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.
Global-leading energy services company Proserv has been awarded a multi-million pound contract with Statoil for the provision of production control equipment in Norway.
Proserv will supply five wellhead hydraulic power units (HPUs) for Statoil’s Gullfaks oil and gas field in the Norwegian sector of the North Sea which is undergoing an extensive topside upgrade program.
The design, manufacture and supply of the workscope will be carried out by Proserv’s specialist engineering and project teams in Stavanger, Norway. Work has already begun on the manufacturing of these systems and all five are expected to be delivered to Statoil by 2017.
Statoil’s Gullfaks A. Photo credit: Øyvind Hagen – Statoil
Henrik Johnson, Proserv’s regional president for Scandinavia, said: “This is a significant win for the company that highlights the strength of our technical and engineering expertise as well as our market-leading status for the provision of surface production systems and services.
“We are also extremely pleased that Statoil have so clearly shown their trust in us to deliver robust technology and services on time and to the highest standards, and we look forward to working with them in the successful delivery of this project.”
The agreement comes just months after Proserv was awarded a contract to provide topside control equipment at one of the largest field discoveries on the Norwegian Continental Shelf. Proserv is supplying Aibel, on behalf of Statoil, with a HPU and three chemical injection panels for the prestigious Johan Sverdrup development’s drilling platform.
Proserv is a global-leading market specialist in life-of-field services for the energy industry with its proven technologies and engineering expertise underpinning the company’s success.
The company, which operates worldwide through 25 operating centers based in 11 countries, has a 40-year track record in delivering world-class solutions particularly in the subsea, production and drilling market sectors.
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) CourseGE’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
As a result of a new initiative by PETRONAS to stimulate offshore E&P investment activity, PETRONAS through Malaysia Petroleum Management (MPM), has taken the decision to open an area of Malaysian offshore waters to the multi-client model for the first time.
A consortium comprising of PGS, TGS and Schlumberger WesternGeco, the industry’s three largest multi-client companies, has successfully won the tender for the rights to undertake a multiclient seismic program offshore Sabah.
Offshore Sabah sits in an active fold-and-thrust province that hosts a number of proven hydrocarbon accumulations. An extension of the Brunei Baram Delta play, the primary exploration target has been Miocene deltaics with some younger Pliocene. With exploration and drilling progressing into deeper frontier waters, there is potential for new plays in the carbonate and syn-rift section. This large basin will benefit from modern, high resolution broadband 3D seismic necessary to understand both the existing play concepts and new potential plays.
The consortium is planning to apply a combination of the industry’s most advanced technology solutions including multi-sensor acquisition using PGS GeoStreamer® and WesternGeco IsoMetrix* marine isometric seismic technology, PGS Towed Streamer EM technology and advanced broadband 2D acquisition and processing techniques.
*mark of Schlumberger
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.
Aqueos Corporation, a ‘World Class Subsea Service Provider℠' for the offshore oil and gas sectors of the Gulf of Mexico and the Pacific West Coast, received the Award of Honor from the National Safety Council – South Louisiana Chapter.
This award recognizes Aqueos Corporation for Occupational Safety Performance for 2015, identifying Aqueos as working 500,000 – 1,000,000 hours without a recordable incident. “This award from the National Safety Council – South Louisiana Chapter is a high visibility acknowledgement of the commitment of all Aqueos personnel, including demonstrated passion and commitment from senior management. We attribute a large part of our success to a safety positive culture, which supports continuous improvement, open communication, and a sustained focus on our core value of safety,” comments Jerry Zebor, HSEQ Director.
Zebor further commented, “This recognition is something all Aqueos personnel can be proud of, and it is something to build on as we truly believe all accidents are preventable.”
Aqueos Corporation, with offices in Broussard, LA and Ventura, CA, provides marine construction and specialty subsea services, including a complete range of commercial diving, remotely operated vehicles (ROV’s) and vessel-related services primarily to the offshore oil and gas markets.
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
Bibby Offshore Holdings Limited (“Bibby Offshore” or the “Company”), a leading provider of subsea installation, inspection, repair and maintenance (“IRM”) services to the offshore oil and gas industry, announces the appointment of Archie Kennedy to the Board of Bibby Offshore as a Non-Executive Director. Archie previously served on the Company’s Board between 2011 and 2012.
Archie Kennedy, Non-Executive Director, Bibby Offshore
Archie is a Chartered Engineer with over 35 years’ experience in the oil and gas industry. He has previously held roles as Managing Director of Nexen Petroleum UK Ltd. (2012-2015) and Managing Director of ConocoPhillips UK Ltd. (2004 – 2009). Archie also brings extensive international experience including postings in the USA and Canada.
Howard Woodcock, Chief Executive of Bibby Offshore commented: "We are delighted to welcome Archie to the team and look forward to the benefit that his contribution will bring. His extensive experience of our industry, in a career spanning 35 years, both strengthens and broadens the expertise on the Bibby Offshore Board.”
BOARD COMPOSITION
The Board of Bibby Offshore is comprised of:
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