wren is in 40m of water, 65km east of Norfolk. The NUI is tied back to the Thames host platform. The NUI is part of the wider Thames complex, comprising a skirt-piled three-leg jacket type substructure and a topside with two deck located production trees.

ODE’s engineering support for the removal of Horne & Wren included the basis of design, weight control report, topsides & Jacket structural/lift point verification and on-bottom stability analysis.

Work began in May 2016 with all engineering documentation provided by the end of July 2016. ODE provided comprehensive engineering support in analysis and design, giving Scaldis and Tullow Oil details on proposed decommissioning methodology.

ODE engineering manager Keith Mackie said: “We were grateful for the opportunity to build on our relationship with Scaldis and Tullow. This project reinforces our position in the decommissioning market and demonstrates that contractors and clients value our experience, technical approach and capabilities.”

ODE has a history of successfully completing projects on Horne & Wren. Previous work includes conceptual and detailed designs, and design and operations safety cases.

JDR and Proserv Form Strategic Alliance in West Africa

14JDR1small 730x400JDR, a leading supplier of subsea cables and umbilicals for the global offshore energy industry, has expanded its presence in West Africa through a partnership agreement with Proserv Instrumentation Nigeria Ltd.

Under the strategic alliance, JDR will establish a service and maintenance base in Proserv’s operations facility in Port Harcourt, Nigeria. Together, the companies will offer combined subsea solutions and local content support to the West African market. JDR’s offering will include maintenance and offshore installation services, product termination and testing and technical training.

Carl Pilmer, sales director for oil and gas at JDR, comments: “This alliance will enable JDR to increase local content support for projects in Nigeria and the wider region. We’re proud to work alongside Proserv to better service our clients with integrated solutions and develop the local skills needed to execute projects.

“Almost every project in the deepwater basins off West Africa includes a JDR-supplied umbilical and this partnership marks the next step in our strategic plan to offer our customers high quality, reliable products and services on a global scale.”

Olu Phillips, Proserv country manager based in Lagos, said “Nigeria is a key growth market for Proserv and given the very dynamic opportunities in the region, we are delighted to formalize our working relationship with JDR with the signing of this new strategic alliance.

“Proserv has worked well with JDR for many years and this partnership will allow us to build on our long and successful track record through the delivery of world class subsea technology solutions and services to our customers in Nigeria, strengthening Proserv’s presence in the country.” The partnership follows the appointment of business development manager, Tai Fadipe-Davids last year, to lead JDR’s strategic sales and marketing activities in the region.

In recent years, JDR has supplied complex intervention, workover control systems (IWOCS) to major developments including Egina, Kaombo and Moho Nord in Nigeria, Angola and Congo respectively. JDR also delivered a hybrid steel umbilical to the ABO 12 field offshore Nigeria, and has since invested in a technical test and repair container for umbilical and reeler management.

Enpro Subsea named Great Small Company at Offshore Achievement Awards

SUBSEA intervention specialist firm Enpro Subsea has been named Great Small Company 2017 at the 31st SPE Aberdeen Offshore Achievement Awards (OAA) black-tie event held last night (Thursday 23rd March) at the Aberdeen Exhibition & Conference Centre.

The production optimization company which has 25 personnel and was founded in 2011, was presented with the top award for its excellent performance in the offshore energy sector, and in particular, for its steady and consistent growth during one of the most challenging economic climates in decades for oil and gas businesses.

15Enpro OAAs 2017 Sarah Cruddas with Enpro Subseas Neil Rogerson Tom Bryce and Alan JohnstoneOAAs 2017 Sarah Cruddas with Enpro Subsea's Neil Rogerson, Tom Bryce and Alan Johnstone

Enpro Subsea was established in 2011 with its founding members having worked together for more than two decades through various business entities. Ian Donald, John Reid, Steve Robb and Tom Bryce have been instrumental in bringing several game-changing technologies to the subsea industry, including the ESSI Decommissioning system and the pioneering FAM (Flow Access Module) technology which is becoming a new industry standard for flexible subsea enhanced production intervention.

The OAA win follows a remarkable 12 months for the Aberdeen-based company which saw its patented ESSI Decom system being successfully deployed by a major North Sea operator. This has enabled them to drill into existing gravity based structures and sample trapped fluids prior to decommissioning in accordance with OSPAR compliance regulations.

At the same time, Enpro also saw its ESSI FAM production enhancement systems exported to West Africa and the Gulf of Mexico, and announced news of a £755,000 research and development grant from Scottish Enterprise to help the company further design, develop and test new technology. The company’s managing director, Ian Donald, was also honored earlier this year, winning the outstanding achievement award at the Subsea UK Awards.

Enpro Subsea marketing director, Tom Bryce, said: “The OAA’s have been celebrating and encouraging innovation and collaboration in the North Sea for over three decades. We are very proud to be recognized by the SPE in the Great Small Company category ahead of the other shortlisted businesses which we respect immensely.

“This award is testament to the hard work and dedication of our of team, who exemplify the entrepreneurial spirit encouraged and nurtured throughout the company allowing us to meet the ever-changing needs of the subsea industry.

“It’s because of this that we have experienced strong business expansion across key markets and have a robust strategy in place for continued growth.”

PIRA Energy Market Recap for the Week Ending March 27, 2017

16PIRALogoEuropean Refinery Margins Will Remain Generally Healthy in 2Q-3Q17

Refinery margins will stay relatively firm supporting European refinery runs through the gasoline season. Gasoline stock coverage of demand/export pull will be lower than last year. Distillate stocks will be slower to work off. Consequently, gasoline will outperform diesel in 2Q/3Q17. HFO cracks will trend lower but still remain relatively firm due to reduced Russian and Venezuelan exports.

The Allure of Hub-Indexed Gas Finds its Way to European DES LNG Pricing

As the diversity of global LNG supply dramatically evolves by the month, so does the pricing of LNG in Europe. In the past, buyers were largely expected to pay pricing linked to oil, however, increasingly cargoes are being priced at least partially off of regional hubs. This is the hallmark of two very important changes: further developed European gas markets and increased competition among producers for gas burn. These price developments, combined with Gazprom’s recent proposal to open Eastern European markets, has the opportunity to make Europe a more integrated and less isolated gas ecosystem more akin to the U.S.

Poor Hydro Set to Continue to Support Italian Prices

After setting a new 37-year minimum for January at 36.9% of nominal capacity, water levels in Italian hydro reservoirs continued to stand at multi-year lows in February, dropping to 32.7%. As a result, the 22% year-on-year uptake in hydro output observed in January (2.7 GW) has reversed to a net loss in February (-14% year-on-year to 2.2 GW) and the trend is set to continue in March (-22% year-on-year to 2.4 GW month-to-date). So far in March, across the Italian market, the increase in wind output, +53% year-on-year to 2.6 GW month-to-date, and solar output, +25% year-on-year to 2.2 GW, has more than made up for the hydro shortfall and, together with an +11% year-on-year in combined imports from France and Switzerland (5.6 GW in total), has reduced the need for thermal output, which declined by 4% year-on-year to 14.1 GW.

U.S. Ethanol Prices Gain

U.S. ethanol values advanced the week ending March 17. February RIN generation was slightly less than January a longer month. The D6 RIN carry over during 2016 decreased, but less than anticipated. Brazil is considering a 20% import tax on U.S. ethanol. Spain-based Abengoa sold its European ethanol business.

Rains in the Plains

One rain does not a drought break, but the positioning of this week’s forecasted precipitation could not be any better for those from Texas north to Nebraska and east to Missouri. Whether winter wheat is in the ground or corn has just been planted, these rains will provide a real benefit. Localized flooding is possible in Oklahoma and southern Kansas, but after everything they’ve been through it will be welcomed. These rains will slow down planting in some areas, but not in a wide enough area to make a difference to the market.

California Low Carbon Fuel Standard Market Scorecard

The California Air Resources Board’s Low Carbon Fuel Standard (LCFS) is designed to reduce emissions in transportation fuels as part of the state’s efforts to address climate change. The LCFS policy incentivizes change in the state’s transportation sector and liquid fuel markets and is already impacting refiners, low carbon fuel providers, fuel consumers, blenders, traders and related companies. PIRA’s California Low Carbon Fuel Standard Scorecard offers an updated assessment of the key fundamental and policy drivers impacting LCFS credit prices and compliance in the short to medium term – complementing the longer-term outlook presented in PIRA’s recently released LCFS Study.

Coal Prices Move Lower on Absence of Upside Risks

Seaborne coal market prices moved decidedly lower this week, despite a modest rally in the latter stages of the week. Mild weather conditions, weaker oil and gas markets, and sagging European power prices weighed on CIF ARA prices in particular. In the Pacific Basin, while the recent data releases on the demand side (China, Taiwan, and South Korea) have generally been skewed to the bullish end of the spectrum, the market seems to continue to focus on recovering domestic production in China tamping imports and pricing down. With policymakers in China adopting a more flexible position regarding coal production capacity cuts, and alleviated fears regarding the near term adequacy of European natural gas storage, much of the upside risk potential for coal prices has been removed. These risks had previously been propping up prices and their removal will lead to further downward pressure on pricing in PIRA’s view, barring unforeseen disruptions in supply or demand surges.

Global Equities Continue to Exhibit Rotation

There continues to be noted rotation in the domestic vs. international equity markets this past week. The broad U.S. market was lower on the week. Banking and retail led many of the sectors lower, while utilities was the one sector to post gains. Energy only slightly underperformed the overall market. International indices were led higher by emerging markets, emerging Asia, and China, for the second straight week. Latin America was lower. While all the international tracking indices failed to move universally higher, they did all outperform the U.S. market.

It’s All About Products

Overall U.S. commercial stocks increased just 1.3 million barrels this past week as another sizable 5.0 million barrel crude stock build more than offset a 3.6 million barrel product inventory decline. Both gasoline (-2.8 million barrels) and distillate (-1.9 million barrels) inventory declines figured prominently in the overall product stock decline. Crude stock builds should be largely over now that runs will likely be over 16 MMB/D, though builds at Cushing do not end until April.

Winter’s Return Provides Springboard for Prices

In perhaps a harbinger of things to come, month-to-date Dominion South and Transco Leidy basis discounts have narrowed to levels not seen since 2014 polar vortex. The contraction in the spread between Dominion South and Columbia Gas to ~10¢ this month in relation to the 50¢ gap just a year ago, is also of note. Indeed, it underscores the enhanced year-on-year in-basin interconnectivity brought on by various pipeline projects within the Appalachian Basin and limited growth in Appalachian production year-to-date.

Technology Assessment 2017: Power Generation & Vehicle Transport

This Special Report highlights a number of major technology trends in the power and transportation sectors and reviews PIRA's long-term technology assumptions for its global energy outlook. The report is drawn from PIRA's 2017 Scenario Planning Service Annual Guidebook, which offers a comprehensive country, sector and product-level energy outlook through 2035. Given the importance of the power sector for natural gas and coal demand and the transportation sector for oil use, the key technologies assessed include those for electric power generation and end use, as well as those impacting transport fuel choice.

U.S. Federal Regulatory Calendar

The Trump Administration and the GOP-held Congress have been working to roll back Obama era regulatory initiatives through Executive Orders, the Congressional Review Act and other regulatory means. Congress still has until mid-May to repeal regulations under the CRA. The Stream Protection rule was repealed in February and the BLM Planning rule will likely follow, but a repeal of DOI’s venting and flaring rule is facing resistance. An EO addressing the Clean Power Plan is yet to be released. The Trump EPA will review the final determination not to revise light duty vehicle GHG standards for model years 2022-25 but has not yet taken action on the status of California’s Clean Air Act waiver. Implementation of 2017 Renewable Fuel Standard regs had been delayed, but appears to be going into effect, without revisions. The EPA has also withdrawn an information collection request on methane emissions from oil and gas wells.

S&P 500 Lower as VIX Gains

The S&P 500 moved lower and stress indicators generally increased but remain very low. Volatility (VIX) was higher, and the price of high yield debt (HYG) moved lower. Emerging market debt bucked the trend and rose in price on the week. U.S. government rates, both short and long-term maturities, generally eased. Short-term euro rates rose slightly. Both the total commodity index and ex-energy moved slightly lower, and the dollar was generally weaker.

U.S. Ethanol Stocks Draw

U.S. ethanol stocks fell for the third consecutive week, decreasing by 171 thousand barrels to 22.6 million barrels. Despite the decline, PADD II stocks climbed to a record high 8.5 million barrels. Ethanol production was relatively flat, falling by 1 MB/D to a still-high 1,044 MB/D. Ethanol-blended gasoline manufacture increased to 9,075 MB/D, up 4.1% from this time last year.

2017 Acreage on Tap

While some time remains for U.S. producers, many are past the point of no return on their planting choices, which the market will get a feel for next week. With this week’s numbers of 12% of the expected acreage to be planted in corn and 11% in soybeans currently within areas that are experiencing drought, the thought remains that the drier an area is, the more likely it will be for more corn to be planted as planters keep on moving once they start. That “shift” may encompass 1-2 million acres in our opinion, but given the seed buying pattern exhibited in the spring so far, PIRA doubts much more of a shift can occur.

Propane and Ethane Prices Down Week-On-Week

Price declines were registered throughout all the species, tracking with WTI as well as with the normal seasonal trends. Propane futures ended 4% down to 57¢/gal and ethane by 1% to 22¢. Pentanes plus also declined by 3% to $1.07/gal. Normal butane and isobutane futures remained steady at 75¢ and 77¢, respectively.

Higher Japanese Refinery Maintenance, but Seasonally Lower Demand

Japanese crude runs continued to ease on the week in line with our maintenance schedules, while crude imports fell back sharply. Crude stocks drew 3.9 million barrels, but finished product stocks built 0.5 million barrels. Aggregate major product demand continued to decline seasonally and is being heavily influenced by lower kerosene consumption. Gasoline demand was higher and helped only modestly by the spring equinox holiday and stocks built. Gasoil demand was fractionally lower and stocks also built. Kerosene demand declined along seasonal trends.

2Q Softness Continues to Grow

Europe will likely be required to play a balancing role in global markets this year in contrast with 2016, but probably not as large had been forecast at the PIRA October Seminar. This theory will be tested by what actually happens on the regional AB supply side: if all suppliers step up to produce even at 80% of capacity utilization, there will be excess supply to manage.

Monthly Gas/Power Sensitivity Analysis

Electric power sector gas burn during the April-October period is expected to be down ~2 BCFD from 2016. This projection assumes 10 year average cooling degree days, PIRA’s Reference case gas price forecast, and assumptions on gas and renewables capacity changes and hydro conditions. This report quantifies the potential range in gas burn associated with alternative gas price paths which may result from faster or slower production gains and/or changes in end of injection season storage levels.

Encouraging Pictures Abound in Emerging Economies

One of the most critical macro developments in the first three months of 2017: there are increasing signs that emerging economies (which account for 55% of global GDP) are turning things around. First, there have been tangible improvements in the tone of data – the emerging market economic surprise index, which measures whether data releases have met market expectations, strengthened significantly this year, and is at its highest level since 2010. Second, financial market conditions in the emerging world have exhibited resilience, even as the U.S. Fed continues to tighten its monetary policy.

Shale Past an Inflection Point, On Path of Strong Growth

U.S. shale production finally turned higher in 4Q16 following five consecutive quarters of sequential declines. Shale production, now past an inflection point, is on a path towards strong growth. Initial guidance for 2017 from public shale operators points to a 60% year-on-year increase in spending and a 16% year-on-year increase in shale production. PIRA expects growth will continue to be led by the Permian, but all of the major plays contribute. With activity ramping up quickly, costs are also on course to rise. However, further productivity gains will likely offset some of this inflation.

Ukrainian Industrials to Receive Price Cut

National joint-stock company Naftogaz Ukrainy from April 1, 2017 will cut the price of gas sold to industrial consumers on a prepayment basis by 10.3%. According to a company press release, this price is relevant for consumers buying gas in the amount of more than 50,000 cubic meters per month and under the condition the companies have no debts to Naftogaz. The price for other customers next month will fall by 9.8%.

U.S. Shale Oil: Rising Costs and Breakevens in 2017

Shale costs have begun to rise as surging shale activity has pressured service prices higher. PIRA predicts total well costs will increase by more than 10% between 2016 and 2017. Recent reports suggesting significantly higher cost inflation seem unlikely as much of this year’s cost are locked in under long-term contracts and only certain portions of total well cost are experiencing tightness (e.g. proppants, pressure pumping). In addition, structural efficiency gains are expected to continue and will help offset a portion of this inflation.

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.

GoM Lease Sale Yields $275 Million in High Bids

 1Central Gulf of Mexico Program AreaU.S. Secretary of the Interior Ryan Zinke has announced that Lease Sale 247 for oil and gas parcels in the Gulf of Mexico garnered $274,797,434 in high bids for 163 tracts covering 913,542 acres in the Central Planning Area of the Outer Continental Shelf offshore Louisiana, Mississippi, and Alabama. A total of 28 offshore energy companies submitted 189 bids. The sum of all bids received totaled $315,303,884.

“Today’s strong sale reflects continued industry optimism and interest in the Gulf’s Outer Continental Shelf, a keystone of the Nation’s offshore oil and gas resources and a vital part of President Trump’s plan to make the United States energy independent,” Secretary Zinke said. “In cooperation with the Gulf offshore industry, we are committed to responsible energy development that spurs economic opportunities, generates jobs for American workers, and produces revenues for local, state, and federal partners. Expanded Gulf production is critical to America’s economic and energy security, and will play a greater role as we move to break our dependence on foreign oil and strengthen the Nation’s energy independence.”

Today’s lease sale, which included all unleased and non-protected areas in the Central Gulf of Mexico Planning Area, is the final to be held in the Gulf of Mexico under the current Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 (Five Year Program). The Five Year Program makes available all offshore areas with the highest resource potential. The first eleven sales in the Five Year Program offered nearly 73 million acres for development and garnered more than $3 billion in bid revenues.

The Department’s Bureau of Ocean Energy Management (BOEM) offered 9,118 unleased blocks, covering 48 million acres, located from three to 230 nautical miles offshore Louisiana, Mississippi, and Alabama, in water depths ranging from nine to more than 11,115 feet (three to 3,400 meters).

“The Gulf of Mexico is one of the most productive oil and gas basins in the world, and its mature offshore and onshore infrastructure supports safe and responsible development of our domestic energy resources,” Secretary Zinke said.

BOEM estimates the lease sale could result in the production of 460 to 890 million barrels of oil, and 1.9 trillion cubic feet to 3.9 trillion cubic feet of natural gas. The sale terms include stipulations to protect biologically sensitive resources, mitigate potential adverse effects on protected species, and avoid potential conflicts associated with oil and gas development in the region. BOEM’s economic terms include a range of incentives to encourage diligent development and ensure a fair return to taxpayers.

The broadcast of the bid reading via the internet livestreaming allowed bid information to reach a much broader audience and eliminated the need for the public to physically attend the bid reading.

Following today’s sales, each bid will go through a 90-day evaluation process to ensure the public receives fair market value before a lease is awarded. Lease awards will be posted to BOEM’s website as they are completed. A Note to Stakeholders will announce final sales statistics and bids rejected upon completion of evaluations. All materials and statistics for Lease Sale 247 are available.

As of March 1, 2017, about 16.9 million acres on the U.S. OCS are under lease for oil and gas development (3,194 active leases) and 4.6 million of those acres (929 leases) are producing oil and natural gas. More than 97 percent of the leases are in the Gulf of Mexico; about 3 percent are on the OCS off California and Alaska.

Aker Solutions Secures NOK 1 Billion in Work for Njord A Upgrade

The company will as a subcontractor of Kvaerner take part in upgrading the platform after operator Statoil exercised an option in an agreement awarded in April 2016. The option is for work in the engineering, procurement and construction phase of the project. Aker Solutions' share of the work is valued at about NOK 1 billion and will be booked in the company's first-quarter orders.

1AkerSolutions statoil njordAker Solutions will provide design engineering for the upgrading of the semi-submersible Njord A platform in Norway. Photo: Thomas Sola / Statoil.

"This is the largest offshore platform in Norway to have been brought to shore for a total upgrade," said Luis Araujo, chief executive officer of Aker Solutions. "We're excited to continue our work with Kvaerner and Statoil on this landmark project, which will enable the Njord field to keep producing oil and gas for several more decades."

Aker Solutions' office in Bergen will execute the engineering work with support from the company's division in Oslo, working as part of an integrated team with Kvaerner. The work has already started and will at its peak involve about 330 Aker Solutions' employees. Delivery is scheduled for spring 2020.

"We have together with Kvaerner and Statoil succeeded in significantly lowering costs on this project and we are now focused on keeping up the momentum," said Knut Sandvik, head of projects at Aker Solutions.

The Njord field, located in the Norwegian Sea, had its first production in 1997. The Njord A platform will be upgraded at Kvaerner's yard in Stord, an effort that will require about 3,000 man-years.

Aker Solutions has previously delivered concept and feasibility studies as well as front-end engineering and design (FEED) work for the Njord upgrade. The subcontractor agreement with Kvaerner includes an option for prefabrication work.

Statoil and Partners Proceeding with Phase 2 of Johan Sverdrup

Phase 1 of Johan Sverdrup is under development, with first oil scheduled for late 2019. The partners will now proceed with maturing Phase 2 for the investment decision and submission of the plan for development and operation (PDO) in the second half of 2018. Phase 2 is scheduled to come on stream in 2022.

2Statoil JohanSverdrupPhase2Illustration of the Johan Sverdrup field center. Credit: Statoil

“We must take a generational perspective on the Johan Sverdrup development. Working closely with partners and government authorities we now have a plan for Phase 2 that maximizes value for society, industry and the licensees”, says Statoil’s project director for Johan Sverdrup, Kjetel Digre.

“The Johan Sverdrup suppliers have demonstrated a willingness and capabilities to develop good solutions in a partnership with us. The contributions have been key to the improvements we have achieved so far. We are pleased to see that this trend is being progressed in the awarded FEED contracts. And we see that Norwegian suppliers are competitive in an international market,” says Digre.

Statoil has implemented several improvement programs for phase 2 in the Johan Sverdrup development. Capital expenditures for Phase 2 are now estimated at between NOK 40 – 55 billion (NOK billion nominal, fixed currency and excluding IOR), halving the estimate since the PDO was submitted for Phase 1 of Johan Sverdrup. “The quality of phase 1 and the improvement work we have performed with our partners and suppliers for phase 2 has enhanced profitability. The break-even price for the full-field development is now less than USD 25 per barrel and with an ambition of a world class recovery rate of 70 %,” says Digre.

The partnership has also decided on the development concept for Johan Sverdrup. Phase 1 of the development establishes a field center consisting of four platforms on the field. Phase 2 builds on this infrastructure, adding another processing platform to the field center. Overall this will result in a processing capacity of 660 000 barrels of oil per day.

The following FEED contracts will be awarded in connection with the decision to proceed with the development that has now been made:

  • Processing platform, Aker Solutions
  • Jacket, Kværner
  • Power supply from shore, Siemens

Phase 2 also includes the development of the Avaldsnes (east), Kvitsøy (south) and Geitungen (north) satellite areas to be phased in for processing and export on the field center.

28 new wells are planned to be drilled in connection with the Phase 2 development. The Phase 2 concept also includes the establishment of an area-wide solution for power from shore for the Utsira High by 2022.

Maturing and planning Phase 2 parallel with the development of Phase 1 will ensure a consistent full-field solution and cost-efficient hook-up when Phase 1 is on stream. With a field life estimated at 50 years, Johan Sverdrup will generate great value for society and the partners.

Phase 1

Includes the development of four platforms, three subsea installations for water injection, power from shore, export pipeline for oil (Mongstad) and gas (Kårstø)

Under development. Approx. 40 % of the development is completed

More than NOK 60 billion worth of contracts awarded. More than 70 % of the suppliers with a Norwegian billing address

CAPEX estimate: NOK 97 billion

Break-even Phase 1: Below USD 20 per barrel

Production start: late 2019

Phase 2

Includes development of another processing platform for the field centre + the Avaldsnes, Kvitsøy and Geitungen satellite areas, in addition to power from shore to the Utsira High in 2022

Made the DG2 decision to proceed with the development

Investment decision (DG3) and submission of the plan for development and operation: Second half of 2018

Investment estimate: NOK 40 – 55 billion

Break-even price: Below USD 30 per barrel

Production start: 2022

Full field (Phase 1 + Phase 2)

Includes both Phase 1 and Phase 2 of the Johan Sverdrup development

Resource estimate: 2.0 – 3.0 billion barrels of oil equivalent

Break-even price: below USD 25 per barrel.

Subsea 7 Awarded Mad Dog 2 Contract

3Subsea7 MadDog copySubsea 7 announces the award of a large(1) contract by BP as part of the deepwater Mad Dog 2 development, located approximately 190 miles south of New Orleans.

The contract scope covers engineering, procurement, construction and installation (EPCI) of the subsea umbilicals, risers and flowlines (SURF) and associated subsea architecture.

Subsea 7 has worked closely with BP to deliver a lump sum integrated solution from design through to supply, installation and commissioning. Furthermore, by collaborating with OneSubsea, a Schlumberger company, our Subsea Integration Alliance(2) partner that has been awarded the Subsea Production Systems (SPS) contract, additional areas of cost improvement have been identified to provide greater cost certainty and reduced risk.

This has enabled the original cost of the Mad Dog 2 development to be substantially reduced.

Together the SURF and SPS contract awards are a significant endorsement of our Alliance offering and confirmation of the client's high level of interest in this approach, and in Subsea 7 as a key partner. This is also the first substantial project in the US to use Subsea 7' Swagelining(3) polymer lining technology.

Project management and engineering will take place in Houston, Texas with support from Subsea 7's Global Project Centre in London, UK. Offshore installation activities are scheduled for 2019 and 2020.

Craig Broussard, Subsea 7 Vice President for the Gulf of Mexico, said: "The Mad Dog 2 project is a significant award for Subsea 7. It combines Subsea 7's capability with our Subsea Integration Alliance value offering to reduce risk and provide lower cost solutions for BP. This project serves as a step-change of how we work in the region and in Subsea 7's ability to deliver superior value to the industry."

Second Shah Deniz 2 Platform Jacket Sent Offshore

The Shah Deniz consortium has announced the sail away of the second jacket for the Shah Deniz Stage 2 platforms. The Quarters and Utilities (QU) platform jacket sailed away to the Shah Deniz contract area in the Caspian Sea from the Heydar Aliyev Baku Deepwater Jackets Factory (BDJF) ahead of schedule on 15 March.

The transportation, launch, positioning, pile installation and final completion activities of the jacket structure are expected to take around 75 days, depending on the prevailing weather conditions.

4ShahDeniz2PlatformPhoto credit: BP

The construction of the jacket was completed ahead of schedule on 20 February 2017 and was then successfully loaded onto the transportation barge STB-1 at the quayside of BDJF.

The QU platform jacket, built by the BOS Shelf, Star Gulf and Saipem consortium, was fully constructed in country at the BDJF, using local construction infrastructure and facilities. 2000 people including sub-contractors and specialist vendors were involved in the construction works. Some 90% of the construction workforce was Azerbaijani citizens.

Ewan Drummond, Vice-President, Shah Deniz 2 Projects, said: “The second jacket sail away is the first major milestone planned for this year and we are pleased to have achieved it ahead of schedule. 2017 is an important year for BP and for the Shah Deniz 2 project, which is already around 90% complete. We have planned a series of key completion milestones for this year. We are committed to achieving all of these milestones on schedule to make BP’s 25th anniversary celebrations in Azerbaijan a big success.

“On this occasion, I would like to thank SOCAR and our partners for their support and cooperation in moving this giant project forward. My thanks are also to all people representing BP, contractors and subcontractors whose hard work has made it possible to achieve this milestone ahead of schedule. I would like to specifically thank the BOS Shelf, Star Gulf and Saipem consortium for their firm commitment to BP’s safety standards throughout the 22-month construction period of this jacket. This is a great safety achievement and I am confident that the offshore installation will be performed with the same level of commitment to safety and quality”.

The QU platform jacket weighs approximately 12,084 tons and stands 105 meters high. It contains 31 J Tubes, 7 utility caissons and 3 J tube caissons. The jacket will be installed in a water depth of 95 meters.

Seaway Heavy Lifting Takes Delivery of Seatools Pre-Piling Template Equipment

5Seatools Pre piling template PIF SeatoolsOn behalf of its client Seaway Heavy Lifting, subsea technology company Seatools completed the development, manufacturing, and installation of a piling instrumentation and control system for the Pile Installation Frame (pre-piling template) which will be used for the construction of a large offshore Windfarm. Seaway Heavy Lifting will commence the offshore installation operations in April of this year.

For this project, Seatools’ scope of supply comprised the complete mechanical, electric, hydraulic, and software design of the pile template instrumentation and control system, complemented by the hydraulic and mechanical system for template leveling and pile positioning. The entire project has been successfully completed in as little as 5 months, from signing the contract to FAT.

Marcel Remijn, Project Manager at Seaway Heavy Lifting,: “We are very pleased with the technical solutions Seatools have provided to our Pile Installation Frame. By using proven technology and ruggedized equipment we are confident that the provided technology will result in a solid performing Pile Installation Frame. Working together with Seatools has been an absolute pleasure and we look forward to see the Pile Installation Frame in action”

The project’s challenging deadline required close collaboration between Seatools’ in-house technical disciplines and related suppliers, as well as between Seatools and its client Seaway Heavy Lifting. Early-stage dialogues, during which Seatools linked its technical expertise to the operational expertise of the client, opened up a number of suitable technical configurations and potential solutions. Complemented by a thorough FMEA analysis, this resulted in an adequate system architecture and related solutions featuring a high level of redundancy, a solid backup strategy, and innovative measurement technologies. Thanks to the delivered solutions, Seaway Heavy Lifting is set to stay well within the limits of the prescribed pile installation tolerances.

Jan Frumau, Managing Director at Seatools, said: “In addition to the honor of collaborating with a prominent EPCI player like Seaway Heavy Lifting, I am very pleased with the delivered technical solutions. We are confident that the developed solutions will allow Seaway Heavy Lifting to perform efficient piling operations. The highly ruggedized equipment will result in a solid performance, despite vibrations and shock loads that are present during piling operations.”

Apart from drawing on Seatools’ extensive subsea technology toolbox – containing rugged dredging sensors, among others – the project demanded for the development of several innovative measurement technologies that facilitate efficient piling operations. A case in point is the Post Pile Stick-up Measurement system, which facilitates very accurate determination of the (relative) pile stick-up height.

Learn more about Seatools’ offshore and subsea installation equipment here.

Vryhof and Its Business Unit, DSM, Launches New Engineering Unit

Vryhof, a trusted partner to many of the offshore industry’s leading players, and its business unit Deep Sea Mooring (DSM), a leading provider of offshore mooring services, have launched a new engineering unit to support the company’s offshore oil & gas, renewables and aquaculture operations across the globe.

The new unit, which is just one element of Vryhof that also includes anchoring technology specialists Vryhof Anchors and Moorlink, a provider of mobile and permanent mooring solutions, will be home to some of the industry’s leading engineers with previous experience as oil & gas operators, rig owners and vessel designers.

6Vryhog DeepOceanMooringA time domain simulation model where a flotel on DP (Dynamic Positioning) is connected to a moored production unit. The model has been used for availability analysis and forecasting of gangway. Image credit: Deep Sea Mooring

The unit will provide expertise in hydrodynamic and vessel motion analysis; advanced mooring analysis (including for offshore wind turbines and offshore fish farms); dynamic positioning (DP) analysis; flexible and rigid riser analysis; complex marine operations (including offshore crane operations and subsea operations); and probabilistic and deterministic stability analysis for all ship types and floating structures.

A main element of the new unit’s activities and a key differentiator in the marketplace will be one of the industry’s largest servers with parallel processing capabilities. This will enable Vryhof and DSM to carry out 120 simultaneous engineering simulations, thereby shortening computational times, reducing assumptions and simplifications, and delivering highly accurate and less conservative engineering analysis for customers.

Wolfgang Wandl, Vryhof CEO, continued: “When is it safe to drill? What are my optimal mooring line arrangements? How does my vessel react to different sea-states? How can I ensure safe connections between accommodation platforms and the main rig? What issues should I be aware of when installing my flexible riser? Our engineering team can provide answers to these questions and more...”

He continues: “At a time when engineering innovation is so important to operators as a means of increasing efficiencies and managing costs, access to many of the foremost technical and engineering minds in the mooring industry is a definite value-add for our customers. The result will be viable engineering solutions and highly accurate information and analysis for real-life challenges.”

One recent engineering project and a key area of innovation at Vryhof and DSM is availability and forecast response analysis to facilitate the link-up of floating offshore accommodation platforms (known as ‘flotels’) to their main rigs. In one North Sea application, availability analysis provided by DSM saw the input of hindcast data - over 50 years of historical weather data - in order to estimate the expected availability of the flotel at a specific location. Working with Storm Geo, a global provider of decision support for weather sensitive operations, DSM combined state-of-the art hydrodynamic software and weather forecasts to forecast gangway motion, maximize availability, reduce risk, and optimize operations.

Endeavor Management Announces Subsea Decommissioning JIP Phase II “Plugging in the Power Tools”

7EndeavorEndeavor Management is pleased to announce a second phase follow-on to its earlier successful Joint Industry Project (JIP) "Stocking the Decommissioning Tool Kit" completed in 2016. That JIP delivered results covering eleven (11) topics and identified several areas for additional work.

Bruce Crager, Executive Vice President of Endeavor Management, stated, “We are delighted to be able to continue the work of defining improved operations, new technologies and methods to evaluate whether to leave subsea hardware in-situ or recover it. It is only with the cooperation and dedication of our Member Companies that significant progress is being made to deliver state-of-the-art tools and techniques to overcome the major operational and economic hurdles of offshore oil & gas decommissioning.”

Building on the results of the initial JIP, Phase II “Plugging in the Power Tools” will focus on several issues being proposed:
1. USA GoM Financial Requirements: common sense rationalization of regulatory requirements.
2. Using NEBA [Net Benefits Environmental Analysis] in decommissioning decisions: five (5) separate issues proposed, including 3 case studies.
3. Proving resins’ long term durability for well P&A and other interventions.
4. Examine the case for leaving subsea equipment in place as the best option for deep water ecosystems and outline ways for companies to gather, store, and share oilfield environmental data to prove or disprove this theory.

Keith Caulfield, JIP Project Manager for Endeavor Management, stated, “The collaboration of our Member Companies during the initial JIP was exemplary. Their contribution along with Endeavor’s subject matter experts truly brought a new level of insight into the problems and solutions available for deepwater decommissioning. I look forward to additional advances coming from the Phase II effort.”

Details of the JIP, Phase II will be revealed at this week’s DecomWorld GOM 2017 March 14-15 at the Omni Houston Hotel, in Houston, Texas during a presentation by Keith Caulfield, JIP Project Manager.

The JIP Proposal for “Plugging in the Power Tools” is available here.

Keynote Speaker Announced for Decom Offshore 2017

Decom North Sea, the membership organization for the oil and gas decommissioning sector, has announced Chris Cox, managing director of Centrica’s Exploration & Production business, as keynote speaker for its flagship conference and exhibition, Decom Offshore 2017.

This year’s annual conference, entitled “Challenging the Norm”, is principally sponsored by Bureau Veritas UK and takes place on 24 May at Aberdeen Exhibition and Conference Centre.

8DecomOffshore Chris CoxChris Cox, managing director of Centrica Exploration & Production

With over 30 years’ extensive experience in global oil and gas upstream activities, Chris has also held a number of senior roles at BG Group plc and a variety of international technical, commercial and management roles with both Amerada Hess and Chevron Corporation.

Outlining his vision for North Sea decommissioning, his keynote address will explore a number of themes, including: risk-based and total cost approach to optimal timing; collaboration between regulators; industry bodies and operators to establish fit-for-purpose work scopes, and the urgent need for the supply chain to focus on solutions and delivery models that can support and collaborate with operators to manage their decommissioning activities and costs.

Commenting on the announcement, Decom North Sea chief executive, Roger Esson, said: “With a number of mature assets in the Centrica portfolio and efficient decommissioning amongst his top priorities, Chris is ideally positioned to provide insight into the current decommissioning landscape from an operator perspective and we are delighted to announce him as keynote speaker.

“Now in its fifth year, Decom Offshore 2017’s program will reflect the title, “Challenging the Norm”, by focusing on providing a clear picture of recent and current activity within the decommissioning sector. This is an evolving sector, and fundamental to our commitment to assisting a robust, global supply chain win work, is to ensure we are constantly learning from latest experience.” This annual, sell-out event has gained a reputation for providing unrivalled learning and networking opportunities for the expected 400 delegates. This year, the programme is keenly focused upon the current opportunities available in the late life and decommissioning sector, for all levels of the supply chain.

In addition to plenary sessions, interactive break outs and over 30 exhibitors, Decom Offshore 2017 introduces One-to-One sessions, with a particular emphasis upon supply chain export opportunities via engagement with Decom North Sea’s board of directors and other strategic partners.

Delegate bookings are now open for Decom Offshore 2017. Sponsorship and exhibition opportunities are also currently available. For further information on both, click here.

Subsea 7 Announces Acquisition of Seaway Heavy Lifting

9Subsea7 RGB JPEGSubsea 7 S.A. (Oslo Børs: SUBC, ADR: SUBCY) has announced the acquisition, from K&S Baltic Offshore (Cyprus) Limited, of its 50% shareholding in Seaway Heavy Lifting Holding Limited (Seaway Heavy Lifting).

Following signing and completion, after close of business on 10 March 2017, Seaway Heavy Lifting and its subsidiaries became wholly-owned by Subsea 7 (the Group).

Jean Cahuzac, CEO, said: "Our investment to acquire the remaining shares in Seaway Heavy Lifting, such that it becomes a wholly-owned subsidiary of our Group, is aligned with our strategy to grow and strengthen our business for the long-term. Consolidating Seaway Heavy Lifting into the Group increases our participation in Renewables, Heavy Lifting and Decommissioning services. These are areas where we expect market activity to increase and see potential to grow our market share."

The Group will report revenues and net operating income from Seaway Heavy Lifting within a new Business Unit 'Renewables and Heavy Lifting'. This new reporting structure will be reflected within the Group's first quarter results, which will be announced on 27 April 2017.

For more information, click here.

Mexssub and INTECSEA Announces Strategic Alliance

10 1Mexssub Logo updatedTwo Houston-based solution providers in the oil and gas industry, Mexssub and INTECSEA, announced the formation of a strategic alliance built to deliver permanent riser and pipeline integrity solutions to operators worldwide. The companies will present details of the alliance at oil and gas industry trade show, Subsea Tieback and Exhibition, hosted this week in San Antonio.

10 2Jesus 436x272The alliance provides INTECSEA customers additional options for pipeline integrity management, designed to minimize risk and maximize production, while Mexssub gains an increased footprint beyond its historic work predominantly in the Gulf of Mexico.

“Mexssub celebrates this new partnership with INTECSEA, a well-respected leader in offshore infrastructure projects, and an ideal ally in pipeline integrity management. "Our two missions converge nicely at a time when proper integrity management serves a critical role in maximizing year to year productivity.”
- CEO Jesus Silva of Mexssub.

“For our customers, we strive to maximize the value of their assets, and facilitate the adoption of innovative technologies,” said Geeta Thakorlal, president of INTECSEA. “In Mexssub, INTECSEA has found an alliance partner that helps us achieve that objective more fully.”

VIKING Gaining Ground in Continued Difficult Market

11Viking HenrikUhdChristensenVIKING Life-Saving Equipment A/S is experiencing a moderate slowdown following several years of continuous growth. In a market affected by continued decline in two important segments, cargo vessels and offshore, revenue for 2016 totaled DKK 1.858 billion, compared to DKK 1.891 billion in 2015. Profit before tax for the financial year totaled DKK 183.5 million, compared to DKK 200.5 million in 2015.

“We want to continue developing and delivering growth in terms of both revenue and earnings. In the current market situation, we are performing well compared to our peers, while maintaining – and in most segments increasing – our market share. We also continued to invest in and develop our business with new products and concepts in 2016, and we established positions in the strategically important markets of Korea and Thailand. We will continue this offensive approach to the market, ensuring that we can seize the growth that is expected to return in 2018,” says CEO Henrik Uhd Christensen.

Cargo and offshore segments hit hard

VIKING operates in three main segments: cargo vessels, passenger vessels and offshore, two of which have been hit hard by the overall state of the economy. Although the scrapping of cargo vessels has increased globally, this has merely put a damper on the extreme expansion of capacity seen in the market over the last several years. In the offshore sector, lower oil prices continue to dictate the extremely low level of newbuild activities.

“The downturn has been deeper and longer than what could have been predicted a few years ago. The contours of a weakened market emerged in the years 2013-2014, combined with an absence of positive trends in the market economy to cushion the fall. You would have to go back decades to find a similar situation where the cargo newbuild market had fallen by more than half, as is the case now. Meanwhile, the operational market – the vessels in operation – are under pressure due to low demand and low freight rates,” says Henrik Uhd Christensen.

Signs of improvement in some segments

VIKING has launched a number of successful concepts in recent years for shipowners and offshore rig owners, which are adapted to the difficult market conditions. Customers are seeking multi-year agreements with transparent pricing on safety equipment and service, combined with reduced administrative burdens. The efforts to meet these needs will continue in the coming years.

“Even well-established shipowners see their liquidity dwindling these days; and some may go under, while consolidation in the form of mergers and acquisitions will also continue. I believe in a recovery in 2018. We are now seeing that parts of the market, most recently dry cargo vessels, are on the road to recovery,” says Henrik Uhd Christensen.

A few of the major bright spots

On a positive note, the holiday-driven cruise industry has remained successful for decades and proven less dependent on the global economy. The part of the passenger ship market that transports both passengers and cargo has also benefited from growth and lower oil prices. This has had a positive impact on both newbuilds and the existing tonnage.

In 2015, VIKING acquired the Danish manufacturer of a game-changing technology for handling lifeboats, Nadiro A/S. The market has warmly embraced the Drop-in-Ball™ system, and VIKING Nadiro has achieved high growth rates and excellent earnings in a market driven by new SOLAS rules that will take effect in 2019.

Robustness for all market conditions

2016 was the first year of the new five-year business plan, BP20, which includes ambitious growth objectives. One of the objectives of BP20 is to strengthen our foundations, ensuring that VIKING’s position remains robust and attractive following years of crisis-like conditions in a number of maritime industries.

“We expect profit in 2017 to be on par with what we achieved last year. Despite the slightly declining top and bottom lines in 2016, we saw growth in important key figures, such as gross profit, EBITDA and cash flows. The good development in equity has also continued as a result of sustained solid earnings and the high level of investment. VIKING is therefore in a good position to withstand the difficult market conditions of recent years and to achieve accelerated growth when conditions hopefully improve within the next couple of years,” says Henrik Uhd Christensen.

VIKING’s equity at the end of 2016 totaled DKK 922.9 million.

DKKm20162015201420132012
Revenue 1,859 1,891 1,728 1,612 1,584
Operating profit 186 201 191 158 126
Profit before tax 184 201 184 141 115
Profit after tax 140 147 135 108 79
Assets 1,661 1,630 1,408 1,332 1,319
Equity 924 802 712 617 559
Average no. of employees 2,014 1,914 1,860 1,766 1,694

Danos Posts Best Safety Record in Company History

12Danos 70 logoGRAY, La. – Danos completed 2016 with a Total Recordable Incident Rate (TRIR) of 0.11, the lowest since the company began tracking the data in 1979. The company credits this record to its comprehensive safety management system and the dedication of employees at every level.

“We’re extremely proud that our team’s focus on working safely is reflected in this record-low TRIR,” said Eric Danos, executive vice president. “Whether it’s mentoring or safety seminars or process audits – everything we do is about giving our employees the skills they need to be safe and to be leaders by improving the overall safety of the places they live and work.”

Danos’ comprehensive approach to safety begins with the hiring process, ensuring that all employees are tested, screened and selected based on strict criteria. Once onboard, new hires undergo a multilevel orientation program that provides both general and job-specific training and education. All Danos employees are required to sign a “Work Safe” pledge, committing to abide by established safety practices. Ongoing safety meetings, seminars, training and mentoring reinforce this commitment and provide opportunities for further learning and improvement.

In addition, Danos incentivizes safe behavior for all employees through a variety of proprietary initiatives, rewarding them for using stop work authority or sharing safety concerns with customers. In order to make safety reporting easier and more effective, Danos developed “W.A.T.C.H.” cards (Working Always to Control Hazards) that workers can submit via paper slips or electronically. This program allows managers to closely track safety successes or concerns in real time and to use that information to improve safety throughout the company. In 2016, Danos employees submitted nearly 17,000 W.A.T.C.H. cards.

Danos also works in partnership with its customers to develop safety standards and procedures that are aligned and meet project needs. Pre-job safety planning processes detail the necessary equipment and personnel assignments for every project. Safety inspections and audits of worksites, including joint audits with customers, provide additional accountability.

Over the course of its 70-year history, Danos has constantly sought to improve and refine its approach to safety, developing new programs, positions, departments, standards and training modules to address new challenges. Danos employees are active in a number of industry groups focused on safety, including the American Society of Safety Engineers, Gulf Coast Safety Training Group, National Institute for Occupational Safety and Health, the National Safety Council, Offshore Operators Committee, Center for Offshore Safety, LA1 Coalition and the Board of Certified Safety Professionals.