Companies serving the offshore energy sector must accept that crude oil prices are not going to bounce back anytime soon and look to diversify into other market areas in the same way the commercial shipping industry does when high crude oil prices squeeze its profit margins.

Patrik Wheater, the Managing Director (photo) of specialist maritime PR consultancy Seaborne Communications, said: “The commercial shipping industry has developed an uncanny ability to adjust to the historical boom and bust cycle of international seaborne trade and diversify into other maritime sectors that are more commercially favorable. But it seems those companies serving the offshore sector are just waiting for an upswing. This isn't going to happen anytime soon. The offshore marine sector must look at opportunities elsewhere.”

With Brent crude oil prices tumbling to less than US$30/bb and analysts predicting persistent low oil prices for the medium term, Wheater, a former shipping journalist, believes opportunities do exist for the offshore marine sector in other areas.

He said that while some equipment suppliers will inevitably struggle, particularly those pushing oil and gas processing and subsea equipment, other suppliers that have traditionally served the offshore sector could find opportunities in the commercial shipping market and the nascent offshore mining industry.

“With sanctions now lifted on Iran, increasing the flow of oil from the Middle East, there could be a requirement for additional FSO (floating storage and offloading) capacity, while offshore support vessels could find employment in the emergent offshore mining industry, particularly offshore Australia. This is a new area for both industries,” said Wheater in a blog on his website.

Offshore mining is nothing new but most activities are confined to shallow waters close the shore. However, more deep-sea mines are beginning to emerge as the industry looks to exploit higher yield concentrations for significantly less investment and infrastructure required of a land-based mine.

According to mining industry analysts there are massive sulphide deposits, manganese nodules and cobalt-rich crusts on the seabed that can be extracted relatively easily. “The mining industry knows little about sub sea exploration and shipping knows little of the requirements of the mining industry, so there is a need for a concerted marketing drive if these industries can combine their technical know-how to benefit commercially from the extraction of minerals and metals from the seabed.

“Certainly both sides have to placate environmentalists that the technology is available to ensure that the extraction process is contained and will not impact negatively on the marine ecosystem. But this is a potentially lucrative new market for the offshore shipping industry,” said Wheater.

Next year, Marine Assets Corporation will take delivery of what will be the world’s first deep sea mining ship. The 227m long, 40m wider vessel will operate the Solwara 1 project offshore Papua New Guinea, extracting high grade seabed metals and ore in water depths of 1,600 meters.

This week, we look at some of the key takeaways from an event held last Thursday in London, hosted by the Society of Underwater Technology. Douglas-Westwood (DW) presented its outlook for the offshore energy sector, including outputs from its latest, soon to be published studies, in the context of a highly-turbulent start to the year that saw oil prices on the day of $27/bbl.

Research Director Steve Robertson opened the event with an introduction that examined the current outlook for offshore expenditure in comparison to that of a year ago, highlighting the movement in overall number of projects expected and subsequent expenditure (look out for more on this in the coming weeks…).

Economist Matt Adams followed with a review of the macro-economic factors impacting the sector presently, examining key drivers for energy supply and demand and highlighting recent DW analysis concerning supply additions vs the demand outlook for 2016. Matt explained that whilst there were limited positive drivers for oil price in the near term (other than unpredictable geopolitical events), towards the end of the year we should see excess supply eroded by some 1 million bpd. Matt also highlighted the relative stock performance between firms in different sectors of the oil industry (land drilling, offshore drilling, subsea equipment, oilfield services, etc.) with subsea hardware providers faring the best (down 15%) and offshore drillers the worse (-64%).

Steve followed with a run-through of DW’s latest market forecasts in a number of key sectors including offshore drilling, oilfield services (OFS), oilfield equipment, floating production and offshore wind. He highlighted the underlying reason for the poor performance of offshore drillers is excess supply, with low levels of utilization for the fleet and dayrates for high-spec rigs falling from over $600,000/d at peak to less than $250,000/d for new fixtures in the last six months. The fragility of the subsea equipment providers was also highlighted, with most original equipment manufacturers (OEMs) having been somewhat insulated during 2015 as a function of high backlogs which are now rapidly declining. Order levels in the last 12 months have been very low and DW anticipates that the sector will see heightened competitive intensity and firms will need to position themselves accordingly for lower levels of activity in the coming years. The FLNG and Offshore Wind markets were presented as a positive growth story and a highlight amongst the more negative outlook in other sectors.

Geologist Matt Cook presented some highlights from his recent work with DW’s Drilling and Production offering, including in-depth country analysis for Egypt, Mozambique, Angola, and the USA, followed by analysis of anticipated subsea activity by operator type. ENI was highlighted as a company that stands out in terms of the volume of subsea development activity compared to previous years, with Matt highlighting projects such as Zohr, Coral, Mamba and Sankofa.

The session was wrapped-up with a summary proposing that 2016 would likely be a very difficult year for the offshore sector – for many firms the focus would be survival. However, for those in position to invest, it was suggested that this was an opportune moment to secure equipment, services and skilled labour at historically low prices and historically short lead times.

The second edition of Seawork Asia will open its doors 29 November in Shanghai. It is the fastest growing commercial marine and workboat exhibition in the East Asian region, located at the heart of this fast growing industry sector.

The biennial Seawork Asia presents a unique opportunity for organisations to build and maintain their market positions in China and East Asia. It was established in response to the need to service the vast of coastline spanning 14,500km in China and provides an international marketplace for buyers to showcase their latest products, services and technology.

The exhibition attracts a host of organizations; from shipbuilders and vessel designers, through to civil engineering and diving, to navigation, recruitment and safety. Delivering the latest in maritime industry developments, equipment and services, Seawork Asia is held at one of China’s leading event centres, the Shanghai World Exhibition and Conference Centre (SWEEC). SWEEC has 8,500m2 of dedicated exhibition halls, plus conference and meeting facilities.

China is the world’s largest exporter and the world’s second largest economy, with the UK being the second biggest exporter to China, exporting £14.1Bn worth of products and services. It is anticipated that China will spend in the region of £9Bn between 2015 and 2018. China is the world’s second largest economy, with an expected GDP growth of 5% during the next 15 years.

China is also the world’s leading shipbuilding nation, and is looking to increase its capabilities with more complex vessels and is currently moving away from plastic vessels to those of aluminium. However, China needs help to match the western nations and therefore actively encourages Western expertise in order to develop its industries. Additionally, as the world’s leader in renewable energy, China has ambitious plans for offshore wind, being a prime solution offered by many of Seawork Asia’s exhibitors.

Seawork Asia | Background

The first edition of Seawork Asia was held in 2014 and is held bi-annually at the World Exhibition and Conference Centre in Shanghai (SWEEC).

Seawork Asia comprises of an exhibition, forum and banquet. Commercial marine professionals benefit from an exhibition, tailored networking, and informative forum with inspiring and topical seminars.

Visit www.seaworkasia.com to find out more.

Aquatic Engineering & Construction Ltd, an Acteon company, is working with DNV GL and other organisations in the subsea supply chain, on a Joint Industry Project (JIP) to develop a set of guidelines to be incorporated into new or existing DNV GL Offshore Standards or Recommended Practices. The guidelines will be, ‘The Development of Codes for Offshore Equipment for Cable and Pipe Laying – Phase 1.’

The JIP will develop a set of guidelines to be incorporated into DNV GL

David Tibbetts, vice president, technology, Aquatic, said, “We were eager to get involved with this ground breaking project due to the lack of coherent standards for the specification, design, manufacture, procurement and approval of equipment intended for use in offshore cable and pipe laying operations. DNV approached Aquatic because we are the obvious supply chain choice, due to our market leading reputation, our extensive range of products, four decades of experience and our close working relationships with all of the leading contractors.

“The work involves engineering and technical experts from contractors and equipment manufacturers like Aquatic, collaborating in order to establish joint industry guidelines for our type of equipment, where at present nothing exists. Subject to satisfactory completion of the first two phases, a third phase undertaken by DNV GL will result in the publication of an Offshore Standard or Recommend Practice for cable/pipe laying equipment.”

The Road Map for the project proposed by DNV GL in November 2014 consisted of the following phases:

Phase 1: Mapping the Big Picture. This is intended to provide a common, system level understanding of the equipment required for the successful laying of cables and pipes.

Phase 2: Mapping the Detail. This is intended to focus on the individual components of the system to identify their inputs, outputs and interaction with other system components.

Phase 3: Following the culmination of Phases 1 and 2, which are scheduled to be completed during 2016 and will result in the creation of industry guidelines and a glossary of common terms for cable and pipe laying equipment, there is potential for a third phase, which will lead to the publication of a DNV GL Standard for Certification or Recommended Practice.

Dr.-Eng Marius Popa, lead naval architect, DNV GL, said, “Consistency and collaboration within the industry is essential. Individual practices create unnecessary cost and risk, so the development of a unified approach will ensure standardisation across the supply chain. The JIP will deliver a decision tool that can be used by all stakeholders during the specification, design, manufacture, procurement and approval of any equipment intended for use in offshore cable/pipe laying and recovery.”

Phase 1 participants include: Allseas Engineering; Amclyde Norson Engineering; Aquatic Engineering & Construction Ltd; IHC Engineering Business; IHC SAS BV; MAATS Tech Ltd; NLI Offshore & Marine Products AS; Parkburn Precision Handling Systems Ltd; Reel SAS (IMECA); Saipem Group ; Subsea 7 and Technip UK Ltd.

A desire to capitalize on distressed situations, grow international market share and acquire new technology will drive a surge in M&A activity in the oilfield services sector during 2016, according to major new research from international law firm Pinsent Masons.

A survey of 200 senior executives across the oilfield services industry has revealed that despite unprecedented price volatility, 86% of respondents expect a surge of deal activity in the next 12 months. Seventy per cent said they were actively considering an acquisition within the next year.

Almost three quarters (74%) pinpointed expansion of overseas operations as the main driving force behind deal activity, with 70% expecting opportunism around distressed assets to drive deals, while 60% are looking at technology-driven consolidation. Corporates operating in the offshore technology and equipment segments were seen as the most attractive targets.



Respondents revealed that Singapore, Mexico, Indonesia, China and Nigeria are the most attractive emerging markets with falling valuations and new strategic deal structures presenting lucrative outbound investment opportunities against the backdrop of continued oil price volatility.

In more mature markets, two thirds (67%) of respondents said the UK would be likely to yield opportunity for buyers over the next three years.



Notwithstanding that, the report reveals optimism in the industry with an overwhelming 96% predicting UKCS recovery to 'peak' levels of profitability. Almost half (48%) expect the UKCS to rebound within five years, while over a quarter (28%) predict recovery within three years subject to a general improvement in the oil price.

The research found that 83% of respondents have based their five year investment strategy on an oil price range of $60-$80 bpd in the face of the new 'lower for longer' consensus across the oil and gas industry.


Global Head of Energy at Pinsent Masons, Bob Ruddiman, said: "The new landscape is very different from other downturns. We are in a more complex world where supply and demand and significant geopolitical events conspire with unpredictable consequences. Despite that, it's encouraging to see a sense of optimism and long-termism in the sector as oilfield services companies seek to find opportunity amid the undoubted challenges.

"

David McEwing, a Partner in the oil and gas team at Pinsent Masons, said: "Much of the discourse around oil and gas deals has focused on the majors and how they will respond to a more volatile environment. However, it shouldn't be forgotten that the global oilfield services sector is on course to be worth $144bn by 2020, and is a significant employer and wealth creator.



"What our research shows is an industry on the cusp of transformation. Corporates are clearly looking to build out their international propositions and invest in technology which will maximize efficient recovery. It's no surprise that the UK stands out in that regard given the industry's focus on innovation and deep sea exploration – not least when we're seeing more of those types of projects in Asia.



"There is encouragement to be taken from the optimism surrounding UKCS. There has been discussion in some circles about whether UKCS could ever recover to previous levels of profitability, but an overwhelming majority of those we spoke to see a recovery within 3-5 years, and almost a third think this will happen before then.


"That said, there's no complacency and boards are clearly focusing hard on their corporate strategies. Yes there's challenge but for some that means a chance to challenge the status quo in a dynamic market."



The oilfield services sector is expected to be worth $144bn by 2020. Source: http://www.marketsandmarkets.com/PressReleases/oilfield-services.asp

According to the most recent estimates, in 2013 the UK the oilfield services was worth £27bn. Industry paid corporation tax of £0.6 billion, directly employed at least 134,000 people on an average salary of £50,000, and generated exports of £16.4 billion. http://www.ey.com/UK/en/Industries/Oil---Gas/EY-review-of-the-UK-oilfield-services-industry-key-highlights

About the survey

Pinsent Masons engaged Mergermarket to surveyed 200 senior-level executives, drawn from 150 corporates and 50 private equity firms. Ten of the most prominent banks in the sector were also surveyed on a qualitative basis. Interviews were conducted during H2 2015.

Corporate revenues of respondent companies are split between $1bn+ (31%), $101-1bn (30%) and $20m-100m (39%). The survey included a combination of qualitative and quantitative questions and all interviews were conducted over the telephone by appointment. Results were analyzed and collated by Mergermarket and all responses are anonymised and presented in aggregate.

All of the respondents have operations or investments in the UK oilfield services sector. 52% of respondents are headquartered in the UK, and the remaining 48% are headquartered outside of the UK but maintain offices in the UK – 26% in North America, 9% in the Nordic countries, 9% in other European countries, 2% in MENA, 1% in Australia and 1% in Russia.

Survey participants include: ACE Alfred Cheyne Engineering Ltd, Aker Solutions ASA, Archer Ltd, ARKeX Ltd, Awilco Drilling Plc, CETCO Energy Services, CIRCOR International, Inc., Crondall Energy Subsea Ltd, Dando Drilling International, Diamond Offshore, Drilling, Inc, DOF Subsea Group, Dolphin Drilling AS, EnerMech Ltd., Ensco Plc, Expro International Group, Flexlife Group Ltd, FoundOcean Limited, Geoquip Marine AG, Gulf Marine Services, Hunting Plc, KD Marine Ltd, MacDermid Offshore Solutions, Maersk Drilling Norge AS, MRC Global Inc, Noble Corporation Plc, N-Sea Group, Ocean Rig UDW Inc, Oilfield Solutions Ltd, PD&MS Energy, Petroleum Geo-Services ASA, Petroleum Technology Company, Prosafe SE, ROVOP Ltd, Saab Seaeye Ltd, Saipem Ltd, Saltire Energy Ltd, Sand Monitoring Services Ltd, Schlumberger, Scientific Drilling Controls Ltd., Sembmarine S L P, Technip S.A., Welltec UK Limited, Wood Group.

Seatronics, an Acteon company, is the first to sign up to enhanced accreditation as a supplier of third party calibrations to the ROV and survey communities, globally. The enhanced accreditation is provided by Valeport; the UK’s leading manufacturer of oceanographic, hydrographic and hydrometric instrumentation.

Seatronics has established calibration facilities in Aberdeen, Singapore and Houston. The original calibration facility was established in Aberdeen in 2003 to manage Seatronics’ extensive range of Valeport assets. Since then, the facility has been extended to handle increased throughput and to support the growing demands of Seatronics’ customers requiring local third party calibrations. Following the success of the operation in Aberdeen, Seatronics replicated the facility in Singapore in 2005, and Houston in 2008.

Derek Donaldson, vice president global operations, Seatronics, said, "Collaborating with Valeport has been key to the success of our calibration facilities across the Seatronics group. We are committed to working locally with our clients, offering asset management in a timely and affordable manner, which is of critical importance in a challenging market.”

Kevin Edwards, sales and marketing manager, Valeport, said, "Monitoring third party calibration facilities that provide services for Valeport products is important to us. We have to know that our own standards and performance expectations are maintained, which is achieved through this annual audit scheme. Seatronics has demonstrated its capability well, and we are very confident Seatronics provides a qualified and accurate service.”

InterMoor, an Acteon company, has appointed Folabi Bolatiwa (photo) as general manager in Nigeria. Bolatiwa will be responsible for overseeing the company’s continued growth in the region.

InterMoor is globally renowned for providing integrated solutions that include the design, provision and installation of both temporary and permanent moorings, as well as customized foundation and subsea installation and recovery services. The company has worked in West Africa for more than 10 years, and has bases in Luanda and Malongo in Angola. The company has extensive experience with rig moves and mooring campaigns in Angola, Nigeria and Equatorial Guinea. In 2014, InterMoor formed a joint venture agreement with a local partner in Nigeria to ensure an effective local engagement with the Nigerian oil and gas market.

Bolatiwa joined InterMoor in 2007 as an engineer and has more than 10 years of experience in the offshore oil and gas industry, gained in engineering, operations and management roles. He served as InterMoor’s Gulf of Guinea operations manager and helped launch the business in Nigeria. Bolatiwa spent the last 8 years working in Africa; in Angola as an engineer and a specialist in the co-ordination of mobile offshore drilling units (MODU) and FPSO mooring systems installations, repairs, maintenance and recovery, and in Nigeria, Cameroon, Equatorial Guinea and Ghana in an operations capacity. He graduated from Texas A&M University with a bachelor of science degree in marine engineering in 2006.

Tidewater Subsea charters the Jones Act compliant MV Brandon Bordelon for (60) sixty days plus options. Tidewater Subsea is mobilizing (2) two FMC Technologies Schilling HP 150 ROVs to the vessel. The Brandon is now fully capable to perform a variety of operations, including IMR (inspection, maintenance and repair), light construction, survey and inspection work.

The Brandon is a highly specialized 260’ (80m) DP2 vessel featuring a helideck, a 60 ton AHC crane with 3,000m of wire, POB (60), a mezzanine deck supporting the (2) two FMC Technologies Schilling HP 150 ROVs. The vessel also offers 6,200 sq. ft. (576 sq.m) of clear useable deck space. The Brandon also features (2) two fully-integrated Ranger2 Pro thru-hull full USBL systems. The vessel delivers a fully integrated ROV control room, ROV support offices, below deck work and storage spaces, extensive communications and ROV data network, plug and play, with patch panel racks installed. All systems are fully interfaced with the vessel systems, bridge, office, and accommodation spaces. The vessel is designed with removable bulwarks around the entire aft of vessel along with power, water, air, and hydraulic oil connections on the deck. The vessel is also equipped with four additional below deck Tier 3 generators, providing fully redundant power to the crane and ROV systems.

Wes Bordelon, President/CEO of Bordelon Marine commented:

"We are very excited to work with Tidewater Subsea. Being a vessel operator, we speak the same language on day one. But Jason and his team also bring a wealth of ROV and subsea experience to the game. And when partnered with our new Stingray ULIV design, I think we will be very successful in the light IMR and Intervention space. The vessel and ROV systems are new and state of the art. This vessel is truly a high spec, fit for purpose, Jones Act-compliant solution that gives the client an affordable option to the larger MPSVs.”

- One-third of US respondents are concerned that they do not have a strategy in place to maintain innovation in a declined market -

A new research report published by DNV GL reveals that skills shortages are seen as a barrier to growth and an increasing concern throughout the US. More than half of the respondents believe organizations are taking a short-term approach to skills and career development.

A New Reality: the outlook for the oil and gas industry in 2016, a DNV GL report based on a global survey of 921 senior professionals in the sector1, shows that an increased portion of US respondents see cost management as the top priority in 2016 (38% compared to 25% in 2015).

In terms of cost-cutting strategies, 42% identify tougher decisions on CAPEX approvals as amongst the highest priority; this is 9 percentage points higher than the global average. At the same time, 30% of respondents confirm that their approach to cutting costs is to reduce exposure to and involvement in higher-risk projects (25% globally).

Key findings in the research report include:

• 52%, versus the global average of 43%, of respondents believe that their organization is taking a short-term approach to skills and career development

• 38% still believe their company is taking a long-term approach to innovation and R&D

• Skills shortages and the aging workforce are increasingly seen as barriers to growth in the US (21% in 2016 compared to 13% in 2015), and now exceed the global average of 14%

• 28% of respondents expect to see additional job losses, especially within the publicly traded sector. This is up 5 percentage points from 23% in 2015

• Cost management is established as a top corporate priority, rising from 25% (2015) to 38% (2016)

• The proportion of respondents who believe that operators will increasingly push to standardize their operations is 60%, which is in line with the global average

Peter Bjerager, executive vice president, director of division Americas in DNV GL Oil & Gas, says: “The majority believe that oil prices will remain lower-for-longer, which ultimately leads to continued pressure on cost management. Within this region, and throughout DNV GL, we continue to focus on new ways to drive research and innovation. We partner with every segment of the value chain and look for new ways to improve through standardization. It's encouraging to see that leaders in oil and gas companies are also seeking new ways to standardize operations as a preferred way of driving efficiency.”

This year’s report shows that six out of ten (61%) respondents agree that operators will increasingly push to standardize their approach globally - an increase of 9 percentage points since 2014.

Elisabeth Tørstad, CEO of DNV GL - Oil & Gas, says: "While the industry is understandably preoccupied with generating shorter-term value, we must also keep an eye on where longer-term value and permanent efficiency gains can be achieved.

"Innovation is not just about finding the breakthrough technologies, although that is important too, it is also about making things simpler and more efficient and ultimately helping the industry to safely cut costs. At DNV GL, we are continuing to invest 5% of our revenue in R&D as we see this as a key enabler for long-term competitiveness,” she continues.

Other findings include:

• Not unexpectedly, uneconomic oil prices (63%) and the weak global economy (34%) are seen by US respondents as the two biggest barriers to growth in 2016. A growing regulatory burden is also cited by 21% of US respondents

• One-third of respondents in the US (33%) listed subsea technologies as the top new or emerging technology impact areas for 2016

• The percentage of US respondents who believe there will be increased consolidation in the sector is higher than the global average (81% vs. 72%)

Download a complimentary copy of A New Reality: the outlook for the oil and gas industry in 2016.

Aker Solutions won a front end engineering design (FEED) contract from Statoil for the Trestakk field tie-in to the Åsgard A production vessel in the Norwegian Sea. The company also secured a separate concept study order for a low well-pressure project at Åsgard A.

"We're very pleased to secure the orders for this major oil and gas field, which will help secure jobs in our MMO business in Norway," said Per Harald Kongelf, head of Aker Solutions' Norwegian operations. "We look forward to continuing our good cooperation with Statoil as we together seek to find the most robust and cost-effective solutions for these projects."

Work on both contracts will start at once and be carried out by Aker Solutions' Norwegian maintenance, modifications and operations (MMO) business. The concept study will look at ways to allow future production at Åsgard A at lower well pressures. The contract includes options for FEED and engineering, procurement, construction and installation (EPCI) services. The Trestakk agreement has an EPCI option.

Harding has been awarded contracts for nine FF1200 freefall lifeboat systems complete with davits on Heerema Offshore Services BV’s Semi Submersible Crane Vessel Sleipnir. The vessel will be built by Sembcorp Marine at its flagship Tuas Boulevard Yard in Singapore.

Heerema’s Sleipnir is one of just a handful of large offshore projects currently running, along with the Johan Sverdrup Field Centre in Norway, where Harding is also a supplier. “Everyone is talking about Sverdrup, but this project is every bit as big, with just as many systems,” says Harding’s regional sales manager Oddgeir Mælen.

And while deliveries are essentially based on offshore technology, the Heerema contracts pose a special kind of challenge. “The new crane vessel will serve world-wide, so a number of relevant international standards had to be considered when selecting life saving equipment,” Mælen relates.

The Sleipnir contract will push Harding just over the 100 mark on delivered FF1200 lifeboats, securing its place as an industry favorite. Oddgeir Mælen believes it is no coincidence that Harding was selected to supply this latest Heerema project. “Harding lifeboats are the industry leaders, the boats chosen for the most demanding projects and benchmark vessels,” he points out.

For example, Harding supplied lifeboats to all the ships nominated for major Nordic shipping magazine Skipsrevyen’s “Ship of the Year” award for 2015, including the winner, the Skandi Africa. “Delivering to Heerema’s NSCV is yet another confirmation of the quality of our products and service,” Mælen states.

“Superior systems are the key to winning contracts, and we believe Harding quality is at the base of this success. But we also put in a lot of hours with both the yard and the owner right from the start on the Heerema project,” Mælen tells. “We listened to their concerns and came back with the best answers,” he explains, adding that Harding’s ability to draw on good local contacts, a strong global network and technical prowess was a determining factor.

“Harding has truly used its global outreach on this project. In order to put together the best possible bid, we enlisted a high degree of participation from our offices in the Netherlands, in Singapore and in Norway,” says Mælen. “Access to this overall expertise allowed us to provide the most value for the money. I believe it speaks of our ability to deliver quality at competitive prices.”

Harding CEO Styrk Bekkenes agrees: “We are extremely proud of winning such a competitive contract in today’s tight market. Harding has been through a major transition to reach our current level of capability, and in this bid we could really see the benefits. Our people pulled together and stepped up to a new level.”

With the Sleipnir contract, Harding has proven that it is not just a player, but a stayer in offshore, matching Heerema’s own forward-leaning stance. By pressing ahead with the Sleipnir project despite the low price of oil, Heerema has proven its commitment to serving the industry, and Harding stands equally as firm: “We are not in and out,” Bekkenes emphasizes. “Harding is in to stay.”

In the Awards in Predefined Areas (APA) round 2015, Statoil has been awarded interest in 24 licenses on the Norwegian continental shelf (NCS), 13 of those as operator and 11 as partner.

"The NCS is the core of Statoil’s business and we are pleased with the awards in the APA 2015 round, which will allow us and the industry to further explore for value. This award is an important contribution to replenishing our exploration portfolio and in the work to maintain the production on the NCS until 2030 and beyond,” says Jez Averty, senior vice president for NCS exploration in Statoil.

Jez Averty, senior vice president for NCS exploration in Statoil. (Photo: Ivar Langvik)

Two commitment wells are included in the work program in areas important to Statoil. Both prospects are potential tie-back opportunities to existing infrastructure – Blåmann to Goliat and Cape Vulture to Norne.

The “Blåmann” prospect in the Barents Sea, where Statoil is operator with 50% participating interest and ENI and Petoro partnering with 30% and 20% respectively, has a firm well commitment to be drilled within two years of award.

The “Cape Vulture” prospect is awarded as an extension of the “Norne” license (PL128) in the Norwegian Sea in which Statoil’s holds a 64% interest, ENI 11.5% and Petoro 24.5%. Also here, the work program comprises a firm well commitment to be fulfilled within two years of the award.

“The APA 2015 award is an important component of securing future activity and value creation on the NCS. We also look forward to the announcement of awards in the 23rd concession round later in the year, in particular the new acreage in the Barents Sea South-East which is an important contribution to further exploration in frontier areas of the NCS," says Averty.

In APA 2015, Statoil has been awarded new licenses in all three NCS provinces.

NYC-based PIRA Energy Group believes that low crude price is impacting non-shale lower 48 production. In the U.S., demand recovers but stocks increase to new high. In Japan, crude runs and imports declined and stocks drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

U.S. Demand Recovers but Stocks Increase to New High

Reported demand increased after two weeks of holiday depressed demand. Commercial stocks still managed to build making a new all-time high and expanding the stock surplus to last year. It is hard for oil prices to go up despite how low they currently are while stocks are building, especially in the current fragile macro environment which weakens the demand for inventory.

Supply Delays Emerge, but Do Not Erase Price Weakness

PIRA is pushing back some start up dates on LNG production over the next 24 months due to weaker prices and a lack of buying enthusiasm from key contract holders. Sellers with take or pay contracts in hand to sell LNG or tolling will be more eager to fire up the liquefaction than producers with non-contracted volumes faced with a crowded spot market.

Spark Spread Renaissance: How Wide Can Spread Sparks Go?

The widening of the spark spreads is now a reality across the Continent, with Germany now seeing the most efficient gas units starting to move in the money. While fossil fuel requirements continue to shrink further, due to weak demand and growing renewable output, German gas profitability has the potential to rebound to 2010 levels, but this outcome will be entirely driven by the movements in gas prices.

LPG Rebounds With Crude, Natural Gasoline Slide Continues

U.S. Gulf Coast LPG prices rebounded strongly with the broader energy markets. February Mt Belvieu propane prices improved by 12% to 33.6¢/gal and butane settled 5 cents higher on the week at 47.8¢. Natural gasoline prices continued to underperform last week as the blendstock’s value sagged to just 93% of WTI, after weeks of trading at a premium.

Coal Prices Rebound, Limited Upside on China Risks

Coal pricing ended its string of weeks in which prices declined week-on-week last week, with Atlantic Basin prices leading the charge upward. For 1Q16, API#4 (South Africa) rose by the greatest extent, followed by API#2 (Northwest Europe) which also rebounded strongly. A notable jump in FOB Richards Bay physical pricing, where one buyer reportedly pushed the market higher perhaps on short covering, likely fed into the notable rise in API#4. FOB Newcastle (Australia) prices moved up modestly compared to the prior week. Over the short term, coal prices will remain under considerable pressure due to depressed oil pricing and weak coal demand from China.

Impressive Corn Exports

A nice jump in corn sales was credited as the reason for last week’s rally but there’s a bit more to the story. The export number of 1.157M MT was for the week ending January 14th, so all the buying theoretically could have taken place on the 11th and 12th when the corn market tested sub-$3.50 futures pricing. While interest in corn at that level is supportive, it does not indicate interest at current levels which are 20 cents higher than the lows.

U.S. Ethanol Output Drops, but Stocks Rise to a Three-Year High

Ethanol production declined to a four-week low 983 MB/D the week ending January 22, as manufacturing margins were the poorest since 2013. Ethanol inventories, however, built for the tenth time in twelve weeks, rising by 533 thousand barrels to a three-year high 21.9 million barrels.

Deterioration of Russia’s Reserve Fund Signals Trouble Ahead

Russia’s Reserve Fund, which helps cover federal budget deficits, deteriorated rapidly in recent months, falling by nearly 30% in the final quarter of 2015. But despite mounting economic pressures on the Russian government, domestic oil producers have flourished. A favorable tax structure and currency depreciation insulated Russian producers from weak oil prices over the past year. PIRA expects this momentum to carry into 2016. But the Russian government, which shouldered the burden of collapsing oil prices (along with consumers), may be running out of policy options. Collectively, these economic pressures are casting a shadow over our 2017 outlook.

Financial Stress Elevated

Financial stress remains elevated. The S&P 500 declined for the third straight week on a weekly average basis, though it was higher Friday-to-Friday. The other key indicators such as VIX, high yield debt (HYG) and emerging market debt (EMB) also continue to weaken. Total commodities continue to decline, and the U.S. dollar continues to generally strengthen.

Fracking Policy Monitor

Federal focus has moved to making sure already announced regulations are finalized and implemented. Regulation of activity on federal lands (fracking, methane emissions, changes to leasing) are expected to have limited impact on overall production volumes. Oklahoma legislators may soon be forced to address the impact of wastewater disposal. North Dakota continues to be responsive to industry concerns, relaxing regulations where production or profits are threatened. Limits on local control remain a key issue in Colorado where the state’s Supreme Court, new regulations, and submitted ballot initiatives will all soon collide.

Tepid Price Recovery Points to 2015 Weakness Transitioning to Even Weaker 2016

Over the past several months, Canadian dry gas production has been hammered by stiff competition in its traditional export markets, compounded by an extremely slow start to the traditional withdrawal season. Compared to the prior year, 4Q15 production declined, expanding the year-on-year losses experienced during the third quarter. More recently, a shift to colder temperatures across the U.S. and Canada seems to have alleviated fears of a record El Niño event, although PIRA still projects a milder-than-normal winter. The colder weather seems to have reinvigorated Canadian exports to the U.S. in the short term, but year-on-year production losses are expected to continue into 1Q16.

U.S. Ethanol Prices Rise/Margins Fall

Reversing a downward trend that pushed prices to a ten-week low the week ending January 22, ethanol prices rebounded driven by higher feedstock cost. Manufacturing margins declined as rising corn values overshadowed the increase in product assessments.

Global Equities Rebound

Global equities generally posted a positive week. In the U.S., energy and technology posted the strongest gains as energy prices staged a rally from multi-year lows. The banking and industrial tracking indices declined. Internationally, all the tracking indices posted gains. Emerging markets, BRICs, and China were the strongest. In the first three weeks of the New Year, global markets have declined about 8%.

Japanese Crude Runs Ease, Imports Fell and Stocks Drew

Crude runs eased fractionally, and implied imports fell back, such that stocks drew 0.92 MMBbls. Despite generally higher demand, finished product stocks rose 1.87 MMBbls. Refining margins remain strong, though they softened a bit on the week due to easing in all the cracks other than fuel oil. Other than middle distillates, all the cracks remain statistically strong.

Iran Cuts Gas Price for Petrochemical Producers

Iran's Oil Ministry cut the price of methane/ethane mix fed to the petrochemical industry by 38.5% on Saturday, sending most petrochemical stocks up. The price cut will boost petrochemical profits, though some industry managers say the pricing is still uncompetitive, putting Iran's sanctions-battered petrochemicals at a disadvantage vis–à–vis their foreign rivals, especially those in the Persian Gulf periphery.

Constructive Data from China, and Dovish Message from ECB

Recent Chinese data had a broadly constructive tone. Economic expansion remained solid, while receiving more contributions from the service sector. The labor market, meanwhile, generated a large number of new jobs. Some data were disappointing, however: the housing sector, for example, experienced a serious setback. The European Central Bank’s policy statements helped stabilize sentiments in financial markets. Global leading indicators for manufacturing remained weak.

Low Crude Price Impacting Non-Shale Lower 48 Production

PIRA estimates Lower 48 non-shale crude and condensate production decreased significantly through the course of 2015 primarily due to less drilling activity and less maintenance on base production. PIRA expects further declines in 2016 as drilling activity continues to decrease with depressed oil prices but does not expect material losses in stripper well production (a subset of non-shale Lower 48 production).

Iran Exports Increase Post Sanctions – Where Will They Go?

PIRA expects that Iranian production will increase by roughly 500 MB/D over the next couple of months. Although NIOC will try to quickly recover their former market export volumes into Europe that will initially be hindered by logistical and commercial issues. In addition, Iran will increase exports by drawing down some of their floating inventory, largely sour condensates, which are more likely to be placed into Asia. This all points to more initial incremental exports likely heading to Asia followed by a slower return to Europe.

Up, but Risk Premiums are Almost Gone, Will Storages Turn Off?

Absent the move up along with oil on Friday, European gas prices have been weakening in the face of quite a bit of added demand from power and heating. If a commodity is acting bearish to bullish factors, how can we expect gas to rise any time soon? The answer is sustainability. Pockets of short-term demand growth will not be enough to reverse course on spot prices. It's not exactly an issue of "too little too late;" at this point it's simply too little. Downward pressure on spot gas will remain due to emerging supply, economic uncertainty, and a lack of duration in weather-based increases in gas demand relative to a comfortable storage situation and relatively strong accessibility to gas imports.

Mild February Weather Forecasts Sustain Bearish Concerns

While Thursday’s pull from storage was the highest thus far this heating seating, it did fall below expectations in the mid-to-high 180s leading to an initial ~10¢ pullback of the nearby month NYMEX contract. Yet, the ~$2.14 settlement price (up ~2¢ D/D) underscored the resiliency of gas futures since the last week’s striking downturn. The explanation appears to reflect the market already pricing in prospects for mild February weather, the strength of HH daily cash prices, and growing expectations for tighter post-winter gas balances.

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.

Churchill Drilling Tools, a specialist engineering company delivering market-leading drilling solutions to the global oil and gas industry, has launched its HyPR HoleSaver™ in the Middle East. The expansion follows successful deployments of the innovative hydraulic pipe recovery tool in the North Sea and Gulf of Mexico.

Stuck pipe situations cost operators hundreds of millions of dollars a year in non-productive time. The HyPR™ cuts that cost significantly by enabling operators to free pipe in just a few hours, as opposed to using traditional methods, which can take several days.

The HyPR™ dart will be premiered at the SPE/IADC Middle East Drilling Technology Conference and Exhibition in Abu Dhabi, UAE, 26 - 28 January 2016.

Nicholas Kjaer, (photo) general manager of Churchill’s Dubai office, said: “This is an exciting time for the company and our clients, as we continue to expand our global offering and make the HyPR tool available to the Middle East region for the first time. The tool has already been recognized by the oil and gas industry for its ability to deliver ground-breaking time savings for operators.”

HyPR™ was developed following extensive collaboration between Churchill Drilling Tools, deepwater Gulf of Mexico drilling teams in 2013. Since then the tool has experienced rapid up-take having been deployed by major operators in Houston, Aberdeen and Norway.

The HyPR™ tool offers the simplest method to recover the drill pipe rapidly and to begin side-tracking right away. It also delivers a clean cut for operators wanting to maximize BHA recovery options.

Mr. Kjaer, added: “Despite current challenges facing the oil and gas industry, the outlook of the Middle East market looks promising. As a result, we have recently opened a new office in Dubai, and increased technical support staff to expand opportunities and meet growing demand for the company’s products in the region. As we go from strength to strength, our team is committed to continue delivering exceptional value to our clients and provide them with innovative, cost-saving solutions.”

The company has recently been shortlisted as finalists in the Export Achievement category at the prestigious Offshore Achievement Awards. The winners will be revealed at a black-tie dinner, which takes place at the Aberdeen Exhibition and Conference Centre on Thursday, 17 March.

Specialist offshore marine weather company, MetraWeather with science partner MetOcean Solution is supporting Woodside Energy in Myanmar with tropical cyclone, tropical squall and maritime forecasts; tow and route forecasts and tsunami monitoring.

In early-January 2016 Woodside announced that its joint venture well with Total E&P and local energy firm MPRL E&P had intersected a gross gas column of approximately 129 m, with approximately 15 m of so-called net gas pay interpreted within the primary target at the Shwe Yee Htun-1 exploration well in Block A-6 in Myanmar’s Rakhine Basin.

Across South East Asia and Australia, typhoons (tropical cyclones) and tropical squalls rank amongst the greater threats to offshore safety.

Taranaki Sunset Oil Rig

Marine weather guidance and metocean studies are crucial to offshore exploration and production. The safety of crew, both on the sea and in the air; the mitigation of weather impacts on infrastructure assets; and logistics planning are top-of-mind considerations for offshore operations.

MetraWeather and MetOcean will be exhibiting their offshore marine weather solutions on Stand 07 at the 6th Myanmar Oil & Gas Exhibition. OGEX is the largest and longest established oil and gas exhibition in Myanmar and is being held in the Sedona Hotel, Yangon, Myanmar from 28th–29th January 2016.

MetraWeather forecasts and historical metocean datasets provide guidance for safe offshore operations. Metocean engineering experience includes heavy lifts and construction, jack-up and semi-sub rig moves, metocean design criteria for pipelines, platforms and floating structures, and daily weather guidance for offshore operations.

Asset Guardian Solutions Ltd (AGSL), which specializes in protecting companies’ process control software assets, announced that it has landed another contract to support an oil and gas supermajor in Perth, Western Australia.

The contract is the second to be awarded by this operator in Australia to AGSL in the last 12 months.

Once again, AGSL will provide the Asset Guardian toolset, which provides a secure repository to store back-up software files and associated data, allowing them to be easily accessed in the event of a software-related production system failure. Asset Guardian will also manage all process software configuration changes.

Maintaining communications in “cyclone country”

Because the LNG project is located in “cyclone country”, communications between its onshore facilities and offshore project teams are often disrupted. To ensure that the integrity of all software and data files managed by Asset Guardian is maintained when communications break down, AGSL is also supplying its AGSync software.

AGSync synchronizes software and data files across multiple locations and continues to operate during periods of disrupted communication, allowing all files between locations to synchronize as soon as communication links are restored.

Australian oil and gas market looks to Asset Guardian

For AGSL, the Australian oil and gas market has really taken off. The recent contract is the fourth Australian contract to be awarded to AGSL during the last three years, beginning with an order from Woodside Energy. Shortly thereafter, INPEX followed suit, adopting Asset Guardian for the Ichthys LNG Project.

“This recent award demonstrates the confidence that Australia-based oil and gas operators have in Asset Guardian’s ability to manage their process software, reliably and effectively,” said Sam Mackay, chief executive of AGSL. “The rapid rate at which the Australian market has embraced Asset Guardian has encouraged us to consider expanding our presence in the region in 2016.”