Bibby Offshore Strengthens Renewables Division with Key Appointment

Bibby Offshore, a leading subsea services provider to the oil and gas industry, has appointed Dorothy Shepherd as general manager, renewables.

Mrs. Shepherd joins Bibby Offshore with more than 15 years’ experience in the energy industry. Having spent a significant time at The Crown Estate - a key player in supporting the delivery of energy supply for the UK – Mrs. Shepherd brings with her a wealth of offshore renewables knowledge, including the delivery of new developments and supporting infrastructure.

13Bibby DSC 0516Dorothy Shepherd, General Manager, Renewables

In her new role, Mrs. Shepherd will be instrumental in the delivery of new business in the renewables sector. The position includes supporting existing business development and tendering efforts, while collaborating with Bibby Offshore’s sister companies Bibby Marine Services, which offer SOV and Walk to Work vessels and Bibby HydroMap, which offer a range of seabed survey services.

This appointment follows the formation of Bibby Offshore’s new business optimization team, led by Graeme Wood, as part of the company’s strategic growth strategy. The primary purpose of the team is to facilitate a number of key business initiatives, accelerating the business through the next level of growth.

Commenting on her new role, Mrs. Shepherd said: “I am thrilled to be joining Bibby Offshore and to be working with a company which has such a strong track record. I am confident my knowledge will help to identify new opportunities in the renewables market and deliver the strategic results required for long-term success.”

Graeme Wood, business optimization director at Bibby Offshore, said: “Renewables has been a key element of Bibby Offshore’s strategic growth plan for a number of years, and Mrs. Shepherd’s appointment demonstrates the importance that we attribute to this market as a potential source of revenue in the future.

“While this market has a longer tendering cycle than seen in the oil and gas sector, Dorothy’s knowledge and experience will help to ensure we continue to establish the most effective market opportunities and remain resilient in a competitive marketplace.”

PIRA Energy Market Recap for the Week Ending May 15, 2017

14PIRALogoU.S. Inventory Deficits to Last Year Likely to Widen

U.S. product demand was very strong this past week, pulling up the four week average adjusted demand growth to 4.1%, or almost 800 MB/D over last year. Total commercial stocks drew 3.6 million barrels this past week led by a 5.2 million barrel crude stock draw, the largest weekly decline this year. Cushing crude stocks surprisingly drew 0.4 million barrels last week and another stock decline of 0.3 million barrels is forecast for this week’s data. Inventories of the two major light products are forecast to decline next week, along with another significant crude inventory decline.

Peak Restocking Month Set to Disappoint

After faltering early in the week, NYMEX futures quickly regained lost ground and have now tested the calendar highs set back in early April. Helping to feed the bulls was yesterday’s EIA weekly storage report showing an unexpectedly low build that took the market by surprise — widening the year-over-year storage deficit to 372 BCF. Indeed, it appears that the aggregate storage refill will fall 100 BCF short of the 5-year average — roughly in line with last year’s anemic levels. Yet, while the net monthly build will likely be similar to last May, such a comparison belies the notably different year-over-year trends at work — particularly on the demand side of the U.S. balances, but also in the case of supply given signs a turnaround is finally unfolding.

NBP is Pricing Out U.S. LNG – Should Henry Hub be Concerned?

Current deliveries to N.W. Europe vs. the balance of the Continent highlights a vulnerability to LNG producers and a challenge to marketers, in particular American ones (given the proximity) during shoulder months. In the previous weeks, we highlighted this issue for global LNG markets, but it also is true for Europe on its own. Pipeline producers will try to lock in utilities into high minimum takes to block LNG deliveries in these shoulder months, but there will be an increasing desire for companies to gain ever more flexibility in order to take advantage of LNG length in these vulnerable periods. This pattern has certainly been evident in portions of Southern and Eastern Europe, where the legacy of oil indexation in gas pricing has made it relatively vulnerable to immediate competition from attractively priced spot LNG.

Japan Power Generation Growth Surge Still Threatened by Nuclear Capacity Increases

Japan did an impressive job by stepping up to keep its new LNG contract commitments early this year. But the increased imports may have been temporary – caused by lower LNG prices, colder weather patterns, higher oil prices and in the future, the lingering issue of nuclear restarts could further threaten LNG consumption. The restart of the two Takahama nuclear reactors in Fukui Prefecture (total of 1.7 GW) appears imminent, with Kansai planning to restart unit 4 on May 19. This will have a potentially large downside impact on LNG consumption as opposed to oil going forward.

Back to a Weather Watch

With the May WASDE behind us, the markets will focus on weather and planting progress for the next 6-7 weeks until the end of June and the Acreage report. However, planting progress numbers can be a bit misleading moving forward as they do not take into consideration the number of acres that will need to be replanted.

Malaysia Approves New Ammonia Plant

Malaysia’s Union Cabinet has approved the signing of a Memorandum of Understanding (MoU) for the development of a US$2.1 billion ammonia and urea manufacturing plant in Malaysia. The plant’s capacity is expected to total 1.35 million tpy of ammonia and 2.4 million tpy of urea. Supply will be focused on the Indian market. "The Union Cabinet today gave its ex-post-facto approval to the signing of MoU with Malaysia on the development of a urea and ammonia manufacturing plant in Malaysia," an official release said.

Ethanol Stocks Slightly Lower

U.S. ethanol production rose 20 MB/D last week to 1,006 MB/D. East Coast stocks jumped to a five-year high 8.6 million barrels, though total inventories fell a relatively small 158 thousand barrels to 23.1 million barrels. For the first time in nine months, imports were reported, all of which were received in PADD V. Ethanol-blended gasoline manufacture dipped to 9,161 MB/D from 9,203 MB/D in the preceding week. June ethanol futures were up 0.1¢ to $1.45 per gallon today as of 11:55 A.M. CT.

Propane Inventories Begin to Build

Propane stocks registered a 2 million barrel build, which is the first significant build of the injection season. Total inventories rose to 41.6 MMB, which is 31.5 MMB below last year’s levels. Propane inventories increased in all PADDs. Exports will curb within the upcoming month based on reported cancellations and will most likely remain relatively low through the summer. Declines in exports may not be noticeable in the next several weeks, although should begin by mid-May.

Slower Debt Growth in China Not Yet Hitting Economic Activity

In April, the amount of credit in the Chinese economy continued to increase, but at a slower pace compared to earlier. The Chinese government is likely to maintain its restrictive stance on credit creation, as worries about the debt-to-GDP ratio continue to loom. While credit growth has been a leading indicator of economic activity in China, a slowing in the economy’s momentum has not yet materialized. In the U.S., retail sales for April pointed to a rebound in consumer spending. A reading on core inflation stayed soft, but this is not expected to influence the Fed’s deliberations on policy.

Lower Renewables Firm German Prices. Signs of Flexibility of Wind to Negative Prices Emerge

German day ahead prices have been quite firm so far in May, with reported solar output down by over 2.7 GW year-over-year and wind 0.3 GW year-over-year. However, the German power system has actually seen another period of negative prices, between April 30 and May 1. Coal, lignite, gas, and even nuclear plants have ramped down during the period of negative prices, while German exports have reached a peak for the year at 12.2 GW on April 30. Unlike thermal plants, renewable plants have been typically sheltered by their remuneration structure, but large negative prices are also unveiling some degree of flexibility.

Shoulder Season Slumber; Focus on Capacity Markets

Spot power prices increased year-over-year in April in most Eastern markets driven by rising gas prices, higher cooling loads across the South, and nuclear outages. Henry Hub spot prices continued to hover around the $3 mark in April reflecting a 60% year-over-year increase. PIRA is neutral to near term gas market forwards but remains bullish during heating season 2017-18. Year-over-year power price increases continue through the forecast period but generally fail to keep pace with gas prices as the call on gas-fired generation continues to weaken while efficient CCGT capacity grows. Implied heat rates fell in nearly every market, led by a 36% average drop at PJM-W which is fast becoming the poster child for the dangers of overbuilding.

Japan Holiday Impacts, Pluses and Minuses

Two weeks of data were reported due to the Golden Week holidays. Runs declined, on balance, as further maintenance kicked in. Crude imports ran particularly high and then plunged, which ballooned crude stocks at month-end April, but then corrected lower as we entered May. Finished product stocks fell in the latest week but generally continue their seasonal rise. Demand trends remain largely seasonal and have held up well. Gasoline demand was hyped by the holidays in the latest week with demand besting 1 MMB/D. Gasoil demand fell both weeks as the holiday reduced industrial and commercial activity. Stocks built both weeks by an almost cumulative 1 MMBbls, and 2.28 MMBbls over the last five consecutive weeks. Refining margins have looked increasingly sloppy. The implied marketing margin has improved the past three weeks, which has helped to partially offset the developing weakness in refining.

Coal Prices Continue to Shift Lower, Chinese Demand Fundamentals Strong... For Now

Coal prices continued to shift lower last week despite a notable rebound in the oil market. FOB Newcastle prices declined by the greatest extent, with the entire curve losing more than $2.50/mt compared to the end of last week. The coal market in general continues to search for a new short-term equilibrium following pricing surges both last year and last month. Clear signals out of the Chinese market remain elusive, as imports have remained strong, although domestic production continues to rebound.

European Carbon Prices Stay Low, Trialogue Talks Coming Up

Breaking the trend from prior years, European carbon (EUA) prices failed to rise during the April compliance period, suggesting existing market positions were adequate for compliance. Prices have moved lower in May, with a price rise not expected until August (when auction volumes are lower). “Trialogue” talks on post-2020 market reforms remain the major market wildcard, with EUA price swings possible both ahead of and following the upcoming May 30th meeting. At the same time, the widening EUA delivery spread for 2019 suggests that EUA prices increasingly reflect an ambitious reform package – as well as continuing poor fundamentals in the balance of 2017 and 2018.

Credit Conditions Remain Positive With Low Stress

Financial stresses remain extremely low. The S&P 500 is still trying climb over and hold the 2,400 level. There still remains noted divergence between bank equity performance (higher) and a flatter yield curve. This is still occurring in the major regions (U.S., Europe, and Japan). Commodities remain soft, but energy perked up this week, and we had noted that cash energy had been acting weaker than energy credit would have suggested. Price trends in non-energy-high yield debt still look positive.

U.S. Ethanol Prices Mostly Lower

U.S. ethanol prices declined most of the week ending May 5, but there was some rebound Friday. Manufacturing margins tumbled. 2017-D6 RINS decreased to 41.0 cents. Brazil returned to an export position in April. The vote on imposing a tariff on U.S. ethanol imports was postponed until June. European ethanol values increased to a six-week high.

Long Term Models Remain Wet

The recently concluded California drought began on December 27, 2011 but it wasn't until August 13, 2013 when the category "extreme drought" made its debut in the southwestern part of the state. In 2014, 2015, and 2016, major portions of the so-called Golden State were covered by both extreme and exceptional drought. With this past winter's heavy rains, just over 5 years of drought ended with an official gubernatorial declaration on April 4, 2017. Unless you're a vegetable/fruit producer or consumer, that stretch of intense drought probably didn't mean much. However, given the predominant west to east pattern flow, we started to wonder aloud a few months ago what the impact of a non-drought stricken California would have on Midwest weather this summer.

Tighter Seasonal NOx Limits Begin in the East as Other Rules are Targeted

A number of rules finalized under the Obama EPA are being targeted under the Trump administration. The tighter CSAPR Update rule NOx limits associated with 2008 Ozone NAAQS attainment have managed to survive and are in effect as of May 1st for units across much of the Eastern half of the country. Seasonal NOx allowance prices have risen in response. With court challenges outstanding, questions remain over whether EPA will defend the CSAPR Update rule. EPA has delayed litigation on the stricter 2015 Ozone NAAQS. Pressure to reduce cross-state emissions continues to come from petitions under the “good neighbor” provisions of the Clean Air Act.

B.C. Voters Decide - Almost

Last week, British Columbia voters went to the polls but the outcome remains uncertain. Prior to the inclusion of absentee ballots and the likely call for a recount in some tight ridings, the Liberals have captured 43 seats, the NDP 41 and the Greens, holding the balance of power, with 3 seats. Several ridings had very slim margins of victory and still await absentee ballots and possible calls for recounts leaving the final outcome in doubt between a slight Liberal majority or a minority government decided by Green Party support. The closest vote was in the riding of Courtenay-Comox where the NDP hold a nine-vote lead in a riding with a large military base that should have many absentee ballots from soldiers stationed out of the province. The Liberal candidate in the riding is the former base commander which suggests this riding could swing to the Liberals and produce a Liberal majority.

Global Equities Remain at or Near Record Highs

The broad U.S. market flirted at or set new record highs but was lower week-on-week. Technology and energy were the best performing sectors, while retailing was the weakest. Internationally, many of the emerging market sectors posted strong gains. World equity capitalization moved to a new record high this past week, something that had eluded it since the mid-July 2015 peak.

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.

Westwood Insight: Exploration Turns the Corner in 2017

15 1WestwoodGlobalenergylogoIf the industry is out of the emergency room in 2017, it is not yet out of hospital. Even if oil prices recover further, explorers will need to focus on finding low cost oil and gas profitable to develop at $40 per barrel or less. Low cost oil will always find a market, never mind the current stranded assets mantra. Finding costs need to be kept below $1–2/bbl, or perhaps a bit higher for near field discoveries where development costs are lower. Being the average explorer of the past few years will not be good enough – companies will need to believe they have the acreage portfolio, technology, people and processes to create value. This means an efficient exploration process with larger prospect portfolios and fewer, better wells targeting bigger prospects at higher commercial success rates.

It also means making discoveries that will not be stranded commercially or politically. In mature areas like the North Sea, it means exploring efficiently for oil and gas near late life fields to delay abandonment.

15 2Westwood Insight 15 05 17 Exploration Turns the Corner in 2017

Left: REP40 benchmark companies gross wells drilled and success rates for the period 2012-2016 showing a drop in number of well penetrations, but an increase in success rates for 2016, implying greater pre-drill screening and selection of prospects. Right:, REP40 companies gross volume discovered for oil and gas with finding costs for oil only and overall hydrocarbons. Source: WILDCAT Database.

The industry is emerging leaner and fitter from this latest down-cycle, but it must be able to remain disciplined during the bull oil market to come (whenever that might be). Decreased competition means lower access costs for exploration acreage and more opportunity to create value from exploration for the accomplished explorer. 

The eighth edition of the State of Exploration Report1 provides a detailed analysis of the exploration sector and the challenges it faces in 2017.

Westwood Global Energy Group (WGEG) has produced its eighth annual State of Exploration Report1, the definitive global benchmark for conventional oil & gas exploration, which covers 991 completed conventional wildcat wells at a total drilling cost of $43.5bn. The most detailed report of its kind, it spans five years of global high impact exploration and also benchmarks the performance of 40 international E&P companies.

  • Westwood Global Energy Group (WGEG)’s annual State of Exploration report analyses the last five years of conventional oil & gas exploration and forecasts exploration drilling plans for 2017.
  • The analysis confirms that 2016 saw a nine-year low in oil & gas exploration in both wells drilled and discoveries made.
  • But it expects a brighter outlook with exploration efficiencies starting to deliver results.
  • Conventional exploration can compete with North American unconventional oil and gas in full cycle breakeven costs.
  • Decreased competition means lower access costs and greater opportunity for accomplished explorers, tempered somewhat by the lack of new oil plays to explore.

To arrange a demonstration of the latest WILDCAT data or to purchase the report, please visit Westwood Global Energy Group.

DEEPFRAC™ Deepwater Multistage Fracturing Service from Baker Hughes

Baker Hughes Incorporated (NYSE:BHI) announces the introduction of its DEEPFRAC™ deepwater multistage fracturing service, which can save operators hundreds of millions of dollars in offshore developments through unprecedented efficiency gains across the completion phase. Using multiposition sleeves and patented flowback control technology, the service accelerates or eliminates certain steps of conventional multizone completion operations and enables rapid stimulation of 20+ stages. This translates into significantly greater reservoir contact, with an average OPEX savings of USD 30 to 40 million per well.

Proprietary flowback control media is incorporated directly into the multiposition sleeve's production ports to enable long-term, sand-free production without the need for conventional sand screens. (Photo: Business Wire)

“Historically, operators who needed to stimulate their offshore wells were faced with complex completion operations that could take longer than a month and with costs approaching a hundred million dollars,” said Jim Sessions, Vice President, Completions at Baker Hughes. “By adapting some of the technologies and techniques that delivered game-changing efficiencies in unconventional land to an offshore service, we’ve enabled a new level of deepwater completion design flexibility and streamlined operations—all without compromising our commitment to safety and compliance.”

1DEEPFRAC 1Proprietary flowback control media is incorporated directly into the multiposition sleeve's production ports to enable long-term, sand-free production without the need for conventional sand screens. (Photo: Business Wire)

Typically, after a deepwater well has been drilled, the subsequent completion phase involves multiple, time-consuming steps. In contrast, the DEEPFRAC service eliminates casing and cementing operations and simplifies fluid logistics by using ball-activated, multiposition sleeves that can be installed in openhole wellbores containing drilling mud. And, unlike conventional offshore systems’ complicated tool running procedures and extensive mechanical manipulation requirements, no tool movement is needed during the DEEPFRAC service’s stimulation process. The sleeve’s ball activation enables continuous pumping from the first stage to the last, cutting the lower completion phase from weeks to days.

Conventional offshore stimulation systems are often limited to only five zones or ‘stages’ and these systems lack configuration flexibility that often results in uneven treatments and creates long sections of ‘dead space’ that cover up hundreds of feet of viable pay. The sleeves used in the DEEPFRAC service are modular and flexible, enabling placement of 20+ tightly-spaced stages across the pay zone to ensure more uniform treatments and to maximize reservoir contact.

After stimulation operations are complete, Baker Hughes IN-Tallic™ disintegrating frac balls allow production to flow without intervention. Patented Baker Hughes BeadScreen™ proppant flowback control technology built directly into the DEEPFRAC sleeve’s production ports provides increased reliability over conventional sand screens through higher burst/collapse ratings and improved erosion/plugging resistance, helping to ensure long-term, sand-free production.

On a recent job, the DEEPFRAC service saved an estimated 25 days rig time and USD 40 million on a first-ever 15-stage deepwater completion in the Gulf of Mexico’s Lower Tertiary.

The DEEPFRAC service is the latest example of Baker Hughes’ strategy to improve well efficiency, optimize production and increase ultimate recovery.

Enpro Supports Operator to Achieve Record Time for First Oil

2 1Enpro flow assurance chemical injection Flow Access Module installed onto existing flow loop manifoldProduction optimization specialist Enpro Subsea has revealed details of how its unique subsea architecture was used for the first time by an operator in the Gulf of Mexico and was a contributing factor to the organization achieving first oil production in under 12 months – a record time for the client.

Enpro showcased its Enhanced Subsea Sampling & Injection (ESSI) and Flow Access Module (FAM) systems during Monday’s Standardization technical session at OTC 2017 in Houston, discussing how their equipment was instrumental to the tieback project’s success and provided added flexibility to the asset’s life of field. The ESSI FAM system is designed to use standard subsea systems to deliver faster, more cost effective and more flexible subsea systems.

The challenge from the operator was to tie back a new production well via a single spur into an existing subsea flowloop in the Mississippi Canyon. Enpro Subsea was invited to assist in the design of a fast track solution making use of its existing deepwater infrastructures and surplus inventory of standardized subsea hardware. For the project to remain competitive, the operator gave a challenging 12-month deadline for the campaign, from concept to first oil.

The unique nature of the well spud location, existing infrastructure and established facility operating procedures, created various hurdles for Enpro to consider when designing its system. The production chemistry and uneven seabed topography required a flow assurance strategy to be considered which successfully managed and mitigated the potential for hydrate formation within the single spur flowline.

2 2Enpro Multiple FAM solutions and access at both ends of the single spur flowlineThe technical obstacles included the need to utilize existing components from different hardware manufacturers with differing hub connector designs. By enabling access to production processes at both ends of the 3.2km single line tieback, the operator was able to fit a range of enhanced recovery solutions at multiple locations, including, but not limited to:

  • flow assurance chemical injection
  • pressure balancing
  • multiphase metering
  • fluid intervention (scale squeeze)

Enpro Subsea business development manager for the Gulf of Mexico, Adam Hudson, said: “The ESSI and FAM systems allowed the operator to fast track the project using their existing stock hardware. With the addition of the patented FAM technology, Enpro provided the required subsea system functionality onto existing hardware, enabling the ‘life of field’ solutions to be installed directly onto existing hardware. Our solution enabled concurrent engineering, which in turn enabled first oil within 12 months”

“Looking beyond this campaign and to the future of the operator’s asset, another benefit is that our technology provides a retrievable platform which will allow a range of enhanced production solutions to be fitted at various locations throughout the life of field, including fluid intervention and sampling.

“We are extremely proud to have played an integral part in our client’s success and to have developed technologies that can be integrated into any vendor’s equipment making well intervention a safer and less expensive option throughout the life of field for new and mature assets.”

InterMoor UK Expands Their Decommissioning Services

3InterMoor Oak 20 wellhead 22InterMoor Ltd, a leading provider of mooring services, foundation solutions, and offshore installations in subsea services group Acteon, has added rigless well abandonment capabilities to its UK-based services.

Consolidating the capabilities of former sister company OIS Ltd, InterMoor UK can now help their clients to plan and execute turnkey suspended well decommissioning campaigns. This includes vessel charter and project management of all onshore and offshore operations from the initial review of well schematics to the production of end of well reports.

Mike Kearney, Decommissioning Lead, InterMoor Ltd, says, “In the current industry downturn, not owning a vessel is an advantage, as it means we can focus 100% of our efforts on the needs of the client rather than on our vessel utilization rate. Our team which has joined the existing InterMoor project team, is experienced in planning commercially efficient solutions with significant client benefits. The team has an unrivalled track record in the successful decommissioning of suspended wells and has completed 128 wells since 1996 in the North Sea. Merging these long-standing capabilities to the experience and support of the InterMoor marine staff will certainly add great value to our customers.”

As part of Acteon’s risers and moorings division, InterMoor designs, supplies and deploys technically advanced mooring systems and foundations worldwide.

Vessel Demonstrates Capability of U.S. Domestic Fleet to Perform Work Currently Being Done by Foreign Fleet

Harvey Gulf International Marine has announced the delivery of the first of two, large capacity Multi Purpose Support Vessels (MPSV) scheduled for 2017 deliveries, significantly enhancing the domestic Jones Act Fleet. This first vessel, the M/V HARVEY SUB-SEA, is a “best in class” Jones Act-qualified vessel that has the technical capabilities to efficiently, effectively and safely perform high quality field development activities that are currently being performed by a foreign fleet.

4 1HARVEY SUB SEAM/V HARVEY SUB-SEA

As U.S. Customs & Border Protection (CBP) finalizes a decision to revoke previous letter rulings inconsistent with the lawful enforcement of the Jones Act that permitted the use of foreign-flag vessels for subsea construction, inspection and maintenance activities, this delivery of the M/V HARVEY SUB-SEA clearly demonstrates the capacity and capability of Jones Act qualified vessels to immediately perform the necessary work. This delivery is part of an industry-wide $2 billion investment since 2009 to ensure the Jones Act fleet has capacity to meet the needs of the offshore industry.

“Today ends the debate as to whether the U.S. Jones Act fleet of MPSV’s is capable of doing work that foreign vessels have been doing illegally in the Gulf for many years. The Harvey Sub-Sea has the size, crane capacity, deck space, accommodation, equipment, and station keeping capability equivalent to, or better than, her foreign competitors,” said Mr. Shane Guidry, Chairman and CEO of Harvey Gulf. “The Harvey Sub-Sea can perform a broad spectrum of subsea installations and removals, inspection, repair and floatel services. It can be equipped to lay umbilicals and cables and perform well-intervention and hydrate remediation operations. If there is a MPSV job needed in the Gulf, she can do it.”

4 2Harvey Sub Sea and sister ship Harvey Blue SeaHarvey Sub-Sea and sister ship, Harvey Blue-Sea, expected delivery July 2017

The M/V HARVEY SUB-SEA is a Jones Act compliant 327’ x 73’ x 29’ MPSV, equipped with a 250-ton knuckle boom, heave compensated crane with 4000’ of wire. The crane’s winch is below deck, expanding her lifting capacity and enabling loads of 107 metric tons to be delivered to water depths of 12,000 ft. The Sub-Sea has 150 berths, all in 1 or 2 person rooms, 13,000 sq. ft. of deck space and a 24’ x 24’moon pool. It has a S61 (Heavy) Helideck and meets ABS DP2, SPS Code and MLC 2006 certification requirements, among many others.

M² Subsea and Frontera Offshore Join Forces in Gulf of Mexico

M² Subsea has joined forces with Frontera Offshore to deliver remedial pipeline work for Permaducto, a subsidiary of Grupo Protexa, in the Ku-Maloob-Zaap (KMZ) oilfield in the Bay of Campeche, 65 miles north east of Cuidad del Carmen, Mexico. This contract also marks the first award for M² Subsea in the Gulf of Mexico region.

5M2Subsea The MPSV TehuanaThe project will see personnel from M² Subsea’s Houston base on-board Frontera Offshore’s chartered multi-purpose support vessel (MPSV) Tehuana, to facilitate pre and post lay surveys for Frontera Offshore. The survey work will be carried out along a 7.5km section of the KMZ-94 pipeline to be stabilised for the Mexican pipeline contractor, Permaducto.

Frontera Offshore loading M2 Subsea’s ROVs onto the MPSV Tehuana

Two Triton work class ROVs will be deployed from the MPSV Tehuana to deliver the survey services, with 277 mattresses being installed at a depth of approximately 250ft.

With over 100 years’ global subsea experience between the executive team at M² Subsea and strong financial backing, chief executive officer Mike Arnold said the company is well on track to meeting its business objectives.

He said: “Our reputation as a global ROV services company is steadily growing. We are fully focused on developing and demonstrating this further through safe, well executed, value adding project delivery throughout our client base. This, together with our flexible, low cost model, augments our overall goal to become one of the world’s leading independent ROV project management and execution companies.”

“The Frontera Offshore contract demonstrates our willingness and desire to collaborate with other like-minded companies in order to provide strong, knowledgeable partnerships so clients feel comfortable working within region.”

Brad McNeill, CEO of Frontera Offshore said: “Frontera is pleased to have been awarded this project, and especially to be collaborating with M2 Subsea for a successful campaign. This is a big step toward our goal of becoming a leading subsea contractor in the sector.”

Expro Showcases a Range of New Technology Solutions at OTC

6EXPRO Subsea landing stringExpro has demonstrated its continued commitment to innovation, as it showcased a range of new capabilities and technology at OTC Houston 2017.

With Brent oil prices forecast to average $55/bbl in 2017, according to the EIA, operators remain focused on optimizing production from existing assets.

In the last year since launching four new areas of capability, including production optimisation and pre-well abandonment services, the company has seen a 15% increase in opportunities. This response and approach to the low oil price has reflected a change in focus areas for mature, higher cost basins like the US Gulf of Mexico (GoM).

Commenting on this trend, Expro’s Technical Marketing Director, Nigel Webster, said:

“While we have seen a softening in demand for our exploration and appraisal related products and services, our intervention and production business remains robust. This includes a record order backlog for our well intervention business, which has seen demand increase across a range of mechanical, slickline and cased hole support services. Our production surveillance and multi-phase metering related business has also experienced an uptake in demand, reflecting the ongoing focus to maximise incremental reserves from existing assets.

“For companies prepared to invest time in understanding their market and customer needs, the business is there. We’ve proven this by maintaining a stable customer base throughout the downturn, leaving us ideally positioned for a return to increased activity in the coming year.”

The landscape is continuing to change. For the first time in two years, exploration and production spend is forecast to increase, with North America poised to grow by as much as 60%, according to Barclay’s 2017 Global E&P Spending Outlook report. Lower break even prices on deep water projects, combined with a 1.3 million bbl/day growth in global demand for energy, means that operators are reviewing key project sanctions this year.

In response to the market fundamentals rebalancing, Expro has invested for a return to increased activity and is showcasing a range of new technologies at OTC Houston. The most significant investment is Expro’s Next Generation Landing String (NGLS), which comprises a programme of work to deliver a complete landing string package in line with the industry’s latest API 17G standards.

This includes a range of new functionality across its 7 3/8 valves, including; high debris tolerant ball mechanism and hydraulic latch mechanism; dual seal protection to both environment and control systems, and; new retainer valve cut and seal technology. The system is validated through extensive connector testing and analysis, allowing the development of structural and fatigue capacities to meet the most rigorous industry standards. This is complemented by a comprehensive data and fatigue life cycle management system, with Expro’s landing string certified SIL 2 compliant.

Coli Mackenzie, Expro’s Vice President of Subsea, commented:

“Subsea test trees have become the established safety system for well commissioning and intervention, with new standards developed to ensure well integrity is maintained at all times. As market leaders in subsea completions, Expro is committed to maintaining our position at the forefront of landing string technology as we continue to deliver the safest and most cost effective solution for our customers.”

The company has also invested in a range of other key technology solutions, including a new electronic choke for managed pressure drilling, well control and other choke applications. It can be retrofitted on to existing chokes with no specialist tools, delivering a fast response choke speed of less than 10 seconds, compared to traditional hydraulic chokes.

Expro is also featuring its non-reactive samplers that, when used with its mercury speciation services, deliver absolute measurement on mercury independent of any contamination from the sample device or analysis techniques.

Damen InvaSave Port-Based Ballast Water Management System Has World Premiere

7InvaSave port based BWMS 1 low resOn April 25th Damen’s award-winning and IMO certified InvaSave ballast water management system (BWMS) received its world premiere in front of an invited audience courtesy of Groningen Seaports at the harbour of Delfzijl and Eemshaven, The Netherlands. This marks the culmination of a seven-year programme to develop an effective mobile BWMS for use in ports.

The premiere was a joint presentation between Damen Shipyards, the designated operator MariFlex and Groningen Shipyards, as well as Royal Wagenborg. This was the first time that the InvaSave has been used by a commercial operator. The newly launched MV Egbert Wagenborg was brought alongside a quay and the containerised InvaSave 300 mounted on a barge in front of the bow. Ship-to-ship operator MariFlex then quickly connected the vessel and InvaSave using a convenient standard hose connection. The ballast water was then pumped out of the ship and passed through the InvaSave for treatment before being released into the harbour.

The operation was witnessed by representatives from port operators and authorities, ship owners and other maritime organisations. Anneke Schäfer, Director of Nature and Environment Federation Groningen, gave a speech welcoming the arrival of this new technology before officially turning it on. While the treatment process was taking place, the guests were also entertained by a water jet flyboard performing acrobatics in the harbour.

Philip Rabe, responsible for InvaSave sales at Damen, commented: “We’re delighted that the Damen InvaSave is finally operational in a commercial environment. It is a unique product and, in many cases, it enables ports to offer vessel owners a viable and cost-effective alternative to retrofitting on-board systems. And, in the event of failure of an onboard system, ports can offer owners a means by which they can access ballast water treatment at short notice, ensuring minimal downtime.”

The IMO-approved Damen InvaSave is the world’s first external ballast water treatment unit designed primarily for use in ports. The system receives ballast water from inbound vessels and treats it to IMO D-2 standard to eliminate potentially invasive marine micro-organisms. It can also deliver water treated to the same standard to outbound vessels. Its mobile, containerised format means that it can be operated from the dockside or from onboard a vessel alongside.

The new unit is now ready for operations at the harbour of Delfzijl and Eemshaven for vessels either without, or with malfunctioning, onboard BWTS capability. MariFlex also plans to have a second operational in Rotterdam ahead of the September implementation of the IMO Ballast Water Management Convention.

Diamond Offshore Continues Relationship with Speedcast for Managed Remote Communications Services

8Speedcast DiamondSpeedcast International Limited (ASX: SDA), the world’s most trusted provider of highly reliable, fully managed, remote communication and IT solutions, had announced it has secured a long-term contract with Diamond Offshore. Diamond Offshore, a leader in offshore drilling, is leveraging Speedcast’s managed communications services across 10 rigs and one shore-based facility.

“Diamond Offshore continues to adapt to the competitive nature of the industry,” said Tim Osburn, CIO, Diamond Offshore. “Through this agreement with Speedcast, Diamond Offshore increases its operational agility, benefiting from Speedcast’s world-class global customer support network. Diamond Offshore is pleased to continue this long-standing relationship with Speedcast.”

Under the terms of the new agreement, Speedcast’s service model yields increased flexibility for Diamond Offshore to better allocate bandwidth as the rig’s communications requirements change and as Diamond Offshore’s operations move from one region of the world to the next. Diamond Offshore’s rigs – a combination of drillships and semisubmersibles – are currently located across the Gulf of Mexico, North Sea, Brazil and Asia Pacific.

Diamond Offshore’s onshore facility and offshore rigs that are included in the agreement will receive fully managed voice and data communications services backed by Speedcast’s proactive network monitoring and management.

“We have a long history of supporting Diamond Offshore with reliable communications and we couldn’t be more pleased about extending our relationship,” said Keith Johnson, SVP and general manager – Energy, Speedcast. “We worked very closely with Diamond Offshore’s team to make sure we designed the best solution to meet their current needs, while also positioning them to benefit from our continued innovation and product development to add further value in the future.”

Ampelmann Introduces S-type Walk-to-Work System for the Crew Change Market

9Ampelmann S typeAmpelmann has designed its latest access system, the S-type, as a cost effective and safe option in the transportation of workers and luggage to and from offshore platforms.

The company, a leader in the provision of safe offshore access to the energy industry, is launching the new Walk-to-Work system as an alternative to using helicopters or baskets.

In total, the cost of using the system will be around 30% cheaper than helicopters. The S-type builds on Ampelmann’s track-record of innovative design by incorporating a lightweight system that uses a low amount of energy to operate.

Aimed at the global oil and gas market where volume of crew is high and the sea state can be severe, the S-type can continuously transfer 50 people and luggage in five minutes in significant wave heights of up to three to four metres. The S-type design includes a separate luggage belt, can be tailored for installation to individual vessels and is expected to be a particularly attractive option on current or new build fast or light-weight medium-sized vessels; such as mono-hulls, catamarans and trimarans.

Gerbrand Marbus, Crew Change Market Manager, said: “The S-type can easily transfer more people at a time than helicopters and is a safe alternative. As the industry continues to look for ways to work more effectively, we have listened to operators requests and developed a system that should be an attractive option for companies as well as providing more comfortable transportation for their workforce.

“In developing the S-type we worked closely with vessel designers to provide an integrated package that has a reduced footprint and is lighter than comparable systems. With this integrated package, different clients can share logistics and see walk to work as an offshore bus service reducing their crew transportation costs by 30 to 40%. The technology used in the transportation system will place the S-type as a leader in the Walk to Work crew change market.”

The S-type provides a wide operational range thanks to its 360 degrees access and is a lightweight system with low energy consumption. In comparison, it is approximately half the weight and uses 50% less energy than typical similar systems.

In addition, the S-type occupies a small deck space and can be fully integrated with its host vessel. It requires no alterations to the receiving platform.

ExxonMobil and Employees Contribute More Than $13 Million to Texas Colleges and Universities

10ExxonMobil 1ExxonMobil and its employees contributed more than $13.4 million to institutions of higher education across Texas as part of the ExxonMobil Foundation’s 2016 Educational Matching Gift Program.

ExxonMobil employees, retirees, directors and surviving spouses contributed $6 million to 78 Texas colleges and universities, which was matched by more than $7.4 million in unrestricted grants from the ExxonMobil Foundation. Although grants are unrestricted, colleges and universities are encouraged to designate a portion to math and science programs supporting student engagement.

ExxonMobil’s program matches donor pledges on a 3:1 basis up to $7,500 to qualified colleges and universities in the United States, as well as the American Indian College Fund, Hispanic Scholarship Fund and the United Negro College Fund. More than $630 million has been contributed to such American institutions over the more than 50 years the company has offered the Educational Matching Gift Program.

“ExxonMobil’s employees are committed to investing in quality education,” said Ben Soraci, president of the ExxonMobil Foundation. “The ExxonMobil Foundation has a long history of supporting a range of efforts to improve education in the United States. We hope our contributions and the generous support of ExxonMobil’s employees will help create a stronger future for today’s students.”

Nationwide, more than 850 institutions received more than $50 million through the 2016 Educational Matching Gift Program.

In addition to the Educational Matching Gift Program, ExxonMobil and the ExxonMobil Foundation support and develop programs that encourage students, particularly women and minorities, toward careers in science, technology, engineering and math, as well as teacher training initiatives.

About the ExxonMobil Foundation

The ExxonMobil Foundation is the primary philanthropic arm of Exxon Mobil Corporation (NYSE:XOM) in the United States. The foundation and the corporation engage in a range of philanthropic activities advancing education, with a focus on math and science in the United States, promoting women as catalysts for economic development and combating malaria. In 2016, together with its employees and retirees, Exxon Mobil Corporation, its divisions and affiliates, and the ExxonMobil Foundation provided $242 million in contributions worldwide, of which $72 million was dedicated to education.

BMT Launches New Hybrid Approach to Management of Big Data

11logoBMT Scientific Marine Services (BMT), a subsidiary of BMT Group, the leading international design, engineering and risk management consultancy, has launched its Data Exploration and Analytics Platform for Actionable Insights (DEAP-AI), an initiative driven by over 20 years’ experience of measuring and modelling data for the global oil and gas industry.

DEAP-AI is an intelligent studio capable of processing large and small datasets using a rich set of processing libraries. The solution has been developed with support from a leading IT company, Capgemini and hosted by an industry leading cloud service provider Amazon Web Services (AWS).

BMT’s Soma Maroju, product development leader of DEAP-AI explains: “Our goal with this platform is to unify data acquisition, transmission, quality control, processing, system documentation and exploration of measured and modelled data and in turn, provide near real time access to information. Ultimately, we want to bring all the expert knowledge and data together on this platform. By doing so, we can create actionable insights, such as mooring fatigue damage accumulated over the years, met-ocean analysis, long term trends and even the system status of the monitoring systems to our clients, data analysts, service engineers and user groups with similar requirements.”

A virtual environment, DEAP-AI benefits from a powerful scalable and reliable global computing infrastructure. DEAP-AI is powered by a distributed computing engine, which can process large batches of data, as well as stream real time data. The user interface includes custom charts and screens that are fit for purpose.

Soma continues: “The platform provides customers with a full suite of exploration and analysis tools and a holistic approach to the management and analysis of data. Having taken a modular approach to the software development, it can be applied to multiple operational requirements including jacket integrity, operational met-ocean forecasts and preventative maintenance of safety critical instrumentation.”

The DEAP-AI platform is already being used by operators to monitor near real-time data from the independent remote monitoring systems, which provide critical information, particularly from offshore platforms during hurricanes.

MTS Houston Section - Presentation – May 25, 2017- Comparison of Deepwater Hub Facilities

12 1MTSHoustonlogoOn May 25, 2017, Mark Cizek, Project Manager for Williams, will make a presentation to the MTS Houston Section on deepwater hubs in the Gulf of Mexico.

Mark Cizek with Williams will discuss both new and mature hub facilities. He will illustrate his talk by comparing and contrasting the Kodiak tieback to the Devil's Tower truss spar with the Gunflint tieback to the Gulfstar One classic spar. With different commercial arrangements, work scopes and facility ages these two tieback projects offer interesting insights into how a producer might most effectively accomplish a subsea tieback to an existing hub facility. Mark will also discussion commercial aspects, operational arrangements and lessons learned from both projects.

The Gunflint oil field was developed as a long-distance subsea tieback to the Gulfstar One FPS in the deepwater Gulf of Mexico. Gulfstar One, also known as Tubular Bells, is located 135 miles southeast of New Orleans in 4000 feet of water. It was completed in 2014 and offers a flexible, reliable solution for deepwater producers. At over 21,000 tons, it is the first spar-based floating production systems with major components built entirely in the US. Gulfstar's standard design approach allows customers to reduce their cycle time from discovery to first oil. From sanctioning a project to completion, Gulfstar’s “plug and play” options allow delivery within 30 months.

12 2MTS gulfstar fps gs1 lrGulfstar One. Photo credit: Williams

The Devil’s Tower facility is a truss spar located in Mississippi Canyon Block 773, approximately 150 miles southwest of Mobile, completed in 2003. The facility, also owned by Williams, is capable of producing 60,000 barrels of oil per day and 60 million cubic feet of natural gas per day. In 5,610 ft. of water, this spar is the world’s deepest dry-tree platform. The hull is 586 feet in length, 94 feet in diameter and weighed over 11,000 tons at the time of installation whilst the topside weighs over 9,300 tons. The spar currently hosts production from several satellite fields including Devil’s Tower, Triton/Goldfinger and Kodiak, and has the flexibility to accommodate future subsea tiebacks.

About the Speaker

Mark Cizek joined Williams in 2006 and has held a variety of roles, including Project Manager of the Perdido export pipeline project, as well as Project Director for the construction and installation of the Gulfstar One (Tubular Bells) spar. Mark is currently Vice President and General Manager of the Eastern Gulf of Mexico for Williams, overseeing both onshore and offshore operations, as well as the commercial aspects of both operations. Prior to joining Williams Mark worked for Shell Exploration and Production and Technip.

Mark holds a Bachelor of Science in Maritime Systems Engineering from Texas A&M University - Galveston, and a Master of Business Administration from Rice University.

iSURVEY Sees Success in First Quarter of 2017

iSURVEY has reported a strong end to 2016 and a positive first quarter of 2017, including ongoing recruitment due to a string of significant contract wins.

New business this year includes:

  • A three-year, non-exclusive call-off contract with Shell UK Ltd, Shell NAM, Norske Shell and Shell E&P Ireland for the provision of rig positioning and surveying services
  • A four-year contract with Maersk Oil Danish Business Unit, with iSURVEY named the nominated first caller contractor for survey and positioning services
  • A marine construction survey support contract with Solstad Offshore Asia Pacific to support its 2017 pipeline and platform installation programme in Thailand

Part of this growth has also been attributed to iSURVEY’s diversification into the offshore wind sector last year. Having already worked on a number of cable preparation, laying and burial projects in 2016, a significant percentage of iSURVEY’s turnover last year came from renewables projects.

The company is targeting further growth in this sector this year, with Scottish Enterprise’s Strategy Development Project Support helping iSURVEY engage with specialist consultants. This initiative is designed to assist companies identify key operational strategies, projects and high level implementation plans to build competitiveness and achieve growth aspiration.

13iSurvey Andrew McMurtrieAs a result, iSURVEY will be taking on more offshore personnel and a new business development manager, which is set to bolster the UK team by 20%.

Andrew McMurtrie, managing director of iSURVEY

Managing director of iSURVEY Offshore, Andrew McMurtrie, said: “Our outlook for 2017 is positive based on the success we have already experienced in Q1, and in the last few months of 2016. As well as a steady level of international work, projects and long-term contracts in the North Sea are also increasing.

“We believe that this recent success is down to the fact we remain an independent business with a team which always delivers, and a reputation for providing a cost-conscious service which is centred on quality.

“We have a very strong track record in the oil and gas subsea sector, particularly within our cable installation and burial business line in Norway, and this experience has transitioned well into the offshore wind cable installation sector, where we see great potential.

“As well as retaining a significant number of our clients, we have also seen many return after weathering the storm of the last couple of years. Our team is feeling optimistic about what 2017 will offer and we look forward to continued work with clients old and new.”

AMETEK Solidstate Controls Launches SlimLine Product Enhancements for Offshore Oil Rigs

14AMTEK 20kVA DPP Slim AMETEK Solidstate Controls, Inc. (SCI), a leading manufacturer of highly customized uninterruptible power supply (UPS) systems, announced the first release of its SlimLine product line enhancement, designed to meet the highly specialized need for smaller UPS units for offshore oil and gas rigs.

AMETEK SCI’s SlimLine cabinet design has the smallest footprint in the industrial UPS industry. That design can be applied across many of AMETEK SCI’s product lines, including its Digital ProcessPower (DPP) UPS, industrial digital battery chargers/rectifiers (DCR), bypass solutions and stand-alone Digital ProcessPower inverters (DPI).

“To meet our customer’s demands, SCI engineers have implemented the SlimLine cabinet design on many of our major product lines without sacrificing the existing quality and integrity of AMETEK SCI products and their features,” says Dan Huey, SCI Product Manager. “In the offshore drilling market, as well as in many other applications where saving space is saving money, the SlimLine products are a perfect fit.”

AMETEK SCI’s new SlimLine product enhancement allows for more efficient operations within the oil and gas market, while maximizing the limited square footage on drilling platforms where space is at a premium. SlimLine products provide the same continuous, clean, regulated power as the existing larger AMETEK units.

TWMA Accelerates Growth with New Strategic Ownership

15TWMAThe international drilling waste management and solutions provider TWMA has secured an important strategic partnership and substantial investment from Buckthorn Partners.

The undisclosed funding package from Buckthorn, a specialist oil field services investment firm, will allow TWMA to accelerate its plans for global growth and product and service expansion, and invest further into research and development.

Ronnie Garrick will continue as Chief Executive Officer of TWMA. Tony Branch will join the management team to support the planned development, growth and expansion of the business. Prior to joining TWMA, Tony was President of Regional Operations at Weatherford where he was also an Officer of the company. Nicholas Gee from Buckthorn Partners joins the company as Chairman.

Ronnie Garrick said: “We are very pleased to welcome Buckthorn as investors – it will allow us to embark on the next stage of our global growth plans. Our commitment to research and product and service development is key to our success and this investment ensures TWMA will continue to provide revolutionary technologies and industry leading solutions. We are delighted to have Tony joining our team and are really looking forward to working with him on further building TWMA.”

Established in 2000 and with over 500 staff, TWMA has become recognised internationally for providing specialist drilling waste and environmental solutions that reduce drilling costs and maximise operational effectiveness. The company has offices and service bases in Europe, the Middle East, North Africa, West Africa and the Americas.

Ronnie continued: “Securing this investment demonstrates confidence in our business and TWMA’s ability to develop our offering on a global scale. Despite the downturn, we’ve grown significantly over the past few years, particularly in the Middle East, which is testament to our commitment to continually innovate, invest and grow.”

Tony Branch commented: “This initial investment, together with access to further capital, will allow the company to expand its expertise and its geographical footprint, ensuring we continue to offer the safest and most effective drilling waste solutions to the industry. Our international expansion plans in new and existing regions are crucial for long-term sustainable growth and the TWMA team look forward to driving these further.”

Commenting on the investment, Nicholas Gee, Partner at Buckthorn said: “As a leader in the provision of drilling waste management solutions, TWMA has built a strong international profile, centred on a clear commitment to high quality and tailored client solutions that drive effective and efficient operations for customers. Our objective is to further develop the business both organically and through M&A to expand further geographically and bring new products and services that will add further value to our customers.”

The institutions supporting this Buckthorn transaction include BMO Global Asset Management (EMEA), Souter Investments Limited and Aberdeen Asset Management.

Presserv Group Announces £1.5m Contract and New Hires at OTC

16Presserv Allan Duham 6Leading corrosion specialist Presserv Group announced at the Offshore Technology Conference (OTC) in Houston that is has secured a £1.5 million contract for corrosion control on platform risers from a Norwegian operator. The year-long contract, along with other recent contract successes, has also led to the creation of seven new positions across the company’s UK, Norway and Singapore operations – including three in Scotland.

Brian Reid, recognized as a leading authority on coatings, will join the company in May in the newly-created role of operations manager in Presserv’s Aberdeen office. A 30-year veteran of the fabric maintenance industry, Brian has previously worked for Wood Group and Shell, and will work with the company to support business growth.

A field supervisor based out of Aberdeen and a business development executive in the central belt will also join the UK team, alongside operations managers and sales staff in the firm’s Norway and Singapore arms.

These newly created positions will strengthen Presserv’s operations and allow the company to increase its operations in the preservation sector, while expanding further into above-ground storage tank (AST) preservation, FPSO preservation management and corrosion control.

Managing Director Allan Durham said, “Despite a difficult economic climate for many, the last year has been strong for Presserv in the UK. Following the launch of the Presserv Tank Brigade in late 2016, which enabled us to offer AST corrosion solutions to a range of industries from energy to pharmaceuticals, this new contract has allowed us to expand even further.

“No matter how volatile the market, there is always a need for corrosion prevention. By properly corrosion proofing mobile drilling units, ASTs and other assets, businesses are able to protect their investments, keeping production high and downtime to a minimum.”

Presserv has designed worldwide preservation programs based on vapor phase technology and dehumidification that will protect drill ships, semis, jack-ups and vessels for extended periods in wherever location and lay-up status they are moored, and keep them in a state of readiness with the minimum of mechanical maintenance needed. In addition, the Presserv Tank Brigade uses Cortec Corporation’s Corrologic® and Seal for Life Stopaq® solutions to address issues with above-ground storage tank corrosion.

PIRA Energy Market Recap for the Week Ending May 8, 2017

17PIRALogoEuropean Refinery Margins & Runs Will Remain Healthy Through the Mid-Year

Oil prices are still consolidating but will go over $60 late this year as surplus stocks are drawn down. Refinery margins and runs will stay strong for now, but high gasoline stocks will cap further improvement. Gasoline cracks will ease and diesel cracks will increase in 2H17. HFO cracks will trend a bit lower but still remain relatively firm. European runs will decline in 2H17 with higher expected maintenance and seasonally softening margins.

Key Data Continue to Suggest Broad-based Global Expansion

There were three main takeaways from the latest U.S. labor market data release: first, there are no signs of slowing in the pace of job creation; second, people who are not in the labor force are still not rushing to be a part of it; and third, wages are growing only at a moderate pace. This was a positive release for the U.S. economic outlook, but it may also reignite debate at the Fed about possible overheating in the labor market. This week’s other economic releases (European GDP, and confidence readings from various sources) were also mostly positive.

U.S. Propane Stocks see Second Consecutive Build

Propane stocks increased a meager 16 MB to 39.7 MMB. For the past two weeks, stocks are basically unchanged. The y-o-y deficit continued to widen to 32.2 MMB. This is the seventh consecutive week that y-o-y deficits have increased, largely due to robust exports. The EIA reported that exports declined to 764 thousand barrels, which is the lowest level since early December 2016. Cargos are expected to temporarily remain relatively low in May due to weak arbitrage economics, as well as declining heating demand overseas.

U.S. Ethanol Prices Fall

U.S. ethanol prices were lower the week ending April 28. Manufacturing margins worsened. 2017 D6 RIN values plunged to April 28. Brazil began its 2017/2018 sugarcane harvest in April, but heavy rain limited output. The Latin American country is considering tariff of 17% on U.S. ethanol imports. Hydrous ethanol prices are now competitive with gasoline at the retail level in parts of the Southeast region. European ethanol prices have bottomed and are increasing.

Wheat Tour’s Results Questioned

The 2017 Kansas Wheat Tour barely finished before many started to discount the findings, some entirely. While a somewhat typical response to Tours in general if the results don’t fit a specific narrative, this year’s Tour was hampered by the much-publicized spring snowstorm which resulted in an inordinate amount of subjectivity in the reports. Some have claimed that scouts drove for 90 miles without taking a sample on Wednesday due to poor weather conditions, invalidating the results. From the number of samples taken in the hardest hit areas out west, which were well below normal, that concern seems legitimate.

Fundamentals Warrant Price Support Despite Production Uptick

NYMEX futures prices have held up relatively well this week with the June 2017 contract barely down. Nevertheless, the slow descent from early April highs is largely a factor of the market’s uncertainty surrounding structural tightness — with the latest U.S. production data likely failed to assuage any such concerns. The EIA Monthly Crude Oil and Natural Gas Production Report, reflecting the first pass at February 2017, showed a sizeable ~1.4 BCF/D increase in dry production compared to the prior month, marking the largest sequential gain since 2014. Yet, this month’s “surprise” was not limited to just one side of the ledger; the EIA observed concurrent strengthening on the demand side, in effect expanding the size of the market rather than merely balancing on storage.

U.S. Cargos Steer Clear of Europe Even as Sabine 4 Ramps Up

Atlantic Basin trading maneuvers are set to become more intricate, as more LNG is pushed out of Sabine Pass into the region in a lower priced 2Q/3Q environment. At the same time, keeping gas out of N.W. Europe to support NBP netbacks will remain a priority. Or looked at another way, N.W. European netbacks have not been large enough to secure U.S. cargos, and spot marketers are seeking more attractive markets.

Indian Producer Keeps Gas In House

Reliance Industries (RIL) will sell the natural gas it produces from coal seams in Madhya Pradesh to its own units in Gujarat and Maharashtra. After last month's government decision to give coal bed methane (CBM) producers freedom to discover market price, RIL invited bids from users of gas. Five companies including RIL participated in the bidding process, according to the bid evaluation report the company posted on its website. The bidders besides RIL were Deepak Fertilizer & Petrochemicals Corp Ltd., state-owned gas utility GAIL India Ltd and GMR's Rajahmundry and Vemagiri power plants. While RIL bid for using the gas at its petrochemical plants at Patalganga and Nagothane in Maharashtra and Jamnagar in Gujarat, Deepak Fertilizer was a close second.

Warmer Weather Undermined Demand in April, but U.K. Losses Larger than Expected

Demand in April declined by 5% across the largest markets (France, Germany, Italy, Iberian Peninsula and the U.K.), with April this year not as cold as last year, while seasonal factors are also in part to blame. However, the declines reported for the U.K. and, to some extent, France, have been relatively wider than the rest of Europe. The more contained demand losses in Spain and Italy suggest that macroeconomic conditions outside of the U.K. appear relatively stable. While intra-month volatility in temperatures could explain the large fall in French demand, the trend still warrants closer attention in the upcoming months.

Long-Term Gas Demand Rests on Winning a War of Attrition vs. Other Thermals

Even though gas plants will gradually dominate the non-renewable (shrinking) slice of the power generation pie, PIRA does not predict that Western Europe will ever have the gas-to-power demand it achieved in 2008. To reach such heights, gas would have to become over 42% of non-renewable power generation in 2017 – 8% higher than forecasted. For the moment, though, gas is on a trend towards greater dominance in power generation over other thermal technologies, which not only means that fuel switching potential becomes gradually limited, but that gas demand becomes more a function of renewable supplies.

Coal Prices Shift Lower on Weaker Oil Prices

The coal market moved considerably lower this week, with weaker oil prices adding further bearish momentum to the downward correction in coal supply/demand fundamentals. The decline in pricing was particularly acute for prompt FOB Newcastle and FOB Richards Bay prices, flattening their respective forward curves. India’s electricity generation increased by 3.9% year-over-year, although resurgent hydro generation suppressed coal-fired generation growth to just 2.4%, which is not sufficient to stimulate thermal coal imports. U.S. thermal coal exports hit a three year high in March, but should shift lower.

WCI Carbon Market Challenged by Legislative Proposals

WCI carbon prices reset to a higher level after the auction verdict, averaging $14.20 in April. Early May has seen a retreat from end-April levels, as proposed legislation threatens the market framework and the Scoping Plan/Cap and Trade amendments are yet to be finalized. Significant buying needs for CP2 should give the May auction a boost vs. the severe undersubscription in February. However, given that one set of uncertainties has been replaced by another, continued undersubscription is a real possibility.

2Q17 Latin American Gasoline & Diesel Imports Higher

2Q17 Latin American gasoline demand is 35 MB/D lower year-on-year. Mexican demand is slowing, Brazil is flat and Venezuela is down. The diesel market is also softer, we expect 2Q17 consumption to be 40 MB/D lower year-on-year. We see demand picking up again later in the year. Overall Latin American refinery crude runs are forecast to decline year-on-year in 1H17 but improve in 2H17. PIRA estimates Latin American gasoline and diesel imports to be up on the year in 2Q17. Attractive import incentives continue to support high imports of diesel into Brazil, keeping domestic refinery runs unusually low.

Stresses Low, Energy Credit Holding Up

Financial stresses remain extremely low, as evidenced by the St Louis Fed stress indicator continuing to trend down, the DOW breaking above 21,000, and the S&P 500 nudging up against the 2,400 level. Commodities remain soft, particularly energy. However, energy credit indicators are not as soft as cash oil prices might suggest. Price trends in non-energy high yield debt still look positive.

Ethanol Stocks Remained Near Record Levels

U.S. ethanol production fell 1 MB/D the week ending April 28 to 986 MB/D, matching the six-month low achieved three weeks earlier. Output outside of the Midwest was just 68 MB/D, the lowest since June 2014. Total inventories fell by 56 thousand barrels to 23.3 million barrels as East Coast stocks retreated from a five-year high. Ethanol-blended gasoline manufacture dipped to 9,203 MB/D from a 2017-high 9,220 MB/D in the preceding week.

Crude Stocks Fall on High Refinery Runs, Syncrude Fire

U.S. crude stocks declined in April, for the first time this year, falling 8 million barrels as refinery crude runs topped 17 MMB/D – a full 1 MMB/D higher than last year. Cushing stocks also fell, 2 million barrels, on higher shipments out to the Gulf Coast and to the Midwest, where refiners had to replace sweet crude supplies following the fire at Syncrude’s oil sands facility in March. Western Canadian stocks also fell in April, as the Syncrude shutdown affected both light and heavy supplies – the latter due to the need for synthetic light crude in bitumen synbit blends.

Global Equities at or Near Record Highs....

Again, most equity tracking indices posted a positive week. The broad U.S. market set another record high. Banking, technology, and retailing indices did the best, while energy was the only sector giving ground. International indices were also mostly higher, with Europe doing the best, though China eased.

Fracking Policy Monitor

The opening months of the Trump administration have been positive for industry as federal regulations have been rolled back. The EPA has withdrawn its request for data on methane emissions and has temporarily stayed implementation while the rules are reevaluated. The BLM intends to let its well integrity rules die in the court system. In response, states and localities are tightening their own regulations. PIRA expects further loosening at the federal level and further tightening at state and local levels. However, the primary oil producing states such as Texas and North Dakota are expected to remain friendly to industry and not tighten regulations further.

U.S. Commercial Stocks Flat with Last Year

Overall commercial stocks built 1.3 million barrels with another disappointing crude stock draw, at just 0.9 million barrels, which was more than offset by a product build. Adjusted product demand continues to grow at about 2.4% (or 470 MB/D) year-on-year in the latest four weeks. Cushing crude inventories drew 0.7 million barrels. Crude stocks should show a larger decline next week, but the major light products are forecast to build.

Heavy North Sea Maintenance Forecast for Q2 and Q3

PIRA forecasts another year of heavy maintenance in the North Sea in 2017. Oil production loss due to maintenance is expected to rise to 230 MB/D in Q2 and 360 MB/D in Q3, up from 40 MB/D in Q1. Maintenance will taper at the end of the year to 100 MB/D in Q4.

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.