New Appointments Strengthen Technical Offering for Aberdeen Firm

13ArdyneArdyne, provider of specialised plug and abandonment and slot recovery technology and services to the global energy industry, has made two new top tier appointments in its technical support division.

Duncan Livingstone and David Stewart both come to Ardyne from Schlumberger, and have a combined experience of more than 70 years working in the global oil and gas industry. The appointments are part of Ardyne’s commitment to bringing in expertise to the company’s UK technical support offering for clients.

Both Duncan and David will be working out of Ardyne’s offices in Aberdeen and Stavanger, and will be part of a team of experienced field engineers servicing the company’s international operations, as well as a R&D team developing new technologies and equipment modifications for specific operational needs.

Duncan commented: “I’m delighted to be joining Ardyne where I can continue my involvement in managing clients and projects. My role in the technical support team will see me out and about with clients, solving their problems with solutions bespoke to them.

“I am confident that my previous experience will help me provide Ardyne’s customers with the best technical assistance and service available, and I look forward to working closer with the team in Aberdeen and Stavanger.”

David added: “Staying hands-on in the industry and finding original and innovative solutions to the current oil and gas market is what drew me to Ardyne.

“I’m looking forward to continuing to support clients in finding different ways to tackle their challenges, a goal I share with the company.”

The appointment of David and Duncan represents a significant addition to the expert team at Ardyne. Having launched in early 2016 and quickly acquiring Norwegian oil services company Wellbore AS, Aberdeen-headquartered Ardyne is already working on a number of projects in the UK, Norway, Australia, and the Americas

Alan Fairweather, chief executive officer, Ardyne said: “We have an ambitious growth plan already in motion and we are absolutely delighted to welcome Duncan and David to Ardyne. Their appointment solidifies Ardyne as a company that is bringing new technology, combined with robust thinking and risk minimising for our clients, to market.

“Together, we will deliver on our promise to bring our customers the new technology and service approach they need to optimise operations, cut costs, reclaim rig time and unlock the long-term value of brownfield resources.”

Are You Prepared? New IMCA Safety Videos and Pocket Cards Launched

14IMCA slipstrips video grab comprEffective promotion of safe working practices is high on the workplace agenda, and keeping safety material fresh and accessible remains vital to putting over the message. This has led to the International Marine Contractors Association (IMCA) launching a new series of mini safety videos, each with a supporting pocket safety card.

The series launches with ten videos with ‘Be Prepared to Work Safely’ as part of the title. The first is ‘Be Prepared to Work Safely – Working at Height’ and there are nine others dealing with preventing slips and trips; toolbox talks; manual handling; permit to work; watch your hands; lifting operations; line of fire; lifting equipment; and confined spaced – the dangers. A further five videos (and accompanying pocket cards) will be available later in 2017.

“The phrase “Are you prepared?” is key to the videos and the accompanying cards,” explains IMCA’s Technical Director, Richard Benzie. “It is a vital question that any worker, starting any task, should ask of him or herself. All feature the same blue animated character, which enables IMCA to publish safety promotional material with a common look and feel.

“The videos and cards are easy to understand and intended for use as part of a briefing session or toolbox talk, as well as by individuals. The new videos and pocket safety cards demonstrate that ‘less is more’. Words have been kept to a minimum, and a new and eye-catching format is used for each card, including the use of stills from the videos.

“Work on the development of the videos and cards began in Autumn 2015. A small and committed workgroup of members of our Health, Safety, Security and Environment (HSSE) Core Committee has continued the work; we would like to express our gratitude to them for the cost-effective and timely manner in which they have delivered this vital project. Safety is of paramount importance and we believe these new safety promotion tools have an invaluable role to play.”

The videos are available in Arabic, Brazilian Portuguese, French, Indonesian, Italian, Latin American Spanish, Malay, Russian and Tagalog as well as in English, and are designed to appeal to a wide range of cultural backgrounds. The English language version of the videos is streamable from the IMCA website. IMCA member companies can download all other language versions.

Further information on IMCA and its work on behalf of around 1,000 member companies in over 60 countries is available here.

OSIL Vibrocorer for Exploration Electronics

Ocean Scientific International Ltd. (OSIL) have recently supplied Exploration Electronics with a custom built 10m Vibrocorer system for use in their rental pool.

Exploration Electronics specializes in the rental and operation of marine seismic systems for oil and gas exploration, hazardous site surveys and engineering investigations.

Paul Fisher, Business Manager for Exploration Electronics, said that “As a geotechnical & seismic service provider with a 35-year track record and a reputation for providing reliable and high quality equipment, maintaining that reputation across all of our services has been a key objective. To that end we have selected OSIL as our preferred supplier of sediment corers and grabs.

15UnknownOSL406

Our most recent addition to our rental pool is the OSIL modular Vibrocorer, we chose this unit in response to customer demand for core samples up to 10m in length, using an easily transportable modular system.

The OSIL modular Vibrocorer fits the bill, exactly.”

The Vibrocorer purchased by Exploration Electronics comes in easy to assemble 2m barrel and frame sections to allow different corer configurations/heights to be built up depending on the requirements of the end user. The system can be used in dense or compacted sediments in depths of up to 600m.

The purchase of this system adds to Exploration Electronics’ existing rental pool of seabed sampling equipment, which includes CPTs, Vibrocorers, Piston Corers, OSIL Box Corers, Grabs and Multi (Multiple) Corers.

OSIL adapted the vibrocorer system to meet Exploration Electronics’ exact requirements, maintaining their reputation for working closely with customers to deliver high quality reliable equipment.

OSIL offer a wide variety of sediment coring equipment, from off-the-shelf grabs and box (spade) corers, to bespoke coring systems such as the Gravity Corer, Piston Corer (available in lengths from 3m to 60m), Vibrocorer for dense or compacted sediments or the industry standard Multiple Corer for undisturbed sediment sampling.

PIRA Energy Market Recap for the Week Ending March 20, 2017

16PIRALogoAsian Net Exports of Key Products to Ease

Asian refiners have been buying more crude from the Atlantic Basin due to narrower Brent-Dubai price spreads and declining freight rates. Asian net exports of key light products will ease as demand growth is expected to outpace incremental refinery runs in the region in 2017. Product exporters to Australia are fighting for market share. Asian LPG imports will grow more slowly this year due to moderating demand growth. Asian refining margins will remain generally healthy in 2017.

Russian Gas Price Up in February

The price of gas supplied by Russian state-owned Gazprom at Germany’s border climbed 14% in February IMF data show. Day-ahead gas on the UK’s National Balancing Point fell 20% in February, according to broker data compiled by Bloomberg. Gazprom, which supplies about a third of Europe’s gas, sees its prices recovering from a 12-year low in 2016. Most of the exporter’s contracts have an oil link, usually with a delay of six to nine months, while some also have minimum and maximum prices indexed to market rates. Gazprom plans to ship a record volume to its biggest market for a second year even as more liquefied natural gas may come to Europe this summer. It sees European gas demand rising about 5% in 2017, deputy head Alexander Medvedev said last week in an interview.

U.S. Power Storage Outlook

PIRA’s U.S. Power Storage Outlook reviews the latest trends in U.S. storage project installations, policy and market changes, and technology and cost developments, providing an updated market penetration forecast through 2024. PIRA has upgraded its post-2018 penetration forecast for SPP, ISO-NE, and NYISO, which will be most impacted by FERC’s recent proposal, along with other updates. Beyond the FERC proposal, PIRA does not see Trump administration policies changing our outlook, though tax reform, FERC appointments, and an infrastructure package are areas to watch in the coming months. The report also reviews the state of long-duration storage systems, including pumped-hydro storage (with around 30 U.S. projects in the development pipeline), compressed air, gravitational storage, thermal storage, flow batteries, and hydrogen systems.

EU Council Weighs in on Post-2020 Carbon Market Reforms, With Short-Lived Price Gains

EU Carbon Allowance (EUA) prices rose on the EU Council’s support for post-2020 market reforms and a stronger oversupply measures at their Feb 28th meeting, but the price gain was short-lived. The reform package could still change in the upcoming “Trialogue” negotiations, but the reforms currently on the table will have only a limited near- to mid-term impact on market oversupply. With the exception of a compliance-related rise in April, we maintain a generally flat view for EUAs in 2017. The possibility of price gains from positive Trialogue talks is balanced by a poor fundamentals situation, with auction volumes remaining high and declining power sector EUA demand.

Lower Price Trend to Persist as Shoulder Approaches

With warmer weather dominating in February, electric loads fell nearly 4% year-on-year and coal burn was up only negligibly as compared with last year’s levels. As winter supply risks have fallen off and demand is close to entering the shoulder period, it is unlikely that coal prices will be able to break out of their downward trend and push higher until summer arrives.

U.S. Ethanol Prices Higher

U.S. ethanol prices bounced late in the week ending March 10. RIN prices rebounded after plummeting the previous week. January exports of fuel grade ethanol climbed after shipments to Brazil reached a five year high and cargoes to Asia more than doubled. European ethanol values plunged as more supply became available.

USDA Cuts

A deeper dive into the Trump budget released Thursday morning showed that the hefty $4.7 billion proposed cut to the USDA budget would not affect crop insurance although that remains a hot button topic. Cuts in USDA county offices and statistical capabilities at NASS were specifically mentioned, along with rural water infrastructure. The county office cut was previously mentioned by the Obama Administration with no result. Going to be a long and tough fight amongst factions on the USDA budget in our opinion.

Fed Paints Rate Hike in Positive Light; Better Data from U.S. / China

At the policy meeting, the U.S. central bank did two things. First, as expected, it hiked the policy interest rate by 0.25%. Second, it sent a constructive message about the economic growth and monetary policy outlook via its communication tools. Specifically, policymakers assigned a good grade to the economy’s current performance; and they also made certain to communicate that the Fed has not become more hawkish compared to three months ago. In China, data releases for January / February were solid, indicating that the economic growth rate probably strengthened from the fourth quarter of last year.

Weak Start in 2017 Portends Challenging Year

Tanker rates are off to a slow start in 2017 and are expected to weaken further due to OPEC and non-OPEC production cuts and excessive vessel supply growth. Suezmax markets were a notable exception with rates recovering in February from rock-bottom levels in January. But the respite may be short as we approach the seasonally weak second quarter.

Gasoline Imports into Latin America to Stay Strong in 2Q17

Gasoline imports into Latin America are expected to stay strong in 2Q17. However, gasoline and diesel demands are forecast to be modestly lower year-on-year. Mexican and Venezuelan gasoline demand is projected lower year-on-year while Brazil’s is flat. Furthermore, Brazilian spark ignition fuel demand is set to fall in 2017 with petroleum gasoline demand to be flat as ethanol market share is projected to decline. PIRA expects regional refining crude runs in 2Q17 to be lower year-on-year.

Storage Deficit Re-Widening Ends Assault on Prices

Winter-like weather conditions finally returned — catching many off guard — with some parts of the U.S., primarily in the Northeast and Midwest, facing the coldest temperatures of the year. The belated return of cold air from the Arctic put an end to worries that U.S. storage levels would swell to 2.2+ TCF, which was weighing heavily on price expectations throughout February. The end of such concerns is allowing attention to shift back onto the other issues at work that have tightened weather-adjusted balances and kept gas prices at ~$3/MMBtu throughout much of the heating season.

French Nuclear Availability Low in March, in Spite of ASN Clearance

French nuclear availability remains at a multi-year low point for this time of the year (48.3 GW, or the lowest in the past six years), but the French nuclear regulator ASN has issued a press release on March 15 confirming the authorization to restart 12 of the reactors affected by the steam generator anomaly. It is interesting to note that the previous minimum availability for nuclear in March was set in 2014 (50.8 GW), i.e. 36 months ago. As a result of the generation cycles adopted by EDF, similar availability patterns are likely to recur every 3 years because of the length of the two maintenance cycles. The increased availability to 50.3 GW next month, the highest of the past six years for April, and high levels of availability through to June, based on REMIT data, recalls the pattern seen in 2014, when availability was also at a record high.

FOB Newcastle Prices Drive Higher, Atlantic Basin Dips

Coal market prices diverged considerably this week, with FOB Newcastle prices rising considerably across the forward curve, while FOB Richards Bay and CIF ARA prices pushed lower. Physical tightness surrounding China was the driving force behind the rise in FOB Newcastle prices in PIRA’s view. PIRA’s belief that China’s domestic coal demand strength was maintained into 2017 was confirmed this week, with the National Bureau of Statistics (NBS) releasing strong electricity generation figures for the January/February aggregate.

LPG Prices Fall in the United States

Despite some strength in WTI prices, falling demand and a decline in Henry Hub prices lowered U.S. NGL prices. Mont Belvieu ethane futures fell by 5% to 22¢/gal, while propane futures fell by 6% to 59¢/gal. Normal butane futures declined by 5% to 75¢/gal and isobutane similarly declined by 5% to 77¢/gal. Natural gasoline registered no week-on-week decline and was flat at $1.10/gal.

Global Equities Exhibit Rotation Near Record Highs

There was noted rotation in the domestic vs. international equity markets this past week. The broad U.S. market was little changed, with housing being the best performing sector. Energy basically matched market performance. International indices were all broadly higher and did very well as noted by the strength in the world, ex-US, tracking index. Performance was led by emerging markets, emerging Asia, and China.

U.S. Ethanol Scorecard and Supply Report

U.S. ethanol production rose 23 MB/D to a 5-week high 1,045 MB/D the week ending March 10, the sixth highest output ever reported. PADD II stocks climbed to a record 8.4 million barrels despite a decline in total U.S. inventories to 22.8 million barrels. Ethanol-blended gasoline manufacture increased to 9,049 MB/D from 8,697 MB/D as total gasoline production increased.

Commodity Liquidation

An extremely slow end to the trading week received a jolt on Friday afternoon as the weekly Commitment of Traders report reflect surprisingly large selling by the Funds in commodities generally, and grains/oilseeds specifically. The 900 million combined bushels of corn, soybeans, SRW, and HRW sold by the Funds was one of the heaviest single weeks in our memory. Combined with large bean oil liquidation, and some meal, Funds sold a record 207.5K contracts during the reporting week which included a WASDE but did not include the Fed’s rate hike.

U.S. Light Products Lead Inventory Lower

Overall commercial stocks declined by 7.8 million barrels on the latest week, led by a steep 9.8 million barrel drop in the four major products. Crude stocks were down just 0.2 million barrels, although Cushing added 2.1 million barrels, given the temporary closure of the Seaway Pipeline. Imports of crude were down to 7.4 MMB/D, 750 MB/D less than the previous week. Refinery runs were flat week-on-week. With planned downtime anticipated to fall in the coming weeks, refinery runs will be increasing.

Gazprom’s Proposal to Alter Contracts May Have Unintended Consequences

Gazprom has offered to settle their longstanding disputes with European antitrust authorities, theoretically in exchange for greater access to European markets and for their bigger ambitions to deliver more gas volumes through a second Nordstream pipe and the Turkstream pipeline. Gazprom offered to remedy issues with 8 Eastern European nations that represent around 15% of Russia’s pipeline gas sales, the biggest of whom is Poland that represents 4.5% of Russia’s total pipeline sales. On the surface, it may seem like Gazprom is sacrificing these sales for the hope of bigger ones when OPAL capacity is freed up and their new pipeline projects are fully operational. However, there seems to be some space for Gazprom to charge similar or even higher prices than before.

Stress Remains Low as Fed Rate Hike Announced

The S&P 500 was modestly changed on the week, but other indicators, such as the Russell 2000, posted more noticeable gains. Volatility (VIX) was lower, while the prices of high yield debt (HYG), and emerging market debt (EMB) moved higher. The Fed raised its target fed funds rate 25 basis points, while long-term U.S. government rates also tended to move higher, along with mortgage interest rates.

Japanese Crude Stocks Build, While Demand Eases Seasonally

Japanese crude runs continue to ease on the week, while crude imports rose sharply and crude stocks built 5.7 million barrels. Finished product stocks drew 1.2 million barrels, with much of the decline being in naphtha. Aggregate major product demand continued to decline seasonally. Gasoline and gasoil demands were lower. Gasoline stocks drew slightly, while gasoil stocks built moderately. Kerosene demand rose marginally, but with much lower yield, and the stock draw rate accelerated.

Australian Supply Tensions Threaten Coalseam LNG Exports

As Australia positions itself to become the world’s largest supplier of LNG, long simmering concerns about domestic supply availability for the key consuming southeast regions within the country have erupted in recent weeks to threaten the short-term viability of export growth from the recently commissioned Queensland export projects in the northeast.

March Weather: U.S. and Japan Cold, Europe Warm

At midmonth, March looks to be 2% colder than the 10-year normal for the three major OECD markets, with a composite net oil-heat demand effect of -41 MB/D. The markets are 6% warmer than the 30-year-normal.

Fire at Syncrude’s 350 MB/D Mildred Lake Upgrading Plant

An explosion struck Syncrude’s 350 MB/D Mildred Lake upgrading site on March 14. A 48 MB/D naphtha hydrotreater as well as piping from the hydrogen plant were damaged. Reports indicate that it could take two months for these units to be repaired and return to full service. Until then, modified production of lower quality, high sulfur syncrude is expected. The Mildred Lake upgrading plant has more than one train, meaning the temporary loss of the hydrotreating facility will not result in a complete shutdown. Expect Syncrude differentials to remain tight during the outage.

75 MB/D “Hidden” Demand Growth in 2017 Due to New Facilities Infrastructure

PIRA sees “hidden” demand associated with the start-up of new petroleum/petrochemical facilities and the Myanmar/China pipeline. 1.5-1.7 MMB/D of new refining capacity and 8-9 MMT/A of ethylene capacity are expected to start up in 2017. These new facilities will require oil for infrastructure needs, such as feed tankage and pipeline line fill. This will add roughly 75 MB/D to 2017 demand.

Asian Demand Growth: Expected Downshift is Unfolding

PIRA's latest update of major country Asian product demand indicates that year-on-year growth in our latest snapshot slowed to 556 MB/D, vs. 1,157 MB/D last month. Data actuals cover the three month period Dec-Feb. for China and India, while Japan, Taiwan, and Korea pick up data Nov-Jan. Much of the slowing was anticipated and relates to timing issues with regard to the Chinese New Year and India’s removal of “small denomination rupee bills” from circulation.

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.

Chevron Starts Production at Mafumeira Sul Offshore Angola

1mafumeria sul project facebookChevron Corporation announced that its subsidiary, Cabinda Gulf Oil Company (CABGOC) Limited, has commenced oil and gas production from the main production facility of the Mafumeira Sul project offshore Angola.

“This milestone supports our priority of completing major projects and improving free cash flow,” said Jay Johnson, executive vice president, Upstream, Chevron Corporation. “The Mafumeira Sul project generates new production and value for Angola, our partners and the corporation.”

Located 15 miles (24 km) offshore Cabinda province in 200 feet (60 m) of water, Mafumeira Sul is the second stage of development of the Mafumeira Field in Block 0. It has a design capacity of 150,000 barrels of liquids and 350 million cubic feet of natural gas per day. Early production from the project commenced in October 2016 through a temporary production system. Ramp-up to full production is expected to continue through 2018.

CABGOC is the operator and holds a 39.2 percent interest in Mafumeira Sul. Chevron's partners are Sonangol E.P. (41 percent), Total (10 percent) and ENI (9.8 percent).

CSA Conducts Deepwater Video off Columbia

2csa columbia deep water video webCSA Ocean Sciences recently provided, mobilized, and operated a deep water towed video system and all the ancillary equipment to conduct a video survey down to 2650m (8,700 feet) off the coast of Colombia. Included with the ancillary equipment was a slip-ring winch with 6,000 m of .68” EM cable, a Sonardyne USBL system, DGPS unit, and Hypack navigation software.

After overseeing the shipping of the equipment spread from the U.S. to Colombia, CSA assisted with the mobilization and demobilization of the equipment to and from a Colombian offshore supply vessel of opportunity. The project data was collected in less than one week time and was a huge success, collecting over 2,000 photos and video of over 235 line km during the field effort. CSA operated all listed equipment and directed navigation of the vessel.

For more on CSA’s primary underwater imaging system capabilities, click here.

InterOcean Offers Oil Spill Monitoring Service for Offshore Platforms

3InterOcean unitsDetecting accidental oil releases on and around offshore rigs in real time is crucial in today's offshore market. For the first time, offshore oil spill monitoring is now being offered as a service, eliminating the need for facility owners and operators to purchase, install, operate, and maintain their own spill monitoring system. The Slick Sleuth™ Rig Guard Oil Spill Monitoring as a Service allows owners and operators to focus on core production and operation activities, while at the same time providing them with the benefits, protection, and peace of mind that come with a state‐of‐the‐art spill monitoring system.

“We are excited to offer this new service to the offshore industry,” said Chris Chase, InterOcean’s Environmental Systems Division Manager. “Rig Guard Oil Spill Monitoring as a Service provides cost savings and environmental safety to offshore platform owners and operators. These cost‐benefits are particularly significant when compared to the risks and costs associated with even a relatively small spill.”

The Slick Sleuth Rig Guard system detects oil on water using optical non‐contact sensor technology, which provides users critical early warning for immediate spill response and containment, reducing the risk of fines and cleanup costs. Employing Rig Guard Oil Spill Monitoring as a service ensures that the best available technology is currently installed and operating on operators’ platforms, while at the same time eliminating capital outlay and budgeting associated with equipment acquisition and ownership.

For more information, click here.

McDermott Signs Strategic MOU to Construct Offshore Production Solutions in Saudi Arabia

4McDermottMcDermott International, Inc. (NYSE:MDR) has announced it plans to construct offshore production solutions in Saudi Arabia. McDermott signed a memorandum of understanding with Saudi Aramco for a long-term land lease at the new maritime facility at Ras Al Khair in Saudi Arabia, currently being developed by Saudi Aramco.

With a long-term phased approach, McDermott plans to build a new fabrication and marine complex expected to use state-of-the-art facilities, increased automation and an optimized layout to increase McDermott’s abilities to service its growing Middle East and Caspian markets.

“We are excited about this strategic move and believe it expands and strengthens our ability to service all our growing Middle Eastmarkets and our decades-long leadership position with Saudi Aramco and in the Middle East,” said David Dickson, McDermott’s President and Chief Executive Officer. “When we look at our next 50 years of business in the Middle East, we see strong benefits to moving our business operations to Saudi Arabia, including the opportunity to modernize our facilities, move closer to Saudi Aramco and other key customers in the region as well as provide McDermott’s world-class training programs to Saudi Arabia’s talented workforce to further enhance McDermott’s Middle East operations.”

McDermott expects to expand its capabilities and capacity in the region to serve its customers in offshore and subsea markets throughout the Middle East, Caspian and other markets in the Eastern Mediterranean Sea and offshore India and East Africa. The future fabrication facility at Ras Al Khair is expected to provide up to 16-million manhours of capacity, up from 8-million manhours at McDermott’s current Jebel Ali facilities, with a gradual transition from McDermott’s operations in Jebel Ali expected by the mid-2020s.

The move also demonstrates McDermott’s support of Saudi Arabia’s Vision 2030 and Saudi Aramco’s In-Kingdom Total Value Add (IKTVA) program. The IKTVA program intends to expand KSA-based business operations to help drive domestic value creation and maximize long-term economic growth, diversification, job creation and workforce development, to support a rapidly changing Saudi economy.

Wood Group Awarded Two Mad Dog Phase 2 Contracts

Wood Group has won two separate contracts related to BP’s Mad Dog 2 project providing engineering services to further develop deepwater production.

Wood Group has been contracted by Samsung Heavy Industries to provide detailed engineering and procurement services for the topsides for BP’s Mad Dog Phase 2 floating production unit. The $80 million contract follows the December 2016 completion of Interim Agreement Period (IAP) early work, which was valued at $4.5 million.

5MadDogPhoto credit: BP

Additionally, as part of the recently signed global services agreement with BP, Wood Group’s Specialist Technical Solutions (STS) business was awarded a $4.89 million contract for Subsea Engineering and Project Management Services to the Mad Dog 2 project. That work includes gas lift system interface design, geospatial information system support, subsea controls engineering and geotechnical engineering support.

Mad Dog 2 is the second platform designed by Wood Group for BP in the Gulf of Mexico Mad Dog field.

Robin Watson, Wood Group’s chief executive, said: “Wood Group’s strong relationships with BP and Samsung and proven performance in deepwater projects are the foundations of our partnership in continuing deepwater work in the Gulf of Mexico.

“These contracts demonstrate the confidence our key clients have in our teams to meet their specific cost-saving needs while delivering innovative and impartial engineering solutions on time. The combined Wood Group offering provides a perfect blend of our technical expertise giving BP an optimal solution.”

Wärtsilä to Optimize Performance and Uptime of Four Songa Offshore Drilling Rigs

The technology group Wärtsilä has signed a five-year technical management and services agreement with Songa Offshore for four Cat-D type semi-submersible drilling rigs operating in the North Sea. Through the partnership with Wärtsilä, Songa Offshore ensures optimal performance and maximum availability of the Wärtsilä engines and thrusters on board the drilling rigs, which operate in extremely harsh conditions. This is possible with real-time knowledge of the actual condition of the equipment, provided by Wärtsilä's digital offering.

6WärtsiläSonga EncourageSonga Encourage is one of the four drilling rigs covered by the new services agreement between Wärtsilä and Songa Offshore.

Under the agreement, signed in December 2016, Wärtsilä offers Songa Offshore dynamic maintenance planning and inspections, real-time condition monitoring of engines and thrusters as well as equipment analysis reports. Improved maintenance scheduling leads to better predictability and improved cost efficiency.

The agreement concerns four of the customer's rigs: Songa Equinox, Songa Encourage, Songa Endurance and Songa Enabler. Each rig is equipped with six Wärtsilä 32 engines. Two of the rigs have six Wärtsilä FS3500 steerable thrusters, and two have six Wärtsilä FS3510 steerable thrusters. The rig type is designed for efficient year-round drilling, completion, testing and intervention operations in harsh conditions.

"We are very excited about this first long-term service agreement with Songa Offshore. With our expertise, we ensure that Songa Offshore's rigs can reach their full performance in the harsh environment of the North Atlantic basin," says Cato Esperø, Sales Director, Wärtsilä Norway.

Wärtsilä Genius offering provides flexibility

The agreement also covers solutions from the Wärtsilä Genius portfolio of digital services. With Condition Based Maintenance (CBM), Wärtsilä continuously monitors the condition of the Wärtsilä 32 engines installed on the rigs. The data is carefully analysed by Wärtsilä to determine service and maintenance needs. This can ensure the optimal performance of the engines and may reduce operating costs.

In addition, the agreement includes the Wärtsilä Propulsion Condition Monitoring Service (PCMS), which provides the customer with real-time advice and periodic reports concerning the condition of the steerable thrusters, as well as information necessary for efficient maintenance planning. With Wärtsilä PCMS, customers can enhance the availability, reliability and profitability of their installations, whilst also reducing risks to their assets.

"The agreement helps Songa Offshore maximise the availability of the Wärtsilä engines and thrusters on our four Cat-D rigs. Reliability of the engines and thrusters as well as real-time knowledge of the actual condition of the equipment are crucial to our operations, and this is also a part of Songa Offshore's Class on Location strategy and continuous class project," says Geir Arne Rolland, Head of Asset Maintenance, Songa Offshore.

Proserv Seals Significant Subsea Contract with Premier Oil

7ProservTechnician working on subsea controls systemEnergy services company Proserv has been awarded a multi-million dollar contract with Premier Oil for work in Asia Pacific.

Proserv will supply a subsea control system and associated equipment for the BIGP (Bison, Iguana & Gajah Puteri) development project, located in the Natuna Sea, Indonesia.

The scope of supply is a three well subsea control system, which includes the company’s award winning Artemis 2G subsea electronics module, tied back to two platforms, Naga and Pelikan, in approximately 90m water depth. Bison and Iguana will tie back to the Pelikan platform and Gajah Puteri will tie back from a controls perspective to the Naga platform. The Gajah Puteri well is the longest step out at 21km.

Each well will have a wet gas meter, which is part of Proserv’s scope of supply and the system will be capable of future expansion to accommodate potential future infill drilling.

Delivery of the first phase of equipment is scheduled for May 2018. Work for the project will be carried out in various Proserv service centres and technology hubs around the world, reinforcing the company’s strong inter-regional capability.

This latest award will allow Proserv to build on its installed base of subsea control systems, following the project completed with Premier Oil on the Dua project in Vietnam in 2013.

Mathieu Al Kharfan, region president for Far East & Australia, said: “This order cements our position as a global provider of subsea controls and communications.

“Proserv has already worked with Premier Oil on several projects and the award of this contract is testament to the strength of our relationship and their trust in our ability to deliver robust technology solutions and services on time and to the highest standards. We look forward to working with Premier Oil in the successful delivery of this project.”

Proserv is a technology-driven company providing products, services and bespoke solutions to clients across the drilling, production and decommissioning market sectors. Operating worldwide through 22 operating centers based in 12 countries, the company has won a string of industry awards over the years in recognition of its achievements.

RINA Leads the Way with New Offshore Directive

8RINA logoRINA Services has carried out the first independent review and verification of risk management in line with the EU Directive 2013/30/EU in Italy for the multinational oil and gas operator Eni S.p.A. Eni carried out a first application of the Directive on their fixed offshore platform Angela Angelina, located off the Ravenna coast.

The EU Directive 2013/30/EU was issued in 2013 in response to offshore safety incidents outside of Europe including the Deepwater Horizon drilling rig accident in 2010. By July 2015, EU members were required to implement a framework for the directive and from July 2016 owners/operators needed to ensure compliance for any new installations, fixed or floating.

With the aim of significantly reducing the risk of accidents and environmental damage, the Directive calls for systematic risk assessment and management. It covers all stages from exploration through production and maintenance to decommissioning. It requires that operators must gain approval from the Competent Authority in the EU state before commencing drilling and, can only commence well operations with an accepted Report of Major Hazards (RoMH).

To achieve approval for operations, the Directive requires that an independent third party carry out review and verification of the risk assessment of the critical safety and environmental elements identified in the project. Risks are assessed based on analysis, comparison with applicable standards or solutions previously executed in similar conditions.

Andrea Bombardi, Chief Commercial Officer Energy & Infrastructure, commented, “We are pleased to have successfully carried out this service for Eni for the completion of the pipeline connecting the Angela Angelina platform and the shore facilities. This project represents the latest milestone of a business relationship which began in the 70’s.”

The verification services provided by RINA for Eni included confirmation that the safety and environment critical elements identified and carried out by Eni were appropriate in accordance with the EU Directive. They also involved review of the maintenance and test plan for the same critical elements, which was confirmed as adequate.

Eni submitted the relevant RoMH with the Report of Independent Verification from RINA to the appropriate Competent Authority, which for Italy is UNMIG, during December 2016. Following this first application of the Directive in Italy, Eni plans to carry out further compliance work for other existing offshore installations. As part of its commitment to support offshore operators and help protect communities against the risks of accident and environmental damage RINA has developed internal tools such as guidelines, procedures and check lists to consolidate the quality of the independent verification service.

RINA Services S.p.A. is the RINA company active in classification, certification, inspection and testing services. RINA is a multi-national group, which delivers verification, certification, conformity assessment, marine classification, environmental enhancement, product testing, site and vendor supervision, training and engineering consultancy across a wide range of industries and services. RINA operates through a network of companies covering Energy, Marine, Infrastructures & Construction, Transport & Logistics, Food & Agriculture, Environment & Sustainability, Finance & Public Institutions and Business Governance. With an estimated turnover in 2016 of over 450 million Euros, about 4,000 employees and 170 offices in 65 countries worldwide, RINA is recognized as an authoritative member of key international organizations and an important contributor to the development of new legislative standards. 

Ashtead Boosts Rental Fleet with State-of-the-Art Inspection Technology

9Ashtead Lyft PEC 04 copyAshtead Technology has expanded its equipment rental pool following a significant investment in the latest Pulsed Eddy Current (PEC) technology to deliver faster, more accurate asset integrity inspections. A global leader in marine technology, non-destructive testing and subsea services, Ashtead will now supply the Eddyfi Lyft™, an inspection tool for identifying corrosion under insulation (CUI), a major asset integrity issue for the oil and gas, and petrochemical sectors.

CUI is a type of corrosion that occurs as a result of a moisture build-up on the external surface of insulated equipment. The corrosion is most commonly galvanic, chloride, acidic, or alkaline, and if undetected, the consequences can lead to the shutdown of a process unit or an entire facility.

Lyft™ can be used to accurately measure corrosion and wall thickness on insulated pipes without the need to remove insulation, significantly reducing time and costs. It’s suitable for use on a number of materials including metal, aluminium, stainless steel and galvanised steel weather jackets, to provide real-time C-scan imaging, wall thickness measurements and fast data acquisition (up to 15 readings per second).

Allan Pirie, chief executive of Ashtead Technology said: “This investment underlines our commitment to the subsea and non-destructive testing markets, by offering the latest, cost-effective technologies ensures our customers are getting the most efficient, reliable solution available.

“CUI is one of the most difficult processes to prevent. No matter the precautions taken, water invariably seeps into the insulation and corrosion occurs.

“With traditional methods it was near on impossible to identify and measure the severity of corrosion without physically removing the insulation, however Eddyfi Lyft™ provides a fast, reliable and flexible solution.”

Headquartered in Québec, Canada, with offices in France, USA, and the UAE, Eddyfi focuses on offering high-performance eddy current and electromagnetic solutions for the inspection of critical components and assets.

Jim Costain, vice president of sales for Eddyfi, said: “We are thrilled that Ashtead Technology has added the Lyft to its range of Eddyfi inspection tools. This provides Ashtead’s large customer base with access to this unique, cost-effective technology, alongside its highly skilled technical support team.”

Aleron Broadens Horizons with North Africa Contracts

10Mike Bisset Aleron Ltd copyAleron Ltd has boosted its international credentials, with the announcement of two contract wins in the North Africa region for its group companies, Aleron Subsea Ltd and ROVQUIP Ltd.

Supplying turnkey ROV solutions via Aleron Subsea (specializing in service, repair and upgrade of Work Class ROV systems) and ROVQUIP (producing specialist subsea tools), the group has recently completed the first of two projects for client, Oceana Subsea.

Utilising an Aleron Subsea Triton XL, supplied together with ROVQUIP’s new decommissioning multi-mode Cutting Tool, the Aleron Subsea ROV system is continuing to operate with Oceana on a subsea intervention project and will remain available for additional work in the Mediterranean.

Aleron Ltd managing director, Mike Bisset, commented, “Aleron Ltd’s business model is a perfect fit for Oceana Subsea, who are making great progress as an ROV operator. We have rented them highly capable assets, allowing them to add to their capability without deploying the level of resource required to acquire and maintain a wider range of ROV systems and tooling.

“This is further complemented by ROVQUIP’s design and production skills, based at the same facility close to Aberdeen. ROVQUIP designed and built a bespoke diamond wire cutter, specific to the project scope, within an extremely tight deadline. The rapid deployment of this tool enabled the project to proceed on time and complete the cut-off and recovery of a 30” concrete filled subsea conductor.”

The ROVQUIP 30” TCT saw was re-designed to allow the option of a Diamond Wire to be installed, thus ensuring the successful cut of a composite of steel and concrete. Built and tested in just three weeks, the tool demonstrates the depth of engineering capability within ROVQUIP.

With ten overhauled Work Class ROV Systems currently available for sale or rental, Aleron Limited is successfully gaining global traction, with recent contract wins in South East Asia, Norway, France and North Africa.

Gad Habiby, managing director of Oceana Subsea commented: “The rapid turn-around of the saw development and deployment enabled us to meet our project deadlines for mobilization of the system. Oceana Subsea has found the availability of both ROV systems and Engineering Skills from the Aleron Ltd group to be a major advantage in the integration and test of the spread prior to mobilization.”

UK Government Moves to Prolong UKCS Production as it Faces Estimated £23 Billion Decommissioning Burden

11Douglas Westwood Decommissioning Total Expenditure bnMeasures announced in the UK Budget will review the potential transfer of ownership of UK fields along with the ability to transfer the benefit of past taxes paid on production to be used for relief in future field decommissioning by the new owners.

At present, operators can claim relief for decommissioning on taxes paid as far as 2002 for Ring Fenced Corporation Tax (RFCT) and Supplementary Charge (SC), and indefinitely for Petroleum Revenue Tax (PRT). In 2013, the Government announced Decommissioning Tax Relief Deeds for operators, providing certainty that these reliefs would continue to apply in the future.

Allowing for relief to be transferred in a trade should open up the market. At present, a new company coming into an asset will not have any tax position and will face paying for decommissioning without any relief. Yet there is an opportunity for ‘late-life specialists’ that focus on pushing back COP and thereafter handling decommissioning as efficiently as possible. This new measure is expected to promote further sale of assets and, in turn, extend the production life of older, marginal fields. According to data from Hannon Westwood (HW), it is thought that some c.5.8 bnboe recoverable reserves remain as either producing or yet to be produced in the UK. The UK is a mature province and some 184 fields are currently thought to have less than 10% of their original reserve estimate remaining and this increases to 228 if 29 fields with less than <20% are included (out of 297 producing assets tracked by HW).

In the latest Western Europe Decommissioning Market Forecast, published this week by Douglas-Westwood, the UK decommissioning spend is forecast to total £47 billion over the 2017-2040 period, with over 300 platform removals and thousands of wells permanently plugged and abandoned. It is thought that around 50% of the overall UK spend will be borne by the taxpayer, implying a liability of nearly £23 billion.

There is a clear incentive for the UK to prolong field life, not just to delay the costs of abandonment, but also to ensure that infrastructure remains in place to allow marginal field development in the future, for example, by means of subsea ‘tie-backs’ to existing platforms and pipeline export routes.

Steve Robertson, Douglas-Westwood
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John Corr, Hannon Westwood
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Released March 8, 2017: Western Europe Decommissioning Market Forecast 2017-2040

Marine/Offshore Industry Outlook Conference

12MTSHoustonlogoHouston (February 9, 2017) – The MTS Houston Section will host its annual Marine/Offshore Industry Outlook Conference on March 30, 2017 in Houston in conjunction with NOIA (The National Ocean Industries Association). Now in its 40th year, this highly acclaimed half-day conference provides industry professionals with insights and forecasts for the following three years.

Changes in the Administration generally mean there will be changes in how the government views the oil and gas industry. This conference allows attendees to hear firsthand from industry experts with specialized and hands on knowledge just what the next few years are likely to hold, making it a key event for all industry professionals with an eye to the future. A particularly strong program has been put together by NOIA, the event co-sponsor and includes a legislative review, financial overview and discussions on specific industry segments offshore services, drilling, construction, geology and geophysical.

The conference will be held at the Pelazzio, 12121 Westheimer, Houston, TX 77077 and will run from 8:30am- 1:00 pm. Lunch is included. The MTS Young Professional will host an evening reception the day before the Conference on March 29, 2017. Location to be advised.

The cost of the Conference is $125.00, which includes both the evening reception and lunch. More information, and registration click here.

UPCOMING MTS HOUSTON PRESENTATIONS AND EVENTS

  • February 23, 2017 – Luncheon – Texas LNG – Langtry Meyer, Texas LNG
  • March 25, 2017 - Sporting Clays - American Shooting Center
  • March 30, 2017 –Offshore Outlook Conference – Half-day conference
  • April 27, 2017 - Luncheon – Jack St Malo Operations and Next Stages – Travis Flowers, Chevron
  • May 25, 2017 - Luncheon – Platform Hub UpgradesWilliams
  • June 22, 2017 - Luncheon – Decommissioning of Subsea Infrastructure for Independence Hub – Carly Fisher, Anadarko
  • October 9-11, 2017 - Dynamic Positioning Conference, Westin Memorial City, Houston

About the Marine Technology Society

The Houston Section of the Marine Technology Society is the largest Section of the Society. The Society’s members are comprised mainly of professionals involved in offshore oil and gas exploration and recovery. The Section hosts regular lunch presentations, as well as a variety of fund-raiser social events. These include a Sporting Clays Tournament, Golf Tournament, and the Annual Barbecue.

The Section hosts and/or supports a number of conferences and seminars each year, including the Offshore Outlook Industry Conference, the Offshore Technology Conference, the Dynamic Positioning Conference and Underwater Intervention. In addition, the Section supports Student Chapters at Texas A&M in College Station and Galveston, and donates over $160,000 in scholarships and student support annually.

Headquartered in Maryland, The Marine Technology Society is an International nonprofit society founded in the 1960s and includes members from the offshore petroleum community, ocean community: marine sciences, engineering, academia, industry and government. For more information, or please contact Liz Stansfeld, MTS Publicity, 9300 Sandstone, Austin, TX 78737.Telephone: 512.301.2744, email: This email address is being protected from spambots. You need JavaScript enabled to view it..

Ashtead Strengthens Senior Management Team

13Ashtead David MairAshtead Technology has strengthened its senior management team with the appointment of a business development director.

With a career spanning more than 20 years in the oil and gas industry, David Mair joins Ashtead from Hoover Ferguson Group where he held the position of global business development director. Prior to this, Mr Mair worked at Subsea 7 where he held a number of senior management roles, including group vice president of business development.

Based in Aberdeen, Mr Mair will be responsible for Ashtead’s global business development activities as the firm looks to further broaden its range of services and increase its geographical reach to provide its customers with the most efficient, cost-effective technological solutions. Mr Mair’s appointment is the latest move in Ashtead’s growth strategy and follows the company’s recent expansion in the Middle East following the acquisition of Abu Dhabi based TES Survey Equipment Services LLC.

Allan Pirie, chief executive of Ashtead Technology said: “We have invested heavily in growing our international footprint over the past 12 months and expanding our service offering to meet the needs of our customers in the current market.

“David’s extensive subsea industry experience, coupled with an excellent business development track record makes him an extremely valuable addition to the team. He will be integral to driving forward our growth strategy, developing new business opportunities in both new and existing markets across the globe.”

Commenting on his appointment, Mr Mair said: “With more than 30 years’ experience in delivering equipment and service solutions to the subsea industry, Ashtead is well positioned to build on this long heritage with innovative thinking, cutting-edge technology and services.

“I am delighted to be joining such a high calibre team and look forward to contributing to the continued growth and success of the business.”

Founded in 1985, Ashtead Technology is a world-leading, independent subsea equipment solutions specialist providing rental and sale of survey and ROV equipment, custom engineered solutions, offshore personnel, training, calibration, repair and maintenance and asset management solutions. Positioned at the forefront of technology and innovative solutions, Ashtead strives to provide a one-stop-shop for cost effective solutions to maximise performance with high quality service and delivery.

Bibby Offshore Appoints Director of Diving

Bibby Offshore, a leading subsea services provider to the oil and gas industry, announces the promotion of Allan Nairn to Director of Diving.

14BibbyOffshore Allan copyAllan Nairn Director of Diving at Bibby Offshore

Allan joined Bibby Diving Services in 2010 as Offshore Project Manager with over 30 years’ experience in the subsea sector. In his new role, Allan will be responsible for leading all diving related activity within the business. He will ensure day to day diving operations are executed safely, efficiently and continue to meet the high standards Bibby Offshore is known for.

Commenting on his new position, Allan said: “I am excited by the opportunities my new role will create. To date, I have worked on operations throughout the company’s South East Asia and Houston bases, as well as its headquarters in Aberdeen.

“I look forward to using my experience and industry relationships to enhance Bibby Offshore’s diving operations, while playing a key role in delivering strategic results for long-term success.”

Howard Woodcock, Chief Executive at Bibby Offshore, said: “We are delighted to promote Allan to the position of Director of Diving, Allan’s commitment to the Group and many years of experience makes him ideally suited for the role.

“The creation of this position was part of our management restructure, designed to ensure we are well placed to continue to succeed in this competitive marketplace and meet our long term strategic objectives.”

PIRA Energy Market Recap for the Week Ending March 13, 2017

15PIRALogoBruising U.S. Crude Stock Build, Sharp Light Product Draw

Overall commercial oil inventories fell 2.4 million barrels on the week led by a sharp decline in gasoline of 6.6 million barrels. Crude oil continued its unrelenting stock build, adding 8.2 million barrels to an already bloated system, while Cushing crude stocks built 0.9 million barrels. U.S. product demand (adjusted) remains constructive, up 3.1% or 600 MB/D over the last four weeks.

Shoulder Months Are When Pipeline/LNG Wars Will Be Waged

Two important supply-side factors in the European gas landscape are converging in a way that may make shoulder months among the most interesting going forward and fiercely competitive for suppliers. One, gas supply contracts are becoming more and more spot indexed. Two, shoulder months tend to be when LNG supplies are at their loosest.

UK Spark Spread Supported as Gas Prices Slide

With NBP prices falling off the cliff, the UK dark spread has been narrowing at a point that doesn’t currently justify the baseload operation of coal, with operation during the peak hours also increasingly at risk because of the limited flexibility of many of these plants and the insufficient price margins. The result is that coal output has dropped from 8 GW in February to 3.8 GW month-to-date without major planned unavailabilities. We have observed lower de-rated margins (DRM) in the system during March, which are occurring with fairly high power prices, even with relatively high wind output.

Weaker Oil Market, China Supply Developments Depress Pricing

The sharply weaker oil market proved to be a drag for coal market pricing this week, although there was a modest rally for coal pricing on Friday. Price declines were the most pronounced in the FOB Newcastle market, likely due to the supply side policy developments in China with growing certainty that domestic producers will be given flexibility to operate at high levels if prices are high. With the largest upside risk to prices fading (potential shortage in China) and seasonal demand falling, FOB Newcastle prices will be under considerable downward pressure over the next 90 days, particularly after the wave of safety inspections at Chinese coal mines has concluded.

Market Must Buy California Carbon for CP2; Court Decision Imminent

WCI carbon prices declined after the severely undersubscribed auction, but have recovered. The market still needs to acquire significant volumes of compliance instruments to reconcile CP2 emissions. Next year, the auction offering will primarily consist of V-18s and a price premium could emerge for vintages usable for CP2 compliance. A decision in the auction lawsuit will come by the end of next month and likely sooner. A ruling against the auctions will be appealed for sure, but could send market prices below the floor. CA legislation is being teed up to address a potential legal setback. CARB has agreed to delay finalization of the Scoping Plan/Cap and Trade Amendments until outreach is complete – and a compromise on offsets seems likely.

U.S. Labor Market Conditions Turn Better; ECB Stays Dovish

The U.S. labor market report for February was constructive for two reasons. First, the pace of job growth quickened significantly compared to late 2016. The labor force participation rate also improved, and this has apparently been responsible for keeping wage growth in check. After this positive report, the high likelihood is that the Fed will go ahead with a rate hike at next week’s meeting. The European Central Bank maintained its dovish policy stance, even though European inflation has accelerated significantly in recent periods. China’s 2017 economic targets signaled that the country intends to keep the pace of economic growth roughly stable from last year.

Ethanol Production Flat; Stocks Build

The week ending March 3, U.S. ethanol production was flat, but stocks continued to build. RIN values tumbled amid rumors that the point of biofuels obligation would shift from refiners and importers to blenders at the rack. In the South-Central region of Brazil, 116 mills are expected to start the 2017/2018 season by the end of March. European ethanol values ease from the 14-month high.

Crop Forecasting Comes Full Circle

Ten or so years ago the use of satellite imagery was all the rage in crop forecasting, until one bad year when the leader in that technology spent the fall extensively surveying elevators as the satellites didn’t get the job done. Satellite imagery is still used by many, including NASS, but those numbers are always augmented by some other closer-to-the-ground data points.

Japanese Product Stocks Low, but Cracks Continue to Weaken

Japanese crude runs eased again on the week, while crude imports fell sharply and crude stocks drew 2.8 million barrels. Finished products built modestly with a fall back in aggregate major product demand. Gasoil demand was surprising strong and stocks drew again. Kerosene demand fell back seasonally, but the stock draw rate accelerated. Margins remain very mediocre, of late.

Netbacks Remain Skewed Against Dry Gas

The continuation of the late season rally has lifted NYMEX gas futures prices back to ~$3 this week as production remains anchored well below year-ago levels. For the most part, the market has focused on timing the next leg higher for Appalachian production. Yet, given former outsized contributions wet gas has made to total domestic supply, this segment warrants attention. Although U.S. tight oil and NGL field production growth will turn positive in 2017, for now residual year-on-year losses are also still undermining wet gas, and thus, overall U.S. production. Moreover, a build-up of year-on-year gains in the 2-3 BCF/D area (as realized in the 2012-15 period) will not occur until 2018 at the earliest.

Record Warm Feb Whittles Prices

Record warmth in many East/ERCOT markets led to steep declines in heating loads in February. Gas prices weakened from January but remain up year-on-year due to export gains, production declines, and lower storage. Price projections have been revised down from last month, mainly at the front of the curve. Implied on-peak gas heat rates for Mar-Dec 2017 are down year-on-year on most markets due to higher gas prices, lower cooling demand, and gas-fired capacity additions. The steepest decline are expected in the Mid-Atlantic markets.

Low RGGI Compliance Interest, Specs Engage at Low Prices

The March RGGI allowance auction cleared well below secondary market prices and down significantly from the December auction. The coverage ratio remains relatively strong, but has fallen to its lowest level since September 2013. Winnings by compliance entities fell, suggesting increased speculative buying at these price levels. Market uncertainty continues, with another RGGI program review meeting slated for the “spring.” Tightening the cap, further banking adjustments and the proposed Emissions Containment Reserve could provide supportive pricing signals this year.

Market Awaiting Fed Rate Increase

The S&P 500 backed off its record highs, but financial stresses remain low. Even so, volatility (VIX), high yield debt (HYG), and emerging market debt (EMB) all fell again slightly in price on the week. The market appears to be digesting the almost certain prospects of a rate increase by the Fed, and as such, credit spreads have widened a bit, commodities have weakened, and long-term yields have moved up.

Bearish March WASDE

Soybeans were the star of the show in the March WASDE with Brazil getting almost all the focus, as we had been suggesting in the run-up to the report. This year’s aggressiveness of the soybean group at the World Board came through once again through a sizeable jump in Brazilian bean production, along with a cut in U.S. exports.

U.S. Ethanol Stocks Decline

U.S. ethanol stocks declined for the first time in nine weeks, falling by 235 thousand barrels to 22.9 million barrels during the week ending March 3. PADD II inventories soared to a record high 8.4 million barrels, though total inventories are now 451 thousand barrels lower than they were at this time last year. Domestic ethanol production sunk 12 MB/D to a 14-week low 1,022 MB/D. Ethanol-blended gasoline manufacture dropped to 8,697 MB/D from 8,738 MB/D as total gasoline production decreased.

U.S. Customs Data Point to Very Low Imports

PIRA is now collecting Customs Data on U.S. oil imports. For last Friday through Wednesday, crude imports are just 6.0-6.5 MMB/D. With the Houston Ship Channel closed most of Thursday, crude imports likely stayed very low. Light product imports are also very low with gasoline at just 380 MB/D. The crude import figure taken literally would imply a sizable crude stock draw for the week, but likely reflects oil backing up on the water because of poor weather and logistical constraints.

Japan Reversing Course on LNG?

The winter surge in imports to Japan offers a sharp contrast with the markedly more pessimistic LNG forecast PIRA has been presenting over the course of the past 24 months. The question is whether this resurgence is a mere seasonal phenomena or can we expect to see LNG consumption patterns of recent years in Japan to reverse course?

Will U.S. Shale Oil Resources Last Forever?

U.S. shale resources are massive with approximately 160 billion barrels recoverable oil at $50-80/Bbl, of which roughly half are economic at around $50/Bbl based on today’s well economics, admittedly at the bottom of the cycle. At the current drilling rate of 10,000 horizontal oil wells/year, it would take around 45 years to deplete the resources (22 years for the ones currently economic at $50/Bbl). The well locations economic at above $50/Bbl will get drilled only if oil prices are higher than $50/Bbl or if well productivity improvements offset higher costs expected from service providers.

Global Equities Consolidate Recent Record Strength

U.S. markets eased off record highs. Even so, technology and housing sectors still posted gains. Energy was the weakest performing sector. Internationally, Europe continued to post gains, while other tracking indices were only modestly lower. Most longer-term equity trends remain bullish.

Argentina Will Reduce Incentives for Gas Producers

Argentina will lower the price it guarantees for gas drilled from new wells after 2018 to encourage companies to speed up investment in the vast Vaca Muerta shale play, Energy Minister Juan Jose Aranguren said on Wednesday. In January, President Mauricio Macri announced a plan to stimulate production in Vaca Muerta in which the government would guarantee a minimum price and tax stability, while companies pledged investments and unions agreed to measures to lower notoriously high labor costs.

How Profitable is Argentinian Shale Oil?

Argentina has most of the ingredients to become a major shale oil producer. Its shale resources are significant, with its main accumulation (Vaca Muerta) comparable in size and quality to the Bakken and Eagle Ford plays. It also has mostly favorable conditions for shale production. However, development is still primarily in the appraisal stage, current production is small (< 50 MB/D liquids) and play wide breakeven costs of around $60/Bbl are much higher than comparable U.S. shale plays. Long term growth will depend on continued favorable fiscal terms to attract more foreign investment and favorable resolution of labor issues that have so far slowed down shale development.

Saudi Aramco Placing More Crude in Out-of-Country Refining Joint Ventures

Saudi Aramco is entering into additional out-of-country refining joint-ventures (JV’s) with accompanying term crude supply arrangements. In the last year, agreement was reached with Pertamina on a JV to expand the Cilacap refinery in Indonesia, as well as participation in Petronas’ new RAPID refinery/petrochemical project in Johar, Malaysia. These JV’s are part of Saudi Aramco’s long-term strategy to maintain its market share in competition with other crude suppliers.

U.S. Crude Oil Exports Increase to New Record in January 2017

PIRA has been forecasting high January 2017 exports for several months now. As early as in the December outlook, PIRA noted that reported November and December exports would be low but would increase in January 2017 – which ultimately occurred. Additionally, in PIRA's report on U.S. port-level exports in mid-December PIRA stated that the late-2016 OPEC/non-OPEC output cuts would keep the incentive to export U.S. crude to Europe larger than it otherwise would have been as reduced crude supplies to Europe and Asia would directionally widen crude differentials.

Iraq Oil Monitor, 1Q17

Baghdad is implementing pledged production cuts, with 1Q17 averaging over 200 MB/D below 4Q16. Southern export infrastructure capacity now looks sustainable above 3.4 MMB/D, and work is ongoing to provide another boost. In the north, the KRG and Baghdad agreed to refine 40 MB/D of NOC oil in Kurdistan. But the deal reignited a Kurdish political feud, causing a brief shutdown of 120 MB/D of NOC flows. An ISIS sleeper cell is suspected of recent bombings at the 195 MB/D Bai Hasan field, highlighting risks of insurgent attacks as ISIS is evicted from Mosul.

Low Inventories Support LPG Prices

The EIA reported that propane exports rallied to 1,022 MB/D for the week ending on March 3rd. This high volume resulted in an unusually high stock draw for this time of year of 4.1 MMB, which brought U.S. propane inventories 17.1 MMB below last year’s level. Exports above 1 MMB/D have persisted since the end of December, and fell to an annual low of 755 MB/D for the week ending February 24th. Bullish sentiment from high exports and plummeting inventories caused U.S. LPG prices to buoy from its seasonal downward trend. Mont Belvieu C3 futures rallied 3% (2¢) to 63¢/gal, while butane futures were also up by 3% (2¢) to 72¢. Ethane futures registered a slightly faster rise of 15% (3¢) to 23¢/gal.

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.

Secretary Zinke Announces Proposed 73-Million Acre Oil and Natural Gas Lease Sale for Gulf of Mexico

1OilrigsKevinAll available areas in federal waters will be offered in first region-wide sale under new Five Year

U.S. Secretary of the Interior Ryan Zinke has announced that the Department will offer 73 million acres offshore Texas, Louisiana, Mississippi, Alabama, and Florida for oil and gas exploration and development. The proposed region-wide lease sale scheduled for August 16, 2017 would include all available unleased areas in federal waters of the Gulf of Mexico.

“Opening more federal lands and waters to oil and gas drilling is a pillar of President Trump’s plan to make the United States energy independent,” Secretary Zinke said. “The Gulf is a vital part of that strategy to spur economic opportunities for industry, states, and local communities, to create jobs and home-grown energy and to reduce our dependence on foreign oil.”

Proposed Lease Sale 249, scheduled to be livestreamed from New Orleans, will be the first offshore sale under the new Outer Continental Shelf Oil and Gas Leasing Program for 2017-2022 (Five Year Program). Under this new program, ten region-wide lease sales are scheduled for the Gulf, where the resource potential and industry interest are high, and oil and gas infrastructure is well established. Two Gulf lease sales will be held each year and include all available blocks in the combined Western, Central, and Eastern Gulf of Mexico Planning Areas.

The estimated amount of resources projected to be developed as a result of the proposed region-wide lease sale ranges from 0.211 to 1.118 billion barrels of oil and from 0.547 to 4.424 trillion cubic feet of gas. The sale could potentially result in 1.2 to 4.2 percent of the forecasted cumulative OCS oil and gas activity in the Gulf of Mexico. Most of the activity (up to 83% of future production) of the proposed lease sale is expected to occur in the Central Planning Area.

Lease Sale 249 will include about 13,725 unleased blocks, located from three to 230 miles offshore, in the Gulf’s Western, Central, and Eastern planning areas in water depths ranging from nine to more than 11,115 feet (three to 3,400 meters). Excluded from the lease sale are blocks subject to the Congressional moratorium established by the Gulf of Mexico Energy Security Act of 2006; blocks that are adjacent to or beyond the U.S. Exclusive Economic Zone in the area known as the northern portion of the Eastern Gap; and whole blocks and partial blocks within the current boundary of the Flower Garden Banks National Marine Sanctuary.

“To promote responsible domestic energy production, the proposed terms of this sale have been carefully developed through extensive environmental analysis, public comment, and consideration of the best scientific information available,” said Walter Cruickshank, the acting director of Interior’s Bureau of Ocean Energy Management (BOEM). “This will ensure both orderly resource development and protection of the environment.”

The lease 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 proposed economic terms include a range of incentives to encourage diligent development and ensure a fair return to taxpayers. The terms and conditions for Sale 249 in the Proposed Notice of Sale are not final. Different terms and conditions may be employed in the Final Notice of Sale, which will be published at least 30 days before the sale.

BOEM estimates that the U.S. Outer Continental Shelf (OCS) contains about 90 billion barrels of undiscovered technically recoverable oil and 327 trillion cubic feet of undiscovered technically recoverable gas. The Gulf of Mexico OCS, covering about 160 million acres, has technically recoverable resources of 48.46 billion barrels of oil and 141.76 trillion cubic feet of gas.

Production from all OCS leases provided 550 million barrels of oil and 1.25 trillion cubic feet of natural gas in FY2016, accounting for 72 percent of the oil and 27 percent of the natural gas produced on federal lands. Energy production and development of new projects on the U.S. OCS supported an estimated 492,000 direct, indirect, and induced jobs in FY2015 and generated $5.1 billion in total revenue that was distributed to the Federal Treasury, state governments, Land and Water Conservation Fund, and Historic Preservation Fund.

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 these leases are in the Gulf of Mexico; about 3 percent are on the OCS off California and Alaska.

The current Five Year Program [2012-2017] has one final Gulf lease sale scheduled on March 22, 2017 for Central Planning Area Sale 247. The 2012-2017 Five Year Program has offered about 73 million acres, netted more than $3 billion in high bids for American taxpayers and awarded more than 2,000 leases.

All terms and conditions for Gulf of Mexico Region-wide Sale 249 are detailed in the Proposed Notice of Sale (PNOS) information package, which is available here. Copies of the PNOS maps can be requested from the Gulf of Mexico Region’s Public Information Unit at 1201 Elmwood Park Boulevard, New Orleans, LA 70123, or at 800-200-GULF (4853).

The Notice of Availability of the PNOS will be available today for inspection in the Federal Register here and will be published in the March 7, 2017 Federal Register.