Danos has successfully completed the fabrication of three boarding valve skids and one service line skid for Shell Offshore Inc.’s (Shell) deep-water Appomattox facility. Requiring approximately 12 months to complete, the project engaged four Danos service lines, including project management, fabrication, coatings, and automation.
“Delivery of this project marks Danos’ entry into the module fabrication market,” said Mark Danos, vice president of project services. “We are proud that Shell chose us as their contractor for this critical component of the Appomattox project.”
The skids, weighing in at approximately 160 tons each, were fabricated at Danos’ 120,000 square-foot facility in Amelia, La. Coordinating the complex, customer-furnished items required extensive planning and support from each of the company’s service lines, especially its project management team.
Key design elements of the modules included 12,200 psi design pressure and 350˚F operating temperature requirements. The API 15K psi piping system consisted of 4130 material overlaid with Inconel 625. All welding was completed on the project with less than 0.45 percent weld-repair rate. Indoor humidity-controlled painting habitats were utilized. The project was delivered on budget and was performed safely with no lost time due to accidents or injuries.
NOIA, IPAA, LMOGA & GEST Submit Joint FOIA Requests to BOEM and DOI
Washington, D.C. – The National Ocean Industries Association (NOIA), the Independent Petroleum Association of America (IPAA), the Louisiana Mid-Continent Oil and Gas Association (LMOGA), and the Gulf Economic Survival Team (GEST) submitted Freedom of Information Act (FOIA) requests to both the Bureau of Ocean Energy Management (BOEM) and the Department of the Interior (DOI) seeking information related to the recent drastic changes to the financial assurances and bonding required of offshore oil and gas producers.
The four industry trade groups—which collectively represent the entirety of the offshore oil and gas industry in the Gulf of Mexico – have joined together to press for immediate consideration of these FOIA requests and continue to urge BOEM, the Bureau of Safety and Environmental Enforcement (BSEE), and DOI to be responsive to industry concerns regarding its Notice to Lessees (NTL) No. 2016-N01, which dramatically changed the existing framework for securing decommissioning liability for the offshore oil and gas industry.
This comes on the heels of NOIA’s recent FOIA request to BSEE seeking information related to the agency’s revised estimates for future well plugging and abandonment and platform decommissioning costs in the Gulf of Mexico, which varied wildly from actual and current decommissioning costs and BSEE’s own previous cost projections.
Today’s FOIA requests augment continued industry efforts to gain greater clarity into how BOEM and DOI determined that new financial assurance requirements were necessary and the considerations underpinning and informing their decision-making process.
Combined, these efforts represent our industry’s commitment to understand how DOI and BOEM determined that changing the rules via the NTL guidance was appropriate rather than undertaking a formal rulemaking process, a much more transparent and equitable process.
Remarkably, transparency typically afforded to companies under normal circumstances with NTLs has been at a premium with BOEM in this instance, as information central to the rationale of NTL No. 2016-N01 has not been released to the public or to companies attempting to meet the new financial assurance and bonding requirements.
The new rules are a solution in search of a problem, as the existing framework has protected taxpayers for decades. Moreover, offshore operators made significant investments based on the existing regulatory framework and BOEM has now changed the rules in a manner that threatens to trigger the very risk it is trying to protect against, as these new burdensome bonding requirements will tie up capital that would otherwise be available for exploration, development, jobs, revenues to states and the federal government – and most ironically – for actual plugging and abandonment work.
On behalf of our members, NOIA, IPAA, LMOGA and GEST stand ready and committed to work with BOEM, BSEE, and DOI to ensure a robust future of responsible development in the Gulf of Mexico for the benefit of taxpayers in the form of royalties, severance tax revenues to the state and federal government, jobs, and additional capital investment.
Technip’s latest newbuild, the diving support vessel (DSV) Deep Explorer, was officially named on Saturday November 12, in Norway. The traditional naming ceremony was held at VARD’s Langsten shipyard. The vessel godmother was Heidi Brovoll-Bø, wife of Knut Bø, President of Technip’s North Sea Canada region.
The vessel hull was built by Vard Tulcea shipyard in Romania, and then towed to Vard Langsten in Norway for equipment outfitting and commissioning. The vessel features a state-of-the-art 24-man twin bell saturated dive system rated to 350m. The dive system was designed, built and commissioned by JFD, part of James Fisher and Sons plc.
Image courtesy: Technip
Deep Explorer is a DP3 class DSV, purpose-designed and certified for subsea projects in the demanding North Sea Canada market. She is the most modern and versatile DSV in the world, thanks to her latest technology diving control system, 400 Te box boom crane, large deck area, working moonpool and work-class ROVs*. Deep Explorer is capable of working globally on diving and subsea construction projects, even in extreme weather conditions. She will commence operational duties in 2017.
Bruno Faure, Technip’s Senior Vice President Subsea Projects and Operations, said: “This event marks an important milestone in this three-year project to design, build and deliver this impressive fantastic new ship. We are proud to welcome the Deep Explorer, an impressive key asset for the Technip fleet and for our clients. My sincere thanks to all those in Technip and our partner companies who have contributed to this successful project.”
Yard Director and Senior Vice President at Vard Langsten, Dag Vikestrand, commented: “It has been a great honor for us in VARD to be a part of this exciting project. Deep Explorer represents a technological quantum leap, thanks to the excellent teamwork between Technip, JFD and VARD. The knowledge, skills and experience of all parties involved have been key factors in achieving the design and build of this impressive vessel.”
Technip operates a leading-edge fleet of 18 vessels (with another 4 under construction) specialized in pipeline installation and subsea construction on all continents.
* ROVs : Remotely Operated Vehicles
The end of one of the worst downturns in the history of oil & gas may be in sight, as OPEC’s November meeting looms large – bringing with it fresh hopes of a production cut and consequent market rebalancing. In this context, DW has recently undertaken analysis of 15 major upstream players, to understand prospects for the industry should we see a near-term upswing in oil prices.
Since the downturn began, cutting Capex across all business segments has been one of the primary methods of improving profitability and free cash flow for E&P companies – with spend in the first nine months of 2016 ~45% lower than that of 2014. Over the same period, cash flow from operating activities has been squeezed, as falling oil prices have reduced revenues and price hedges have expired.
Despite the downturn, IOC dividend pay-outs have remained fairly steady, due to an emphasis on maintaining investor confidence in future performance – thus sustaining access to liquidity and credit. However, IOCs have had to pay a heavy price, cutting Capex, selling assets and increasing debt, with free cash flows generally turning negative, despite relatively strong downstream performance. While IOC free cash flows have generally made movements back to neutrality in Q3 2016, only Shell, ExxonMobil and Chevron have returned to the black. Given that dividend payments are unlikely to be cut by the group, a significant uptick in oil price after OPEC’s meeting will be required to spur new large-scale investment.
Non-OPEC NOCs, on the other hand, have generally been quick to cut dividend payments during the downturn, alongside Capex reductions, as greater emphasis is placed on profitability and free cash flow. The group had the highest free cash flow in Q3 2016 of the 15 companies studied by DW (5 of which Non-OPEC NOC), amounting to $10bn. As a result, this group is particularly well placed in the current market, as well as being able to quickly react to any improvements in project economics in the wake of the OPEC meeting.
Matt Adams, Douglas-Westwood London
BP (NYSE: BP) and GE (NYSE: GE) announces the start-up of Plant Operations Advisor (POA), a new digital solution designed to improve the efficiency, reliability and safety of BP’s oil and gas production operations. Plant Operations Advisor is already helping BP manage the performance of one of its platforms in the Gulf of Mexico and, subject to a successful pilot, it will be deployed next year to other BP facilities around the world.
The tool, built on GE’s Predix operating system, was created as part of a development partnership the two companies announced in January. “BP gravitates toward new technologies, especially digital, and that makes working with them particularly exciting,” said Lorenzo Simonelli, president and CEO, GE Oil & Gas. “We are taking a big step forward together during this time of digital transformation, deploying what we’ve co-created over the past year to drive the kind of productivity improvements that the oil and gas industry needs. The global deployment is expected to be the largest-scale deployment of GE’s Predix-powered APM technology to date.”
Plant Operations Advisor will help prevent unplanned downtime and improve facility reliability by helping engineering teams respond quickly to issues as they occur in real-time.
“By bringing together some of the best minds at GE and BP, we were able to develop this innovative digital product and are confident that it will have a significant impact on our business,” said Ahmed Hashmi, BP’s Head of Upstream Technology. “When fully deployed, these advanced digital technologies will change the way we work and improve the integrity and performance of our assets around the globe.”
Using GE’s Predix and Asset Performance Management (APM) capabilities, POA rapidly integrates operational data from producing oil and gas facilities to deliver notifications and analytical reports to engineers so they can identify operational performance issues before they become significant.
The system provides simplified access to a variety of live data feeds and includes visualization capabilities including a real-time facility threat display. It also incorporates an extensive case management capability to support learnings from prior operational issues.
GE intends to offer this technology, which combines big data, cloud hosting, and analytics on both individual pieces of equipment as well as the entire production system, as an APM solution that will be available to the industry.
Allianz Middle East Ship Management and Maritime Craft Services (MCS) have taken delivery of a Damen Fast Crew Supplier 2610. Demonstrating the cooperative relationship between the two companies, the new vessel will offer safe and cost efficient crew transfer services for up to 50 passengers to and from the Abu Dhabi oil fields. The two companies welcomed guests on board the new vessel in a festive celebration during this year’s Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC). Business associates and clients were given a tour on board the vessel at the Emirates Palace Marina.
“We are very proud to see another FCS 2610 enter service in the Middle East oil and gas industry,” states Damen Sales Manager Middle East Teun Haverkort. “A great result of 3 companies combining their expertise to reduce operational costs and to create a higher standard in safety and crew comfort.”
Photo credit: Damen
With the vessel available on stock, Damen carried out a number of adaptations to make it OPCO compliant. This meant preparing the vessel – called MCS Allianz Venus – for operations in the Abu Dhabi oil fields, where she will soon start work on her first contract.
The most significant modification was made to the passenger accommodation, says Mr Haverkort: “The passenger capacity has been increased to 50 persons – making for cost effective and safe crew transfer services for the oil and gas industry in the region. This represents a truly viable alternative to helicopter transfers.”
Illustrating this last point even further is the vessel’s 90m2 of deck space, which is big enough to accommodate two 20 foot containers. “The outfitting also included upgrading the 5-man crew accommodation to allow for extended offshore duties.”
Allianz Middle East Ship Management is headquartered in Abu Dhabi, United Arab Emirates. Allianz is a maritime service provider and specialises in the provision of marine transportation services to the offshore oil and gas drilling and production industry.
Scotland-based MCS operates an international fleet of tugs and workboats active in the a wide range of sectors that include dredging support and marine construction in addition to crew transfer operations for both the offshore wind and oil and gas industries. MCS has more than 10 years of experience working in the Middle East.
Allianz and MCS have a long working relationship; one that draws upon their operational knowledge and crew transfer experience. The purchase of this new FCS 2610 signifies an extension of their collaborative association.
Damen’s FCS 2610 design showed its first signs of success while performing crew transfer duties for the North Sea offshore wind sector. To this day, the vessel operates at 25 knots and provides operators with safe and swift passenger and cargo transfers.
The vessel’s seakeeping is perhaps the most crucial aspect though – a smooth ride ensuring that offshore personnel reach their destination in a fit and healthy state. It is these proven credentials that have recently started to be noticed by operators active in the oil and gas industry. The MCS Allianz Venus is the second FCS 2610 active in this sector in the Middle East.
EnerMech’s cranes and lifting division has benefited from a £85 million-plus uplift to its order book with a series of contract wins, extensions and renewals.
The Aberdeen-based mechanical engineering group has consolidated its position as a major international cranes services provider, strengthening its reputation in the Caspian region and extending its reach by winning new work in the Gulf States, Far East and the Caribbean.
In Azerbaijan, BP Exploration (Caspian Sea) have renewed a contract which EnerMech has held since 2010 for up to a further five years. Crane operations, maintenance and inspection services for 16 BP offshore pedestal cranes and two new platforms on the Shah Deniz 2 project are included in the contract. EnerMech has also undertaken to employ an Azeri-only nationalized workforce for the contract term which also includes the provision of spare parts, repair and refurbishment and training.
EnerMech’s cranes. Photo courtesy: EnerMech
In Qatar, EnerMech has secured exclusivity for the provision of crane maintenance services to the Al Shaheen Field. As part of its integrated services approach, EnerMech will also offer process, pipeline and umbilicals, valves inspection and repair, hydraulics and training services.
A three-year deal to provide crane operation and maintenance services to Daewoo International E&P on the Shwe Gas field in the Bay of Bengal, marks EnerMech’s first long term contract award offshore Myanmar.
A major breakthrough has been made in Trinidad & Tobago where EnerMech have been awarded a crane operation and maintenance contract by an international operator and a new base has been established on the island from which EnerMech will offer all its service lines in line with their standard approach to entering a new market.
In the North Sea, Nexen Petroleum U.K. Limited have awarded EnerMech a five-year crane operation and maintenance contract covering the Buzzard, Scott and Golden Eagle platforms.
Also in the UKCS, contracts first awarded to EnerMech as far back as 2006 by two major oil and gas operators have been renewed for a further three years and EnerMech will continue to provide crane maintenance, mechanic and operator crews, spare parts and equipment inspection services on a combined total of 11 platforms.
EnerMech’s international mechanical handling services director, John Morrison, said: “It has been an excellent 2016 to date for our cranes and lifting services division with key contracts renewed by major clients alongside winning work in new markets and extending our market share. This is quite an achievement in today’s competitive environment.
“Our long-held belief that clients want integrated services and not a stand-alone provision of one service line is paying off, and it is particularly relevant in the current market conditions where operators and contractors are demanding much more cost-effective methods of doing business.
“Extending contracts in Baku with BP and in the North Sea, winning our first crane contracts with Nexen, Daewoo and in Trinidad & Tobago, while securing extra workscopes in Qatar, all indicate that our cranes and lifting expertise is highly regarded across the oil and gas producing world.
“We will continue to seek out more efficient methods of providing crane and lifting services to clients which are capable of being integrated with our other business lines. The energy industry is demanding more collaboration to counter the downturn in the oil price and this is an approach which has been championed by EnerMech since the company was founded.
Technip’s wholly-owned subsidiary Technip Umbilicals Inc.(1) has been awarded a contract by a major Operator to supply a subsea control umbilical(2) in the Gulf of Mexico.
The contract includes the project management and manufacture of several kilometers of a static and dynamic unarmoured steel tube umbilical.
Technip Umbilicals facility in Houston, USA, will manufacture this prestigious project for the high pressure field, which is scheduled to be completed in 2017.
Technip Umbilicals’ Managing Director, Sarah Cridland, said: “This award confirms Technip’s position as a world leader in the supply of umbilical systems to the Gulf of Mexico region.”
(1) Technip Umbilicals Inc is a wholly-owned subsidiary of Technip. The Group, through its Technip Umbilicals group of companies, operates four manufacturing sites in Newcastle upon Tyne, UK, Houston, USA, Lobito, Angola, and Johor, Malaysia.
(2) Umbilical: an assembly of steel tubes and/or hydraulic hoses which can also include electrical cables or optic fibers used to control subsea structures from a platform or a vessel.
Saipem has been awarded new contracts and change orders in the E&C Offshore segment, for an overall amount of about 1 billion dollars.
In particular, the most significant are the notification of award by Saudi Aramco of two EPIC contracts (Engineering, Procurement, Installation, Construction), under the Long Term Agreement in force and renewed in 2015 until 2021 for activities in Saudi Arabia. These two contracts refer to, respectively, the development of fields in Marjan, Zuluf and Safaniya located in the Arabian Gulf, which are among the most important offshore fields in the Region. These contracts include the design, engineering, procurement, construction, installation and implementation of subsea systems in addition to the laying of pipelines, subsea cables and umbilicals, platform decks and jackets. Furthermore, the two contracts will also include additional maintenance and dismantling works on the existing platforms already operating in the fields.
“With these contracts, Saipem is further reinforcing its presence in the Middle East, a highly strategic area”, stressed Stefano Cao, CEO of Saipem. “New contracts from a long-standing customer like Saudi Aramco are also an important, strong mark of its trust in Saipem as - once again – the high quality of its services and its solid expertise in the construction and installation of offshore platforms is recognized”.
Saipem is one of the world leaders in drilling services, as well as in the engineering, procurement, construction and installation of pipelines and complex projects, onshore and offshore, in the oil & gas market. The company has distinctive competences in operations in harsh environments, remote areas and deepwater. Saipem provides a full range of services with “EPC” and “EPCI” contracts (on a “turn-key” basis) and has distinctive capabilities and unique assets with a high technological content.
On Friday, the 7th October 2016, Robotica in Maintenance Strategies BV (RIMS) launched inspection services of enclosed spaces to the Maritime and Offshore Industry, using the drone Elios.
RIMS was founded in 2015 by David Knukkel, Sr. Maintenance Consultant in Maritime and Offshore Industry, with a clear mission to replace all high-risk & resource intensive maintenance activities with smarter drone and robotic technologies to increase safety and cost efficient operations.
David Knukkel, Director of RIMS BV demonstrating the Elios Drone. Photo credit: RIMS BV
One major focus of RIMS was to realize safe inspections of enclosed spaces. We carried out extensive market research including visiting several Universities in Holland and Switzerland with our partner ‘Flyability’, where they gave a presentation of their drone Elios. This is a drone within a protective cage, and is perfectly suited to enter enclosed spaces and carry out in depth inspections of the enclosed areas.
With our partners Rotterdam Offshore Group, Rolldock and Flyability, under supervision of Class, RIMS carried out a test on board the vessel ‘Rolldock Sky’ to check whether the controls and data transfer would be okay in a ballast tank and duct keel.
These tests were successfully completed and you can share the experience by viewing this brief video.
Our industry is changing fast and the door to a new “world” of technological advances is already open. There is technology available which can change traditional operations, so It is not a question of ‘if’ technology will change the market, but ‘when’ and ‘how’ the voyage will be.
We believe it is time for the Maritime and Offshore markets to understand and embrace what can robotics can mean for our industries. Hiring local unexperienced employees, sceptics against technology and changes and questions like where to start, are all actual challenges of leading shipping and oil companies. RIMS can support these organizations in finding solutions. Offering inspection services with new technology, RIMS will show the industry that many things are already possible, and a wealth of new opportunities are available using our technical solutions in the very near future.
Will Scargill, GlobalData's Senior Oil & Gas Analyst covering Upstream Fiscal & Regulatory Regimes says:
“Donald Trump’s election as the 45th President of the United States may have significant effects for the global oil and gas industry. The policy platform laid out during the campaign on both domestic issues and foreign affairs includes a number of elements with notable impacts on regulation, tax and investment opportunities in the sector. The Republican Party’s retention of its majority in both the House of Representatives and the Senate, should facilitate legislation to progress the new administration’s initiatives. The lack of detail of Trump's platform and absence of a track record in public office cast uncertainty over the policies that will be enacted and the effects they will have, but the tone of the campaign suggests a priority on domestic energy policy over international.
Photo credit: DonaldJTrump.com
“Domestic energy policy statements during the election campaign suggest a positive outlook for the oil and gas sector. This is supported by reports that his adviser Harold Hamm, CEO of Continental Resources, is in the running for Energy Secretary. Trump’s energy plan sets out support for the shale industry and open leasing of federal lands and offshore areas for upstream operations. During the campaign he also noted opposition to environmental regulation including the Paris climate agreement adopted at the COP21 summit, suggesting that the industry will face a reduced regulatory burden under his presidency.
“The expansion of offshore lease sales would likely be supported by the Republican-controlled Congress, particularly for Alaska’s Outer Continental Shelf (OCS) and perhaps also for the frontier Atlantic OCS. The Obama administration had initially proposed a lease sale in the Atlantic OCS in the 2017-2022 program but later removed it due to environmental concerns. However, Trump’s support for the shale industry may be more difficult to realize from the Oval Office. He will have control over some regulations such as wastewater and emissions standards through the Environmental Protection Agency, but the majority of regulatory barriers have been imposed at local or state level which are currently decoupled from Federal involvement.
"On wider energy markets, Trump has indicated that he would give the go-ahead to the Keystone XL pipeline, which was vetoed in 2015 by President Obama, if the operator reapplies for approval. This could improve supply side economics on heavy crude for US refiners by increasing supply capacity from Alberta, where production is expected to increase by approximately 500,000 barrels per day by 2020. This also suggests strong prospects for the North Dakota Access pipeline which provides additional lower-cost takeaway capacity from the Bakken, for which federal agencies have requested a construction pause.
"Financial disclosures have shown that Trump has invested in the operator, Energy Transfer Partners, and that its CEO contributed to his campaign, though it is customary for sitting presidents’ assets to be held in a blind trust. Although the prospect of infrastructure projects moving forward is positive for the oil and gas sector, the inherent contradictions between his support for business and his protectionist trade position may untangle as policy is realized. A focus on US energy independence and opposition to broader trade deals could create direct or indirect hurdles for the industry in the US and abroad."
For a full version of this analysis, please visit the GlobalData Energy website.
Image courtesy: Teledyne Marine
Teledyne Oil & Gas, a market focused entity of Teledyne Marine, hosted a Focus on Technology Event on November 15, in Houston, Texas on November 15, The annual event, in its 8th year, concentrated on the emerging technical challenges found in Topside and Subsea Oil & Gas exploration and production with over 250 industry professionals from over 100 companies representing major oil operators, service companies and suppliers attending through special invitation.
The event focused on confronting current market challenges with innovative solutions to address cost pressures, harsh environments, and longer step-out distances as the industry experiences unprecedented changes. Two technical panels comprised of industry experts from Shell, Chevron, INTECSEA, and Noble Energy discussed new technology to enable lower cost execution and shared best practices in offshore projects in an open Q & A format with the audience.
“Teledyne Oil & Gas is taking a leadership role during these challenging times, to identify the technical obstacles and develop innovative solutions that will help our industry to meet the current and future market challenges head-on” said Mike Read, President of Teledyne Marine. “These dedicated professionals came here today with one goal in mind: to share perspectives towards the best technical resolutions in the new reality of the oil and gas industry.”
An opening keynote address: “The State of the Industry: An Oil Operator’s Perspective” was presented by BP’s Ryan Malone, Projects Manager for the Gulf of Mexico. The featured keynote was delivered by Tom Moroney, VP of Deepwater and Wells Technologies for Shell, titled “Driving a Competitive Shell Deepwater Business.” The latest deepwater oil and gas market forecast from Quest Offshore Resources was presented by CEO Paul Hillegeist, and additional notable presentations were given by Teledyne Scientific & Imaging and Texas A&M Engineering.
The first major study of oil and gas workforce perceptions since the start of the global downturn has revealed which operators and service companies are rated highest by oil and gas professionals based on key issues including values, performance and pay rates.
Shell, Chevron, ExxonMobil, BP and Halliburton make up the top five in the wide-ranging Ideal Employer Survey 2016, undertaken by Rigzone, which attracted responses from 8,400 people in more than 100 countries.
More than 3,000 oil and gas industry companies were named in the survey, published today, and despite the challenges faced by the sector through the depression in the oil price, no companies from other industries were ranked in the top 30.
The research, the first of its kind in the sector, was carried out between July and September this year, ranking companies based on 19 questions focused on their qualities and rating their ideal employers.
Commitment to health and safety is the single most important attribute (securing 90%) for people in the upstream, midstream and downstream sectors worldwide. Competitive salary, interesting and challenging work, and corporate integrity (all 88%) were equal second, with workplace culture, and training and development programs (87%) joint third.
Regionally, only respondents in North America and Europe chose factors other than safety as their top priority. Salary, and manages business with integrity were joint top for North America, and the focus was on ‘interesting/challenging work’ for Europe.
James Bennett, Rigzone managing director said: “The results are revealing as this is the first major survey to be conducted with the global workforce, and against a background of continuing challenging economic circumstances for the sector.
“That the largest companies in the sector complete the top 30, the majority having undergone significant change due to the effects of the downturn in the past 18 months, will give them confidence that the workforce remain committed to the sector.”
On coming first in the survey, Jonathan Kohn, Shell HR VP for the UK, Ireland, Nordics and South Africa said: “Shell people are our strongest ambassadors and we are proud of the quality of the people that we've got. I think it's pretty clear and central to the group's strategy that having that access to quality people really is part of how we compete to win.”
The supermajor continues to invest in the development of the industry’s future workforce, and reiterated its desire to continue to bring new blood to the sector through graduate recruitment. Kohn added: "We have made a strong commitment to try to maintain our graduate recruitment through the whole cycle. We typically recruit in the range of 800 to 1,100 graduates per year around the world. We are at the bottom end of that range at the moment… But that is still a very substantial commitment.”
James Bennett, said, “It is no surprise that health and safety is the overwhelming priority across the majority of respondents, but no-less reassuring for an industry which continues to put people first in all aspects of E&P and downstream activity. Across the industry, new challenges continue to emerge - companies that can best adapt to the current environment and take advantage of new technology will be most attractive to professionals looking for interesting and rewarding work. Ensuring that the working environment, from the perspective of corporate culture and integrity, remains attractive and continues to garner respect is an area where organizations will need to ensure they do not become complacent after these positive results.”
Sonomatic, a market leader in the provision of advanced automated ultrasonic inspection services, has developed a brand-new tool for the internal inspection of caissons. The integrity of caissons is critical to safe and efficient operation of offshore structures. As offshore facilities age there is a growing need for inspection of caissons, with knowledge of their condition providing a basis for justification of ongoing operation or highlighting the need for repairs or replacements before in-service failures occur. The development was carried out internally by Sonomatic’s Research and Development group and brings together their considerable skills and experience in Mechanical Engineering, Automation, Electronics, Software and Signal Processing.
Image courtesy: Sonomatic
In the first field application of the new Internal Caisson Tool (ICT), Sonomatic were recently tasked to perform critical inspections on three caissons for a North Sea operator. The work was completed in collaboration with Cape Specialist Services in a single campaign with a combined offshore team. Cape Specialist Services deployed their environmentally safe caisson cleaning system capable of operating below sea level to remove all scale and marine growth from the caisson interior back to deck level for disposal. This prevents debris from dropping to the seabed or being sucked into the lift pumps on adjacent caissons.
In response to Operators wishing to reduce POB where possible, Sonomatic and Cape Specialist Services have assembled a team where cross training of the disciplines has been undertaken. This multi skilling of personnel has led to a three or four member team to conduct HP water jet cleaning, digital image surveying and NDT inspection from a single mobilization.
The ICT performed reliably throughout, allowing Sonomatic to deliver industry leading inspection results. Recognising the needs of industry, the focus of Sonomatic’s inspection service is on providing accurate and consistent data, this allowing client’s to make effective integrity decisions that contribute to operational safety and efficiency. The ICT was developed with this objective in mind and it provides rapid and reliable deployment of Sonomatic’s industry leading ultrasonic inspection techniques.
The inspection was performed from the internal surface of the caissons, using 0° Corrosion Mapping. Data scan files were collected at 500 mm axial intervals, with the data collected in a helical scan pattern. All of the ultrasonic data was processed in making several million thickness measurements for each caisson. This data was used to create corrosion maps that provide a colorgraphic representation of areas of wall loss.
Caissons often have internal corrosion, this means the inspection is from the corroded side which represents a challenge to maintaining accuracy of corrosion mapping. Sonomatic has optimized its approach to the inspection set up and has developed a range of new signal processing algorithms specifically to enhance the accuracy and reliability of measurements made from the corroded surfaces. Sonomatic’s approach means they can provide accurate measurements, to support fitness for service and remaining life assessments, in situations where the measurements made by competing systems have considerable uncertainty. Sonomatic’s results provide the basis for sound integrity decisions, proving significant cost benefits to clients.
“Obtaining reliable inspection data from the inside of caissons has long been recognized as a challenge in the industry”, says Sonomatic’s Topside Project Manager, Scott Bulloch. “This was one of the main drivers for development of the internal caisson inspection tool. In addition to massively improved data quality, Sonomatic is also advancing the methods of data presentation to ensure clients get the most from the data. This includes 3D presentation of corrosion maps, statistical summaries and comprehensive datasets for efficient creation of finite element models used in fitness for service assessments. Feedback on the results obtained has been very positive, with comments from clients indicating that they see Sonomatic’s measurement capability as offering a step change in the value of internal inspections.”
U.S. Commercial Stocks Led Lower by Product DrawComing after a build the previous week, total commercial stocks commenced drawing, this week by almost 7 million barrels. Stocks have now declined for seven of the past eight weeks. Product stocks fell by 9.4 million barrels, while crude inventory added 2.4 million barrels. The four major products drew by 5.9 million barrels, led by gasoline off by 2.8 million barrels and distillate down over 1.9 million barrels. Colonial Pipeline’s gasoline line was restored to service on October 6th, as the outage prompted downstream product movement from primary storage.
Predominately warm weather forecasts have primed the market for a fourth consecutive weekly loss, with the nearby December futures contract targeting an 11¢ decline. The extended sell-off that began in mid-October is now approaching $1 in cumulative losses, with prices currently breaching key technical support levels. Indeed, the 50-day moving average has now fallen below the 100-day moving average. This indicator is also colorfully referred to as the ‘death cross’ and commonly signals the onset of a bear market on the horizon. Putting aside price data as a market barometer, current economics are likewise skewed negatively to price recovery. To be sure, the mild weather unfolding this month has extended the traditional injection season, placing an even larger premium on weather conditions in the months ahead to help work off the expanding inventory overhang.
On-peak prices were mostly higher year-on-year in October as above normal temperatures supported demand across the south and gas prices rose (outside of the Northeast). Loads in the East increased by 0.7% with much of the gain in the south as cooling degree days increased year-on-year in every region. ERCOT loads were up by nearly 8%. Gas prices have eased sharply from October highs amid mild actual and forecasted weather. Adding to bearish pressures were latest gas production estimates. With normal weather, year-on-year stock deficiencies should emerge before year-end and cause prices to firm again. In contrast, eastern coal prices strengthened due to soaring international met and thermal coal markets. In our view, the only regions where coal stocks could tighten to near long-term averages are ERCOT and SPP. Sharp price increases in power prices are expected in all markets through Q1 due to rising space heating loads and higher gas prices (once withdrawals begin).
The coal market moved decidedly lower this week along with the oil market in the wake of the uncertainty surrounding the aftermath of the U.S. election and on news that Chinese producers were signing term deals with major domestic consumers. For prompt pricing, FOB Newcastle prices retreated by the greatest extent, with 1Q17 prices falling by nearly $6.00/mt from the end of last week, while API#4 prices fell by $2.75/mt and API#2 prices only dipped marginally. Beyond the prompt market, the curves shifted $2.00/mt - $3.00/mt from the end of last week. While it is tempting to think that the bullish run prices have been on has run its course and the market is now starting to correct back lower, PIRA would caution against this view. While Chinese production is showing some signs of recovery and Indonesian output has also rebounded, coal demand in most markets is rising seasonally, and there are notable supply side risks within China and for seaborne supply from disruptive weather conditions.
A more balanced European LPG market has led to its outperformance versus other regions last week. A dearth of U.S. large cargo arrivals over the next few weeks has tightened the supply situation, leading to a 3.4% gain in NWE propane coaster prices and an unchanged cash large cargo price of $343/MT. Butane prices in the region were affected by a possible strike at the Shell Moerdijk cracker complex. Cash coaster butane was called 7.4% lower week-on-week at $364/MT while larger cargoes eased $8 to $352.
The week ending November 4, U.S. ethanol values were pressured by lower corn and oil values and a sharp rise in output. Manufacturing margins were slightly lower week on week. U.S. ethanol exports soared in September, due to a shortage and high prices in Brazil.
Usually not advisable to sell slow markets but that’s not a good enough reason for optimism. Seasonally we do see year-end rallies with frequency in grains/oilseeds, only to be disappointed in January, but this year there’s more uncertainty than usual with the election of an outsider to the White House.
The election of Donald Trump as the next U.S. president, combined with Republican majorities in both chambers of Congress, signals potentially notable changes to U.S. energy policy and oil markets. Much remains uncertain at this point. PIRA laid out Trump’s energy policy platform in a prior piece. The more likely changes we can point to at this time are fewer regulations and more support of the oil and gas industry while pursuing a pro-growth macro agenda. Still, we see little impact to near term domestic oil and gas production, as states remain the primary regulator of fracking on private lands. President Trump is likely to approve the Dakota Access pipeline and rejuvenate Keystone XL. He may also revisit and ultimately moderate 2017 renewable fuel mandates planned to be issued by November 30. Oil demand will be stronger under President Trump from faster economic growth, and longer term because of a potential roll back in fuel economy standards. Foreign policy is more opaque. Questions have been raised about the future of the Iran oil deal. President Trump may attempt to roll back the suspension of Iranian financial and banking sanctions which would make it difficult for Iran to sell oil. Imposing effective new multi-lateral sanctions would be very hard given the lack of international support. Meanwhile, political discord in the U.S. may bring OPEC together to reach a deal on November 30, in a show of political unity as an organization.
On the whole, financial markets’ initial reactions to the unexpected outcome of the U.S. presidential election were positive for the economic outlook. Developments in U.S. equity markets were constructive. Long-term U.S. interest rates jumped, as markets anticipated the new administration to pursue reflationary policies. These policies, when enacted, will trigger substantially faster growth in the U.S, and there will also be positive spillovers through global economic linkages. This week’s currency market movements were not worrisome, but equity market actions in the emerging economies raised some concern.
Crude runs rose with a vengeance by 371 MB/D, as refinery restarts entered the data. Crude imports rose from a very low 2.6 MMB/D to 3.6 MMB/D and stocks rose 2.3 MMBbls, despite the run rise. Finished products rose 0.7 MMBbls, with builds in gasoline, naphtha, and gasoil more than offsetting draws in jet-kero and fuel oil. Kerosene demand was again higher, and is still thought to be reflecting secondary and tertiary inventory pull on primary. The stock draw rate accelerated. Margins and cracks again improved on the week, with all the major product cracks showing gains.
In the wake of the U.S. election results, there were some major shifts in a number of key indicators. The broad market rallied strongly, with banking, financial, and industrial related drivers doing best. Many of the emerging equity markets did not participate in the broad equity rally. The U.S. dollar was generally stronger, while commodities were generally lower.
U.S. ethanol production declined 20 MB/D to 1,002 MB/D last week, giving back some of its recent gains. Inventories were drawn for the second consecutive week, falling by 510 thousand barrels to 19.2 million barrels. Ethanol-blended gasoline manufacture rose to 9,178 MB/D, up 5.3% from this time last year.
The loss of Dutch production has not only given a green light to Norway and Russia to sell more gas into Northwest Europe, but it has also given an important role to Bergermeer and other Dutch storage facilities to fill in those lost winter volumes. Dutch storage has taken the opportunity recently with net withdrawals this winter that are 480% higher than at the same point last year and this is linking well to gas exports from Holland. We are not talking small volumes either - according to the grid operator GTS, net Dutch gas exports to Belgium, Britain, and Germany reached 152 mmcm/d on November 8th. The market has not seen flow rates out of the Netherlands like that in November since 2013, when Groningen produced 5.8 BCM of gas.
PIRA’s first U.S. Power Storage Outlook examines recent developments in the power storage industry and provides a market penetration forecast through 2024. PIRA sees a convergence of technology, market, and policy factors that will propel substantial growth in the U.S. energy storage market, from 1.5 GW of installed non-pumped hydro storage capacity today to 5.0 GW by 2024. Power storage technologies are already reshaping ancillary services markets, deferring investment in transmission and distribution infrastructure, changing peak load profiles for large commercial users, and enabling greater behind-the-meter solar consumption.
With the recent start of production at the Kashagan field and the sanctioning of the new Tengiz field expansion, Kazakhstan is ready to start growing oil production. Long-term growth is expected to come primarily from these two oil fields. Kazakhstan has a very large resource base. However, the complicated conditions at Kashagan (reservoir, weather, sour gas), where most of the growth is expected, constrain larger or faster growth than what we have assumed.
The reduced system margins following the closure of a number of coal plants earlier in the year are adding an important premium to U.K. power prices and, in turn, are underpinning the spark spreads. In fact, the output of U.K. CCGTs has surged to levels not seen since January 2011. Looking at the Elexon data, week 49 looks particularly tight, with usable nuclear capacity in the U.K. reducing from Dec. 5 to 7 GW out of the nominal 8.9 GW. The latest RTE winter outlook, shows France is expected to be equally tight in the same week 49, and might need exceptional measures to balance the system with temperatures as cold as 3C below normal. The 2 GW interconnector between France and the U.K. is looking increasingly vital in balancing both markets, especially given the uncertainty over the German ability to export to France during the peak hours.
Global equities, in the aggregate, staged a broad gain on the week. Developed / industrial market performance was strong, but emerging markets weakened. In the U.S, the stellar performer was banking, up 14% on the week, but industrials and retail indices were also very strong. Defensive and interest sensitive sectors, such as utilities and consumer discretionary, declined. Internationally, many of the individual emerging market equity markets declined. Latin America was particularly weak.
Strong and stable winter pricing indicators out of Asia appear to have newfound fundamental support from Korea. Do not assume this support is sustainable post-winter, but it appears to be a fixture in the months to come due to weather- and power generation-based drivers.
World refining capacity (crude distillation plus condensate splitters) reached a milestone in 2016, moving beyond 100 MMB/D for the first time. Capability has been steadily increasing each year of this century gaining by an average of about 1.1 MMB/D per year to reach this benchmark. The capacity increases have outpaced the change in demand especially if factoring out the largely non-refinery production of biofuels and NGLs. As such, refinery utilization has been trending downward over the years.
Gas prices for Ukraine’s industrial consumers will increase through mid-winter. A key role at the moment is, of course, a seasonal factor. Moreover, the dynamics of gas prices is largely similar to the dynamics of oil prices. A significant increase in Naftogaz of Ukraine natural gas prices for industrial consumers in November was caused by wider regional factors. As reported, Naftogaz of Ukraine from November 1, raised the price of gas supplied to industrial consumers, on a prepayment basis, by 16.3%.
PIRA notes that Saudi's finances have improved since earlier in the year due to a mixture of higher oil prices, a very successful $17.5 billion sovereign debt issuance, and a lower expenditure burden. This improvement has allowed it to lessen the burn rate on its foreign exchange reserves. A lot of financial flexibility still remains on a host of fronts that can be employed with measures designed to find that sweet spot with regards to setting oil policy, along with balancing fiscal and social pressures. We see the Kingdom on a stable and sustainable glideslope as they approach the next decade.
State oil companies own around 64% of current crude and condensate supplies of 81 MMB/D and its share is expected to remain at that level for the next twenty years. They operate mostly large assets with lower base decline rates (2.5% versus 4% for oilfields held by public companies). As a result, they require less volume growth to increase net production. We estimate that 54% of future growth volumes will come from state companies. In addition, the cost to develop the new volumes is much cheaper than for public companies (81% of future growth at <$50/Bbl versus 55% for public companies). However, higher growth volumes from state companies are unlikely due to the political and economic constraints that they face.
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.
Greater use of LNG as fuel would reduce global emissions of greenhouse gases, but barriers remain to its widespread adoption. One challenge is the varying compositions of LNG fuel globally, which can lead to engine damage and failure. DNV GL has now addressed this by developing a new online PKI Methane Number Calculator1 to match fuel quality with an engine’s requirements, and which can also support the development of an international standard. The PKI Methane Number Calculator can be applied to a wide range of engine types and used across the entire supply chain by engine manufacturers, ship and truck owners, traders, as well as international policy makers on LNG.
Viking Lady. Image courtesy DNV GL
Engine knock is characterized by auto-ignition of the unburned fuel mixture, known as the end gas, ahead of the propagating flame in the engine cylinder. DNV GL has developed a verified algorithm to quantify the effect of LNG quality on engine knock, and thus to help LNG users ensure safe and efficient engine operations. The algorithm has been shown to give a significantly more accurate reflection of the impact of variations in fuel quality on engine knock than traditional tools. An extra advantage is that the algorithm can be readily incorporated into an engine-control system to maximize knock-free performance when supplied with a wide range of fuel.
DNV GL’s Senior Vice President, Oil & Gas, Liv Hovem, says: “As LNG is produced at different locations around the world, using an assortment of production technologies, its composition can vary considerably. Determining its fitness-for-purpose can be difficult and the consequences of mismatching fuel quality to a specific ship engine can cause potentially dangerous effects such as significant loss of performance, engine shutdown and even damage. Knowledge of the knock characteristics of LNG fuels is therefore crucial for suppliers and traders to provide reliable and efficient products and to break down the perceived barriers of adopting LNG.”
“DNV GL’s PKI Methane Number Calculator applies a generic method to quantify the knock resistance of LNG. The methodology behind the knock characterization calculator has been developed with an eye towards serving as the basis for a robust standard,” says Johan Knijp, Head of Gas Quality and Energy Transition, DNV GL – Oil & Gas. “The user-friendly tool is based on the physical and chemical processes that govern knock and the methodology behind the tool can be applied to a wide variety of new and current marine and land-based engine types. Together with an international industrial consortium, the calculator is currently being extended to cover this full range of engines. Market analyses using the tool to characterize the range of fuel qualities can be used by the entire supply chain, by engine manufacturers, ship and truck owners, by traders and by international policy makers on LNG.”
The knock resistance of LNG is characterized by a methane number, similar to the octane number used in gasoline engines. Users of the tool simply enter LNG composition information such as nitrogen, methane, ethane, propane, and n-butane, and the tool calculates a PKI methane number, which can be matched with the engine specification.
DNV GL has also launched a joint industry project (JIP) to develop tools to support customers in investment decisions on the design of small-scale LNG distribution infrastructure. The project will perform economic and supply chain optimization analyses to improve knowledge on LNG transportation, storage, quality, and safety. DNV GL also recently undertook a study on the LNG market in the EU as part of its efforts to drive the development of an EU-wide network of LNG refueling points.
Liv Hovem adds: “Step by step DNV GL is facilitating the removal of barriers hindering the safe and efficient adoption of LNG as fuel and the creation of an open and free LNG marketplace. Our cross-industry collaborations in this arena have already seen the development of a number of recommended practices relating to gas quality and bunkering. Our collaborative efforts will go a long way to increase knowledge and remove any remaining concerns about the adoption and application of LNG as a viable fuel for the future.”
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