The Industry Technology Facilitator (ITF), together with Energie Beheer Nederland (EBN) and Petroleum Development Oman (PDO), has launched a joint industry project (JIP) which will reduce time and costs for oil producers to determine whether gas fields are economically viable.
The PETGAS III (Petrophysics of Tight Gas Sandstones) project sees the continuation of the successful work being conducted by University of Leeds in examining the petrophysical properties of tight gas sandstones. A robust database of key petrophysical properties has been formed to make rapid estimates of the properties of unknown samples based on their microstructure. Its specialist software, PETMiner, has been developed to visualise this and other petrophysical properties data.
The database of the petrophysical properties of tight gas sandstones will be used to improve the interpretation of wire-line log data for the characterisation of tight reservoirs during exploration, appraisal and production.
ITF CEO, Dr Patrick O’Brien
The project partners, EBN and PDO, are contributing £321K in total and the project, now in its third phase, will run for a period of three years. The project remains open to late participants.
Professor Quentin Fisher of University of Leeds, the principal researcher of the project said: “When oil producers are developing low permeability objectives, the petrophysical properties largely determine whether gas fields are economically viable. Current methods used in the industry are both expensive and time consuming.
The PETGAS research, which is now in its third stage, has been transformative in creating a workflow, database and datamining software that allows operators to reduce the cost and time to estimate to petrophysical properties of tight gas sandstone prospects.”
ITF CEO, Dr Patrick O’Brien said: “At ITF, we are seeing new opportunities for technology developers as the pursuit to increase efficiency is forcing the oil and gas industry to look for new technologies and solutions. The launch of a new phase of the PETGAS project demonstrates the leading edge work of UK Universities, and how the joint industry project model enables operators to effectively leverage the information they share into an advanced software model to radically transform industry outcomes. The work of the PETGAS JIP could in time play a key role in unlocking the significant, yet untapped, potential of stranded gas resources in the Southern North Sea and beyond.”
The PETGAS consortium has been running for eight years and has received sponsorship from San Leon, BG, BP, EBN, Engie, Shell and Wintershall. Results of PETGAS I and PETGAS II have been used by industry to justify drilling new prospects and to improve understanding of the controls on gas and water production in existing fields, which has shaped appraisal and production strategies. The PETGAS III project will extend the database by a further 15 samples per sponsor and continue the extensive special-core-analysis (SCAL) test work on a further seven samples per sponsor.
ITF is driving oil and gas technology development and collaboration. With a membership of international oil and gas operator and service companies, the industry technology facilitator has launched over 200 innovative joint industry projects. ITF champions technology development and believes investment is crucial to solving the most pressing challenges the industry faces in securing reserves and maximising economic recovery.
Offshore accommodation and workspace solutions specialist, HB Rentals, has invested in excess of £750,000 into new product lines in response to customer demand.
The company has added hazardous area workshop containers to its rental fleet which are multi-functional with the combination of standard features and fit-out options. This offers a wide range of applications ranging from mechanical workshops, electrical workshops, rigging lofts and storage containers.
The new DNV 2.7-1 certified workshops come with ATEX Zone 1 electrics, lighting, heating and air conditioning, allowing them to operate in a hazardous area. Standard features also include workbenches, vice and caged shelving with the option of an extendable lifting beam and hoist.
In addition to the workshop containers, HB Rentals has invested in refrigeration / freezer containers, which are also DNV 2.7-1 certified. The containers feature stainless steel hygienic surfaces for easy cleaning and wash down, dual temperature settings for refrigeration or freezing and automatic sensor lighting.
Featuring Carrier’s marine refrigeration plant, the containers can operate in environments ranging between -30°C to +50°C and also have a removable floor grid for easy cleaning.
Norman Porter, managing director HB Rentals Limited, commented: “We are thrilled to be adding these two new product lines to our portfolio of rental equipment. So far we have received a healthy level of enquiries and already have success with a number on contract in the North Sea.
“We are continuing to diversify our business to meet the changing customer requirements and our investment in this new equipment is a testament to our on-going commitment to the industry.”
Bureau of Ocean Energy Management (BOEM) Director Abigail Ross Hopper has announced that the bureau will offer approximately 47 million acres offshore Louisiana, Mississippi, and Alabama for oil and gas exploration and development in a lease sale that will include all available unleased areas in the Central Planning Area (CPA).
Proposed Central Gulf of Mexico Lease Sale 247, scheduled to take place in New Orleans in March of 2017, will be the twelfth offshore sale under the Administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 (Five Year Program). This sale builds on eleven sales, already held in the current Five Year Program, that have netted more than $3 billion, and supports the Administration’s goal of continuing to increase domestic oil and gas production.
“As one of the most productive basins in the world, the Gulf of Mexico remains a critical component of the Administration’s domestic energy strategy to create jobs, foster economic opportunities, and reduce America’s dependence on foreign oil,” Hopper said. “The exploration and development of the Gulf of Mexico’s vital energy resources will continue to help power our nation and drive our economy.”
Sale 247 will include approximately 8,878 blocks, located from three to about 230 miles offshore, in water depths ranging from 9 to more than 11,115 feet (3 to 3,400 meters).
“The decision to move forward with plans for this lease sale follows extensive environmental analysis, public comment and consideration of the best scientific information available,” said Hopper. “This proposed sale is another important step to promote responsible domestic energy production through the safe, environmentally sound exploration and development of the Nation’s offshore energy resources.”
The proposed terms of this sale include conditions to ensure both orderly resource development and protection of the human, marine and coastal environments. These include stipulations to protect biologically sensitive resources, mitigate potential adverse effects on protected species and avoid potential conflicts associated with oil and gas development in the region. BOEM’s proposed economic terms include a range of incentives to encourage diligent development and ensure a fair return to taxpayers. The terms and conditions outlined for Sale 247 in the Proposed Notice of Sale are not final. Different terms and conditions may be employed in the Final Notice of Sale, which will be published at least 30 days before the sale.
All terms and conditions for Central Sale 247 are detailed in the Proposed Notice of Sale information package, which is available here. Copies of the PNOS maps can be requested from the Gulf of Mexico Region’s Public Information Unit at 1201 Elmwood Park Boulevard, New Orleans, LA 70123, or at 800-200-GULF (4853).
The Notice of Availability of the Proposed Notice of Sale will be available tomorrow for inspection in the Federal Register here and will be published in the September 16, 2016 Federal Register.
Hydrographic survey and diving equipment specialists, Unique Group, has selected subsea vehicle positioning and navigation technology from Sonardyne International Ltd, to add to its expanding equipment rental pool.
The SPRINT Inertial Navigation Systems (INS) and Syrinx Doppler Velocity Logs (DVLs) will be held at the company’s regional headquarters in Aberdeen and made available to support survey and construction projects using ROVs and AUVs in water depths up to 4,000 meters.
Introduced onto the market over 10 years ago, Sonardyne’s SPRINT makes optimal use of acoustic aiding from data sources including USBL, LBL and DVL and pressure sensors to improve the accuracy, precision and reliability of subsea vehicle positioning. Unique will be one of the first rental companies to own Sonardyne’s recently launched third generation SPRINT which features dual outputs to support Survey and ROV teams, a small titanium housing and upgradeable performance levels to suit users’ operational requirements.
Sonardyne’s Syrinx DVL provides tight beam-level aiding to SPRINT INS allowing for unprecedented positioning performance, even if one or two DVL beams are unavailable. As a standalone instrument, fully linear signal processing, low noise electronics and adaptive bottom lock, enables Syrinx to operate at altitudes up to 50 percent higher than conventional 600 kHz DVLs with the high resolution performance of a 1200 kHz DVL, all whilst navigating over undulating and challenging terrain of any type.
To complement their SPRINTs, Unique has selected 4,000 meter rated Syrinx DVLs which can be mechanically mated with 3rd generation SPRINTs to make installation on vehicles straightforward, an important consideration when equipment is being mobilized for short term projects.
“The specifications for SPRINT and Syrinx are individually very impressive but when they are combined, it’s clear to see that they provide outstanding levels of performance in a single offering for ROV guidance and survey,” said Andy Doggett, Director at Unique Group’s Survey Equipment division. “The decision to invest was therefore a simple one for us – and one which allow our clients to complete their projects in less time and for less cost.”
The United States Coast Guard (USCG) has confirmed that Norwegian ballast water treatment (BWT) specialist Optimarin has become the first supplier to submit an application for type approval. John Mauger, Commanding Officer of the Coast Guard’s Marine Safety Center (MSC), describes the move as “a milestone” in the fight to protect marine biodiversity in US waters.
Optimarin’s application was submitted this week by DNV GL after the firm’s Optimarin Ballast System (OBS) satisfied the USCG’s stringent testing criteria for fresh, brackish and marine water. MSC has the stated goal of reviewing and replying to submittals within 30 days, after which point successful suppliers will receive their approval certification.
In a statement from MSC, Mauger hailed the development, commenting: “The receipt of the first application for a Coast Guard type-approved ballast water management system represents an important milestone for the future of protecting our nation’s waterways from the spread of invasive species.”
Optimarin CEO Tore Andersen responds: “We have invested a huge amount of time and money in developing a reliable, simple, effective, environmentally friendly and powerful BWT system. This final step towards approval is reward for that, positioning us at the forefront of the market for any shipowner that wants the ultimate in compliance, fleet flexibility and proven BWT success.
“We believe we’re now the clear choice within our chosen segments and are delighted to be acknowledged by USCG as a key player in the fight against this pressing environmental problem.”
Optimarin has received orders for around 500 OBS systems, which utilize a combination of filtration and powerful 35kW UV lamps to treat ballast water without the need for chemicals. Of these units 280 have been installed worldwide, with close to 100 retrofits, fitted in tandem with global engineering partners Goltens and Zeppelin.
As well as satisfying all IMO and USCG requirements, OBS is certified by a comprehensive range of classification organizations, including DNV GL, Lloyd’s, Bureau Veritas, MLIT Japan, and American Bureau of Shipping.
Bureau Veritas, a global leader in testing, inspection and certification (TIC) services, has appointed Paul Shrieve as chief executive officer (CEO) of North Sea Offshore Operations, Marine and Offshore.
Paul, is based at the company’s Aberdeen office, and has more than 15 years experience in senior management in the oil and gas industry, including roles at Senior Vice President at other TIC organizations and as Managing Director at ATL Consulting Services, which was acquired by Bureau Veritas in 1999. The appointment marks a return to the company for Paul, who was Vice President of North Sea Oil and Gas from 1999 until 2006.
Paul Shrieve, CEO, Bureau Veritas
Paul rejoining Bureau Veritas earlier this year reaffirms the company’s long term commitment to the North Sea, and the business has been recently restructured to provide an enhanced, more streamlined service for customers. Five new Client Technical Services Manager roles have been created that will allow customers to have a single point of contact who can provide leadership in all areas of planning, financial control, technical, operations management and communication.
The company’s Aberdeen office has also welcomed 10 new members of staff this year with further hiring plans for 2017.
Paul commented: “I am thrilled to be back with Bureau Veritas at such an exciting time. The new restructure will allow us to develop deeper and broader client relationships as well as allow continued development opportunities for our staff.”
“As part of the company’s growth plan, we hope to bring a wider range of compliance services across the whole project life cycle from concept to decommissioning. Despite current market conditions, it is essential we continue to invest in our industry and that is exactly what Bureau Veritas plans to do.”
Bureau Veritas employs around 66,500 people globally, with 3,000 in the Marine and Offshore (M&O) division and 75 in M&O North Sea Offshore Operations, which are based in the UK and Norway. Despite the challenging conditions facing the oil and gas industry, Bureau Veritas, which sponsored the Innovation in Safety category at this year’s Offshore Safety Awards, sees the North Sea as a key area for business growth.
Paul added: “We have a renewed energy and focus on service delivery towards our clients, challenging our existing activities to ensure we are supporting our clients to face the current operating environment.”
“We have increased the level of client engagement, both current and prospective, looking for opportunities to develop more of a partnership relationship rather than a client/supplier relationship.”
“Internally, we have been investing in training despite the challenging market conditions to make sure our staff are well equipped to support client needs and equally, respond to market demand for a wider range of services being delivered by Bureau Veritas at a local level.”
Statoil has, as operator for the Johan Castberg project, distributed a proposed impact assessment program for the largest field yet to be developed on the Norwegian continental shelf (NCS).
“During our improvement work we have created new opportunities for the Johan Castberg field in the far north. We have changed the concept and found new solutions that allow us to realize the project. But we are still vulnerable to increasing costs and a continued low oil price,” says Margareth Øvrum, executive vice president for Technology, Projects and Drilling in Statoil.
Johan Castberg field. Image courtesy: Statoil
The proposed impact assessment program is an essential part of the preparations before a final development plan for Johan Castberg is submitted in 2017, according to schedule. The plan will present the development, relevant development solutions and expected impacts on other businesses and communities. The proposed program is being sent to consultative bodies today to allow them to submit any issues for discussion during the consultation process related to the Johan Castberg impact assessment work.
“The Johan Castberg project may be a central project for further development of the NCS and in the far north. The field will provide significant tax income. The field development and operation will also create new opportunities for the industry throughout Norway and in North Norway in particular,” says Arne Sigve Nylund, executive vice president for Development and Production Norway.
Based on a spin-off report from Agenda Kaupang the Johan Castberg project, based on an investment estimate of between NOK 50 and 60 billion, will represent a significant part of NCS investments in the period 2018-2022. The first phase of the Johan Sverdrup development will be completed in this period. A continued low oil price may affect these plans.
According to Agenda Kaupang’s report the expected value creation in Norwegian supplies of goods and services to Johan Castberg amounts to NOK 29 billion, more than half of the project’s total investments. Value creation in North Norway during the development period is estimated to be NOK 1.7 billion.
“The Johan Castberg field will be producing for more than 30 years, and the major project spin-offs will be created in the long-lasting production phase. Castberg will trigger much activity for suppliers in North Norway and have ripple effects throughout Norway Norway, both in the development phase and the operating phase. In a normal year of operation the Johan Castberg field will generate 1200 man-years in Norway, of which 300 are expected to be in North Norway,” says Nylund.
Recommended power solution for Johan Castberg Statoil has, on behalf of the license, made an extensive analysis of possible power solutions for Johan Castberg. Aker Solutions, Aibel, ABB, Unitech, Pöyry and Thema Consulting have contributed to the power analysis. The power solutions include full and/or partial electrification based on power from land as well as gas-fired power.
Due to the long distance and technical challenges the cost of the measures related to partial/full electrification will be high, from just above NOK 5000 per ton of CO2 to just above NOK 8000 per ton of CO2. Investment costs for full/partial electrification will span from more than NOK 4 billion to just above NOK 12 billion. The Johan Castberg power solution effort reveals that costs related to land-based power, including technical challenges, represent a risk to both the timeline and feasibility of the project.
“We have developed a highly energy-efficient solution involving use of gas turbines for power generation on Johan Castberg. By use of heat recovery we achieve a turbine power efficiency of 64%, which is an outstanding result from use of gas turbines on offshore platforms. The license partners consider gas-fired power to be the most suitable and socio-economic solution for the development,” says Øvrum.
Johan Castberg will be prepared for future electrification by use of alternating current technology in case this becomes an efficient and feasible solution in the future.
Emissions from Johan Castberg by use of gas turbines will be 0.27 million tons of CO2 per year, or 2% of current annual emissions from the NCS.
The proposed impact assessment program covers only the offshore field development, not a possible terminal at Veidnes, which is a separate project with a separate timeline. Statoil is cooperating with the other licenses on Wisting, Goliat and Alta/Gotha to secure sufficient volume and a profitable basis for a terminal.
CGG announced on Tuesday, that the Fast Trax™ Reverse Time Migration (RTM) data from its Encontrado multi-client mega-merge project covering the Perdido fold belt has been delivered on time to the industry and the Comision Nacional de Hidrocarburos (CNH) ahead of Mexico’s December Licensing Round.
The Fast Trax results are available now for license on a non-exclusive basis, with final imaging datasets expected in the summer of 2017.
The Encontrado reprocessing project is a unique merge of over 38,000 km2 of wide-azimuth data from over nine previously acquired and processed surveys, covering some of the most prospective areas of the Gulf of Mexico, including the Great White and Trion discovery to the north and Corfu and Ixcuta further south. Over 35,000 km2 of the data is in the Mexican Gulf of Mexico. The data is being processed through an advanced high-end sequence, including bandwidth extension and 3D deghosting, 3D SRME and advanced imaging using TTI RTM and Kirchhoff migrations. Tomography and Full-Waveform Inversion (FWI) are being used to enhance the velocity model.
Jean-Georges Malcor, CEO, CGG, said: “At a time when Mexico is opening up its oil and gas sector to new players, CGG is capitalizing on the wealth of local experience it has gained in high-end deepwater acquisition and processing to help them make better decisions, faster. We have therefore timed delivery of our Encontrado Fast Trax results to give the industry a previously unavailable, very large regional overview of the exploration blocks being offered in Mexico’s Licensing Round based on ultramodern subsurface images.”
Add Energy, an international energy consultancy provider, has been awarded a contract worth £120,000 with a leading upstream gas operator in Oman.
The contract has secured jobs at the company’s Aberdeen office and enabled sustainability of its Oman office and in country partnership.
The scope of work will see Add Energy provide the plant with equipment specific maintenance strategies and procedures, which will enable maintenance execution and planning to be optimized. The project will be carried out with an aim of reducing equipment downtime, by mitigating failures due to maintenance which is inadequate or without full coverage.
Peter Adam, Add Energy managing director, commented: “We are thrilled to be have been awarded this contract from a world class upstream gas operator in Oman. Having completed previous contracts in the region, the Middle East has always been a focus for Add Energy and we look forward to working closely with our client in the coming months.
“This contract signifies that while cost cutting continues, operators still need to invest in initiatives that are driven towards efficiency and streamlining operations.”
The project will be carried out by Add Energy’s asset and integrity management division in both Aberdeen, UK and Muscat, Oman. Work is due to start in September 2016.
Unique Group’s India office has been selected by Trelleborg’s offshore operation as one of its agents in India. As a part of the agreement, Unique Group’s base in India will offer the full range of solutions from Trelleborg’s offshore operation to customers within the region.
The decision was based on Unique Group’s successful track record and their dedicated, proactive team in the region.
Trelleborg’s extensive range of innovative solutions is taking performance to new levels
Andy Hey, Key Account Manager at Trelleborg’s offshore operation, commented, “We are glad to partner with Unique Group’s India office as they have been our value added partner for the Middle East region for several years now. As they are renowned for their global presence, seamless sales and support structure along with a broad client reach, we are confident that Trelleborg’s offshore operations will have an even greater presence in the Indian market over the years to come.”
Sharad Kumar, Managing Director at Unique Group’s India office further added, “Our team in India is continually growing its presence in the region. India is a strategic market for the offshore industry and our partnership with Trelleborg will help us strengthen our global reach and help expand our innovative portfolio of services in the Indian subcontinent.”
Trelleborg is a world leader in engineered polymer solutions that seal, damp and protect critical applications in demanding environments. Its innovative engineered solutions accelerate performance for customers in a sustainable way. Using advanced polymer material technology, Trelleborg’s offshore operation provides high integrity solutions for the harshest offshore environments and specializes in the development and production of polymers and syntactic foam, for all levels of the offshore industry.
This new partnership supports Trelleborg’s strategy to strengthen its positions in attractive market segments.
The Deepwater Horizon oil spill Natural Resource Damage Assessment Trustees will hold a public meeting on September 28, 2016, at the Renaissance New Orleans Pere Marquette French Quarter Area Hotel. The Trustees will present an update on their work since the historic settlement with BP and describe current and future restoration planning activities and opportunities for public engagement. The settlement with BP included a provision for up to $8.8 billion in damages for injuries to natural resources.
The settlement also established seven geographically-focused Trustee Implementation Groups and allocated funds among the groups based upon the type and magnitude of injuries caused in each area. Representatives of the seven Trustee Implementation Groups will give updates on the planning and implementation of restoration projects for the natural resources injured by the Deepwater Horizon oil spill. The groups are responsible for restoration in these geographic areas: Florida, Alabama, Mississippi, Louisiana, Texas, Open Ocean and Region-wide.
This meeting will serve as the first annual meeting of the Trustee Council and the Region-wide Trustee Implementation Group.
The Trustees encourage the public to attend an open house where the Trustees and Trustee Implementation Group members will be available for conversations and questions. The public meeting, beginning at 6:30 PM, will include a presentation and a public comment session.
If you are unable to attend the public meeting, you will be able to view the meeting presentation and transcript on the Trustees’ website soon after the meeting concludes.
The Deepwater Horizon Natural Resource Damage Assessment Trustees represent five states—Florida, Alabama, Mississippi, Louisiana, and Texas—and four federal agencies—Department of the Interior, National Oceanic and Atmospheric Administration, U.S. Environmental Protection Agency, and U.S. Department of Agriculture.
The Trustee Council was established shortly after the oil spill to determine the type and magnitude of injuries caused by the spill to the Gulf of Mexico’s natural resources. Their injury assessment helped to determine the amount of damages BP was required to pay for those injuries. The Trustees also developed a programmatic restoration plan. The settlement funds are allocated in accordance with that plan.
Statoil has, on behalf of the license partners, decided to exercise the option for engineering, procurement, construction and installation (EPCI) of a gas module that will increase gas processing capacity on the Troll B platform.
The contract has a value of approximately NOK 370 million, and is an option in a front-end engineering and design (FEED) contract awarded to Aker Solutions in January 2016.
“The gas module is an important contribution to reaching the licensees’ IOR ambition for the Troll field. It will raise production capacity on Troll B and help us recover as much as possible of remaining resources during tale end production. From the module starts up in the autumn of 2018 until Troll B is shut down in 2025 it will increase recovery by around 4.7 million barrels of oil,” says project director Eric Normann Ulland.
The engineering work will be carried out by Aker Solutions in Bergen and module construction will start at Aker’s yard in Egersund in 2017. Weighing just above 500 tons, the module is scheduled to be lifted onto Troll B in the spring of 2018 and become operational in the third quarter of 2018.
The Troll Field
The Troll field lies in the northern part of the North Sea, around 65 kilometers west of Kollsnes, near Bergen.
The field comprises the main Troll East and Troll West structures in blocks 31/2, 31/3, 31/5 and 31/6.
Containing about 40 per cent of total gas reserves on the Norwegian continental shelf (NCS), it represents the very cornerstone of Norway’s offshore gas production.
Troll is also one of the largest oil fields on the Norwegian continental shelf. In 2002 the oil production was more than 400,000 barrels per day.
Statoil operates the Troll A, B and C platforms and the landfall pipelines, while Gassco is operator for the gas processing plant at Kollsnes on behalf of Gassled. Statoil is technical service provider for Kollsnes operations.
The enormous gas reservoirs lying 1,400 meters below sea level are expected to produce for at least another 70 years.
Proven in 1979
Norske Shell was chosen as operator when block 31/2 was awarded in April 1979. A large gas find with an underlying oil zone was proven later that year. The block was declared commercial in 1983.
The neighboring blocks were awarded to Statoil, Norsk Hydro and Saga Petroleum in 1983. Block 31/2 contains 32 per cent of the Troll field’s reserves, while the remaining 68% lies in the three other blocks.
The license terms for block 31/2 specified that Statoil could take over as operator for this acreage eight to 10 years after a discovery had been declared commercial.
In 1985, the two licenses were unitized so that Troll could be developed as a single field.
Statoil took over as production operator for Troll Gas on 19 June 1996, while Hydro started production from Troll Oil in the fall of 1995.
Oil Prices Are Supported by Surplus Stocks DecliningThe economic backdrop will continue to be constructive, with growth improving in 2017. OPEC is unlikely to agree to any market action in Algiers, and this will put short-term downward pressure on prices. Winter supply/demand fundamentals are tight enough to generally keep crude oil prices in a $40-$50/Bbl range. Surplus stocks will continue to decline, which should be supportive to prices. Supply creation will become the market’s focus in 2017, and this will require higher oil prices. Product markets have been rebalancing, and upcoming turnarounds will help the process. Refining margin outlook is generally healthy for the upcoming season. U.S. crude price differentials and export incentives are encouraging U.S. exports for now. While supply disruptions have eased, political risks to supply will remain high.
Outages continue to pile up in the Atlantic Basin, while Asian supply continues to climb at a faster rate than demand growth. Less and less Mideast LNG will be required to balance the Asian market, but if this gas continues to move to the East, the bearish impact on prices will begin to build.
With French nuclear output set to remain below historical minima, the French dark and spark spreads have gained considerably in the last few days, moving even closer or even above Italian counterparts. A stronger spark spread for 1Q17 in France could be easier to justify in light of the likely introduction of the carbon tax on coal units (30 euro/MT), but less so in October and 4Q16, even assuming nuclear will remain at historically low levels.
Seaborne coal prices continued to rally, with the market still adapting to the emergence of tightness in the prompt market, which has been absent from coal supply/demand balances for several years. It appears as though the Chinese government has activated the "Tier-1" plan, allowing 74 coal mines to increase output by 0.5 MMmt/day because prices hit 500 yuan/mt for two consecutive weeks. This development took an edge off of the rally in pricing this week. Interestingly, API#2 prices gained the most ground, with 4Q16 prices rising by nearly $2.50/mt while API#4 and FOB Newcastle prices rose by less, respectively. PIRA believes this upward adjustment in API#2 was due to a stronger outlook for coal burn from the French nuclear situation. In general, there is not much incremental supply that could be called upon quickly to deflate this pricing rally, particularly as crossover tons are being pulled out of the thermal market into the coking market.
Environmental justice concerns were front and center at the hearing on the proposed Cap and Trade Amendments to promote a “cap and no trade” agenda focused on achieving localized reductions of criteria and air toxins (non-GHG) pollutants. A new report has linked the location of GHG emitters to disadvantaged communities and to particulate emissions, with little improvement in GHG emissions from CA entities since the start of Cap and Trade. The upcoming Scoping Plan will need to rigorously investigate alternative options to the Cap and Trade and must make the case for Cap and Trade in the context of environmental justice. PIRA expects related ongoing legal challenges and further market uncertainty.
The outcome of the Fed policy meeting was as expected. The central bank’s decision to stay put owed substantially to Fed policymakers’ shifting perspective on the economy’s long-run capacity. Specifically, in the last few years, meeting participants substantially reduced estimates for the potential GDP growth rate and the neutral policy interest rate. This shift means that (even though a rate hike in December appears to be a given at this point) the pace of tightening during 2017 will likely be slow. The Bank of Japan decided to target the yield of 10-year government bonds as a policy objective. The purpose of this move is to make the central bank’s quantitative easing program sustainable.
U.S. LPG price outperformance continues unabated. Mt Belvieu propane futures (Oct.) strengthened by 5.8% to 52.8¢/gal — a point at which it’s just about 50% of WTI value. Butane at the market center punched up by 4.1% to 68.5¢. Conway prices outperformed those in the gulf with C3 and C4 jumping 7.1% and 5.6% respectively. Conway butane ended the week at a narrow 2.75¢ discount to Belvieu, the tightest since May of this year.
U.S. ethanol prices were higher the week ending September 16. August RIN generation reached a record high. Manufacturing margins jumped.
Filling sandbags replaced running a combine for some in Northeast Iowa over the weekend as the Cedar River crested Saturday night in Waterloo and is expected to peak at 23 feet Tuesday in Cedar Rapids. Levels on the river so far have been slightly lower than those seen in the historic floods of 2008 as the crest moves south towards Iowa’s second largest city and home to major area grain buyers, including Quaker Oats.
Latin America 3Q16 gasoline demand is estimated at 2670 MB/D, down 15 MB/D year-on-year. Distillate demand is bearish at about 75 MB/D less year-on-year. Mexican gasoline demand at 805 MB/D in 3Q16 is marginally better than 3Q15. Brazilian 3Q16 gasoline demand is forecast to be 5 MB/D higher year-on-year, while diesel demand is projected to be 40 MB/D lower. PIRA expects the region to import ~900 MB/D of gasoline and components in 3Q16. Diesel imports in 3Q16 are estimated to be 950 MB/D. Brazilian exports of heavy crudes are trending down: expected to be 140 MB/D in 2017. Medium crude exports spike and will reach 740 MB/D in 2017. Latin American refinery crude runs in 3Q16 are forecast to be 5,190 MB/D, 470 MB/D lower year-on-year. The likely end of Brazilian incentives to import fuels and the completion of domestic refinery maintenance cycle will help increase refinery runs. Distillate cracks are expected to move upwards, pulled by higher demand for heating but capped by the very high stocks on both sides of the Atlantic.
The Henry Hub (HH) cash price rally has carried the benchmark to $3.14/MMBtu — a high not seen since 1Q15 — as unseasonably warm weather and maintenance delays at Sabine Pass buoyed the call on supply. Accordingly, HH cash prices for the month may top $2.95, and post a M/M gain of more than 15¢. Cooling-degree days (CDDs) are on track to average a whopping ~30% above normal this month, a tally that would mark the second hottest September on record, rivaling last year’s atypical heat in the process. Consequently, gas-fired electric generation (EG) has outperformed prior estimates, with total EG loads outpacing the “norm” by ~4 BCFe/D. Given this backdrop, weekly storage refills have seen a noteworthy “pruning” month to date, and as a result, odds of a sub-3.9 TCF end-October U.S. storage carry have risen.
National Joint-Stock Company Naftogaz Ukrainy from October 1 will raise the price of gas sold to industrial customers on a prepayment basis by 5.1%. According to a company release, the price is relevant for consumers buying gas in the amount of more than 50,000 cubic meters per month and who have no debts to Naftogaz. The price for other customers will rise by 5%. After the increase of gas prices for industrial consumers in August by 9.3%, Naftogaz decreased the price by 7.9% in September. Compared with July, gas prices in October will be higher by 5.6-5.8%.
Cape freight rates have hit their highest level of the year as capesize fixing volumes have surged while bunker prices have remained largely flat. The 180,000 dwt Cape average has moved to over $15,000/day, well above the $5,000 - $10,000 range the market has been trading at for most of the year. On the supply side, Cape fleet growth remains positive as scrapping has decidedly slowed of late, although there is 5 MMdwt of Cape tonnage that was built in 2003 that is susceptible to scrapping as ships approach their third special survey in 2018 because of a need to retrofit to a BWM system under the IMO convention. We believe that Cape rates will show a second bounce in Q4 and will push above $20,000/day in late 2017.
As the clock continues to wind down on the Obama presidency, attention is shifting to finalizing what has been begun rather than new proposals. While the Clean Power Plan is on hold, EPA continues work on the rules for implementation, projected for December — despite opposition from Congress. An endangerment finding for aviation GHG emissions was finalized in July, with GHG standards for heavy duty vehicles following in August. The final Cross State Air Pollution Update Rule for seasonal NOx imposes tighter caps and higher allowance prices in 2017, while a proposal for implementation of the 2015 Ozone NAAQS is forthcoming. The new regional Haze strategy, proposed in May, is expected to be finalized by year end.
The S&P 500, High Yield Corporate Bond Index, Russell 2000 and EMB Index all gained on the week, despite falling slightly on Friday, and VIX receded significantly. Total commodities and commodities excluding energy were both higher on the week. Precious and industrial metals gained. Agricultural commodities fell slightly at the end of the week, though it was higher on a weekly average basis. Long-term interest rates were generally lower (especially the U.S. Baa corporate bond yield).
Output fell 23 MB/D to 981 MB/D the week ending September 16. Inventories drew to a 10-month low of 20 million barrels. Manufacturing of ethanol-blended gasoline dropped to a 15-week low 8,118 MB/D.
Overall commercial oil inventories fell 6.0 million barrels this past week, entirely in crude oil. East Coast (PADD I) gasoline stocks had an historic stock decline (-8.5 million barrels) because of the Colonial Pipeline outage and likely panic buying, while PADD III gasoline stocks not surprisingly built (+4.8 million barrels). Reported oil demand fell 800 MB/D, largely because the EIA revised up product exports by 1.4 MMB/D, 1.2 MMB/D of which was in products other than the four major products. Cushing stocks built 0.5 million barrels this past week but should revert back to drawing next week. Overall crude stocks also decline but at a much more modest pace of 1.2 million barrels versus this past week. Strong distillate demand pulls stocks down next week by 350 MB/D, while gasoline inventories build modestly (80 MB/D) because of much weaker demand.
4Q is traditionally the most volatile gas demand period of the year, and PIRA expects this year not to deviate from this pattern. If anything, the introduction of more wind capacity is creating even more volatility in the gas demand outlook. As October and 4Q arrives, we experience steady and ever-increasing gas demand build. For Europe as a whole, average demand growth between now and the end of the year is 1,000-mmcm/d.
Data were delayed two days because of a national holiday. Crude runs declined on the week. Runs will continue declining through much of the month. Crude imports rose and a crude stock build of 2.37 MMBbl ensued. Finished product stocks rose 0.6 MMBbls, with most of it being in the jet-kero complex. Gasoline demand was lower as were yields. Exports, on the other hand, rose and stocks built slightly. Gasoil demand, yields, and exports were higher and stocks drew slightly. Kerosene stocks continued to build. On the week, all the cracks gained, with gasoline and naphtha doing the best.
Unlike previous years, when farmers pre-stocked their diesel requirements well before the start of planting and harvesting, this year farmers are buying fuel on as-needed basis. During the planting season earlier this year, this hand-to-mouth buying created a bulge in diesel demand during May and June. With this fall's harvest just underway, farm demand for diesel should pick up substantially once again.
Baghdad and the KRG agreed to resume 150 MB/D of shipments from NOC fields to the Kurdish export pipeline. Flows are currently capped at 100 MB/D due to technical limitations, and greater uncertainty will surface upon the deal’s expiration in 2017. In the south, fiscal problems and delayed FIDs will likely prevent a notable near-term increase in production capacity. A military offensive to retake Mosul appears increasingly likely this fall. The involvement of Shiite militias will stoke sectarian tensions and create large security challenges down the road.
Global equities moved broadly higher on the week. All the U.S. tracking indices gained, with utilities, industrials, and housing being the best performers. Retail posted the weakest gain, while energy underperformed. All the international tracking indices also gained and outperformed the S&P 500. Latin America and Japan posting the largest gains, while the ex-U.S., and emerging markets tracking indices also did well.
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.
Harris CapRock Communications has received the TMT News’ 2016 Telecoms Award for its leadership in maritime and energy wireless communications. The TMT News award recognizes service providers and technology innovators in the telecoms sector. The winners were selected by 136,000 subscribers and industry professionals.
“The Maritime and Energy Wireless Solutions award acknowledges Harris CapRock’s contributions to the industry and our ability to deliver advanced communications around the globe,” said Tracey Haslam, president, Harris CapRock. “It is an honor that so many people recognized our organization based on the value of service we provide.”
On Monday September 19, minister of petroleum and energy Tord Lien together with Statoil, Centrica and ExxonMobil celebrated the 5 billion barrels of oil equivalent delivered by Statfjord since first oil in 1979.
The minister got the honor of filling the barrel, which was decorated in golden color for the occasion.
“The spin-offs created by Statfjord can hardly be exaggerated. Generating more than NOK 1500 billion in revenues and 200 000 direct and indirect man-years since the 1970s the field has been of great importance to the Norwegian society,” says Arne Sigve Nylund, Statoil’s executive vice president for Development and Production Norway. He took part in the celebration on Statfjord A.
After Statfjord has been on stream for more than a generation Statoil and its partners still have a horizon until 2025 for the field. Originally the partnership hoped to recover 40 percent of the oil at Statfjord. The result so far is record-high 67 percent.
451 wells have been drilled on the field, and more than 40 years after the field was discovered new profitable wells are still being drilled. (Photo: Harald Pettersen)
The additional resources recovered beyond what was initially believed to be possible equal the lower production estimate for Johan Sverdrup.
“On this is a historic day we take a retrospective view. This, however, is also a story about the future, describing how knowledge, skills and experience acquired through many years across the oil industry are harnessed to create ever more values and new activity. Statfjord was supposed to be shut down more than ten years ago. Instead technology development, smart solutions and clever decisions have extended the productive life and increased the level of activity. This is characteristic of Norwegian oil history and something we will build on in Statfjord’s next chapter and on the NCS for many decades to come,” Nylund says.
NOK 23 billion was invested, and production was maintained during the conversion process. The work included the drilling of 70 new wells and extensive modifications to the platforms. The high recovery factor is largely thanks to the Statfjord Late Life project, lifting the horizon towards 2025. This means that the old oil giant Statfjord will still be producing when a new giant by the name of Johan Sverdrup has started its 50-year production.
Statfjord field partners: Statoil Petroleum AS (44.34 % - operator), ExxonMobil Exploration and Production Norway AS (21.37 %), Centrica Resources (Norge) AS (19.76 %) and Centrica Resources Limited (14.53 %).
The Harris Pye Engineering Group has successfully completed repair works during the two-stage multi-million dollar Diamond Offshore demobilisation project for their semi-sub rig Ocean Endeavor from the Black Sea, which completed its contract in January 2016.
The initial phase of the repair work, which started in December 2015, while the rig was offshore Constanta, Romania involved cleaning of mud, brine, base oil and skimmer tanks. Steel repairs were carried out on a main column blister. The removal of three Seatrax crane pedestals, which included the supply and installation of internal steel stiffening to the pedestals, guides and jacking points, plus handling trunnions, were all required prior to cold cutting of the pedestal which coincided with the arrival of the heavy lift crane to remove them.
At work on Ocean Endeavor
Additional work awarded to Harris Pye in Romania was blasting and painting of four primary column ballast tanks. During the surface preparation steel renewal was added to the project - steel frames, piping, access trunks etc, out of which approx 24 tons of steel work was completed in Constanta. The blasting of all four tanks back to white metal was completed, two tanks received a first coat of paint and two tanks were fully coated before Ocean Endeavor departed from Romania to Fincantieri Shipyard in Palermo, Italy via a pre-booked scheduled heavy lift vessel.
“The project was not without its challenges, but we relish those,” explains Harris Pye’s Chief Technical Officer, Chris David. “Painting and blasting of the four ballast tanks had to be performed within a one month period. An additional 40 tons of steel was required to ensure the work on the tanks was completed within the required timeframe; this had to be brought in from other parts of Europe.
“Additionally a mobile diesel high vacuum grit recovery system was shipped from the UK, due to the large distances involved from the ballast tanks to the recovery system onshore for the purpose of disposal.
“All labor was from the local market, with equipment and materials coming from mainland Europe and the UK. Support to the onsite project team was provided by our workshop in Llandow, Wales which undertook any pre-fabrication required, with Harris Pye UK (HPUK) stores (tools and equipment) and the HPUK purchasing department utilizing local suppliers where possible and outsourcing further afield into mainland Europe for items not available locally, to ensure work was able to continue accordingly.
“Once Ocean Endeavor reached Palermo, the Harris Pye repair team mobilized to work on the remaining steel repairs, and painting of the ballast tanks, including an additional contract to repair a section of column diagonal brace. All works were completed on schedule.
“The six-month long project enabled us to use specialist equipment including a 40 cubic meter per minute high pressure oil free compressor (no oil fumes in the compressed air) which worked 24/7; and Falch 2500 bar hydro blasting equipment.”
“The Harris Pye project team had a very methodical and professional approach to all the projects awarded to them,” stated Diamond Offshore Project Manager Dhaval Mehta. “All projects were completed in a timely manner to the satisfaction of Diamond Offshore’s stringent standards, Class and Statutory rule requirements.
“The project team worked very well with all the other vendors involved and was accommodating with certain last minute changes, without impacting on the end results of the project. The entire Harris Pye site team was well focused on customer satisfaction while keeping safety as the primary focus during the entire project. They also actively participated in Diamond Offshore safety meetings and provided valuable input. A job very well done by the entire HP team involved with the Ocean Endeavor demobilisation project.”
Harris Pye has supported Diamond Offshore on several projects in the past and continues to do so to date in order to build on the existing strong business relations between the two companies.
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