Aberdeen-based subsea cable and connector specialist Hydro Group, has expanded its premises by investing £2million in a new 13,700 sq ft bespoke facility, set to open in spring 2016.

The company currently occupies a 45,500 sq ft facility at the Aberdeen Energy Park, purchasing the additional 0.63 acres of development land from Buccleuch Property and Moorfield Group (Buccmoor LP) to enable it to expand operations and develop a brand new workshop with mezzanine deck.

Doug Whyte, Hydro Group Managing Director, said: “The new facility and additional space was required in order to diversify and develop our business. It has been a significant investment for the future of our company, helping us to open up new business opportunities and deliver major growth plans for the company.”

Hydro Group’s new facility Photo credit: Hydro Group

Hydro Group, an Energy Park occupier since 2008, designs and manufactures underwater cables and connectors for subsea, underwater, topside and onshore applications. The company, one of very few in the UK that offers this technology, will use the space to install its new armouring line, facilitate a pressure testing area, and for additional storage.

The development follows on from a £300,000 investment last year in the advanced armour line, which extended Hydro Group’s product capabilities, enabling it to offer cable products to improve and support subsea operations.

“We are now able to manufacture mechanically protected cables which can withstand higher stresses in subsea and defence operations, and the extra space means that we can also offer greater capacity in size and overall lengths," concluded Mr Whyte.

Speaking on behalf of the Park’s owner, Moorfield Real Estate Fund III, Mark Holmes from Moorfield Group said: "It is very encouraging to see Hydro Group diversify and expand operations here at Aberdeen Energy Park. We were pleased to be able to facilitate the sale of development land which was available adjacent to the company's existing facility. We look forward to the business continuing to develop and prosper at the park.”

Doug Garden, partner of Knight Frank in Aberdeen, who advised Hydro Group, added: "Having project managed the original building for Hydro Group, it was pleasing to be involved once again in assisting Hydro Group with its further growth at Aberdeen Energy Park."

Buckthorn Partners and the Arab Petroleum Investments Corporation (APICORP) have acquired Ashtead Technology, a leading independent provider of subsea equipment and services to the offshore oil and gas industry.

The undisclosed funding package from Buckthorn and APICORP will allow Ashtead to further expand its service offering through both organic and acquisition led growth. The investment will also enable Ashtead to expand its geographical reach, with the Middle East being a particular area of interest and focus for the company.

Buckthorn is a London-based investment firm, and APICORP a financial institution established by the ten member countries of the Organization of Arab Petroleum Exporting Countries.

Since its launch in 1985, Ashtead has grown to become a leading independent provider of subsea technology and services to the oil and gas industry with a strong customer base built on trust and quality. With offices in the UK, Houston and Singapore, Ashtead is focused on delivering cost savings and value-added services to its customers.

Allan Pirie will continue to lead Ashtead’s management team as Chief Executive Officer. Nicholas Gee from Buckthorn joins as Chairman and Bennie Burger from APICORP also joins the board.

Mr. Pirie said: “This deal signals confidence both in our business and in the long-term direction of the market sector in which we operate. It’s a great outcome for Ashtead’s customers, suppliers and staff around the world.

“As the market evolves to cope with the long-term effects of the current oil price, service companies like Ashtead must assist in reducing project cost and risk, helping our customers to focus on their core competences. This initial investment coupled with access to further capital will enable us to significantly expand our expertise in subsea inspection, repair and maintenance (IRM) to fulfill our ambition of becoming an integrated services provider.”

Mr. Gee commented: “With its long subsea heritage, strong management team and robust market position Ashtead is well placed to make the most of the current market conditions. Its reputation, expertise and quality of operations and management systems are cornerstones on which we will build. Our objective is to develop an innovative business that will bring new services to reduce cost and risk, and add value to customers throughout the value chain. The market fundamentals for subsea services remain strong and Ashtead Technology is in great shape to play a crucial and defining role in this sector.”

Prior to joining Buckthorn, Nicholas Gee was an officer and Executive Vice President of Weatherford International. He started his career with BP in the North Sea as a petroleum engineer.

Dr. Raed Al Rayes, Deputy CEO and General Manager of APICORP, commented: “We are very pleased to have completed the acquisition of a stake in Ashtead. It perfectly matches our stringent acquisition criteria, and is in line with our strategy of rebalancing our portfolio by making value adding equity investments in the energy sector. Ashtead’s market position, cutting edge technology, experienced management and track record of achieving cost savings for their clients in the oil industry leave it well placed to take advantage of the prevailing economic conditions. We are looking forward to working with Ashtead’s executive team and applying our own regional industry knowledge to achieving further growth.”

Following this transaction, Phoenix Equity Partners remain as investors with a minority stake in Ashtead Technology.

Well management and performance improvement specialist Exceed has bolstered its decommissioning credentials through a strategic alliance with international oil and gas service company, Weatherford.

The collaboration will offer an end-to-end solution for well decommissioning, using an integrated team which brings together extensive technical and commercial capabilities.

Exceed brings a proven track record in well management to the partnership which will ensure lessons are learned, knowledge is shared and the performance improvement curve is significantly accelerated, whilst Weatherford boasts extensive global plug and abandonment experience, field proven tools and technology and a global footprint.

John Anderson, Exceed commercial director

The expertise brought from both companies means that commercial models can be flexible and tailored to meet client requirements. Significant value is added through cost savings to operator groups through bulk purchases, shared equipment and resources, and improved safety and operational performance through an incentivised approach.

The collaboration also opens up potential to create a project-wide EPC approach through the appointment of further partners. Global agreements have already been established with a number of internationally recognised service providers to expand the service portfolio as and when required.

The collaboration follows Exceed’s recent plug and abandonment contract win with Fairfield Energy, which will see the firm support a campaign which covers 45 platform wells and 16 subsea wells, and recognises the Exceed team’s strong track record in decommissioning.

John Anderson, commercial director at Exceed, said: “This alliance is a major step forward in demonstrating what collaboration in the decommissioning sector should actually look like.

“Integrating the supply chain, sharing resources and drawing upon a knowledge base which extends beyond one company will mean major savings, quicker project execution and effective risk management. There is great potential for this joint approach both now and in the future.”

The Damen Field Service crew has just returned from commissioning the Barracuda cutter suction dredger in Algeria. The customized Damen Cutter Suction Dredger (CSD) 500 has been delivered with a complete dredging package including a booster station and dredge piping enabling immediate start up. The CSD500 will perform maintenance dredging in a reservoir.

As reservoir dredging can be quite a challenge, the standard dismountable CSD500 has been customised. Its job is to clear a water reservoir in an inland location in Algeria. As it is relatively deep, the CSD500 has been fitted out with a longer cutter ladder for the important dredging depth of -18m working at 45°. Moreover the spuds – normally a distinct feature of any CSD– have been replaced by an X-mas tree. The X-mas tree is a multiple wire-based mooring system independent of the deep waters in which the dredger operates.

The cutter suction dredger is also fitted out with a number of standard options such as an accommodation unit, navigation lights, a deck crane and dredging instrumentation. Moreover, it is accompanied by all components for a turn-key dredging project. These components include a remote controlled booster station, type BS500, plus some 4 km of floating and land discharge piping – in total over 30 containers full of steel and flexible piping and floats.

The Algerian customer Hydrodragage has two other Damen dredgers performing similar tasks at other reservoirs. Damen is proud to have delivered it’s third dredger to Hydrodragage, which started its dredging job without delay upon arrival.

Seanic Ocean Systems Inc. (Seanic) and CSA Ocean Sciences Inc. (CSA) are responding to challenges faced by the oil industry to address increasing regulations and environmental stewardship concerns. This strategic partnership merges technology and environmental expertise with the goal of improving oil spill response equipment and services. Innovative solutions developed by Seanic and CSA will provide much-needed support to the oil industry, which is under increasing pressure to maximize efficiency while minimizing risk and environmental impact.

Both companies already support the oil spill response needs of the energy industry, providing a range of specialized equipment and services, from engineered solutions to oceanographic sensors and from testing and maintenance to developing dispersant monitoring plans. Forging this partnership integrates the skills and experience of each company, resulting in better service to both industry and the environment.

“Seanic’s Remote Systems Technology combined with CSA’s experience in Environmental Sciences will allow us to approach oil spill response, particularly the application and monitoring of dispersants, in a unique and innovative manner,” stated Kevin Peterson, President of CSA Ocean Sciences Inc. “As environmental regulations evolve, water depths increase, and locations become more remote, cost-effective solutions based on solid science and technology become more important than ever.”

Seanic brings expertise in ROV tooling, engineered solutions, and the maintenance and improvement of oil spill equipment. Their corporate headquarters in Katy, Texas offers state-of-the-art facilities for manufacturing, testing, storage, and maintenance of equipment, including stabilized yard space, a tool pool, storage warehouse, and a 500,000-gallon in-ground wet test tank. Overseas facilities in Scotland, Norway, Australia, and Singapore support international operations.

CSA brings 46 years of specialized experience in marine environmental consulting, serving the energy industry worldwide through offices in the United States, the Eastern Mediterranean, Qatar, Trinidad, Singapore, and Australia. CSA’s expertise in coastal, marine, and deep ocean surveys, sampling, monitoring, assessment, and mitigation is built on the integration of science, operations, and an understanding of environmental data collection, management, and analysis within geospatial domains.

Aker Solutions' maintenance, modifications and operations (MMO) business in Norway will as a subcontractor of Kværner provide engineering services for upgrading the semi-submersible platform at the Statoil-operated Njord A oilfield. 

Statoil-operated Njord A oilfield. Photo: Øyvind Nesvåg / Statoil.

The company signed a subcontractor agreement with Kværner, which was awarded the framework agreement for the Njord Future project by Statoil. Aker Solutions' initial delivery will be front end engineering design (FEED) work. The contract with Kværner also includes engineering work in the engineering, procurement and construction (EPC) phase of the project should the operator decide to proceed with this, as well as an option for prefabrication work.

"We look forward to working with Kværner to find the most robust and cost-effective solutions for Statoil on this project, which draws on our experience in complex modifications," said Per Harald Kongelf, head of Aker Solutions' Norwegian operations.

The MMO unit in Bergen will execute the FEED work with support from Aker Solutions' engineering business in Oslo, working as an integrated team with Kværner. The work will start immediately and at its peak involve 120 employees of Aker Solutions.

Aker Solutions has previously delivered concept and feasibility studies on upgrading Njord to Statoil.

• One Year after Receiving Nautical Institutes Class A Certification, GE’s Houston Training Center for Mariners Receives Accreditation for Sea Time Reduction (STR) Course

GE’s (NYSE: GE) continuous efforts to help increase marine industry safety standards for operators recently resulted in the endorsement of The Nautical Institute’s (NI) accreditation for GE to conduct a dynamic positioning (DP) sea time reduction (STR) course in its modern DP training center in Houston. With this accreditation, GE’s Marine Technical Training Center has joined an exclusive list of only 13 DP schools worldwide that are accredited to provide STR courses.

The accreditation allows trainee DP operators (DPOs) to receive credit of 30 days of DP sea time when they complete five days of intensive training in the DP simulator. Using GE’s advanced DP simulator, the company can provide the trainees with a selection of scenarios that help prepare the DPOs for a multitude of possible situations that they may encounter when engaged in DP operations.

GE’s Marine Solutions’ DP simulator received the NI’s Class A Certification in June 2015. Together with the DP training program, GE’s Marine Technical Training Center in Houston provides the operators with a suite of following training courses:

Nautical Institute-accredited courses for licensed deck officers:

1. DP Induction (basic).

2. DP Simulator (advanced).

3. DP Sea Time Reduction.

GE product courses for engineering officers, electronic technicians:

1. MV7000 & MV3000 (VFD).

2. DP Maintenance.

3. Automation Familiarization and Basic Maintenance.

4. Advanced Automation and Power Management Maintenance.

5. DP Software Familiarization (A-Series, C-Series, SeaStream*).

“Since the inauguration of the center in 2005, we have continually worked to deliver a high-standard training syllabus for mariners globally. Our continuous efforts have been paying off over time, and after receiving a Class A certification from The Nautical Institute, we’re proud to now receive the accreditation to provide STR Courses too. As the industry struggles to find competent manpower, GE is a leader when it comes to training the next generation of mariners,” said Tim Schweikert, president and CEO of GE’s Marine Solutions business.

GE’s Marine Solutions’ DP technology has gained wide acceptance in the marine industry. DP is a mariner-focused technology that helps mariners maintain their vessel in a predetermined heading and position.

GE’s Marine Solutions recently also provided the Class A DP simulator to the DP center at the Arab Academy for Science, Technology & Maritime Transport (AASTMS) in Alexandria, Egypt, which has also received the STR accreditation.

GE is continuing to build upon its commitment of providing advanced maritime training that corresponds to customers’ needs in the real world.

The MAY 2016 MTS Houston Section luncheon will be held on May 26 2016 and will feature a presentation by Cory Weinbel, Senior VP Development Projects, Venari Resources. Mr. Weinbel will discuss Improving Deepwater Project Outcomes through Enhanced Collaboration.

The current low oil-price environment makes the safe and efficient execution of Deepwater Projects more important than ever as companies look for ways to grow with decreasing project resources. The Oil & Gas industry has traditionally used partnerships to spread the cost burden and reduce risks associated with large projects but in general has not fully taken advantage of the resources and synergies offered by greater involvement of Partners in the Deepwater Development. This presentation uses Cory Weinbel’s experience as well as examples from the Deepwater Oil & Gas industry and other industries to characterize the enhanced collaboration mechanisms and show the tangible benefits and the limited downside to embracing and more-effectively exercising this collaboration. While the changes required for enhancing collaboration are simple, straightforward, and common-sense, they will require many companies and their employees to embrace a new cultural paradigm. The benefits to our industry can be significant and potentially include reduced project costs and schedules, standardization of key technical elements, and the training of new generations of project personnel.

Mr. Weinbel spent over seven years working for Helix Energy Solutions Group as Deepwater Project Manager and General Manager of Production Facilities where he spear-headed the development of the first ship-shaped disconnectible oil production unit in the Gulf of Mexico at the Phoenix Development. His work has allowed him to work on multiple types of deepwater floating production units including Spars (Gunnison), TLP’s (Marco Polo), Semisubmersibles (Independence Hub), and Ships/FPSOs (Phoenix, Jubilee.)

Earlier in his career, Mr. Weinbel worked as a project engineer/project manager for Kvaerner Oil & Gas, Kerr-McGee Oil & Gas, and Kerr-McGee Chemical. Cory holds a Master of Science degree in Metallurgical Engineering and Bachelor of Science degree in Materials Engineering from Columbia University School of Engineering and Applied Science.

UPCOMING MTS HOUSTON PRESENTATIONS AND EVENTS

Following their recent announcement of a partnership that will install over 17,000km of new subsea cable directly connecting Angola, Brazil and the United States, Angola Cables has affirmed and praised Ocean Specialists, Incorporated (OSI) for the highly strategic role the subsea cable advisory and project management firm has played in the design and development of Angola Cables’ global network build out.

Angola Cables, with the strategic and operational support of OSI, has initiated two innovative new subsea cable networks. The first, known as the South Atlantic Cable System (SACS) links Angola with Brazil, is already under construction and marks the first South Atlantic modern D-WDM fiber optic cable network in history. The second, the recently announced Monet cable network, will further connect Santos and Fortaleza in Brazil and Boca Raton, Florida, providing onward connectivity to Angola via SACS. The Brazil-US network is currently under construction in partnership with Algar Telecom (Brazil), Antel (Uruguay) and Google.

Subsea telecommunications cable networks are critical to global voice and data communications, and carry over 98% of the worlds’ telecommunications traffic. High-speed fiber optic networks are essential to both businesses and consumers, and allow real-time access to apps, social media, websites and other bandwidth intensive services. As the most efficient way to transmit information between continents and cities, fiber optic cables provide added benefits of security and reliability that are indispensable to both telecom service providers and their enterprise customers.

“The design and implementation of a subsea cable network is a highly specialized undertaking, and OSI, as our partner in network development from the very beginning of the South Atlantic Cable System (SACS) discussions, has been instrumental to our success. From providing an initial economic viability analysis and network development strategy to evaluating investment options and network design, and then on to running a competitive tender process and rigorous evaluation process for our network contractor, OSI has been absolutely critical in supporting Angola Cables as we execute our regional and global strategy,” stated Antonio Nunes, CEO, Angola Cables.

“With their existing ownership in the West Africa Cable System (WACS), Angola Cables’ network build out across the Atlantic and on to the United States is an important piece in its Tier 1 global connectivity strategy,” stated Tom Soja, Vice President, OSI and Strategic Advisor to Angola Cables. “The SACS and Monet networks, combined with the existing WACS network, place Angola in an excellent position to function as the ‘hub’ of Africa’s regional communications needs.”

Angola Cables has extended OSI’s five-year relationship and responsibilities to the project implementation phase which will carry the company’s involvement through to the final acceptance and initial O&M of the new subsea network. OSI – the industry’s leading submarine cable project management and delivery firm – has actively led and directed these two major supply contracts on behalf of Angola Cables, from project feasibility and funding to network build and installation, contracting two leading suppliers in the undersea cable industry for final project completion.

About OSI: OSI Delivers Global Connections. OSI’s team combines unequalled subsea cable development experience throughout the planning, design, procurement and installation phases of a subsea network development. OSI minimizes project and network risk and maximizes return on investment to ensure project success.

About Angola Cables: Angola cables is an international wholesale carrier that operates submarine cable systems throughout the South Atlantic and Africa. Angola Cables also operate the Angonix (Angolan IXP) in its data center (Angonap) in Luanda. Africa is today the fastest growing region of internet penetration in the world. Angola Cables’ goal is to transform Angola into one of the telecommunication hubs in Africa. For more information visit www.angolacables.co.ao

New subsea technologies and systems must be qualified before use to build confidence that they will function as intended. However, current subsea technology qualification (TQ) processes can be inefficient, time consuming and variations in methodology impede industry players from leveraging on each other’s results. Now DNV GL is calling for a standardized system qualification approach and joint industry effort to drive faster take-up of new technology and value creation in subsea.

A new position paper ‘Subsea system qualification: Towards a standardized approach’ by DNV GL’s Strategic Research & Innovation unit aims to answer two questions: How can confidence in new subsea systems be demonstrated in a faster and more efficient way? How can already qualified technologies be re-qualified in an effective manner for reuse in similar systems or under slightly different operating conditions?

Subsea illustration Credit: DNV GL

The position paper proposes a joint industry effort in three steps to enable more effective technology development and implementation in the field: 1) Establish common industry principles, and consolidate a common framework for system qualification founded on existing industry procedures; 2) Develop a methodology to standardize system qualification for common use across the upstream oil and gas industry and 3) Pilot and demonstrate the developed methodology and roll-out a Recommended Practice.

“The subsea industry needs to overcome key challenges such as cost reductions, enabling increased recovery, and complex field developments. At the same time, the future trend still points towards more complex systems which require integrating process, power, and control systems subsea. Assuring safety and reliability on a system level is critical when interfaces become more complex and system integration failures are harder to identify,” says Tore Myhrvold, researcher and lead author of the paper, DNV GL.

“Developing a standardized approach to subsea technology qualification will enable companies to leverage on each other’s qualification efforts and results, reduce the overall development time and ultimately enable faster innovation in the subsea sector,” continues Myhrvold.

Previous experience has shown that focus on qualification in the early phases of development reduces risk of failures in late phase testing. Failures and errors in tests that are run in later development stages, such as factory acceptance tests (FAT) and system integration tests (SIT), are expensive to fix since they may result in costly rework and re-iteration of the design process. DNV GL’s position paper recommends increasing the qualification efforts in the early phases of development to enable faster and more effective development and implementation of novel subsea technology systems.

The position paper also proposes that numerical or analytical methods (models) could prove to be cost effective and safe alternatives to current expensive physical testing or be used in conjunction with existing methods. These alternative methods can explore the effects from parameter variations and how different sub-systems or single components affect the entire system performance. By using non-intrusive numerical modelling tools to establish a common modelling platform, a wide variety of validated models can be used in the system qualification to virtually test system operational ranges and failures.

“The Norwegian Petroleum Directorate (NPD) reports that subsea tie-back represents the most relevant solution for 68 out of 88 discoveries on the Norwegian continental shelf. To sanction many of these projects, fast and cost effective technology development is vital,” says Elisabeth Tørstad, CEO of DNV GL – Oil & Gas.

“Our efforts to drive standardization in the subsea sector aim to reduce cost, lead times and to increase confidence in new technologies to enable faster innovation. Our collaboration with the industry on subsea documentation and subsea forging for example have resulted in guidance that is being implemented in projects and now delivering benefits for operators,” adds Tørstad.

To download the position paper visit www.dnvgl.com/download-subsea-position-paper.

Materia, Inc. (Materia), in conjunction with Aegion Corporation (Aegion), has been selected by Shell Offshore, Inc., a wholly-owned subsidiary of Royal Dutch Shell plc (Shell), to supply pipeline insulation materials for the Appomattox development in the deepwater Gulf of Mexico.

Materia’s Proxima® resin technology delivers a broad range of products that increase reliability and performance for high pressure, high temperature applications in deepwater oil and gas exploration and production.

The insulation system is unique among existing polymers in its ability to provide an effective thermal barrier between flowlines and seawater. The thermosetting cross-linked hydrocarbon polymer maintains structural integrity in deepwater operating environments as an incompressible solid at water depths greater than 10,000 feet. This advanced insulation technology can also be rapidly and safely applied in the factory or the field.

Chuck R. Gordon, Aegion’s president and chief executive officer, said, “The collaboration with Materia will leverage their leading polymer insulation technology, Bayou’s world class coating, logistics and prefabrication capabilities, and Bayou Wasco’s pipe insulation technology for the safe and efficient transportation of crude oil from deepwater oil field developments in the Gulf of Mexico.”

Dr. Michael Giardello, co-founder and senior advisor to Materia, said, “Shell’s safety and performance requirements were rigorous. We were charged with supplying pipeline insulation materials that met their performance requirements, while greatly reducing the complexity of the system.”

Nitin Apte, Materia’s president and chief executive officer, stated, “Materia’s thermal insulation provides a simple and cost-effective solution to the challenges of deepwater oil and gas production. We greatly value this relationship with Shell and Aegion, and look forward to solving the thermal insulation challenges for future deepwater projects.”

Crude Prices Rise in March, Led by Syncrude and Bakken

Crude prices rebounded strongly in March, despite a large U.S. stock build, but the rebound may be short-lived. Syncrude and Bakken differentials surged, as oil sands upgrader maintenance approached a seasonal peak, but all northern grades should weaken in April — in part, the result of uncertainty surrounding the recent shutdown of Keystone pipeline. Following a minimal draw in March, Cushing crude stocks could see a small build in April, before stock draws begin in May and continue for most of the rest of the year.

Injection Season Coal-to-Gas Sensitivities

In light of elevated natural gas storage, U.S. gas demand in the power sector during the injection season will be of the utmost importance if physical constraints on storage facilities are to be avoided. To this end, PIRA undertook a series of simulations to illustrate the sensitivity of gas demand to different price levels. Flexing injection season NYMEX prices downwards by 25% results in an incremental ~3.0 BCF/D pick-up in gas-fired EG demand, or ~3.5 BCF/D more than PIRA’s current Reference Case, while flexing injection season NYMEX prices upwards by 25% results in a ~2.5 BCF/D decline in gas-fired EG demand (~27.0 BCF/D), or 2 BCF/D less than PIRA’s current Reference Case.

French-Italian Spreads Narrowing, but Largely Driven by Italian Weakness

Two fundamental factors are looking spooky for French price developments in the upcoming months: the sizeable increase in gas-fired dispatching and the gain in French imports from the Germany-Belgium. Under these conditions, the spread between summer and winter prices could further widen. The spreads between French and Italian prices have been narrowing, mostly because of a downward move on the Italian side. Terna has announced that the Sorgente-Rizziconi will be commissioned by June 2016, although we believe that the market may be too pessimistic regarding the impact of this interconnector on prices.

India Demand Growth Strong, But Is It Strong Enough?

Seaborne coal pricing mirrored global energy and equity markets last week, pushing lower early in the week, followed by a strong rally on Friday capping off the week. Despite the end of week rebound, coal prices finished the week in the red vis-à-vis the prior week ending April 1, with API#4 (South Africa) and FOB Newcastle (Australia) prices notably losing the most amount of ground. Demand growth globally remains somewhat soft, particularly as Chinese imports continue to pull back relative to prior-year levels. India’s electricity generation surged in March, but even a 15.3% year-on-year increase in coal-fired generation during the month did little to chip away at the historic high coal stocks at power plants.

CA Court Order Clarifies Timeline in CCA Auction Litigation, Narrows Issues

The California Court of Appeals has issued an order narrowing the issues that the Court is still considering and offering an updated timeline in which we can expect a decision. PIRA’s sense is that the Court’s request for supplemental briefing is generally a bullish factor for the auction’s validation. Final word is now expected from the CA Supreme Court in 2H 2017.

Underlying U.S. Economic Condition Is Solid; Japan Is Worrisome

A tracking estimate of the first quarter U.S. GDP growth has increasingly turned weaker. But concerns about a recession remain implausible. For one thing, the U.S. does not face the threat from broad-based economic imbalances. Traditional drivers of growth, such as housing and consumer purchases of durable goods, are also likely to supply sufficient momentum in the coming periods. The U.S. dollar’s recent weakness has generally been constructive for market confidence. The Japanese yen’s recent strength may reflect the market’s concern that the Bank of Japan may be running out of ways to ease policy.

Expanded Panama Canal to Change LPG Trade Flows

Spot VLGC tanker freight rates continue to decrease with prices on the benchmark Ras Tanura to Chiba route easing an additional 4.5% last week to under $27/MT. Spot freight from Houston to Japan fell to near $65/MT. These next months will likely see the last series of cargoes being fixed on the longer Horn of Africa route to Asia. The opening of the expanded Panama Canal in June should lead to the elimination of the longer route, as PIRA calculates that the canal voyage will save an estimated $1 million per round trip under current spot freight and fuel price conditions.

U.S. Prices and Margins Rise

The week ending April 1, U.S. ethanol prices rallied to the highest levels of the year. Production margins jumped as corn costs plunged.

Indiana

Friday’s route through west central and northwest Indiana saw much of the same as Ohio. Spring weather, if you can call it that, consisted of snow, sleet, rain, some sun, and more snow. Farmers were left looking at the sky and wondering if spring would ever arrive. Then again it was only the first week of April, but crop prices have every producer on edge and poor planting weather is just one more thing to worry about.

Healthy Seasonal Gasoline Cracks Will Outperform Diesel

Refining margins will stay generally healthy and runs reasonably high through the summer, propelled by firm gasoline cracks, before weakening in the autumn. Refiners are shifting yields from middle distillates toward gasoline. Product stock levels are high, but not uniformly, with Atlantic Basin gasoline stock coverage relative to local/export demand tracking on the low side, but distillate staying much higher than normal. Diesel cracks will only gradually recover.

Gorgon Sneezes; China Breathes a Sigh of Relief

The LNG market may not be flinching at this exact moment at the news of a Gorgon commissioning phase shutdown. After all, such issues are commonplace, as systems are tweaked and glitches sorted out. But what happens if the loss is sustained for a longer period of time?

PJM 2019/2020 Capacity Auction: The Party's Over … For Now?

Driven by large downward revisions to load forecasts, combined with continuation of the 80% Capacity Performance (CP) construct for the forthcoming 2019/2020 capacity auction, PIRA expects the RTO auction to clear at $130-$140/MW-day for the CP product (significantly weaker year-on-year). The EMAAC and ComEd LDAs should continue to clear higher, though not as strong as last year. These weaker results could be a temporary blip, however, as the subsequent auction (2020/2021) should again see stronger clearing prices with implementation of 100% CP.

Maryland GHG and Renewables Bills Advance

The Maryland legislature has passed a GHG bill (already signed into law) and a bill strengthening the state’s Renewable Portfolio Standards (RPS). Increases in the solar and Tier 1 RPS requirements will have direct impacts on the MD Solar REC market and MD and wider PJM REC markets as well.

Global Equities Retrench

Global equities fell back slightly on the week. In the U.S., all the tracking indices lost ground, other than energy, which gained 2.2%. Retail and banking were the weakest performers. Internationally, the tracking indices were mostly lower, though Japan posted a decent gain. Among specific markets, the Argentinian market posted a steep drop.

Production and Stocks Decline

About 808 thousand barrels were drawn from U.S. ethanol inventories the week ending April 1, lowering them to 22.2 million barrels. PADD I stocks plummeted from a four-year high, while PADD V inventories built for the first time in five weeks.

Western Ohio

40F with rain, sleet, and snow are not exactly conducive to planting, but those were the conditions that greeted us Thursday in central and southwest Ohio. Needless to say there wasn’t a lot of activity, but locals told us that a fair amount of anhydrous has already been applied this spring, so once the weather breaks, which looks like it’s about a week away, it will be all systems go.

Bullish U.S. Crude Stats

An increase in crude runs and a drop-off in crude imports drove an unexpectedly large crude stock draw. Total products had a net build, for an overall commercial stock build, to a new record high commercial stock level. With a larger total build this week last year, the surplus did narrow. Also of note, the week-to-week increase in total demand which was a function of the EIA using a sharply lower total assumed product exports estimate. Next week a decline in crude runs and an increase in crude imports should return the U.S. crude balance to a small build, while that same decline in crude runs and increase in real product exports drive draws for the three major light products.

Promising Signs of Supply-Side Balancing

Thursday’s EIA storage report revealed a new record end-March inventory level of 2,480 BCF, besting the previous record of 2,477 BCF set in 2012. Yet, the market’s foray back to ~$2/MMBtu suggests attention is shifting beyond the massive year-on-year surpluses in place — for the U.S. as a whole or for the even more ominous situation in the Gulf producing region, where inventories are at nearly ~80% of useable working gas capacity. Other considerations have apparently attracted the market’s attention, including late-breaking weather demand and early signs of a slowdown in domestic production.

Japanese Crude Runs Declines, Imports Rose and Stocks Built

Crude runs were lower and crude imports rose, which produced a small crude stock build of 0.5 MMBbls. Finished product stocks drew moderately, with all the major products, other than kerosene, seeing lower levels. Gasoline demand increased strongly with much higher yield such that stocks drew only slightly. Gasoil demand was also modestly higher, with lower yield and a big surge in exports, thus stocks drew moderately. Kerosene demand declined seasonally and the stocks reverted back to building. Refining margins remain good. Naphtha and gasoline cracks remain strong, while heavier product cracks eased.

China Looks at Simplifying End-to-End Gas Prices

China may harmonize wholesale natural gas prices for residential and industrial users as early as this year in an effort to make pricing of the fuel more market based. The National Development and Reform Commission is discussing a plan to set a single wholesale gas price for all users in 2016 and let suppliers and customers negotiate rates around the benchmark. Industrial and commercial users in most regions pay a premium for gas compared to residential consumers.

Market Eases Back

After seven straight weekly gains, the market eased back slightly. High yield debt and emerging market debt both posted slight gains, while volatility (VIX) increased a bit. The yield of the BAA-rated corporate bond has continued to decline. The U.S. dollar has been generally weaker lately. Commodities, including total, energy, and ex-energy, again eased slightly this past week after having posted solid gains.

California Carbon Below Auction Floor

California carbon allowances are trading below the auction floor price. Although balances are not tight in the near term, the allowance bank is not particularly large. PIRA expects ongoing buying needs to bring secondary market prices in line with the auction reserve by the May auction. Regulatory actions later this year will provide clarity for post-2020. PIRA believes the auction is ultimately likely to be upheld by the courts.

January 2016 U.S. Crude Production Declined, Even as Domestic Crude Supply Increased vs. Last Month

The January 2016 Petroleum Supply Monthly showed another decline in U.S. crude production, although a revised swing positive in the balance item resulted in domestic crude supply being up 250 MB/D versus December 2015. Rail movements of crude continue to have substantial ongoing revisions, and those revisions flow through to PADD-level crude balances, going back to the start of 2014 in the latest release. EIA Crude production data reported using Form 914 have significantly fewer revisions than prior methods, but large and volatile balance items still imply uncertainty in the production data.

Italy Will Take More LNG, But at What Cost?

As the global LNG market looks for a home to park its growing oversupply, marketers and traders will need to compete hard for Italy’s burn. Despite being surrounded by illiquid markets like southern France, Switzerland, and Slovenia, Italy has developed a diverse supply mix. The country’s LNG suppliers include Algeria and Qatar, while the contracted pricing includes Norway, Russia, Libya, and Algeria. Between 2011and 2015, delivered LNG prices linked more closely to higher priced Italian contracted pipeline supply. However, since then LNG has been forced to link closer to Italian market prices (PSV) to move all its volume to Italy. We certainly expect this flow to continue into the future and to force down Italian premiums.

EIA Begins Reporting Rail Movements of Ethanol and Biodiesel, Driving Revisions to PADD Gasoline Demand

The EIA has begun publishing ethanol and biodiesel movements by rail, with the release of the January 2016 Petroleum Supply Monthly. The data extend back to January 2014. The data provide insight into the importance of rail transportation to biofuels, and it now drives PADD-level ethanol and biodiesel net receipts. Net-net, these changes to regional ethanol balance drive revisions to PADD gasoline demand, some significant. The revisions to PADD distillate demand are smaller.

U.S. January 2016 DOE Monthly Revisions: Demand and Stocks

DOE released its final monthly January 2016 (PSM) U.S. oil supply/demand data last week. January 2016 demand came in at 19.06 MMB/D, which was 150 MB/D lower than what PIRA had carried in its monthly balances. Compared to the DOE weeklies, total demand was lowered 550 MB/D. Distillate was revised higher by 344 MB/D. Year-on-year demand declined in January 2016 by 194 MB/D, or -1% led by weak distillate demand, declining almost 10%, or 419 MB/D. End-January total commercial stocks stood at 1,345.4 MMBbls, which was very close to what PIRA had assumed. Relative to the final January 2015 data, total commercial stocks are higher than year-ago by 162.1 MMBbls.

Aramco Pricing Adjustments for May — Remaining Market Competitive

Saudi Arabia's formula prices for May were just released. U.S. differentials were raised across the board. The move was consistent with the trend currently being seen and expected in the refining margins on competing domestic grades in PADD III. In Asia, the two lightest grades were raised, while Arab Light was cut $0.10/Bbl, Arab Medium was left unchanged, and Arab Heavy cut $0.35/Bbl. Here too, it was consistent with key pricing drivers. In Asia there has been strength in gasoline and naphtha cracks, along with weaker fuel oil cracks. In Europe, extra-light was raised $0.60/Bbl, while both of the heaviest grades were cut. Arab Light was left unchanged, which was very close to what our pricing model had forecast.

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.

Aquatic Engineering & Construction Ltd, an Acteon company, has mobilized two projects in the Gulf of Mexico. Both projects build toward the company’s value proposition focused on strength in depth and development of Aquatic’s growth in the Americas market.

The first project involved installing steel flying leads incorporated into the subsea distribution system. For this project Aquatic utilized its 120Te modular drive system, which was based out of Aquatic’s operational yard in Morgan City, Louisiana. The project was executed offshore by Aquatic’s local support staff during the installation campaign. This project is currently underway and will be completed in mid-2016.

The second project uses Aquatic equipment also based out of Morgan City to install a deepwater umbilical. The project is another example of Aquatic’s full solution offered in-country to minimize both mobilization costs and project delivery time. Aquatic’s 500Te reel drive system and 50Te 4-track tensioner system were deployed to safely handle the installation of the umbilical. The project created unique challenges which included complex equipment deck layout plans and handling of the product. A team of six Aquatic Offshore Supervisors and Operators were mobilized to support the client’s offshore operations.

Aquatic’s managing director, Martin Charles commented, “Aquatic is a UK company that promotes the principal of local people for local jobs and this global and local philosophy is already at work in our bases in Singapore. We believe by supporting local economies, we can develop long term relationships in strategic places around the world and these diverse projects gave us the opportunity to take this step for the US market. Aquatic focuses on the added value necessary to slot seamlessly into the organization of our customers, offering engineering support and equipment which is designed and built to provide reliability and capability for flexible product solutions. This allows our specialist teams of people to support the installation, recovery and replacement of reelable products offshore. Aquatic’s strength in depth means our partners can be confident that working with us will deliver their projects safely with proven solutions in deepwater applications.”

Fugro has been awarded a contract by Indian oil and gas company, ONGC, for the provision of ROV services on board the drillship Sagar Vijay. The contract, which was signed at ONGC’s offices in Mumbai, involves providing support for deepwater drilling operations off the east coast of India, in depths up to 900 metres.

A range of tasks will be performed by Fugro’s FCV ROV, including seabed surveys, monitoring of subsea drilling operations, guideline cutting and reinstallation, remote intervention and AX/VX ring gasket installation. Services also include setting up regular fluid injection, drilling re-entry, bullseye checks and routine video monitoring, inspection and cleaning on and around the BOP.

Fugro will also provide drill support tooling during the 18-month project, which is expected to commence in May 2016.

Radio Holland, member of RH Marine Group (formerly Imtech Marine), was awarded an FLNG project from Keppel Shipyard in Singapore. The contract encompasses an Offshore Telecommunication System package for the Golar Hilli LNG carrier, which is being converted into a Floating Liquefied Natural Gas (FLNG) unit. The contract was officially signed in Singapore following a tender procedure that started in November 2014.

René ten Brinke, CEO RH Marine Group, commented: “We are very pleased to be working on such a major contract and have been working closely with Keppel Shipyard since the bidding stage started in November 2014. Some months ago, Radio Holland Singapore also moved office to the district of Singapore where many of our maritime customers are based.”

Whilst 2016 has so far seen much discussion surrounding the oil price, oversupply and the almost daily mini-rallies that appear as fickle as my two-year old’s breakfast selection, not a great deal of attention has been paid to the gas outlook.

From 2016 production levels, Douglas-Westwood currently forecast a 16.2% increase in global gas production to 2020 compared with just a 3.3% increase for oil during the same period. Is this simply a case of stronger demand or is there more to it?

As a geographic spread we see 95% more countries increasing YoY gas production during 2017 as those reducing, this compares to just 44% for oil. The production spread (difference between the largest increase and the largest decrease) between the 59-61 countries covered within the DW D&P report shows a spread of 703 kboe/d for oil and 826 kboe/d for gas during 2017 decreasing to 383 kboe/d for oil and 443 kboe/d for gas in 2020.

So not only will gas see a more rapid relative production increase but it will also experience a slower decrease in YoY production post-2017. However, DW expects to see YoY gas production continuing to increase to the end of our current forecast period in 2022, whereas oil is expected to start showing negative production growth from 2021.

The oil supply glut will return in 2017 thanks in large part to the ramping up of Iranian production and already committed Canadian oil sands projects coming online, offsetting large drops from the likes of the USA –207 kboe/d and Nigeria –121 kboe/d. The South Pars field in the Arabian Gulf along with new shallow water gas projects in Australia supported by the demand for LNG/CBM feedstocks are significant, although demand-based, contributors to the gas outlook.

With the recent lifting of sanctions on Iran and the growth of South Pars there will almost certainly be opportunities for well-placed and well-informed Western OFS providers.

So 2017 really is the wildcard year, or perhaps more appropriately, the production Twin Peaks. The question is surely not if, but how high.

Gareth Hector, Douglas-Westwood London