BP announced on July 14, that following significant progress in resolving outstanding claims arising from the 2010 Deepwater Horizon accident and oil spill, it can now reliably estimate all of its remaining material liabilities in connection with the incident.
As a result, taking into account this estimate together with other positive tax adjustments, BP expects to take an after-tax non-operating charge of around $2.5 billion in its second quarter 2016 results.
This charge is expected to include a pre-tax non-operating charge associated with the oil spill of around $5.2 billion. This would bring the total cumulative pre-tax charge relating to the Deepwater Horizon incident to $61.6 billion or $44.0 billion after tax.
BP believes that any further outstanding Deepwater Horizon-related claims not covered by this additional charge will not have a material impact on the Group’s financial performance. It will deal with remaining claims in the ordinary course of business.
Brian Gilvary, BP chief financial officer said: “Over the past few months we’ve made significant progress resolving outstanding Deepwater Horizon claims and today we can estimate all the material liabilities remaining from the incident. Importantly, we have a clear plan for managing these costs and it provides our investors with certainty going forward.”
Gilvary reconfirmed that BP expects to continue to use proceeds of divestments to meet Deepwater Horizon commitments in line with the financial framework laid out in previous quarters.
A year ago, BP reached agreements to settle outstanding federal, state and local government claims arising from Deepwater Horizon. In the months since, BP has made much further progress in resolving outstanding claims arising from the incident.
PSC settlement - the Court and the Deepwater Horizon Court Supervised Settlement Program have been progressing the remaining economic and property damage claims relating to the 2012 Plaintiffs’ Steering Committee (PSC) settlement, including through simplified and accelerated procedures for processing certain claims. Today’s announced charge includes the estimated cost of settling all outstanding business and economic loss claims under that settlement, which are expected to be paid by 2019.
Opt-out and excluded claims - there has also been significant progress in resolving economic loss and property damage claims from individuals and businesses that either opted out of the PSC settlement and/or were excluded from that settlement. In February 2016, the US federal district court estimated that there were more than 85,000 valid opt-out and excluded economic loss plaintiffs. The vast majority of these claims have since been settled or dismissed as an order of the court today confirms. An estimate of the cost of the remaining claims, expected to be paid by the end of 2016, is also included in this charge.
Securities litigation - in June, BP announced a $175 million settlement of claims from a class of post-explosion ADS purchasers in the MDL 2185 securities litigation, payable during 2016 - 2017. This cost is also included in today’s announced charge.
MacArtney has supplied a total of four winch systems, all featuring active heave compensation (AHC) allowing Canyon to launch, operate and recover their ROVs under rough sea conditions.
With a global track record spanning two decades and a fleet of several purpose-built offshore support and construction vessels carrying cutting-edge ROV, geotechnical and trenching systems, Canyon Offshore has established itself as a leading supplier of subsea intervention, construction and engineering services.
The ‘Grand Canyon’ is designed to perform a broad range of subsea operations, with DP3-class station keeping for work in severe weather conditions. Grand Canyon features a 250 t heave compensated crane, facilities to launch up to five ROVs simultaneously, and a below-deck carousel lay system for installation of power cables, umbilicals, or tubular products.
The ‘Grand Canyon’ vessel range comprises three identical ships (Grand Canyon I, II and III) delivered between 2012 and 2016. All the ‘Grand Canyon’ vessels are delivered with the latest technology and powerful systems in order to maximise performance, flexibility and (cost) efficiency. The vessels are able to perform a broad range of subsea operations with high manoeuvrability and DP3-class station keeping for enabling work in severe weather conditions. All ‘Grand Canyon’ vessels will feature a 250 t heave compensated crane, as well as dual ROV systems.
Installed inside the port and starboard hangars of the Grand Canyon II and III, each of the MacArtney MERMAC R40 winches will be utilised to deploy two ea. 3000 metre rated work class ROV systems which form the backbone of the subsea intervention toolkit of each vessel. Enabled by an integrated AHC system, the winches are able to actively filter out the effects of vessel motion (heave, pitch and roll) hereby allowing Canyon to expand its window of ROV operation and substantially reduce weather related downtime.
“MacArtney always aims to be more than just a vendor, says MacArtney Inc. President, Lars Hansen, and continues: We proactively strive to support our customers all the way - from project draft to delivery and beyond. Downtime definitively costs more than ever and in the light of the challenging circumstances which our industry must currently navigate, working together to maintain a strong focus on system durability and service life through dynamic after-sales support is an absolute prerequisite to success.“
This year has seen US land drilling activities fall to the lowest levels on record. Globally we are seeing a very nuanced and regional reaction to the current oil price downturn. Examination of the global land rig fleet (which Douglas-Westwood tracks on a rig-by-rig basis) reveals some key themes.
Having dominated the global land drilling market for living memory, the number of US rigs drilling has been eclipsed by activity in other regions. In terms of absolute rigs working, Eastern Europe and the Former Soviet Union now occupies the top spot.
In terms of rate of growth (or otherwise) there are other bright spots of activity. Activity in the Middle East has remained robust and a 2% growth is expected in 2016. This compares to a 49% decline this year in the US. The comparative robustness of NOC spend is also evident in the rig data. We see that current NOC operators are responsible for 34% of the identified fleet vs 31% a year previously.
Like the operators, rig contractors themselves are focused on free cash flow. Efficiency of operations and uptime are critical, and key rig components are being recycled from one rig to another to minimize spend on new hardware. Where new rig components are required, our clients are reporting a trend towards increasing adoption of Chinese-manufactured parts. Efficiency and safe operations are also boosted by the continued uptake in automated rig equipment.
Older and less efficient rigs are being scrapped. Our data suggests that 16% of the North American fleet has been scrapped since January 2015.
Whilst we do not expect activity levels to return to the highs of 2014 anytime this decade, we do anticipate recovery from the present levels (just over 3,400 rigs) at a compound rate of 8% to reach over 4,700 by 2020.
Michael Green, Douglas-Westwood London
Saipem has been awarded new contracts and variation orders in E&C offshore, for an overall amount in excess of 1.5 billion euros. The most significant contract relates to the Field Development Project for the “supergiant” Zohr gas field, located off the Egyptian coast in the Mediterranean sea.
Petrobel has awarded Saipem an Engineering, Procurement, Construction & Installation (EPCI) contract for the accelerated start-up of the development project for the Zohr Gas Field. Petrobel, a joint venture between Eni and EGPC (Egyptian General Petroleum Corporation) is in charge of the development of Zohr on behalf of PetroShorouk, a joint venture between EGAS (Egyptian Natural Gas Holding Company) and Eni.
The scope of work of the contract encompasses the installation of a 26-inch gas export trunkline and 14-inch and 8-inch service trunklines, as well as EPCI work for the field development in deep water (up to 1700 meters) of 6 wells and the installation of the umbilical system. Work will start in July 2016 and is due to be completed by the end of 2017.
In order to ensure that the accelerated development schedule is met, Saipem will mobilize a highly capable fleet of vessels to carry out offshore operations, consisting of the ultra-deepwater last generation pipelayer Castorone, the semisubmersible pipelayer Castoro Sei, the trench/pipelay barge Castoro 10, and other specialized vessels.
“We are very pleased to have been selected for the important objective of delivering first gas from Zohr before the end of 2017”, commented Stefano Cao, Saipem CEO. “We will mobilize a fleet of vessels with last-generation capabilities, and leverage on our proven expertise and consolidated presence in the area, in order to ensure our clients achieve their targets.”
The Zohr gas field was discovered by Eni in August 2015, using the drillship Saipem 10000, which is still operating in the area.
Furthermore, Saipem has agreed to various changes in the scope of work on existing E&C Offshore contracts in other countries.
Fugro is to commence a major program of offshore geotechnical investigations under a contract awarded by Indian oil and gas company, ONGC.
Fugro deploys deepwater geotechnical vessel, Fugro Voyager, for ONGC works offshore India’s east coast
Valued at approximately USD 26million, the contract involves site investigation work to gather geotechnical and geohazard data at the field, which is located in the KG-DWN-98/2 block off the east coast of India. The information will support the design and subsequent installation of wellheads, manifolds, platforms, FPSO anchors, umbilicals, pipelines and flow lines.
Fugro will deploy its deepwater geotechnical vessel, Fugro Voyager, which will perform the work in water depths ranging from 50 to 1,500 meters. The fieldwork will be followed by extensive laboratory testing, data analysis, interpretation and integration with other data acquired by Fugro.
Commenting on the work, which is due to commence before end of Q3, Fugro’s Jerry Paisley said, “Fugro has an extensive track record in supporting deepwater field developments offshore India. For the site characterisation reports for ONGC we will integrate the geotechnical and geohazard data from this project with metocean data and AUV geophysical survey data we acquired previously at this field.”
North West safety seal manufacturer Roxtec has launched a new company called Roxtec Services AB targeting North Sea marine and offshore markets.
Roxtec Services AB was developed following sustained demand for equipment inspection on naval ships, drilling rigs and FPSOs (Floating Production Storage and Offloading anchored vessels). The initial focus for the new business will be in the North Sea and the UK continental shelf, an area where Britain has mineral rights – with a view of expanding into international territories including Asia and South America.
Roxtec UK managing director Graham O’Hare said the company will offer three main services to clients: inspection services, maintenance and training, which will all meet the highest worldwide standards.
“Roxtec's products are widely used in the oil and gas industry, so we’re very familiar with the needs of this sector, " he said. “Roxtec Services AB will deliver inspections, maintenance work and installation training within the crucial area of cable and pipe transits.
“The decision behind launching Roxtec Services AB stems from the demand we have witnessed to inspect some 50,000 multi-cable transits in the last 12 months.
“We will be looking to service marine vessels and offshore units. The reason it is so important is that firms must prove they are maintaining performance and meeting safety requirements from the classification societies governing the territory.
“Many classification societies already call for frequent transit inspections and we see a huge potential for the new company.
“The severe offshore environment causes severe material fatigue and means upgrades are frequently required to cables and pipes. Operators can suddenly find their rig or vessel is not protected against fire, gas and water according to the regulations.
“Roxtec’s experience as a global market leader in cable and pipe sealing solutions, with an international presence, means we are perfectly placed to advise and supply these types of projects which may ultimately involve multiple geographical locations.”
Roxtec Services AB will ensure that clients’ projects are fully compliant with international safety regulations pertaining to the use and maintenance of multi-cable transits.
It will see specialist offshore teams sent out to inspect assets on behalf of clients before reporting back with recommendations in line with relevant international safety standards.
Alternatively, it can also install an RFID (Radio-Frequency Identification) system to tag transits so they can be checked remotely.
Mr. O’Hare said: “Currently there are at least forty offshore assets under construction worldwide using Roxtec’s sealing solution, and it is pleasing that a number of these are taking place in the North Sea, which is the initial focus of Roxtec Services.
“Our mission is to provide clients complete assurance and peace of mind that their assets are operating efficiently and fully compliant with safety regulations. Our inspections will be able to assess if transits meet safety standards set by ABS, Lloyds, DNV GL and IMO.
“If the inspection report recommends corrective actions, the Roxtec Services maintenance team is ready to assist the operator with urgent actions onsite as well as with long-term services.
“A key part of the service is also educational. Our inspectors will look to share their knowledge by training installation teams and supervisors.”
Amec Foster Wheeler announces the award of two long-term major services contracts as part of Repsol Sinopec Resources UK's long-term transformation and long-term commitment to the North Sea. The contracts are both for an initial three-year term with up to two one year extensions.
The new contracts are for the provision of maintenance and construction labor and engineering support services, covering its offshore operated assets and the terminal at Flotta. In each category, contracts have been awarded to at least two providers to ensure best practice and to incentivise and reward performance and innovation.
The first contract is a new, simplified labor supply contract, replacing the previous maintenance services model. Amec Foster Wheeler's scope covers seven offshore assets: Arbroath; Bleo Holm; Buchan; Clyde; Claymore; Montrose; Tartan.
The second contract is for a tier 1 engineering services support, covering brownfield modifications and repair orders on a call-off basis, reflecting Repsol Sinopec's asset-based structure and allowing assets to align engineering scopes with suppliers whose core competence makes them best placed to execute them efficiently.
The U.S. Department of the Interior’s Assistant Secretary for Land and Minerals Management Janice Schneider, Bureau of Ocean Energy Management Director Abigail Hopper and Bureau of Safety and Environmental Enforcement Director Brian Salerno have announced final regulations to ensure that any future exploratory drilling activities on the U.S. Arctic Outer Continental Shelf (OCS) are conducted under the highest safety and environmental standards and subject to strong and proven operational requirements.
“With the United States as Chair of the Arctic Council, we are committed to demonstrating our leadership in governance and activities in the Arctic Region,” said Assistant Secretary Schneider. “The regulations we are issuing today support the Administration’s thoughtful and balanced approach to any oil and gas exploration in the Arctic region. The rules help ensure that any exploratory drilling operations in this highly challenging environment will be conducted in a safe and environmentally responsible manner, while protecting the marine, coastal, and human environments, and Alaska Natives’ cultural traditions and access to subsistence resources.”
The Noble Discoverer, a drillship operated by Noble Corp. under contract to Royal Dutch Shell, on position in the Chukchi Sea in August 2015. (Photo: Royal Dutch Shell)
The Arctic-specific regulations focus solely on OCS exploratory drilling operations from floating vessels within the U.S. Beaufort and Chukchi Seas. These rules require oil companies to ensure proper internal controls and planning for oil spill prevention, containment and responses – all issues identified by previous Interior reports regarding Shell’s 2012 exploration activities in the Arctic. The regulations codify and further develop current Arctic-specific operational standards to ensure that operators take the necessary steps to plan through all phases of OCS exploration in the Arctic, including mobilization, maritime transport and emergency response, and the conduct of safe drilling operations while in theater.
“The unique Arctic environment raises substantial operational challenges,” said Bureau of Ocean Energy Management (BOEM) Director Abigail Ross Hopper. “These new regulations are carefully tailored to ensure that any future exploration activities will be conducted in a way that respects and protects this incredible ecosystem and the Alaska Native subsistence activities that depend on its preservation.”
Specifically, the final rule requires operators to develop an Integrated Operations Plan addressing all phases of a proposed Arctic OCS exploration program and submit it to BOEM in advance of filing an Exploration Plan. The regulations require companies to have access to – and the ability to promptly deploy – source control and containment equipment, such as capping stacks and containment domes, while drilling below or working below the surface casing.
Operators also must have access to a separate relief rig able to drill a timely relief well under the conditions expected at the site in the event of a loss of well control; have the capability to predict, track, report, and respond to ice conditions and adverse weather events; effectively manage and oversee contractors; and develop and implement an Oil Spill Response Plan designed and executed in a manner that accounts for the unique Arctic OCS operating environment, and is supported with the necessary equipment, training, and personnel for oil spill response on the Arctic OCS.
“Conducting safe and environmentally responsible Arctic exploratory drilling operations presents a variety of technical, logistical and operational challenges,” said Bureau of Safety and Environmental Enforcement Director Brian Salerno. “This rulemaking seeks to ensure that operators prepare for and conduct these operations in a manner that drives down risks and protects both offshore personnel and the pristine Arctic environment.”
These regulations complement the previously announced Final Well Control Rule, released in April. While the Well Control Rule applies across the entirety of the OCS, including the Arctic OCS, many of the provisions of the final Arctic regulations announced today go beyond the scope of the Well Control Rule and address the unique challenges posed by the Arctic operating environment, especially provisions that put in place systems and processes to further reduce risk and provide rigorous safeguards for Alaska’s North Slope coastal communities and the sensitive Arctic environment.
Interior’s Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement developed the regulations with significant public input from the State of Alaska, North Slope communities, Alaska Native tribes and organizations, industry, and non-governmental organizations. An Environmental Assessment, pursuant to the National Environmental Policy Act, was also prepared in conjunction with this rule and more than 100,000 individual comments were received on the Notice of Proposed Rulemaking.
Although there have been Arctic lease relinquishments, operators continue to hold a number of leases in the Beaufort Sea Planning Area and one in the Chukchi Sea Planning Area that have not expired. Finalizing these regulations will ensure that, should operators decide to act upon their leases or any future leases in these Planning Areas, they will operate with robust safety and environmental protections in place.
The regulations will be available here.
Wood Group has been awarded an extension to its master service agreement (MSA) contract with Apache Corporation in the North Sea. Wood Group will continue to deliver subsea engineering and consultancy services, in support of Apache's routine operation and maintenance works, as well as detailed engineering for future subsea developments across its entire North Sea portfolio; the Forties and Beryl areas, Scottish Area Gas Evacuation (SAGE) pipeline and the onshore SAGE facility at St Fergus.
Effective immediately, the contract includes two one-year extension options. Wood Group has held this service agreement with Apache since 2012 and supported on a number of key projects in the North Sea, including the Forties Subsea Isolation Valves (SSIV) project, the Aviat development and most recently the Ness Nevis development.
Robin Watson, Wood Group chief executive said: “The extension of this contract to provide our technical solutions support across Apache’s North Sea portfolio is testament to our strong, collaborative working relationship with Apache and their confidence in our high standard of service delivery. We look forward to bringing Wood Group’s breadth of subsea consultancy and detailed engineering knowledge and expertise to support this key client in enhancing and optimizing their current assets and effectively delivering future subsea developments in the North Sea.”
ELA Container Offshore GmbH announces that they gained the DNV 2.7-2 certification for their ELA Offshore Accommodation Containers. With this, ELA Offshore is continuing its commitment to deliver high quality products for the offshore oil and gas and wind industry, which are manufactured in Germany to international standards and requirements. The latest modules are now certified according to DNV 2.7-2, a recognized international standard of requirements for offshore service modules and living quarter containers. The DNV 2.7-2 certification addresses key safety aspects required for the offshore container in order to comply with the industry standards like SOLAS and MODU codes.
The high quality ELA Offshore Containers are “Made in Germany” according to German quality standards and possess all necessary certifications such as DNV 2.7-1 / EN 12079-1, DNV 2.7-2, based on SOLAS, IMO FSS Code and MLC as well as CSC and are approved from several IACS-companies.
“DNV 2.7-2 describes safety requirements for temporary offshore container modules. Whereas DNV 2.7-1 is focusing on lifting and transportation of offshore modules, accordingly is addressing the structure and strength of the module; DNV 2.7-2 incorporates these structural aspects relating to in service operations. Besides fire protection, the main focus is on electrical installations and requirements, based on international IEC standards and safety related topics in order to maintain a safe working environment on offshore platforms or vessels”, explains Hans Gatzemeier, Managing Director of ELA Container Offshore GmbH.
Flexibility is still provided by the ELA modular system. Depending on customers’ requirements all ELA Offshore Accommodation Units can be delivered including the DNV 2.7-2 certification. Due to the different accommodation possibilities, the units can be provided as for instance office room, recreation room, galley and dining rooms as well as living quarters and changing rooms.
The high quality ELA Offshore Containers are “Made in Germany” according to German quality standards and possess all necessary certifications such as DNV 2.7-1 / EN 12079-1, DNV 2.7-2, based on SOLAS, IMO FSS Code and MLC as well as CSC and are approved from several IACS-companies. In terms of fire resistance, an A60 insulation provides high safety standards. Every container will be checked before delivery. Depending on customer requirements, ELA Offshore Containers are individually customized, immediately operational and are available at short notice.
The main features of ELA offshore accommodations include:
Danos announces the hiring of Tom Broom as executive account manager. In this role, Broom will be responsible for overseeing and maintaining Danos’ long-term relationship with Shell.
“Tom is a perfect fit for Danos, said Executive Vice President Paul Danos. “His experience in the industry and long career with Shell make him the ideal person to oversee this relationship that has endured for 45 years.”
In 2015, Broom retired from Shell after a 35-year-career, most recently serving as director of coastal issues for Shell Exploration & Production Company. In that role he served as the inaugural director of a 25-person international team focused on collaborating with internal and external stakeholders on coastal management issues. Prior to that position he oversaw workforce development and construction risk mitigation and managed operations training for the United States, Canada and Brazil. He also supervised the daily operations of Shell’s Robert Training and Conference Center, the company’s primary operations training facility.
As an executive account manager for Danos, Broom will draw upon his experience with Shell and industry knowledge to provide leadership and strategic guidance for the partnership. His hiring is part of Danos’ ongoing strategy of investing in new opportunities and planning for future growth.
The Bureau of Safety and Environmental Enforcement (BSEE) has announced that the maximum civil penalty rate for Outer Continental Shelf Lands Act (OCSLA) violations will increase from $40,000 to $42,017 a day for each violation. This legislatively mandated increase is contained in an interim final rule which is effective July 28, 2016.
“BSEE uses civil penalties as an enforcement tool to deter unsafe practices that are not in compliance with regulations,” said BSEE Director Brian Salerno. “We review penalty rates annually to make sure they keep pace with inflation. This ensures they remain a mechanism that emphasizes to industry the importance of safe and environmentally responsible operations.”
BSEE imposes civil penalties when an operator fails to correct a recorded violation or commits a violation that constitutes a threat of serious, irreparable, or immediate harm or damage to life, property, any mineral deposit, or the marine, coastal, or human environment.
The OCSLA directs the Secretary of the Interior to adjust the maximum civil penalty amount to reflect any increases in the Consumer Price Index prepared by the U.S. Department of Labor. In concert, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires Federal agencies to adjust the level of civil monetary penalties through rulemaking. BSEE most recently adjusted the penalty maximum amount in 2011. The rate was reviewed in 2014 and 2015, and it was determined that no adjustment was warranted.
The interim final rule notice is available today for review in the Federal Register.
BSEE will issue a notice to offshore oil and gas operators this week informing them of the changes and provide a list of infractions with the corresponding fine amount. That notice will be available here.
OneSubsea, a Schlumberger company, has been awarded an engineering, procurement and construction contract totaling approximately $300 million from Woodside Energy Ltd.
OneSubsea will supply a subsea production system and a dual multiphase boosting system for the Greater Enfield Project, offshore northwest Australia.
The scope of contract includes six horizontal SpoolTree* subsea trees, six horizontal trees for the water injection system, six multiphase meters, a high-boost dual pump station with high-voltage motors, umbilical, topside, subsea controls and distribution, intervention and workover control systems, landing string, and installation and commissioning services.
For more information, visit www.onesubsea.slb.com
Disappointing EIA DataThe large product stock build added to the market’s worry about excess light product stocks undermining crude demand and ultimately reducing the size of crude stock declines. While PIRA sees crude stock declines accelerating onshore U.S., with this week’s EIA data showing 630 MB/D stock decline, the market is, not surprisingly, skeptical given recent EIA reports and the crude weakness in Northwest Europe and Asia. Oil markets are stuck in a $43-$53/Bbl trading range, and visiting the lower end on occasion is to be expected, especially with lots of fear and data like the July 13 EIA report.
The market is having second thoughts about the industry’s ability to cope with surplus supply despite the atypical heat expected to persist well into the second half of July, as suggested by NYMEX futures brief expedition to ~$3.00/MMBtu and subsequent V-shape reversal back towards ~$2.70/MMBtu. Thursday’s relatively flat price action following a neutral-to-consensus stock build further reinforced the market’s at least temporary hesitation to push prices back toward those July highs. Indeed, weather forecasts and projected seasonal restocking in July certainly appear favorable to sentiment; a post-summer acceleration in refills has called into question the viability of $3.00/MMBtu gas during the upcoming shoulder season.
U.K. winter power prices have jumped in response to the recent tumultuous development in NBP prices, but spark spreads have softened in the past 10 days or so, in spite of the latest Winter Outlook by National Grid confirming that the power market will remain exceptionally tight.
Coal prices shot up last week, with all three major forwards tacking on $3.00/mt or more across the curve. Higher oil pricing, more positive signals coming out regarding Chinese coal demand, and stronger European gas prices all factored into the strength in coal pricing last week. FOB Newcastle (Australia) prices rose by the greatest extent, perhaps due to increased buying activity out of China and weather-induced cuts to Indonesian exports. PIRA would not be surprised if the rally in pricing starts to fade, as additional support on the fundamentals side will be needed to keep prices on an upward trajectory.
Near-term EU ETS fundamentals are poor, but no worse than they were before the Brexit vote. EUA prices rebounded after the January 2016 price decline (which was far more severe) and could do the same now. Auction demand data from June was somewhat positive, and there is historically a price bump in August, when auction volumes are lower. Also, the currency impact from the Brexit vote results in lower compliance costs for U.K. coal-fired generators, potentially supporting emissions demand. However, there is increased market uncertainty.
Chinese economic data for the second quarter surprised on the upside — GDP growth came in above expectations; the manufacturing sector appeared to be picking up steam; consumer spending expanded solidly; and the housing sector remained red-hot. Data on total social financing and local government debt indicated that policy makers have maintained an easy stance on credit creation. In the U.S., growth in consumer spending accelerated in a major way during the second quarter, but other sectors were more subdued. Industrial production disappointed, though capital-intensive manufacturing industries reported encouraging results. The latest inflation data did not set off an alarm bell.
Asian LPG prices were lower last week, with front-of-the-curve contango spreads flattening, indicating that markets are less optimistic of autumn price gains than they had been previously. Cash continues to trade at a significant discount to paper, with August physical Far Eastern propane being called near $310/MT, some $15 below futures. Butane continues to trade narrowly above C3, ending this week at just $14/MT above propane — the tightest premium thus far this year.
Manufacturing margins reach 18-month peak. RIN values soar.
Traders inherently love this sort of volatility, but it’s plainly obvious that these moves, overnight especially, have many backing away. This should continue to be the case in corn until early August, when pollination is close to being finished. For beans, we expect the volatility to continue until at least the end of August as late-August/early-September moisture will make or break this year’s crop. PIRA always believes that fundamentals will win out, but it’s going to be a long and wild ride until true fundamentals take over once again.
Crude runs rose again on the week as maintenance continues winding down. Crude imports eased slightly, but crude stocks still built 0.3 MMBbls. Finished product stocks built 2.1 MMBbls, with increases in all the products other than gasoil and fuel oil. Refining margins have remained poor with little barrel support other than fuel oil and naphtha.
Last week’s regional election in Japan brought to power a decidedly anti-nuclear governor in the very region that houses the only two operating nuclear power reactors in Japan, reigniting questions as to the future of Japanese nuclear power generation. While this development is a decidedly bullish one for Japanese LNG imports, it is unlikely that even a completely nuclear-free Japan will result in a resurrection of Japanese gas demand for power generation.
With the release of the report to the French minister Ségolène Royal on "Proposals for the Carbon Price," together with the Minister's press release of July 11, the French domestic carbon floor is now shaping up as a tax on coal. Assuming the policy starts from Jan. 1, 2017, which is looking optimistic, French 1Q 2017 baseload contract is well priced in the mid €30/MWh and the 2017 annual baseload contract is well priced in proximity of €32/MWh, or €2/MWh below our latest outlook, in line with current market quotes. In the medium term, the decision to penalize the coal units poses risks of earlier coal closures, making the French system more vulnerable during the winter months (similar to the U.K.). In addition, the revised policy still leaves unsolved the longer-term issue of the needed investments in EDF's existing nuclear units.
Draft amendments include a tightening of the cap post-2020, adjustments to the Price Containment Reserve and provisions for unsold allowances — and do not appear to send overly ambitious market signals. After 2020, the Price Containment set-asides are smaller, leaving more of the cap readily available to sources. The high single price tier for Reserve allowances demonstrates that CARB does not expect it to be a factor in regular pricing. The proposal to move unsold allowances to the Price Containment Reserve takes into account the quantitative limits on their return to auction. Quebec is, and Ontario soon will be, a partner in this market, and California policies are looking to serve the broader market.
The S&P 500 set a new record on the week. The strongest gains were posted by the banking index, along with materials, while the “growth” indicator far surpassed the “defensive indicator." Only the defensively oriented utilities tracking index declined on the week. Internationally, all the tracking indices advanced, with Latin America, emerging markets, emerging Asia, China and BRICs all out surpassing the gains seen in the U.S.
Inventories draw, decreasing in four of five PADDs, but there was a large build in PADD I. Output of ethanol blended gasoline dipped to the lowest level in a month.
After jumping 17%, to 32% last week, corn silking should increase at least that amount again for the week ending Sunday, July 17th. The heat is on this week, but the percentage released this afternoon should have pollinated in fairly benign temperatures in the "I" states and Minnesota, according to mean deviation statistics for the first half of the month.
Recent press reports suggesting that bolt failures could cause significant production shutdowns appear to be overstated. There have been a number of failures of bolts that are used to connect blowout preventers, risers, and other subsea equipment in the Gulf of Mexico since 2003. A task force, with representatives from the U.S. Bureau of Safety and Environmental Enforcement (BSEE), API, oil industry and manufacturing companies, is currently reviewing the root causes of the failures and developing a strategy to fix the existing problems. For producing platforms/structures, fixing the problem may require shutting in production for several days to replace the defective bolts. However, it appears at this time that the issue affects primarily drilling operations and to a much lesser extent existing production.
Both the Netherlands and the U.K. are shifting toward market balancing that will rely more on higher seasonal imports and working gas storage. As of now, the way these two markets are managing this inherently riskier position could not be more different. Operating problems in U.K. storage at Rough have created a vast winter risk premium, so vast that PIRA has a difficult time seeing it sustained on an outturn basis. The U.K. will certainly need to rely on more Continental, Norwegian, and LNG supply this winter. As we have emphasized in past years, the U.K. counting on Continental storage to balance some of its peak needs is often at odds with the mandate of Continental storage owners to place the home market as a greater priority no matter how full storage may be. This risk has been particularly egregious in the fourth quarter, given the Continent’s tendency to hoard storage volumes just in case the first quarter produces colder-than-normal weather. Add in real and perceived Brexit fallout and one has to assume the risks to the U.K. are somewhat greater.
Following temperatures and gas markets higher, June on-peak energy prices rose month-on-month in nearly every market in the Eastern Interconnect and ERCOT. Gas prices continued to rise through late June with Henry Hub spot topping the $2.90 mark as the July NYMEX contract expired. Eastern coal prices have also seen a modest advance, but western markets remain weak with supply rebounding. A gas price recovery over the balance of 2016 also implies that heat rates will likely struggle to keep pace with the high levels set in 2015. First half of 2017 is also likely to have lower gas burn and heat rates year-on-year in most markets.
In our 2016 Reference Case, PIRA increased its projections for BEV market growth which reflects greater progress in battery development. In this report PIRA analyzes lithium-ion batteries and examines lithium and cobalt, the raw materials crucial to lithium-ion battery production, and find that in the near term, supply shortages for lithium are possible, but long-term supply for lithium should be available at reasonable prices. Cobalt supply is more difficult to predict, but it appears more likely to be volatile than lithium in both the short term and the long term. Overall, PIRA’s expected EV market penetration rate should not be hindered by a lack of raw materials used in battery production.
Riding on continued efficiency gains and modestly improved prices, producers in Canada grew output by 4% quarter-on-quarter, or ~550 BCF in 1Q16. Production gains were strongest in Alberta and British Columbia; the former reached highs not seen since 2010, and the latter set new records in quarterly volumes. Both the companies within and outside of the surveyed “PIRA Group” grew production, although this quarter, the non-group significantly outpaced the survey group.
The S&P 500 set a new record high. Again, volatility declined and emerging market debt prices rose sharply. Financial stress continued to lessen post-Brexit. The dollar was mixed on the week.
Britain's shale gas industry could get a helping hand from a falling pound and a supportive new prime minister just as it is gearing up for its first production this year, after facing economic and political challenges that slowed its start. The British pound's weakness since the Brexit vote has made it more expensive to import gas, helping the case for shale gas, which had been hurt in the past by weak oil prices and by opposition to planning approval from local campaigners.
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.
(Houma, La.) – Chet Morrison Contractors is pleased to announce that the company’s Harvey-based fabrication facility has been assessed by Hartford Steam Boiler Registration Services and has been found to be in conformance with ISO 9001:2008. With this registration, Chet Morrison Contractors’ fabrication services is certified to provide the highest standard of quality fabrication services in the industry by utilizing procedures guided by ISO requirements.
Fabrication services is the second Chet Morrison Contractors division to attain ISO 9001:2008 Registration. The company’s Deepwater Riser division received the registration in 2014, along with API Q1.
“This certification is important for Chet Morrison Contractors as we seek to grow our fabrication and coatings business. It signals our ability to offer traceability and quality control systems that our clients require,” said Derick Bourg, general manager of fabrication.
Chet Morrison Contractors’ Harvey facility is also ASME “U” and “R” stamp-certified to manufacture and repair/alter boilers and other pressure vessels as authorized by the American Society of Mechanical Engineers (ASME). “These achievements are proof of our continued commitment to operational excellence and an example of the strides we are making to ensure we can provide the premier support our clients expect,” said Bourg.
Offering 24-hour service, on-demand deployment of on-site installation teams as well as in-house custom fabrication, the fabrication team is experienced in handling projects for onshore and offshore facilities and structures. Thanks to its waterfront location, the shop can handle transportation of complex assemblies with ease.
The commissioning ceremony of a production unit for BIOROS, a new oil biodegradation agent, took place on July 7th, at the facility of the Safe Technologies company in St. Petersburg. The event was attended by Oleg Aksyutin, Member of the Management Committee and Department Head at Gazprom.
At chemical analysis laboratory of Gazprom VNIIGAZ. Photo courtesy: Gazprom
The new substance was developed by Gazprom VNIIGAZ, the Company's core research center. BIOROS is an innovative product for oil spill cleanup. It is more effective than similar products made in Russia and abroad, as it provides for, among other things, quicker oil spill removal at a greater range of temperatures, from 5 to 45 degrees Celsius.
It was noted at the ceremony that the production of the BIOROS biodegradation agent was a result of Gazprom's fruitful cooperation with domestic companies aimed at manufacturing competitive import substituting products.
Background
A biodegradation agent is a substance that removes oil spills using special microorganisms, which feed on oil products (oil, fuel oil, diesel fuel, lubricants, etc.), air, and water, thereby cleaning up soils, subsoils, and water sources.
BIOROS and its application technology are protected by Russian patents. The product also received the Gazprom Science and Technology Prize. The biodegradation agent will be produced by Safe Technologies under a license agreement.
Safe Technologies Industrial Group is a Russian enterprise that comprises a number of companies focused on the design and construction of environmental, industrial and chemical facilities, as well as on the development of waste management solutions.
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