GE Oil & Gas (NYSE: GE) has announced the creation of its new Oil & Gas Digital Solutions business, appointing Matthias Heilmann as head of the organization and Chief Digital Officer. GE also announced the development of a pilot program with BP and a business partnership with subsurface software company Paradigm.

“Digitization has become not only a competitive differentiator but increasingly, a necessity,” said Lorenzo Simonelli, Chief Executive Officer of GE Oil & Gas. “We are evolving our business and digital offerings to match the needs of our customers, partnering with them to embrace the transition and help make their businesses stronger long-term.”

“As we move to a digital world in the oil and gas industry, we look to digital technologies to help us move to the next level of operational excellence. These digital technologies offer the opportunity to collaboratively develop industry-leading solutions to address some of the most significant challenges in field operations,” said Dave Feineman, senior advisor on digital technology in BP’s Upstream Technology organization.

This solution will provide analytical insights at enterprise scale through knowledge sharing on demand. Now process engineers can eliminate disruptions by being proactive and analyze problems more efficiently, based on having underlying insights available when needed to advise the offshore team and take action.

Utilizing GE’s Asset Performance Management (APM) software and Predix , the solution is scalable enterprise wide and can be deployed rapidly and globally at low cost.

In today’s economic environment, operators need to maximize the life of existing reservoirs while reducing operating costs. Improving problem detection and treatment design alone can reduce operational costs by 10-25% through fewer interventions and more efficient resource utilization. RDPO provides a clearer understanding of the reservoir geology, permanent monitoring of wells, and predictive analytics, so that operators are better equipped to understand risks and act upon them.

With growing instrumentation throughout the oilfield, operators have access real-time production data such as pressures and flow rates. RDPO enables production engineers to make use of all that data, conduct nodal analyses and evaluate diagnostics via links to a 3D model of the subsurface. The result is a better understanding of the impact of production interventions before taking costly and potentially adverse actions.

“Today, production engineers often rely on single well analysis to make production decisions that have field-wide impact. Partnering with GE, we can now provide a unified view of both production and reservoir data for optimal decision making,” said Arshad Matin, CEO of Paradigm.

Through this collaboration, GE and Paradigm can help operators exceed production targets and manage operational costs by selecting superior infill drilling locations, improving well intervention strategies and optimizing and predicting flood behavior.

- One-third of US respondents are concerned that they do not have a strategy in place to maintain innovation in a declined market -

A new research report published by DNV GL reveals that skills shortages are seen as a barrier to growth and an increasing concern throughout the US. More than half of the respondents believe organizations are taking a short-term approach to skills and career development.

A New Reality: the outlook for the oil and gas industry in 2016, a DNV GL report based on a global survey of 921 senior professionals in the sector1, shows that an increased portion of US respondents see cost management as the top priority in 2016 (38% compared to 25% in 2015).

In terms of cost-cutting strategies, 42% identify tougher decisions on CAPEX approvals as amongst the highest priority; this is 9 percentage points higher than the global average. At the same time, 30% of respondents confirm that their approach to cutting costs is to reduce exposure to and involvement in higher-risk projects (25% globally).

Key findings in the research report include:

• 52%, versus the global average of 43%, of respondents believe that their organization is taking a short-term approach to skills and career development

• 38% still believe their company is taking a long-term approach to innovation and R&D

• Skills shortages and the aging workforce are increasingly seen as barriers to growth in the US (21% in 2016 compared to 13% in 2015), and now exceed the global average of 14%

• 28% of respondents expect to see additional job losses, especially within the publicly traded sector. This is up 5 percentage points from 23% in 2015

• Cost management is established as a top corporate priority, rising from 25% (2015) to 38% (2016)

• The proportion of respondents who believe that operators will increasingly push to standardize their operations is 60%, which is in line with the global average

Peter Bjerager, executive vice president, director of division Americas in DNV GL Oil & Gas, says: “The majority believe that oil prices will remain lower-for-longer, which ultimately leads to continued pressure on cost management. Within this region, and throughout DNV GL, we continue to focus on new ways to drive research and innovation. We partner with every segment of the value chain and look for new ways to improve through standardization. It's encouraging to see that leaders in oil and gas companies are also seeking new ways to standardize operations as a preferred way of driving efficiency.”

This year’s report shows that six out of ten (61%) respondents agree that operators will increasingly push to standardize their approach globally - an increase of 9 percentage points since 2014.

Elisabeth Tørstad, CEO of DNV GL - Oil & Gas, says: "While the industry is understandably preoccupied with generating shorter-term value, we must also keep an eye on where longer-term value and permanent efficiency gains can be achieved.

"Innovation is not just about finding the breakthrough technologies, although that is important too, it is also about making things simpler and more efficient and ultimately helping the industry to safely cut costs. At DNV GL, we are continuing to invest 5% of our revenue in R&D as we see this as a key enabler for long-term competitiveness,” she continues.

Other findings include:

• Not unexpectedly, uneconomic oil prices (63%) and the weak global economy (34%) are seen by US respondents as the two biggest barriers to growth in 2016. A growing regulatory burden is also cited by 21% of US respondents

• One-third of respondents in the US (33%) listed subsea technologies as the top new or emerging technology impact areas for 2016

• The percentage of US respondents who believe there will be increased consolidation in the sector is higher than the global average (81% vs. 72%)

Download a complimentary copy of A New Reality: the outlook for the oil and gas industry in 2016.

Asset Guardian Solutions Ltd (AGSL), which specializes in protecting companies’ process control software assets, announced that it has landed another contract to support an oil and gas supermajor in Perth, Western Australia.

The contract is the second to be awarded by this operator in Australia to AGSL in the last 12 months.

Once again, AGSL will provide the Asset Guardian toolset, which provides a secure repository to store back-up software files and associated data, allowing them to be easily accessed in the event of a software-related production system failure. Asset Guardian will also manage all process software configuration changes.

Maintaining communications in “cyclone country”

Because the LNG project is located in “cyclone country”, communications between its onshore facilities and offshore project teams are often disrupted. To ensure that the integrity of all software and data files managed by Asset Guardian is maintained when communications break down, AGSL is also supplying its AGSync software.

AGSync synchronizes software and data files across multiple locations and continues to operate during periods of disrupted communication, allowing all files between locations to synchronize as soon as communication links are restored.

Australian oil and gas market looks to Asset Guardian

For AGSL, the Australian oil and gas market has really taken off. The recent contract is the fourth Australian contract to be awarded to AGSL during the last three years, beginning with an order from Woodside Energy. Shortly thereafter, INPEX followed suit, adopting Asset Guardian for the Ichthys LNG Project.

“This recent award demonstrates the confidence that Australia-based oil and gas operators have in Asset Guardian’s ability to manage their process software, reliably and effectively,” said Sam Mackay, chief executive of AGSL. “The rapid rate at which the Australian market has embraced Asset Guardian has encouraged us to consider expanding our presence in the region in 2016.”

Leading international energy logistics provider Peterson has secured a significant, long term logistics contract with leading oil and gas operator Maersk Oil. The five year deal enables greater focus on delivering sustainable cost saving concepts and systems.

Peterson will work closely with the operator to deliver a comprehensive logistics approach including warehousing, inventory control, transport, fuel and quayside logistics, crew changes and walk to work supporting Maersk Oil’s UK North Sea assets.

Murdo MacIver, director, Peterson said: “To have been awarded such a ground-breaking contract with Maersk Oil is a huge achievement for Peterson and demonstrates complete confidence in the longevity of the services we provide.

The strong partnership and understanding we have built with this key client positions us well to support them and provide innovative solutions to optimise efficiency, safety and service across these assets at this challenging time for the sector.”

The contract continues the existing relationship between Maersk Oil and Peterson. Peterson also provides fourth party logistics (4PL) support in the Persian Gulf.

Both companies will continue to develop smart solutions utilising Peterson’s proprietary suite of digital applications such as eCargo and VOR which enable real time, data driven decisions to improve performance and will keep both companies at the forefront of technological logistics.

McDermott International, Inc. (NYSE:MDR) announces that it has been awarded a subsea umbilical and flowline installation contract by Anadarko Petroleum Corporation in support of its Phase II development of the Caesar/Tonga field located in the U.S. Gulf of Mexico.

Lay Vessel 105 and North Ocean 102 are docked to support operations at McDermott’s spoolbase facility in Gulfport, Mississippi.

Caesar/Tonga Phase II is being developed as a subsea tieback to the Anadarko-operated Constitution spar, located in Block Green Canyon 726 and 727, with the new development in approximately 5,000 feet of water. The scope covers:

Project management;

Engineering, fabrication and installation of two 7,700-feet-long Pipe-in-Pipe (PIP) insulated rigid flowlines terminated by pipeline end terminations (PLETs) on either end;

Installation of one subsea manifold and associated jumpers;

Installation of a subsea control umbilical approximately 72,000-feet long and associated flying leads; and

Pre-commissioning.

“The combination of our Pipe-in-Pipe experience, efficiency of the Lay Vessel 105 (LV105) and our Gulfport spoolbase led McDermott to secure this important contract from Anadarko,” said Scott Munro. Vice President for Americas, Europe and Africa, McDermott. “We appreciate Anadarko’s trust in our experience and ability to deliver in the Gulf of Mexico.”

McDermott’s operating center in Houston, Texas, has commenced the overall project management and engineering. The PIP flowlines are expected to be assembled and fabricated at McDermott’s spoolbase facility in Gulfport, Mississippi. Offshore installation is expected to be completed in late 2016 by the LV105, McDermott’s deepwater rigid reel-lay vessel, and by the North Ocean 102, McDermott’s deepwater flexible lay vessel, which is expected to complete the umbilical installation and subsea construction scope of work.

The lump sum contract award will be reflected in McDermott’s fourth quarter 2015 backlog.

Aker Solutions won a front end engineering design (FEED) contract from Statoil for the Trestakk field tie-in to the Åsgard A production vessel in the Norwegian Sea. The company also secured a separate concept study order for a low well-pressure project at Åsgard A.

"We're very pleased to secure the orders for this major oil and gas field, which will help secure jobs in our MMO business in Norway," said Per Harald Kongelf, head of Aker Solutions' Norwegian operations. "We look forward to continuing our good cooperation with Statoil as we together seek to find the most robust and cost-effective solutions for these projects."

Work on both contracts will start at once and be carried out by Aker Solutions' Norwegian maintenance, modifications and operations (MMO) business. The concept study will look at ways to allow future production at Åsgard A at lower well pressures. The contract includes options for FEED and engineering, procurement, construction and installation (EPCI) services. The Trestakk agreement has an EPCI option.

The American Petroleum Institute's Global Industry Services department (API Global) has established a new and comprehensive Auditor Certification Program, which is the first to be developed by industry experts.

"API is committed to safety as a core value, and we are pleased to offer this new auditor certification program to help improve the safety and performance of oil and natural gas operations worldwide," said Lisa Salley, vice president of API Global. "API standards and certifications are the industry gold standard. The program is designed specifically for and by oil and natural gas quality management professionals and draws upon API's deep industry knowledge and expertise."

Company personnel and self-employed individuals can register to be trained, tested, and certified to audit various quality management programs according to API's globally-recognized standards. The certification of credentialed auditing professionals will play a key role in advancing quality programs, efficiency, and safety within the industry.

Certification candidates are required to provide proof of appropriate education, qualifications, training, and audit logs as part of the application and pre-qualification process. They must also sit for and pass a 150-question exam, administered worldwide at Prometric computer testing centers. The first exams will be offered March 1-15, 2016, and the registration deadline is February 5. API plans to hold three auditor certification exam periods per year.

Each of the three levels of certification can be obtained with a focus on either API Spec Q1 (Specification for Quality Management System Requirements for Manufacturing Organizations) or API Spec Q2 (Specification for Quality Management System Requirements for Service Supply Organizations).

For more information about the Auditor Certification Program, please click here.

API Global is responsible for certification, standards, statistics, training, events, and safety programs for the international oil and natural gas industry.

API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API's 650 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms. They provide most of the nation's energy and are backed by a growing grassroots movement of more than 30 million Americans.

Statoil has awarded the contract for Johan Castberg Subsea – Integration Pre-FEED and FEED Project with Options to IKM Ocean Design.

The contract includes Pre-FEED and FEED of pipelines, risers, cables, tie-ins and related structures on the Johan Castberg field. Furthermore, detail design and follow-on engineering are included as options along with EPC of pipeline related structures.

CEO of IKM Ocean Design, Peder Hoås says; "We are extremely proud that Statoil has chosen IKM for this prestigious task and we look forward to further develop the field in cooperation with the Statoil team in order to make the project technically and commercially robust. The contract secures work for our engineers on a long term basis, and is one of the largest engineering contracts since the company was established.”

Contract signing (Fornebu – Oslo) - Peder Hoås and Geir Paulsen (Statoil)

The contract has a duration of two years for the completion of Pre-FEED and FEED design, covering the SURF part of the development. Including options, the total contract period and value could extend to 7 years and 200 mNOK, respectively. The engineering work starts immediately and will be run out of IKM’s Lysaker office.

IKM Ocean Design is a part of IKM Gruppen and is established with offices in Stavanger, Trondheim and Oslo. IKM Ocean Design employs 70 engineers within the areas of subsea field development, subsea pipelines and cables, subsea structures and topside engineering.

The Johan Castberg field is located in the Barents Sea, approximately 240 km north-west of Hammerfest in northern Norway. The field development comprises the Skrugard, Havis and Drivis fields, all within Production License 532.

IRM Systems, an independent authority on emergency pipeline repairs, announced that as a result of a new and innovative approach to pipeline repair, it contributed to achieving dramatic cost-savings on the recent repair of a live subsea pipeline in the Java Sea, Indonesia. The objective of the operation was to seal a tear on a weld seam by installing a permanent repair solution.

IRM Systems began providing engineering services for the project in January 2015. Normally, the operation would have been executed by a major EPIC company – and nearly was – but in this instance, the operator decided to do something different. It decided that it should be executed by a smaller service contractor, drawing upon the services of a constellation of specialist providers, including IRM Systems.

A graphic image of a habitat installed over a pipeline.

To ensure that the project would succeed, the operator brought a certification body on board to assist with the engineering and advise on overall quality. Working with IRM Systems, the primary contractor selected the manufacturers and fabricators of the repair clamp, and conducted offshore surveys in cooperation with specialist survey contractors. The components of the repair solution were tested in Norway and the Netherlands in August, and successfully installed on to the live gas pipeline in October 2015, well within schedule.

Given the success of this project, the operator plans to use the approach used for this project as the standard template for more projects throughout the region. Not just repair projects, but for routine maintenance and inspection tasks.

The key to the success of this project is twofold. “First, you must have a highly organized body to coordinate the project. It’s essential that it has a strong grip on all of the players,” said Rutger Schouten. “Secondly, the team must have hands-on experience that duplicates - or exceeds - that of bigger players. Without that, you will not achieve the same quality targets as those completed by bigger players.”

Aquatic Engineering & Construction Ltd, an Acteon company, is working with DNV GL and other organisations in the subsea supply chain, on a Joint Industry Project (JIP) to develop a set of guidelines to be incorporated into new or existing DNV GL Offshore Standards or Recommended Practices. The guidelines will be, ‘The Development of Codes for Offshore Equipment for Cable and Pipe Laying – Phase 1.’

The JIP will develop a set of guidelines to be incorporated into DNV GL

David Tibbetts, vice president, technology, Aquatic, said, “We were eager to get involved with this ground breaking project due to the lack of coherent standards for the specification, design, manufacture, procurement and approval of equipment intended for use in offshore cable and pipe laying operations. DNV approached Aquatic because we are the obvious supply chain choice, due to our market leading reputation, our extensive range of products, four decades of experience and our close working relationships with all of the leading contractors.

“The work involves engineering and technical experts from contractors and equipment manufacturers like Aquatic, collaborating in order to establish joint industry guidelines for our type of equipment, where at present nothing exists. Subject to satisfactory completion of the first two phases, a third phase undertaken by DNV GL will result in the publication of an Offshore Standard or Recommend Practice for cable/pipe laying equipment.”

The Road Map for the project proposed by DNV GL in November 2014 consisted of the following phases:

Phase 1: Mapping the Big Picture. This is intended to provide a common, system level understanding of the equipment required for the successful laying of cables and pipes.

Phase 2: Mapping the Detail. This is intended to focus on the individual components of the system to identify their inputs, outputs and interaction with other system components.

Phase 3: Following the culmination of Phases 1 and 2, which are scheduled to be completed during 2016 and will result in the creation of industry guidelines and a glossary of common terms for cable and pipe laying equipment, there is potential for a third phase, which will lead to the publication of a DNV GL Standard for Certification or Recommended Practice.

Dr.-Eng Marius Popa, lead naval architect, DNV GL, said, “Consistency and collaboration within the industry is essential. Individual practices create unnecessary cost and risk, so the development of a unified approach will ensure standardisation across the supply chain. The JIP will deliver a decision tool that can be used by all stakeholders during the specification, design, manufacture, procurement and approval of any equipment intended for use in offshore cable/pipe laying and recovery.”

Phase 1 participants include: Allseas Engineering; Amclyde Norson Engineering; Aquatic Engineering & Construction Ltd; IHC Engineering Business; IHC SAS BV; MAATS Tech Ltd; NLI Offshore & Marine Products AS; Parkburn Precision Handling Systems Ltd; Reel SAS (IMECA); Saipem Group ; Subsea 7 and Technip UK Ltd.

Statoil ASA (OSE: STL, NYSE: STO) has acquired 37,101, 561 shares in Lundin Petroleum AB (publ.), corresponding to 11.93 percent of the shares and votes, at a total purchase price of approximately SEK 4.6 billion.

The investment in Lundin Petroleum will increase Statoil’s indirect exposure to core assets on the Norwegian Continental Shelf (“NCS”).

“We consider this a long term shareholding. The Norwegian Continental Shelf is the backbone of Statoil’s business, and this transaction indirectly strengthens our total share of the value creation from core, high value assets on the NCS, ” says Eldar Sætre, president and CEO of Statoil ASA.

Statoil is continuously looking to enhance value creation. In recent years Statoil has farmed down in certain mature assets on the NCS to realize value for new investments.

Through the acquisition of shares in Lundin Petroleum, Statoil increases its exposure to core field development projects and growth assets on NCS, including Johan Sverdrup and Edvard Grieg at attractive values. The investment underpins Statoil’s long term interest and commitment to the future of the NCS.

Lundin Petroleum has over the last decade successfully built a strong portfolio on the NCS, and internationally in Malaysia, and France. The company had 187.5 million barrels of oil equivalent of reserves at the end of 2014. From 2002 to 2014 it increased its reserves base four fold, and produced 24,900 barrels of oil equivalent per day in 2014. In 2015 it has booked net 2P reserves of 515 million barrels of oil equivalent for the full field development of Johan Sverdrup, based on its 22.60 percent working interest.

Statoil is supportive of Lundin Petroleum’s management, its board of directors and the strategy. There is no plan to increase Statoil’s shareholding in the company.

Greene’s Energy Group, LLC (GEG), a diversified oil service company and leading provider of integrated testing, rentals and specialty services, has been awarded a United States patent for its Closed Loop Separator, a step change in safety and solids handling for the oil and gas industry.

This third generation system increases safety by preventing the release of gas on location during well completion and intervention operations. Gas separation is optimized significantly with the addition of a 10-inch diameter internal gas buster tube (more surface area for gas breakout) and an 8-inch diameter vertical vent (minimizes velocity spillover and reduces mist carryover).

With the gas buster enclosed in the tank, the system can be completely sealed, is self-pressurized, safely contains all gas, and is able to securely transmit gas to the vent or flare. Further safety features of the system include level safety low/high shutdown controllers on the primary separator and a secondary level safety high shutdown controller on the gas buster (both are key safety differentiators on flowback operations).

Greene’s Closed Loop Separator is specifically designed for high solids applications through reduced fluids velocity. This is accomplished by large diameter chambers for phase separation and quiet zone baffling.

As a new standard for safe and efficient fluid handling, the Closed Loop Separator provides a four-phase hydraulic or atmospheric separation for gas, oil, water and solids and can be used in many onshore and offshore applications, including well stimulation and flowback operations; well intervention projects – including coiled tubing, wireline and pumping – including subsea wellhead to surface operations including flowlines, risers and umbilicals; and commissioning and decommissioning operations – including pipeline flushing, cleaning and testing. The separator can also be used to replace in-line platform production equipment for routine maintenance or equipment replacement periods.

With an 85 barrel tank and a 40 psi operating pressure, the Closed Loop Separator features include:

H2S Certified

BSSE Compliant

Site glass level indicators conveniently placed for monitoring all phases (bbls in/out)

Oil Bucket with 3 adjustable weirs High flow rate capacity, 6-8 bbls/min with 24 bbls/minute surge capacity Internal gun lines

High solids capacity w/ real time evacuation of solids under pressure

Can be integrated with production flow process to control produced water flow (self-throttling)

“This new technology is a game changer in production and completion fluid separation – for operations and the environment,” said co-inventor Elwin Faulk, Vice President / General Manager Water Treatment Services. “The internal gas buster not only optimizes separation by slowing velocity and breaking down the fluids and solids faster, but when followed by additional filtration, ensures clean water is safely deposited back into the offshore environment.”

The International Association of Oil & Gas Producers (IOGP) has appointed Gordon Ballard to be its new Executive Director. He began on January 15^th , succeeding Michael Engell-Jensen, who is retiring after five years.

Gordon comes to IOGP after spending 30 years working with oilfield services company, Schlumberger, on four continents. He became Schlumberger’s UK Chair in 2005. He has also served as Chair of the UK’s Oil and Gas Industry Council and of OPITO International, the upstream oil & gas skills organization, and was Co-Chair of industry trade association Oil & Gas UK.

He graduated from the University of Glasgow with a B.SC. Hons in Civil Engineering and holds a Masters in Petroleum Engineering from Heriot-Watt University.

Commenting on his new role, Gordon said: ‘For the foreseeable future much of the energy the world needs will come from the oil and gas that IOGP’s members produce: for heat, light and transport as well as a reliable, cleaner-burning complement to solar and wind power. I’m eager to work with member companies and associations to get the message across that secure and affordable energy supplies are essential for global prosperity.

‘Equally important is IOGP’s role in helping our members to find and produce oil and gas safely and sustainably. In light of the recent breakthroughs at the Paris climate summit, we are focused on furthering our work with civil society and governments. Such engagement will help to build the world’s understanding of the crucial nature of what we do,’ Gordon said.

‘It’s an exciting time to be taking the helm of IOGP – an organization that has become stronger and more forthright under Michael Engell-Jensen’s able leadership. I’m looking forward to the challenges and opportunities ahead.’

In the Awards in Predefined Areas (APA) round 2015, Statoil has been awarded interest in 24 licenses on the Norwegian continental shelf (NCS), 13 of those as operator and 11 as partner.

"The NCS is the core of Statoil’s business and we are pleased with the awards in the APA 2015 round, which will allow us and the industry to further explore for value. This award is an important contribution to replenishing our exploration portfolio and in the work to maintain the production on the NCS until 2030 and beyond,” says Jez Averty, senior vice president for NCS exploration in Statoil.

Jez Averty, senior vice president for NCS exploration in Statoil. (Photo: Ivar Langvik)

Two commitment wells are included in the work program in areas important to Statoil. Both prospects are potential tie-back opportunities to existing infrastructure – Blåmann to Goliat and Cape Vulture to Norne.

The “Blåmann” prospect in the Barents Sea, where Statoil is operator with 50% participating interest and ENI and Petoro partnering with 30% and 20% respectively, has a firm well commitment to be drilled within two years of award.

The “Cape Vulture” prospect is awarded as an extension of the “Norne” license (PL128) in the Norwegian Sea in which Statoil’s holds a 64% interest, ENI 11.5% and Petoro 24.5%. Also here, the work program comprises a firm well commitment to be fulfilled within two years of the award.

“The APA 2015 award is an important component of securing future activity and value creation on the NCS. We also look forward to the announcement of awards in the 23rd concession round later in the year, in particular the new acreage in the Barents Sea South-East which is an important contribution to further exploration in frontier areas of the NCS," says Averty.

In APA 2015, Statoil has been awarded new licenses in all three NCS provinces.

The agreements signed form the basis for potential new EPC contracts (engineering, procurement and construction) for subsea equipment in the medium term future. An EPC option agreement for subsea production system (SPS) has also been signed with OneSubsea, including framework agreements for subsea operations services and subsea add-ons.

Last year Statoil also signed a Master Service Agreement and an EPC contract including options for EPC project with FMC Kongsberg Subsea AS for Johan Sverdrup.

Torger Rød, vice president for projects in Statoil. (Photo: Øyvind Hagen)

“In light of the current challenges the industry is facing the suppliers have demonstrated commitment and drive to break the cost curve and enhance competitiveness. Statoil has cooperated closely with the suppliers on technology qualification, concept development and pre-engineering studies, and jointly we have delivered successful subsea projects,” says Torger Rød, vice president for projects in Statoil.

The agreements signed form a good basis for future collaboration with three leading subsea suppliers, thereby simplifying collaboration in the time ahead.

In today’s oil price environment, sustained focus on costs and efficiency will ultimately be the key to develop several currently marginal prospects and discoveries.

“We look forward to continuing the good collaboration going forward. The agreements constitute a framework upon which the suppliers can continue with optimization and cost reducing measures. Future awards will go to the supplier who are willing to and capable of continuing the drive for sustained quality, standardization, higher efficiency and lower costs,” says Rød.

With recoverable oil reserve estimates of approximately 750 and 600 million barrels (mmbbl) in Uganda and Kenya respectively, and with government share of the reserves expected to be about 30–50%, the potential impact on economic development in these countries could be great. However, new infrastructure, including an export pipeline, is required to enable commercialization of these discoveries, says an analyst with research and consulting firm GlobalData.

Overall oil production in Uganda is forecast to peak at about 200,000 barrels per day (bd) by 2023, while Kenya’s production is estimated to reach approximately 85,000 bd by 2027, provided the export pipeline is in place.

According to Jonathan Markham, GlobalData's Upstream Oil & Gas Analyst, while a range of possible pipeline routes to ports in Lamu, Mombasa or Tanga have been proposed, upstream development in the region has stalled due to a lack of progress in developing an export route for these inland discoveries.

Markham explains: “Operators have been lobbying for an export pipeline since the discoveries were made to enable development of the area. Tullow Oil and Africa Oil have cautiously welcomed progress made in agreeing a pipeline route from Uganda through northern Kenya to Lamu, but Total prefers routes further south, citing security concerns in northern Kenya.”

The analyst adds that the development of an export pipeline would also be a driver for upstream exploration in the region. Some blocks have already been licensed by governments in central and eastern Africa, but the remote locations have dampened interest from major oil companies.

Markham continues: “Current license holders view new basin exploration as an area with high growth potential, with South Sudan, Ethiopia, Tanzania, Rwanda and the Democratic Republic of the Congo all possible beneficiaries of new pipeline routes.

“Discoveries in Kenya and Uganda have favorable subsurface characteristics and relatively low exploration and appraisal costs compared with the deepwater dominated exploration in West Africa. Estimated full-cycle capital expenditure per barrel for these upstream developments is about US$8–12, which is increasingly enticing, as the oil and gas industry cuts back on costs. However, without an economical export route, the inland discoveries will remain commercially unviable at current oil prices.”