Swagelining Limited, a recognized leader in the design and installation of polymer linings for pipeline and riser systems, has completed work across eight North Sea assets over the last 12 months, including a number of world firsts for the technology.
These contracts saw Swagelining design, fabricate and install almost 90km of polymer liners into water injection pipeline in total, and included ‘first uses’ of the technology by four major operators.
The work has involved the lining of a 4” line, the smallest ever subsea water injection system to be polymer lined, whilst a further project saw Swagelining’s longest pulls to date for 1515m stalks on a 14” pipeline. Projects have been constructed for installation in both bundles and by reel lay vessel.
David Whittle, business development director at Swagelining Limited, said: “Polymer lining has already proven to be an effective method of providing internal corrosion protection to carbon steel pipelines and risers.
North Sea work has resulted in world firsts for Swagelining Limited
“We are seeing a marked increase in the use of polymer lining technology across North Sea assets, demonstrated by the number of projects we have been involved in over the last year and the uptake by operators using the technology for this first time. It is encouraging to see this growth, and to see the industry take advantage of the many benefits of this technology.”
Since 2009, technology-focused Swagelining has grown to establish itself as the market leader for subsea polymer lining systems and has invested strategically in research and development to open up the choice of installer and construction options, as well as potential use for hydrocarbon service.
Swagelining’s Technology Development Group (TDG) currently works with operators to develop testing plans and programmes for material qualification, spearheading the development of new products and processes in polymer lining technology.
One project currently being undertaken by Swagelining’s TDG is a Joint Industry Project with Saudi Aramco and The Welding Institute, which is investigating the extent of corrosion in a polymer lined pipeline when subjected to a sour hydrocarbon fluid environment. The TDG is also working on a materials testing programme in conjunction with two major operators to extend the boundaries for higher temperature water injection service, whilst incorporating the LinerBridge®, Swagelining’s weldable polymer connector, into the test programme.
Mr. Whittle continued: “Polymer lining technology is a well-established and cost-effective method of preventing internal corrosion in carbon steel pipelines, however its full potential for use in the oil and gas industry, particularly for hydrocarbon service and in high temperature environments, is still relatively untapped.
“Swagelining aims to continue working closely with the industry and professional bodies, encouraging operators to consider the use of polymer lining when planning and designing new pipeline systems.”
Swagelining has a number of further projects booked throughout this year and into 2016 for North Sea and West African assets.
Semi-submersible accommodation vessel built in China and chartered in Gulf of Mexico to Cotemar
In its latest major transaction in Mexico’s energy sector, Milbank, Tweed, Hadley & McCloy LLP has advised Atlantis Finance Ltd. as borrower in a senior secured financing for the purchase of a semi-submersible oilfield maintenance, construction & accommodation vessel that will operate in the Gulf of Mexico.
HSBC was lead arranger and administrative agent for the deal, which closed on August 26. The ship, named “Atlantis” and owned by Atlantis Offshore Ltd., will be chartered to Mexico oilfield services company Cotemar, S.A. de C.V., which will use it in connection with service contracts for the country’s state-owned oil company Pemex.
"Atlantis" was built at COSCO’s Nantong shipyard in China. Milbank Global Project Finance practice group leader Dan Bartfeld led the Atlantis deal team, assisted by Global Project Finance associates Alejandra Garcia Garcia and Mark Greenfogel.
Mr. Bartfeld said, “This very successful financing highlights the opportunities in Mexico’s offshore energy sector – an area where we expect to see very significant growth in the coming years. Despite oil price volatility, this successful transaction shows that well-structured projects from top-tier sponsors can obtain successful cross-border financing.” Ms. Garcia Garcia added “We are thrilled to work with Atlantis, Cotemar, HSBC and the other lenders in developing a unique financing structure that supports Pemex and the Mexican energy sector.” The financing for Atlantis is one of many successful Mexican energy-related financings handled by Milbank in 2015 – including most recently the financing of Fermaca’s El Encino-La Laguna natural gas pipeline project.
Further information on Milbank’s Latin America practice is available at www.milbank.com/practices/regions/latin-america.html.
VIKING Life-Saving Equipment A/S has announced it has acquired a part of Australia-based Wiltrading Pty Ltd.’s maritime safety equipment activities effective 1 September. The move strengthens VIKING’s offering in Australasia, adding 4 locations to the company’s global network of wholly-owned servicing stations as well as several products and services, bringing new advantages for shipowners and offshore operators in the region.
A subsidiary of Wilh. Wilhelmsen Investments (WWI), Wiltrading offers integrated activities in marine safety, fire fighting and protection, equipment and servicing, serving the offshore, oil and gas, shipping, military and cruise industries. The company is an authorised representative and service partner for a wide variety of maritime and offshore equipment producers.
Under the new agreement, selected safety equipment and servicing activities previously managed by Wiltrading will be seamlessly integrated into the global VIKING organization, offered and serviced locally, whereas remaining activities will be carried out in close cooperation between the two. VIKING’s CEO, Henrik Uhd Christensen, welcomes the new addition to his company’s constantly expanding worldwide presence and the growth opportunities it provides in the region:
“We’ve worked in close partnership with Wiltrading for several years,” he said. “They are a professional organization with a strong, service-minded approach to customers – something that makes these activities and the people who operate them an excellent fit for VIKING. We strive to be close to our customers, so we can support their competitiveness with fixed prices, flexibility and fast delivery no matter where they operate.”
At the same time General Manager of Wiltrading, Michael Connolly is pleased that VIKING and Wiltrading can continue their respective growth activities, for example through their popular VIKING Shipowner Agreements:
“With the VIKING Shipowner Agreement rapidly winning favour in the market, and plans for even more capabilities in the future, VIKING has much to offer Wiltrading’s customers and staff. We have always had a great deal of respect for the company, and are really looking forward to leveraging VIKING’s global network resources.”
Brian Jacobsen has been appointed Country Manager for VIKING Australia. He is a former VIKING sales and marketing director, and started the company’s Singapore office several years ago. He has recently returned to VIKING.
OEG Offshore, a leading global provider of cargo carrying units (CCUs) and A60 modules to the oil and gas industry announces the merger of its US business with leading Louisiana based oilfield equipment provider Cameron Rental and Tank Inc (CRT).
The multi-million dollar merger positions the enlarged combined businesses with a full geographic network of locations across the Gulf of Mexico region, together with enhanced engineering and service capabilities and a wider range of equipment to support their customers’ full range of requirements.
OEG Offshore-John Heiton
“This merger connects CRT to one of the biggest names in the industry and we are excited to be able to support our customers and the wider offshore oil & gas industry with the additional resources, products and services that we will now be able to deploy. I look forward to working with OEG to really accelerate our growth and provide our high quality service to a wider range of customers across the Gulf of Mexico and beyond,” said Cameron Rental and Tank President Thomas McDaniel.
CRT has been servicing the Gulf coast oilfield industry since 2000 and has operations in key Gulf locations including Port Fourchon, Venice and Cameron. CRT provides a range of cargo carrying units including baskets and containers certified to the internationally recognized standards of DNV 2.7-1/EN 12079/IMO 860/SEPco OPS0055 and API RP 2A as well as DNV 2.7-1/EN12079 certified cutting boxes and DNV/MPT portable chemical tanks for rental alongside pumps and operated vacuum services.
“This merger provides an ideal platform for the OEG Offshore group to significantly expand its presence across the Gulf of Mexico region. We are pleased that Thomas and Chuck McDaniel, as former owners of CRT, as well as all of the company’s other employees will remain with the business as we move forward together,” said OEG Offshore Chief Executive John Heiton. “We intend to work with the CRT team to develop their already strong service offering, at the same time as investing in growing the range and size of the fleet. We strongly believe that current and future customers of both OEG and CRT will benefit from a wider local base network and an enhanced product and servicing offering to support their production and drilling operations in the Gulf of Mexico.”
OEG Houston’s recent relocation to a larger office facility in Houston’s energy corridor and the merger of CRT marks the next step in the development of OEG Offshore’s offering to the Gulf of Mexico region. OEG Offshore’s range of DNV 2.7-1 containers, baskets, cutting boxes, waste compactors, offshore tanks as well as standard and customized A60 engineering cabins are available across the Americas. They offer the same varied range of equipment for sale as well as rental, alongside a bespoke design service.
OEG Offshore continues to develop its geographic spread and global product offering as it expands across Europe, Africa, the Middle East, Caspian and Asia, as well as the Americas. The business has operations in 25 countries worldwide, with further expansion and fleet investment ongoing through 2015 and into 2016. OEG benefited from investment from world renowned investment firm Kohlberg Kravis Roberts (KKR) during 2014.
The next MTS Houston Section luncheon will be held on September 24, 2015. Danny Hough, Vice President of Developments and Kodiak Project Construction Director with Deep Gulf Energy, will describe the challenges associated with the Kodiak project tieback and how these challenges were addressed using an existing technology in a new application for the Gulf of Mexico.
When embarking on tiebacks, in many cases there are few host facilities with adequate topsides weight or process capacities available. Solutions must be found to add capacity to existing facilities to accommodate the tiebacks. Fluid properties and flowing conditions can result in flowline material specifications which are not readily available or easily installed.
About the project
The Kodiak field is located in Mississippi Canyon blocks 727 and 771 in water depths ranging from 4829 to 5,610 feet. It is approximately 60 miles southwest of Louisiana. The project consists of a subsea tieback to the Devil’s Tower truss spar in Mississippi Canyon block 773.
Devil’s Tower spar, named after Devil’s Tower National Monument, was at one time the world’s deepest production truss spar in 5,610 feet of water. It lost its record holding distinction to Shell’s Perdido platform in 2010.
About the Speaker
Danny Hough is the Vice President of Developments for Deep Gulf Energy. Danny has 40 years of industry experience, including US and international onshore and offshore operations and construction. He has spent ten years working in the deepwater Gulf of Mexico.
Deep Gulf Energy was formed in April 2005 and specializes in subsea tiebacks. Beginning in 1995 as the Mariner Deepwater Management Team, the group was one of the first independent management teams to operate in the deepwater Gulf of Mexico, and to date has acquired interest in over 20 deepwater prospects.
UPCOMING MTS HOUSTON PRESENTATIONS AND EVENTS IN 2015
Stork to Deliver ECITB Certified MJI 21 Bolt Tensioning Course
Leading subsea training and trials facility, The Underwater Centre, is working in collaboration with Stork, global provider of knowledge-based asset integrity services focused on the oil & gas, chemical and power sectors, to deliver a brand new one-day certified course in bolt tensioning.
The ECITB approved course, MJI 21 Hydraulically Tensioned Subsea Bolted Connections, addresses a key activity which every offshore construction diver should be familiar with and will be added to the Centre’s commercial diving training suite, firstly as a standalone course.
It will provide students, of varying levels of experience, with the knowledge and experience of working with and using bolt tensioning equipment, which they can then use in their job – whether on the surface or underwater.
Industry has identified that bolt tensioning is a skill more commercial divers should have experience of before going subsea.
It will be delivered by an expert from Stork’s on-site training facility, who have also supplied all the equipment for the course, and will include isolations, dismantling techniques, inspection of components, alignment techniques and assembly and tightening techniques in specialist critical bolting.
Steve Ham, The Underwater Centre’s General Manager, said: “The courses we deliver at the Centre have been tailored to meet industry needs and this addition is a perfect example of this.
“We have been working very closely with Stork to develop this course so that it provides our students with the opportunity to train with the specific equipment they would be using on the job, allowing them to hone their skills before heading offshore.
“Here at the Centre we have been delivering bolt tensioning training for a number of years, but this new course takes things a step further and provides students with a certified ticket which they can add to their CV.”
Rod Agnew, Vice President for Service Delivery at Stork, said: “We are extremely pleased, to again be working in collaboration with The Underwater Centre, integrating higher levels of Subsea Mechanical Joint Integrity Courses. Stork recognizes that quality training and competency lies at the core of safe operations and our vastly experienced and multi-disciplined instructional team, plan, tailor and deliver courses to meet client specific requirements. The new bolt tensioning course is one example of this and builds upon our extensive list of industry recognized courses.”
Both the Premium Industry and Construction Career Packages provide training in the statutory components of the Health and Safety Executive's commercial diving curriculum, as well as training in the use of subsea tools and practical exercises in carrying out construction and maintenance tasks underwater such as subsea welding and cutting, and rigging and slinging operations.
The Premium Industry Package also includes training in subsea inspection techniques: a vital skill to have when working offshore.
The Underwater Centre is a purpose built training facility which incorporates an extensive pier complex including four dive stations, classrooms, workshops and decompression chambers.
With accommodation and additional classrooms based at the landward end of the pier, The Underwater Centre is set up to provide its students with the skills and experience to succeed in their new careers, and continue providing the subsea industry with the workforce that it needs.
Eni has made a world class supergiant gas discovery at its Zohr Prospect, in the deep waters of Egypt. The discovery well Zohr 1X NFW is located in the economic waters of Egypt’s Offshore Mediterranean, in 4,757 feet of water depth (1,450 meters), in the Shorouk Block, signed in January 2014 with the Egyptian Ministry of Petroleum and the Egyptian Natural Gas Holding Company (EGAS) following a competitive international Bid Round.
According to the well and seismic information available, the discovery could hold a potential of 30 trillion cubic feet of lean gas in place (5.5 billion barrels of oil equivalent in place) covering an area of about 100 square kilometers. Zohr is the largest gas discovery ever made in Egypt and in the Mediterranean Sea and could become one of the world’s largest natural-gas finds. This exploration success will give a major contribution in satisfying Egypt’s natural gas demand for decades.
Eni will immediately appraise the field with the aim of accelerating a fast track development of the discovery that will utilize at best the existing offshore and onshore infrastructures.
Zohr 1X NFW was drilled to a total depth of approximately 13,553 feet (4,131 meters) and hit 2,067 feet (630 meters) of hydrocarbon column in a carbonate sequence of Miocene age with excellent reservoir characteristics (400 metresplus of net pay). Zohr’s structure has also a deeper Cretaceous upside that will be targeted in the future with a dedicated well.
Eni’s CEO, Claudio Descalzi, has recently travelled to Cairo to update Egypt’s President, Abdel Fattah Al-Sisi, on this important success, and discuss this discovery with the Prime Minister, Ibrahim Mahlab, and the Minister of Petroleum and Mineral Resources, Sherif Ismail.
“It’s a very important day for Eni and its people. This outstanding result confirms our expertise and our technological innovation capacity with immediate operational application, and above all shows the strength of the cooperation spirit amongst all the company’s units which are at the foundation of our great successes. Our exploration strategy allows us to persist in the mature areas of countries which we have known for decades and has proved to be winning, reconfirming that Egypt has still great potential. This historic discovery will be able to transform the energy scenario of Egypt in which we have been welcomed for over 60 years. The exploration activities are central to our growth strategy: in the last 7 years we have discovered 10 billion barrels of resources and 300 million in the first half of the year, confirming Eni’s leading position in the industry. This exploration success acquires an even greater value as it was made in Egypt which is strategic for Eni, and where important synergies with the existing infrastructures can be exploited allowing us a fast production startup‘, Claudio Descalzi commented.
Eni, through its subsidiary IEOC Production B.V., holds a 100% of the Contractor’s working interest in the Shorouk Block and is the operator of the concession. Eni has been present in Egypt since 1954 through its subsidiary IEOC, a company which has always been a frontrunner in exploring and exploiting gas resources in Egypt since the discovery of the Abu Maadi Field in 1967.
By adopting new exploration concepts, leading edge technologies and operational approaches, through AGIBA and Petrobel, operating companies participated by IEOC and EGPC, Eni has successfully managed to double production of oil from the Western Desert and the GOS Abu Rudeis Concessions in the last three years as well as to revamp production from the Abu Maadi plays in the Nile Delta area following the recently announced Nidoco NW 2 discovery (Nooros prospect) currently already in production.
Eni is the main hydrocarbon producer in Egypt, with a daily equity production of 200,000 barrels of oil equivalent.
Keppel Offshore & Marine (Keppel O&M) has through its wholly owned subsidiary, Keppel Offshore & Marine USA, Inc., entered into a Stock and Asset Purchase Agreement with Cameron International Corporation (Cameron), to acquire Cameron's offshore rigs business, which comprises the LETOURNEAUTM jackup rig designs, rig kit business, and aftermarket services for US$100 million.
NYC-based PIRA Energy Group reports that WTI fell below $40/Bbl in August, hitting a 6-year low before recovering somewhat at the end of the month. In the U.S., the crude stock build propelled commercial stocks to a new record high. In Japan, crude stocks drew and kero-jet stocks led product stocks higher. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
North American Midcontinent Oil Forecast
The price of WTI fell below $40/Bbl in August, hitting a 6-year low before recovering somewhat at the end of the month. Regional differentials were mixed, with inter-pipeline competition in the Permian Basin causing Midland grades to strengthen relative to Cushing WTI, while differentials for Western Canadian and other northern grades continued to weaken from very strong second quarter levels.
Storage Refills Set to Swell
After the NYMEX September futures contract limped off the board at its lowest settlement since the May contract, an outbreak of above-normal temperatures forecasts for a large swath of the U.S. in early September — particularly in the east — has for now lessened the risk of steeper price declines. With storage refills set to swell, sustained weather intervention remains necessary to temper seasonal gas-fired electricity generation (EG) declines and thereby reduce the need for still lower prices.
Western Grid Market Forecast
Western spot on-peak prices reverted to a more familiar summer pattern with Mid-Columbia at a discount to the Southwest hubs. That market shed $8/MWh to average ~$31.50/MWh. NP15 was down $2 to average ~$37.50. However, SP15, the West's premium market, was virtually unchanged at just under $39, and Palo Verde rose by $1.50 to just over $35. Inland Southwest price gains were driven by strong cooling loads with temperatures in the region's load centers averaging 2-4º F above normal. Weather in Southern California has also been hotter than normal this month, helping to propel the CAISO Balancing Authority to its strongest loads of the summer in late August. Mid-Columbia on-peak heat rates are expected to average 12,000 Btu/kWh in CY 2015 up from 8,900 in 2014. Heat rates are also expected to be up at the Southwest hubs for CY 2015 with the largest increase (~10%) at Palo Verde. However, going forward, growth in solar capacity, gradual improvement in hydro supply, and higher gas prices are expected to lead to downward pressure with modest year-on-year declines through 2017.
Cracker Margins Fall with Olefin Product Prices
U.S. steam cracker margins for all feedstocks fell last week with plunging ethylene prices. Propane and butane cracks weakened by nearly 26% to 20¢/lb ethylene. Pentanes plus margins lost 8¢ week-on-week and are now near 9¢/lb ethylene. Ethane cracks continue to trail LPG, falling to 19¢/lb ethylene per PIRA calculations.
Freight Market Outlook
The weakness in the midsized crude tanker groups seen in July was a harbinger that the counter-seasonal strength in VLCC rates was unlikely to persist much longer. VLCC rates followed suit and crashed in August, falling by 50 WS points (65%) from their July highs. The support from near record crude imports into China during June and July (7.2 MMB/D) and discharge delays in Asia related to high inventories and typhoons waned at the same time that September term crude nominations were being reduced to reflect crude runs cuts in Asia due to refinery maintenance and perhaps weaker underlying demand.
Seaborne Thermal Coal Pricing Falls, Retracing Gains from Prior Weeks
Despite a modest rebound in oil pricing last week, coal prices moved notably lower, mostly due to a bearish turn on Friday. For 4Q15 coal prices, FOB Newcastle (Australia) again held up better than API#2 (Northwest Europe) and API#4 (South Africa), as was also the case across the forward curve. The market seems to be saying (similar to PIRA’s view) that the rebound in pricing that occurred in the past two weeks was premature. Fundamentals remain soft, with major demand centers facing challenges, while supply is not backing off quickly enough. Rising oil prices limit the downside for coal pricing, but there is not enough bullish impetus to spark a sustained rally yet.
California Carbon: Choices for November Compliance To Impact Markets
The market response to auction results has been modest for the benchmark contract, though V-18s were boosted. Full reconciliation for 2013-2014 will be in November: choices regarding offset usage will impact the bank build/ stringency of the program (very few were used last November). Last-minute demand for offsets for compliance would temper CCA interest – but prices are supported by seasonal emissions, strong demand for transportation fuels, and by the increase in the floor price next year.
U.S. Ethanol Prices Lower in August
Ethanol prices were pushed down by oil values in August despite robust demand, lower stocks and reduced output. By the end of the month, prices were close to gasoline values in most of the country.
Emotions Remain High
The rhetoric this year is amped up due to a severely shrinking farm economy. Farmers and their landlords have been left to try to come together on land prices as the prospects of a better 2016 fade with each evening’s sunlight. Producers are trying to cut every penny of cost they can, getting no help so far from seed and fertilizer suppliers.
Whether the Fed Will Raise Rates in September Is Now a Toss-up
A few weeks ago, it appeared probable that the Fed would raise interest rates at its September policy meeting. But as global financial markets have turned volatile, policymakers indicated that the rate decision would depend not only on the tone of economic data, but also on financial market developments. This week’s U.S. data releases for August were not blockbusters, but showed sufficient strength to bolster the case for a September rate hike. But problematically, the current U.S. equity market performance does not yet indicate whether the economy is facing serious threats, or merely short-term difficulties.
Foreign Investment in Iran: Iraqi Experience Suggests Production Impact May Be Several Years Out
The removal of Iranian oil sanctions will eventually permit the return of many international oil companies to Iran. Long-term Iranian supply growth will likely depend on the timing and level of foreign investment. Although much remains unknown at this point, we look to the recent opening of Iraq’s oil sector to provide some insight into how the next few years may play out in Iran. While conditions differ in many ways between these two countries, Iraq’s experience suggests contract finalization may take longer than expected and new foreign investment may not translate into meaningful production gains until at least 2018. Development of Iran’s oil sector may also not proceed as planned. As such, PIRA maintains a cautious outlook on Iranian supply.
U.S. Crude Stock Build Propels Commercial Stocks to a New Record High
Crude imports coming in higher than expected and crude runs lower than expected drove a crude stock build that, in turn, drove total commercial stocks to a new record high. With a smaller overall build last year, the year-over-year excess widened. With a 9.5 million barrel build in commercial stocks the first week of September last year, we expect the surplus to decline when we see next week’s data.
Seasonal Demand Begins to Build Amid Loose Supply; Key Storage Deficits Remain
Hanging a bullish call on colder than normal weather in September is a bit of an analytical stretch for PIRA, but some members of the market are talking up less than 40-mmcm/d of additional weather-related demand (Continent wide) like it was the middle of January and supply was tight. Needless to say, this type of demand is fleeting at best and suggests that true underlying demand growth remains elusive to uncover. Nevertheless, this time of year is when seasonal gas demand begins to build and imports will have to build with them in order to cover both prompt use and top off what's left of injection season. Therefore, sensitivity to disruptions, versus what is deemed to be normal, will grow, even if underlying demand does not.
Italy-France Spreads Remain Compressed on a Forward Basis
Italian day-ahead prices have been quite resilient, with the PUN during September moving even higher than August, having averaged €56.6/MWh. The spreads with France also remain at historically high levels on a spot basis, and yet while widening slightly along the curve, the spreads on a forward basis have stayed extremely compressed.
Bearish Developments Predominate in the Beleaguered Thermal Coal Market
Physical coal prices moved lower during August, but have not been nearly as volatile as oil and equity price movements. Despite the devaluation of the yuan hurting the ability of Australian producers to compete in China, FOB Newcastle prices declined by the smallest extent of the major pricing points. Physical Atlantic Basin balances have experienced tightening over the YTD from warmer weather in Europe, and the supply constraint in Colombia, yet pricing has consistently faded. With European coal demand expected to recede while Colombian supply normalizes, it will be difficult for prices to rebound.
Ongoing CSAPR, MATS Uncertainty as EPA Ozone Efforts Move to Fore
Power plant SO2 and NOx emissions are down 1H15 (2014 emissions were already below the current CSAPR caps). SO2 allowance prices dropped dramatically, but NOx is a different story. EPA is implementing 2008 Ozone Standards and updated, stricter Ozone standards are also to be finalized October 1st, though it is unclear how these may interact with CSAPR. We may not see a DC Circuit ruling deciding how to proceed with the MATS rule until the end of the year or even into 2016.
Record Production of Ethanol-Blended Gasoline
Ethanol-blended gasoline production soared to a record 9,223 MB/D the week ending August 28. Ethanol manufacture dropped to a 16-week low 948 MB/D as more plants cut back due to poor margins.
Critical Corn Numbers on Tap
PIRA’s “final” numbers should look familiar as they have not changed month-over-month. Coming off Crop Tour, we commented that 164 bpa for a national average was a pretty solid number, but recent heat has our model back down to 163.8 bpa. We realize that we’re 175 million bushels below current WASDE demand, but also know that a 450 million bushel reduction in production has merit.
Key Market Indicators Drop
The S&P 500 and other key market indicators dropped sharply week-on-week, but on a weekly average basis various indices gained marginally. Market volatility as measured by the VIX increased week-on-week. Financial stress remains high. Credit spreads continue to widen, indicative of increasing strains in the debt markets. With regard to currencies, there continues to be weakness in the commodity producers, along with other currencies such as the Turkish lira, South African rand, Brazilian real and British pound. Commodities remain generally in decline, though there was some strength seen in palladium, aluminum and copper.
Japanese Crude Stocks Draw, Kero-jet Stocks Lead Product Stocks Higher
Crude runs eased due to planned maintenance and unplanned outages. Crude imports were very low and stocks drew strongly. Finished product stocks rose on higher kerosene and jet fuel stocks. Gasoline demand was fractionally changed with a big drop in yield such that stocks drew slightly. Gasoil demand was higher, but even with higher yield and lower incremental exports stocks still drew slightly. Kerosene demand rose again and seasonal stock building continued. The indicative refining margin remains acceptable, though on the week, most of the cracks eased.
Italians Find a Russian-Sized Gas Field Off the Coast of Egypt
Just as Egypt hits the twin milestones of 6 months as an LNG importer and the installation of a second regas terminal, also at Ain Sukhna, a significant domestic supply discovery has emerged to shift the long term supply balance significantly, this time in Egypt’s favor.
U.S. Coal Market Forecast
As producer bankruptcies and mine shut-ins continue to occur, financially stronger producers are reaping the spoils. Murray Energy (ME) just purchased Goldman-Sachs’ Colombian mining operations, with the intent to increase coal output. Whether this is an effective longer-term strategy remains to be seen. It definitely will add to the market’s oversupply woes.
Global Equities Hit Hard this Past Week
Global equities fell about 4% on the week, with all the major regions falling a similar amount. In the U.S., all the tracking indices fell, with housing doing the best, down only 0.7%. Utilities and materials were the weakest, with energy also down significantly. Internationally, again, all the tracking indices posted losses. China and Japan were the weakest performers.
EIA’s Long-Awaited Form 914 Crude Production Data Published
The EIA’s used their new Form 914 as the source of monthly crude production for Texas and a number of other states, for the first 6 months of 2015, with the August 31 release of their June 2015 Petroleum Supply Monthly. Texas production was revised down, closer to PIRA’s estimates. The downward revisions to U.S. production were offset by upward revisions to the crude balance item, resulting in domestic crude supply values that were largely unchanged. These data do show that reported crude production and domestic crude supply (production + balance item) both peaked in April 2015, and have fallen 0.42 MMB/D by June 2015.
EIA Upside Production Surprise
The EIA’s expanded monthly survey released on August 31st revealed a surprising jump in U.S. gas production from May to June that had not been fully reflected in earlier pipeline flow models. For the U.S. as a whole, the EIA reported that June dry production climbed to 74.5 BCF/D, up month-on-month by ~0.7 BCF/D. Although PIRA’s state-by-state estimates vary from the EIA, our upwardly adjusted June total virtually matches the above EIA estimate. PIRA’s state specific estimates cannot be strictly compared with EIA estimates, given they are not reported on a dry basis.
U.S. Refinery Turnarounds, September 2015 – June 2016
As anticipated the pace of U.S. refinery downtime picks up quite sharply in the coming months. This considers both scheduled turnaround activity as well as the carryover of unplanned events into the period. During June thru August 2015 the average distillation unit cutback was around 1.3-1.4 million B/D. This reaches around 1.7 MMB/D for September, before jumping to nearly 2.2 million B/D for October 2015. These are just some of the findings of PIRA's latest U.S. Refinery Turnarounds report.
Pakistan Raises Gas Rates and Targets Inefficient Use
The Pakistan government on Monday made the critical decision to begin converging domestic gas prices to international levels, as more and more of the nation’s gas supply is expected to come from imports. For the first time in recent memory, the hike in gas prices will include domestic consumers, the single largest, most inefficient block of users of natural gas, and one that has traditionally been exempt from prices increases in the past.
U.S. June 2015 DOE Monthly Revisions
DOE released its final monthly June 2015 (PSM) U.S. oil supply/demand data today, along with its annual PSA revisions for 2014. June 2015 demand came in at 19.59 MMB/D, identical to what PIRA had carried in its monthly balances. Compared to the DOE weeklies, total demand was lowered 362 MB/D. Total demand for June 2015 versus June 2014 (PSA) grew 701 MB/D, or 3.7%, compared to the final June 2014 data (year-on-year), and was even stronger than the 530 MB/D (2.9%) growth seen in May. For 2014, annual product demand was raised 70 MB/D, from what had been carried in the preliminary monthlies. End-June total commercial stocks stood at 1,277.4 MMBbls, spot-on with PIRA's assumption for end-June stocks on both crude and product.
U.S. Annual PSA Demand Revisions: Modest Increases
DOE released its Petroleum Supply Annual (PSA), yesterday, which finalized data, by month, for 2014. Annual demand was revised upward by an average of 71 MB/D compared to what had been reported in the Petroleum Supply Monthlies, which for 2014 are now supplanted by the PSA. The upward revisions began to kick in as prices began declining in the second half of the year. By product, the greatest upward revision was in NGL and liquid refinery gases (LRG) demand, which on an annual average basis accounted for 53 MB/D of the 71 MB/D increase. The second largest product increase was in distillate, revised on average 27 MB/D. As evidenced by the data, the magic of price continues to stimulate demand growth, not only in the U.S, but elsewhere.
Aramco Differential Adjustments for October — Generally More Generous
Saudi Arabia's formula prices for October were just released. Most of the terms to refiners were made more generous vis-à-vis their differentials to the key pricing benchmarks. Differentials in Asia and Europe were all lowered on Arab Light and heavier grades, with the biggest reductions on the heaviest grade, Arab Heavy. Differentials in Asia were tightened modestly on the lightest grade, Arab Super Light, and left unchanged for Arab Extra Light. In the U.S., the terms on all the grades were made more generous by $/0.50-0.60/Bbl.
Tight Oil Operator Review
Despite the weak oil price environment, Eagle Ford was the only one of the "Big Three" U.S. shale plays to see production decline on the quarter. Production continued to rise in the Permian and the Bakken was mostly flat as a drawdown in the inventory of drilled but uncompleted wells offset the impact of reduced drilling. Ongoing deflation in service costs, improved drilling times, high-grading, and enhanced completion techniques allowed operators to increase production using fewer capex dollars. As of the second quarter, full-year spending budgets were down 43% from 2014 levels, but spud-to-total depth (TD) times have come down 10-25% and drilling and completions costs down 15-25%. Operators expect to realize another 5-10% in savings by the end of the year. Most operators expect production to remain flat or decline slightly in 2H15.
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.
Clark, a UK national, has more than 30 years of experience from the oilfield services, projects and contracting industry, most recently as vice president of production facilities for Schlumberger. He has also held leadership positions at Wood Group and Technip and has broad international experience in overseeing operations and new business developments.
Clark will be based in London and work on expanding Aker Solutions' international presence with a special focus on the African market. He will assume the position on September 21 and report to Chief Executive Officer Luis Araujo.
"David is a true oil and gas professional with extensive experience in some of our most important markets," said Araujo. "His strong track record in business development will be of major value as we grow in strategically important regions such as Africa."
Aker Solutions has operations in more than 20 countries, including the U.S., Brazil and India. The company in 2011 established regional management teams in key markets to better coordinate customer contact and operations between its business areas, Subsea, MMO and Engineering. The UK role has been expanded to include Africa, a major growth market.
The development of the largest new field discovered in the UK North Sea for a decade* has been approved by the UK Oil & Gas Authority. The Maersk Oil operated high pressure, high temperature (HPHT) Culzean field in the UK Central North Sea is expected to produce enough gas to meet 5% of total UK demand at peak production in 2020/21. Culzean is also the largest gas field sanctioned since East Brae in 1990*.
Discovered in 2008 by Maersk Oil and its co-venturers, the gas condensate field has resources estimated at 250-300 million barrels of oil equivalent. Production is expected to start in 2019 and continue for at least 13 years, with plateau production of 60,000-90,000 barrels of oil equivalent per day.
Maersk Oil and its co-venturers, JX Nippon and BP (Britoil) are investing around £3bn (USD 4.5 bn) in the development, with more than 50% committed to investments in the UK. Over the projected life of the field, it’s anticipated that £2.1bn (USD 3.3 bn) in operating expenditure will be spent in the UK domestic market. The Culzean field aligns with the UK’s commitment to increased gas-fired electricity generation and is expected to support an estimated 6,000 UK jobs and create more than 400 direct jobs.
The Culzean development has benefited from the HPHT Cluster Area Allowance introduced by the UK Government as part of the 2015 Budget. The allowance supports the development of high pressure, high temperature projects - which typically have considerably higher capital costs - and encourages exploration and appraisal activity in the surrounding area or ‘cluster’.
Welcoming today’s announcement, Jakob Thomasen, CEO of Maersk Oil said, “Culzean is an important development for the UK and also for Maersk Oil and our co-venturers. We are pleased the field will support UK economic growth as well as extend understanding of HPHT development. Culzean is the latest in a series of large investments by Maersk Oil in the North Sea where we are active in Denmark, Norway and the UK – reflecting our commitment to the future of the North Sea region.”
The Chancellor of the Exchequer, Rt Hon George Osborne MP said, “Today’s announcement sends a clear signal that the North Sea is open for business. Already the UK’s oil and gas industry supports hundreds of thousands of jobs across the country and this £3 billion investment comes on the back of massive government support for the sector. “Despite challenging times, this government has backed the oil and gas industry at every turn, introducing a vital package of support to help it to protect and create jobs.
Andy Samuel, Chief Executive of the Oil & Gas Authority said, ”Maersk Oil and partners’ £3 billion investment to develop the Culzean discovery is excellent news for the UK during a period when the decline in global oil prices has created difficult operating conditions for this critical sector of our economy. The Oil & Gas Authority has worked closely with Maersk Oil and HM Treasury on the development plans for the Culzean field, which will support many new contracts in the oil and gas supply chain across the UK.”
Subsea 7 S.A. (Oslo Børs: SUBC, ADR: SUBCY) has announced the award of a subsea, umbilical, riser and flowline (SURF) contract by Maersk Oil with a value in excess of USD 150 million for the Culzean development.
The ultra-high pressure, high temperature field, one of the largest gas discoveries offshore UK, is located in Block 22/25 of the Central North Sea at a water depth of approximately 90 meters.
The contract scope includes project management, engineering, procurement, construction and installation of a 22" diameter 52 km gas export pipeline connected to the Central Area Transmission System (CATS), and a 3.6 km pipe-in-pipe (10" outer pipe and 6" inner pipe) providing insulation for the transportation of the condensate to the in-field Floating, Storage and Offloading facility (FSO). The pipe-in-pipe will be laid with a 4" piggy-back line that will transport fuel gas to the FSO. Subsea 7 will also provide subsea structures, tie-ins to the Culzean platform facilities and pre-commissioning expertise.
Project management and engineering work will commence immediately from Subsea 7's Aberdeen office. Offshore activities will utilize a number of Subsea 7 vessels including the highly versatile pipelay and heavy-lift vessel, Seven Borealis.
Offshore operations are scheduled to commence in 2017.
Phil Simons, Vice President UK and Canada, said: "This large project awarded by Maersk Oil for their Culzean field development, confirms our reputation as a world-class provider of reliable and cost-effective SURF solutions. The Seven Borealis has the ability to deliver fit-for-purpose performance demonstrating the optimum balance of cost-efficiency and capability. We look forward to collaborating with Maersk to ensure the safe and timely delivery of this significant gas production development."
Amidst the gloomy days of August when Brent Crude bottomed out at $42/bbl, the acquisition of Cameron by Schlumberger ($14.8 billion) took place as one of the largest mergers in the oil patch, following the tie-up of Halliburton and Baker Hughes ($32 billion) in November 2014. This consolidation has resulted in an integrated service & equipment provider covering the full oil & gas lifecycle from reservoir to first flow.
Our latest research suggests that the Global Oilfield Services sector will face a 36% decline in expenditure in 2015, prompting industry players to cut costs and reposition themselves through shedding underperforming/non-core business units. Prior to the Cameron merger, Schlumberger had already cut 15% of its workforce while the former had been consolidating business lines since 2014, selling several business units to GE and Ingersoll Rand, and subsequently the Letourneau jackup rig designs, rig kits and aftermarket service businesses to Keppel in late August 2015.
This move suggests a strategic intention towards integration of equipment and service/engineering to improve on efficiency and cost effectiveness of field development. The market will be watching closely for the reaction to the ‘pore-to-pipeline’ proposition. Is this the future? Or is it taking the ‘one-stop-shop’ approach too far?
Aquatic Engineering & Construction Ltd, an Acteon company, has appointed Martin Charles as group managing director. Charles replaces Aquatic’s former president, Chris Brooks, who has departed Aquatic after eight years.
Charles joined Aquatic in 2014 as regional general manager, Europe, Middle East and Africa (EMEA) and became COO earlier this year. He has a wealth of experience in oil and gas and associated market sectors.
Bernhard Bruggaier, executive vice president, Acteon, said, “Martin’s progression from COO to group managing director will ensure Aquatic’s mission remains as the first choice for products and services to support flexible product installation, recovery, replacement and decommissioning, on a worldwide scale.”
Charles said, “It has been a pleasure working with Chris and the Aquatic team. Their focus on technology and commitment to the company has been instrumental to the global growth and regional expansion of Aquatic. As group managing director, I will be building on the collective achievements of the leadership team by continuing to meet the needs of the challenging market environment in which we operate. Aquatic has a strong, proven reputation, and we will continue to invest in our core strengths: people, services and products.”
McDermott International, Inc. (NYSE:MDR) announces it has been awarded a lump sum contract by Saudi Aramco for brownfield work in various fields offshore Saudi Arabia.
Work on the contract is expected to be executed through the second quarter of 2018. The award follows the June 2015 signing of a second Long Term Agreement (LTA) between McDermott and Saudi Aramco for engineering, procurement, construction and installation (EPCI) opportunities in various fields offshore Saudi Arabia.
The package of various EPCI projects that make up the lump sum award represent the largest single award for McDermott’s Middle East Area operations in company history. Revenue from the fixed-price award will be included in McDermott’s third quarter 2015 backlog.
“Winning this important award and signing the new LTA sends a clear signal that our increased engagement with key clients is generating concrete results,” said David Dickson, McDermott’s President and CEO. “Our detailed knowledge and understanding of Saudi Aramco’s objectives, as well as our proven excellence in the Kingdom and the region continue to set us apart. Delivering on strong project execution and integrating McDermott’s local knowledge are critical to future success as we execute these and other projects for Saudi Aramco.”
Tom Mackie, McDermott’s Vice President, Middle East, said, “As one of the original two contractors for Saudi Aramco’s first LTA in 2007, we understand Saudi Aramco’s offshore fields, standards and specifications – and the value that Saudi Aramco places in McDermott’s fully integrated EPCI solutions.”
During the execution of the projects under the fixed price contract, McDermott plans to maximize in-Kingdom execution activities with a significant portion of the engineering and fabrication scope expected to be carried out by its engineering office in Al Khobar and fabrication facility in Dammam, respectively.
Additional services are expected to be provided by McDermott engineering teams in Dubai, United Arab Emirates and Chennai, India. Procurement is expected to be managed by McDermott’s Global Procurement Office based in Dubai and vessels from the McDermott global fleet, including specialized shallow-water installation vessels, are scheduled to undertake offshore installation.
McDermott provides its investors with information relating to estimated contract value in its quarterly supplemental financial information slides which can be found on the Investor Relations section of McDermott’s web site. This award would fall into the largest descriptor range included in these slides.
All Coast, LLC, the largest liftboat operator in the Gulf of Mexico, christened its new Class 250 Liftboat, the Great White, on August 20 at C and M Marina in Lafitte, La. Christening sponsor was Erin Allemand. The ceremony was attended by guests from the industry, media and local government, as well as company employees and management.
The Great White is a 250-foot leg liftboat with state-of-the-art design, comfortable accommodations, and modern features, such as a beautiful combination conference room and movie theatre.
The liftboat was designed and built by SEMCO, a well known and highly regarded liftboat builder. It is equipped with two 175-ton leg mounted cranes and a large open deck to assist in carrying equipment and supplies in support of various offshore activities. The vessel can accommodate 50 people, including private rooms dedicated for customer representatives.
"SEMCO's name is synonymous with quality construction of the safest, most reliable liftboats and we are proud to announce that the Great White is unparalleled to any other 250 class currently serving our market," said John Nesser, All Coast Co-CEO and Manager.
The Great White's self-elevating and self-propelled liftboat design operates in a maximum working depth of 185' of water. It features nearly 9,000 sq. ft. of deck space for cargo storage with a maximum deckload capacity of 800,000 lbs. to accommodate heavier equipment loads.
All Coast's newest vessel is one of the few 250+ class liftboats operating in the Gulf of Mexico market. All Coast is the only provider with a fleet of liftboats ranging in size from the 105 class to the 250 class.
"The Great White is emblematic of our investment in our customer's experience and overall satisfaction," said John Powers, Co-CEO and Manager of All Coast. "With this new addition, no other fleet in the Gulf can match our ability to cost effectively meet the specific needs of our customers by having vessels in nearly every class."
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