March 19, 2014- As part of President Obama’s all-of-the-above energy strategy to continue to expand safe and responsible domestic energy production, Secretary of the Interior Sally Jewell announced  on Wednesday that the  oil and gas lease sales for federal waters in the Gulf of Mexico garnered $872,143,771 million in high bids on 329 tracts covering 1,707,358 acres.

“These lease sales underscore the President’s commitment to create jobs and home-grown energy through the safe and responsible exploration and development of our offshore energy resources,” Secretary Jewell said. “The Gulf is a critical component of our nation’s energy portfolio and holds vital energy resources that spur economic opportunities for Gulf producing states as well as further reduce our dependence on foreign oil.”

The Department of the Interior’s Bureau of Ocean Energy Management (BOEM) offered nearly 40 million acres covering tracts in the Central and Eastern planning areas of the Gulf of Mexico, and opened bids from previously offered acreage in the Western planning area. Today’s lease sales build on the first three sales held under the Obama Administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 (>Five Year Program) that offered more than 60 million acres for development and garnered $1.4 billion in bid revenues.

"While domestic energy production is growing rapidly in the United States, the Central Gulf of Mexico, as demonstrated by today's lease sale, will continue to be one of the cornerstones of the nation's energy portfolio," said BOEM Director Tommy P. Beaudreau. "The Gulf of Mexico is one of the most productive basins in the world, and the Obama Administration supports the development of our nation’s offshore oil and gas resources in the Gulf of Mexico while protecting the human, marine and coastal environments, and ensuring a fair return to the American people."

Domestic oil and gas production has grown each year the President has been in office, with domestic oil production currently higher than any time in two decades; natural gas production at its highest level ever; and renewable electricity generation from wind, solar, and geothermal sources has doubled. Combined with recent declines in oil consumption, foreign oil imports now account for less than 40 percent of the oil consumed in America – the lowest level since 1988.

Lease Sale 231 for the Central Planning Area attracted $850,809,921 in high bids on 326 blocks covering 1.7 million acres on the U.S. Outer Continental Shelf (OCS) offshore Louisiana, Mississippi and Alabama. A total of 50 offshore energy companies participated in submitting 380 bids.

Lease Sale 225, the first of two lease sales proposed for the Eastern Planning Area under the Five Year Program, is the first sale offering acreage in that area since 2008. The sale encompassed 134 whole or partial unleased blocks covering approximately 465,200 acres 125 miles south of eastern Alabama and western Florida. Though the sale did not receive any bids, continued interest in this area is evidenced by ongoing and planned activity on existing leases from past sales as well as from similar activity on existing leases immediately adjacent to this area within the Gulf’s Central Planning Area. The area will be offered to industry again in 2016 under the current Five Year Offshore Oil and Gas Leasing Program.

In addition to opening bids for these two sales, BOEM opened three pending bids submitted by a company in the August 2013 Western Planning Area Lease Sale 233 for blocks located or partially located within three statute miles of the maritime and continental shelf boundary with Mexico (U.S. - Mexico TransBoundary Area). A total of $21,333,850 in high bids was submitted on three tracts by one company. Leases awarded as a result of these bids will be subject to the terms of the >U.S.-Mexico Transboundary Hydrocarbons Agreement, which was approved by Congress in the Bipartisan Budget Act of 2013 and recently signed by the President.

BOEM established the terms for these sales after extensive environmental analysis, public comment and consideration of the best scientific information available. These terms include measures to protect the environment, such as stipulations requiring that operators protect biologically sensitive features as well as providing trained observers to monitor marine mammals and sea turtles to ensure compliance and restrict operations when conditions warrant.

The terms also continue a range of incentives to encourage diligent development and ensure a fair return to taxpayers, including an increased minimum bid for deepwater tracts, escalating rental rates and tiered durational terms with relatively short base periods followed by additional time under the same lease if the operator drills a well during the initial period.

Following today’s sales, each bid will go through a strict evaluation process within BOEM to ensure the public receives fair market value before a lease is awarded.

Statistics are available for Lease Sale 231 at >boem.gov/Sale-231 and for Lease Sale 233 at >boem.gov/Sale-233 or at >www.boem.gov.

Announcing its results for the 2013 financial year, VIKING Life-Saving Equipment A/S has again led the way in its industry, achieving growth in both turnover and profits for 10 straight years.

In doing so, the Danish-based company with a worldwide presence has once more beaten the
odds in an industry plagued by reductions in passenger and cargo ship newbuilds, falling exchange rates in key markets, and downward price pressure.

Photo: Viking Offshore Evacuation System

Adjusted for falls in the US dollar exchange rate, currencies pegged to the dollar, and European member state non-euro currencies, the company's turnover for 2013 increased 6 percent to DKK

1.612 billion. Profit before tax grew more than 20 percent to a record DKK 141.2 million.

"Our earnings have now reached an appropriate level for a healthy manufacturing company," says VIKING CEO Henrik Uhd Christensen. "In 2013, VIKING achieved moderate growth in turnover, and the increased profit level primarily reflects internal improvements. We have, in fact, been able to reduce the costs of administration, logistics and production while simultaneously strengthening customer service."

Long-term strategy in a sluggish market

As one of the world's leading manufacturers of maritime safety equipment, VIKING is closely tied to the newbuild market for passenger and cargo ships, a market that has been declining in recent years. Southern European countries, in particular, the traditional stronghold of ferry traffic in the Mediterranean, are still feeling the effects of the economic crisis. Moreover, low economic growth rates in several large markets have had considerable influence on global cargo traffic which, in turn, affects contracts for new cargo ships.

"We have been able to handle the worldwide market saturation of recent years because VIKING's owners take a long-term approach to expanding our global market position, focusing on growth and making sure we are right where our customers are," says Henrik Uhd Christensen. "During the
crisis years, we have continued to develop a competitive product portfolio based on concepts and
services tailored to each customer's specific needs."

Offshore market continues to grow

Henrik Uhd Christensen points to the VIKING Shipowner Agreement, where his company offers to take care of all aspects of a shipowner's safety equipment and servicing tasks for predictable, transparent prices. It's a concept that addresses shipowner needs for flexibility at a time where access to financing is limited, and has quickly become the industry's gold standard since its launch four years ago.

With its broad product portfolio, VIKING has also been able to compensate for slower activity in some market segments by expanding in more promising ones. Here the offshore industry stands out, with growth rates fueled by continued high oil prices.

"As the hunt for new oil and gas discoveries moves further from shore, higher-quality safety equipment and servicing arrangements are necessary," says Henrik Uhd Christensen. "With a product range well-suited to the North Sea and polar conditions, and with a specialised offshore business unit based in Norway, VIKING is uniquely positioned to dominate the offshore market for the foreseeable future."

2014 just as difficult

Despite difficult prevailing market conditions, VIKING expects to see growth both in turnover and profit during 2014.

"We are again facing a challenging year where there is little room for improvement in newbuilds, or strong growth in other areas. We expect the passenger and cargo markets will marginally improve, and that the offshore market will continue to show its strength. Within these largely unchanged parameters, we will continue to be on the offensive with our products and services, tailored to individual customer needs," says Henrik Uhd Christensen.

The positive earnings for 2013, combined with a conservative dividends policy, have contributed to further strengthening the company. VIKING's equity at the end of the financial year amounted to DKK 617.2 million.

Hoover Container Solutions (“Hoover” or the “Company”), has acquired Container Company Ltd. (“Container Company”), a leading supplier of cargo carrying units (“CCUs”) for the offshore oil and gas industry. This acquisition complements Hoover's recent acquisitions of Consult Supply AS and Dolphin Energy Equipment making Hoover one of the largest worldwide suppliers of CCUs.  

Headquartered in Aberdeen, Scotland, Container Company designs, supplies and services a full range of standard and custom-built CCUs including chemical tanks, baskets, skips, workshops, mini, half height, closed top and freezer containers. Container Company maintains a wide range of CCU sizes with a large, readily-available inventory to meet its customers’ requirements while offering a full repair, maintenance and certification program. With a strong focus on quality, Container Company conducts final product inspections through its in-house test engineers to ensure all units exceed required safety and industry standards including BS7072, BS EN 12079 and DNV 2.7-1.

“This acquisition enables us to better serve our global customers with expanded facilities, products and services. Hoover now has a meaningful footprint in substantially all major offshore energy hubs around the world including Houston, Texas; Scott, New Iberia and Port Fourchon, La.; Aberdeen, Scotland; Stavanger, Norway; Abu Dhabi, UAE; Kuala Lumpur, Malaysia; Perth and Melbourne, Australia; and Macae, Brazil,” said Donald Young, Hoover’s chairman and chief executive officer. “As we continue our international growth plan, it is imperative that we continue to provide quality products, services and solutions to our worldwide customers, and Container Company’s presence and reputation in the Aberdeen market will be a key asset in this expansion program.”  

Andy Drummond, Container Company’s managing director, said, “We believe becoming part of Hoover Group presents Container Company with a great opportunity to work alongside a successful, worldwide organization. This will enable us to provide our clients with a larger product range globally and assist them with products which we previously were unable to supply. The investment that Hoover brings to Container Company enables us to grow the business significantly for the future.”

Once again demonstrating their power and agility in both nearshore and offshore waterways, Crowley Maritime Corp.'s ocean class tugs have successfully delivered oversized, overweight equipment – comprised of topsides, tendons, piles and more – that are now part of a massive semi-submersible floating production facility located in the U.S. Gulf, approximately 280 miles south of New Orleans, La. Working alongside the tugs were Crowley's 455 series high-deck-strength barges, which carried much of the equipment as it was towed offshore. Utilizing the Crowley tugs' dynamic positioning capabilities, the facility, known as Jack/St. Malo, was successfully moored and made storm safe at a depth of 7,000 feet between the Jack and St. Malo offshore oil and natural gas fields, which are within 25 miles of each other.

As was done when Crowley's ocean class tugs successfully delivered the Olympus platform and Lucius spar to the U.S. Gulf, both completed late last year, the company's Houston-based Solutions project management team, which manages the tugs and barges, completed the delivery in three stages of work in both nearshore and offshore waters.

During the first stage, the nearshore phase, the topsides were skidded onto the company's 455 series barge Julie B at the Keiwit facility dock in Ingleside, Texas, in Corpus Christi, where they were later lifted and installed onto the hull of Jack/St. Malo. Once in place and secured, the Ocean Wind and Ocean Wave next provided assistance by pushing the Jack/St. Malo facility, away from Corpus Christi, through the Port of Aransas, Texas, and out to deeper waters. The Ocean Sun followed the flotilla and was equipped to provide assistance, if needed.

Relocation to deeper waters marked the beginning of the second phase of work, the offshore stage. Here, the Ocean Wind and Ocean Sun towed the facility to its final location, alongside the Crowley-contracted tugboat Harvey War Horse II. Also during this phase, the Solutions team arranged for the company's 455 series barge 455 7, towed by Crowley's tug Warrior, and third-party barge Marmac 400, towed by Crowley's tug Pilot, to deliver the piles, or long pipe-like structures that serve as anchors for the platform, to the project site. Finally, the Marty J, towed by the Pilot, made three subsequent trips to the installation site to deliver additional equipment – including chains, connectors and line reels – that were used in the mooring of the floating facility.

In the final stage, the positioning phase, the Ocean Wind, Ocean Wave, Ocean Sky, Ocean Sun and Harvey War Horse II worked together to hold the Jack/St. Malo in its final location, and remained on site in a star pattern to provide support as the spar was connected to its moorings and made storm safe in more than 7,000 feet of water.

"This was another successful pairing of Crowley's new ocean class tugboats and high-deck strength barges," said Crowley's John Ara, vice president, solutions. "Not only was the project completed safely and on time, but it also helps to illustrate the increasing competence and capability of our crew and vessels. We look forward to utilizing these specialized teams and assets in projects in the future."

Crowley's ocean class tugs are modern ocean towing twin-screw vessels with controllable pitch propellers (CPP) in nozzles, high-lift rudders and more than 147 MT bollard pull. The first two ocean class vessels, Ocean Wave and Ocean Wind, are classed as Dynamic Positioning 1 (DP1) tugboats and are twin-screw, tugs with an overall length of 146 feet, beam of 46 feet, hull depth of 25 feet and design draft of 21 feet. The second two tugs of the class, Ocean Sky and Ocean Sun, are classed as DP2 and are 10 feet longer. All four vessels are capable of rig moves, platform and Floating Production, Storage and Offloading (FPSO) unit tows, emergency response, salvage support and firefighting.

Scheduled to begin producing oil and natural gas later this year, the facility will have a capacity of 170,000 barrels of oil per day and 42.5 million standard cubic feet per day of natural gas. Jack/St. Malo will act as a hub for the 43 subsea wells, including pumps and other equipment on the seafloor.
Crewmembers involved in the project include Captains Charles Alan Williams, Andrew C. Ashworth, Ted Caffy, Brian Cain, Stuart B. Andrews Jr., Stephen Berschger, Laurence Christie and Ward P. Davis; Chief Mates Darrel Koonce, Dustin Marks, Clyde McNatt, James Hoffman and Scott R. Ellis; Chief Engineers RD Lewis, Charles Pate, Scott Bovee and Edgar C. Henson; Able-Bodied Seamen Terry Laviolette, Ryan Landers, Dave Heindel, Orvin McCoy, Preston Harper, Farrell Bodden, Steven Kendrick, Jonathan Solomon, Corey Hill, Satchel G. Caffy, Ben E. Johnson and Edward J. Rynn; Assistant Engineers Micheal Bibby, Keith Smith, Matthew Hamer, Andralesia Terrell, Richard A. Saunders, James H. Murray, Thomas Murphy and Isaac Levine; Second Mates Travis Cheer, Nate Leachman, Eric A. Eaton, Cecil Wilson and Ray Adams; Third Mate Scott M. Tompkins; Dynamic Positioning Officer John Willson; and Ordinary Seamen and/or Cooks Johnny Godwin, Stephen R. Goletz, Rene Fuentes, Evan Flynn and Glen Williams.

Leak detection is a considerable challenge facing the industry and DNV GL has therefore taken the lead in establishing a new Joint Industry Project (JIP). Twenty key industry players are partnering to develop a best practice for designing and implementing offshore leak detection systems.

Over the last few years, following several oil releases, there has been an increasing focus by both operators and authorities on the environmental impact related to offshore oil and gas activities. This is especially an issue that needs to be addressed now since society's tolerance for leaks is dropping and we are moving into the Arctic and other environmentally sensitive areas. Hydrocarbon leak detection systems are a requirement on the Norwegian Continental Shelf but authorities around the world are also increasingly demanding such systems for new field developments.

There are various leak detection sensors available but they all have limited coverage and application areas. Some sensors will only detect gas, some cover a small area with high sensitivity while others cover a large area with low sensitivity. The challenge is to integrate these into a complete system that provides the required coverage and sensitivity while at the same time avoiding frequent false alarms.
In addition, leak detection methods and techniques have been available in the market for several years, but there are still gaps to be closed concerning the design, engineering, commissioning and operation of these systems to ensure their proper performance.
The industry is coming together to find the right solutions
Twenty companies and regulators are participating in DNV GL's Joint Industry Project (JIP) on Offshore Leak Detection.

According to one of the partners, Lundin Norway, there is a great need to further develop these systems. "Today, it's difficult to get a good system with a demonstrated track record that covers an entire field, both subsea and on the surface. There's a strong need for a common approach so that the operators and suppliers can jointly improve these systems. We also need to define reasonable specifications and requirements. It's equally important to consider how different technologies can be integrated into a system that is practical for the end user," says Arnljot Skogvang Company Rep at Lundin.

DNV GL's Business Development Manager for Subsea, Christian Markussen (photo), says: "I'm really glad to see the great participation from key industry players, but the JIP would benefit from having even more operators, integrators and subsea suppliers."

The Joint Industry Project is aiming high
Markussen explains that the overall aim is to ensure safe and environmentally sound operations by limiting hydrocarbon spills through detecting acute discharges, with a high level of certainty, at the earliest possible stage. A planned outcome will be a DNV GL Recommended Practice that addresses the leak detection system through all the lifecycle phases of offshore development projects. The project will define relevant functional requirements and general specifications for a leak detection system as well as developing a methodology for designing an integrated system, including surface and subsea technologies.

DNV GL is facilitating this JIP, combining industry experience with the competencies and expertise of the Subsea Technology and Environmental Risk Assessment & Technology sections at the DNV GL Oil & Gas office at Høvik, Norway.
Operators: Lundin, BP, ENI, Petrobras and GDF Suez
Integrators: FMC Technologies
Suppliers: NAXYS, Biota Guard, SonarDyne, VisSim, Stinger, Phase, Kongsberg, Norbit, Contros, Metas and KSAT
Observers: Norwegian Oil & Gas, Norwegian Ministry of Climate and Environment and the Petroleum Safety Authority Norway

A deal has been signed t to establish the oil and gas industry's first comprehensive environmental cleaning, decontamination and disposal service: Ecoserv. The new company is expected to create more than 100 new jobs, many of which will be at the company's Lafayette headquarters and other facilities in the Gulf region.

Ecoserv offers fully integrated, cost-effective, and environmentally friendly specialized cleaning, waste management, and disposal services for the upstream oil and gas industry.

Kenny DesOrmeaux, founder and CEO of OCS, will also serve as CEO for Ecoserv, which will be headquartered in Lafayette, LA and operate out of 14 locations throughout the Gulf Coast and Permian Basin of West Texas. "Ecoserv is founded on technical innovation, safety, and a commitment to both the environment and our industry," DesOrmeaux said. "We're focused on creating ease-of-use and profitability for all of our current and future customers.

"Our employees play a huge role in the innovative solutions we offer our customers and we're very proud of that," DesOrmeaux said.

Ecoserv was formed when Lariat Partners merged Houston-based Newpark Environmental Services, LLC (NES), the region's leader in offshore waste disposal, with Offshore Cleaning Systems, LLC (OCS), the Gulf of Mexico's leader in offshore cleaning services

Wood Group Mustang promotes Tim Griffin to vice president, industrial operations leading the company's North American industrial division based in Greenville, S.C.

The division serves the automotive, aerospace, industrial manufacturing, pulp and paper and engineered materials industries with a strong focus on providing high-quality, fit-for-purpose solutions for grassroots projects, revamps, facility expansions and modernizations.

"With Tim's 33 years of project management and controls expertise, Wood Group Mustang's industrial division will continue to excel in serving our North American clients from conceptualization through construction and start-up," said Wood Group Mustang Executive Vice President John Dalton, Sr.

Griffin joined Wood Group Mustang in 2011 and served most recently as director of operations for the industrial group and formerly as director of project controls & estimating. He previously was with Fluor Corporation serving their manufacturing and life sciences business unit. Griffin holds
a Bachelor of Science in construction science and management from Clemson University.

Statoil and co-venturer ExxonMobil have announced the results from their first drill stem test in the Tanzania Block 2 offshore discoveries.

The data acquired is important to reduce technical uncertainties in a possible future Tanzania offshore and LNG development.
The Zafarani-2 operation tested two separate intervals and flowed at a maximum of 66 million standard cubic feet of gas per day, constrained by equipment, and confirmed good reservoir quality and connectivity.

The drill stem test operation was performed through a re-entry in the Zafarani-2 well, in 2,400 meters water depth and approximately 80 kilometers off the coast of southern Tanzania.

"The ongoing appraisal program is crucial to firm up the design and development basis for bringing gas to shore and a first phase onshore LNG project in Tanzania," says Øystein Michelsen, Statoil's Tanzania country manager.

"We are now working constructively with our co-venturer ExxonMobil, Blocks 1, 3 & 4 and the Tanzanian authorities to progress the plans for a joint LNG plant development."

The production well rate potentials are estimated to be higher than the equipment constrained rates obtained during the test. The Zafarani-2 operation will be followed by the appraisal well Zafarani-3, which concludes the planned appraisal in the Zafarani reservoir, the cornerstone for a field development in Tanzania Block 2.

The Zafarani-2 well test announcement follows the Mronge-1 discovery made in December 2013, which was the fifth discovery in Block 2 and brought the natural gas in place volumes up to 17-20 trillion cubic feet (Tcf)*.

The Mronge-1 was preceded by three successful high-impact gas discoveries during the first drilling phase with Tangawizi-1, Zafarani-1 and Lavani-1, and a deeper discovery in a separate reservoir in Lavani-2.

Statoil operates the license on Block 2 on behalf of Tanzania Petroleum Development Corporation (TPDC) and has a 65% working interest, with ExxonMobil Exploration and Production Tanzania Limited holding the remaining 35%.

Statoil has been in Tanzania since 2007, when it was awarded the operatorship for Block 2.

(*1 Tcf =180 million barrels of oil equivalent)

MacGregor, part of Cargotec, has secured deck equipment contract for a series of eight 58,500 dwt bulk carriers under construction at New Times Shipbuilding in China. The vessels are being built for Lemissoler Navigation (Front Marine), based in Cyprus, with the delivery of the first two vessels scheduled to start around August 2015.

The contract will see MacGregor deliver complete equipment packages comprising electric pole-changing winches, steering gear, air compressors, hatch covers and variable frequency drive (VFD) electric cranes, four per ship.

The packages include equipment from combined MacGregor Hatlapa portfolio."The new contract was won as a direct result of our strengthened capability for larger delivery scope and a long standing relationship with the owner," says Jörg Tollmien, Head of Sales for Hatlapa offering at MacGregor.

"It is also a good example of what our combined product ranges can offer customers, particularly in cases such as this where an extensive scope of deck equipment is required for multiple ships," Mr Tollmien notes.

Photo

NYC-based PIRA Energy Group believes that Permian Basin is now being targeted for tight oil production. The United States is now in the heart of the refinery turnaround period which means a max crude stock build.  In Japan crude stocks declined. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Permian Basin Tight Crude Oil Update

A source of conventional production for decades, the Permian Basin is now being targeted for tight oil production, using horizontal drilling and hydraulic fracturing. Relative to Bakken and Eagle Ford, the Permian is in an earlier stage of development. To date, production growth in the Permian more closely resembles the steady increase seen in Bakken than the rapid growth in Eagle Ford.

Max Turnaround Period = Max Crude Stock Build

The United States is now in the heart of the refinery turnaround period. March 14 should be the max turnaround week, after which it drops the subsequent two weeks, if everything comes back as planned, which would be unusual. Historically, unexpected delays have added some 400 MB/D to monthly downtime. Not surprisingly, crude runs hit a low for the year this past week and crude stocks had a very large stock build. Runs are still well above year ago levels as advantaged crude provides U.S. refiners with good margins.

Japanese Crude Stocks Decline

Total commercial stocks dropped on the week. Crude stocks fell, but finished product stocks were only modestly changed, though gasoil stocks fell to a new yearly low and remain very lean. The kerosene stock draw rate moderated further as demand eased and yield rose. The indicative refining margin was modestly higher with gains in gasoline cracks more than offsetting lower cracks in the other products.

Freight Market Outlook

After a strong start to the year, when tanker rates in a number of key trades registered their highest levels in six years, crude tanker rates dropped precipitously. The Baltic dirty tanker index doubled from 674 at the end of November 2013 to 1,344 on January 20, before dropping back to 676 recently. This has touched off a debate on whether the spike in rates was a weather-related, one-off event or a precursor of tighter balances and better times to come.

 Ethanol Prices Soar

U.S. ethanol prices soared as corn values rose to the highest values since September. Product was tight with prices at the coasts reaching seven-year highs. Ethanol manufacturing cash margins reached the highest level in 10 weeks. Brazil is in a terrible drought which will likely cause serious damage to this year’s (2014-2015) harvest.

Low Stock Levels

U.S. propane storage will finish the heating season at a quite low level. While stock building should start in 2Q, year-on-year comparisons will be far lower than last season. The pace of exports will certainly remain firm in the months ahead. As the heating season winds down, more chemical usage will be needed in overseas markets and LPG is being priced to displace naphtha.

Upcoming PIRA Conference Calls--North American Gas Market Presentation

PIRA will conduct a 40-minute online presentation and discussion (via WebEx) for North American Natural Gas Retainer clients, titled North American Gas Market Outlook: Filling the Hole Left in Storage, on Friday, March 21, at 3:30pm EDT. Contact PIRA at This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.

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.

Proposal would strengthen oversight capacity for offshore oil and gas development under the President's all-of-the-above energy strategy

President Obama's fiscal year 2015 budget request for the Bureau of Safety and Environmental Enforcement (BSEE) is $204.6 million, a $2.0 million increase over the 2014 enacted level. The Administration's proposal would provide critically needed resources to further strengthen BSEE's regulatory and oversight capabilities for oil and gas development on the U.S. Outer Continental Shelf, as the Administration works to responsibly expand domestic energy production through the President's all-of-the-above energy strategy.

"The President's 2015 request lays a strong foundation for a sustainable regulatory program and provides the infrastructure necessary to ensure offshore oil and gas activities are conducted safely and in an environmentally responsible manner," said BSEE Director Brian Salerno. "The President's request will enhance our ability to keep pace with a dynamic industry as operators continue to pursue new and emerging technologies that enable them to develop our nation's energy resources in deeper water and frontier areas."

The 2015 budget proposal would enable BSEE to continue to bolster engineering, scientific and technical expertise and research needed to increase its capacity in multiple disciplines to adequately staff regulatory, safety management, structural and technical support as well as oil spill response prevention programs. The development of robust scientific information and the timely and thorough review of exploratory and production permits are critical components of BSEE's oversight responsibilities.

The President's budget furthers BSEE's strategic goals through a program increase of $905,000 to support enhanced review of emerging technologies, and expand project funding to validate technology, test protocols and analyze economic feasibility. The President's request will be offset by $123.6 million from BSEE collections, including $65.0 million from inspection fees, $50.4 million from rental receipts and $8.2 million from cost recovery fees.

The proposed 2015 budget will enable BSEE to continue to build a robust culture of safety, with a strong focus on risk reduction. The Bureau will bolster its capacity for analyzing data gained through incident reporting requirements, near-miss reporting, and real-time monitoring. BSEE will also work with the offshore industry to better understand their safety processes, so that in turn it can mitigate safety risks and reduce the likelihood of future incidents.
As part of this cooperative effort, BSEE will continue the development of the Ocean Energy Safety Institute in FY2015. The Institute will provide a program of research, technical assistance, and education that serves as a center of expertise in offshore oil and gas exploration, development and production technology. This expertise will be especially critical for frontier areas, such as high temperature/high pressure reservoirs, deepwater, and Arctic exploration and development.

By the end of 2013, there were 40 deepwater floating rigs drilling in the Gulf of Mexico, up from 37 at the start of the year. The Energy Information Administration projects offshore production will continue to grow from 2015 through 2040, as the pace of development activity quickens and new, large development projects, predominantly in the deepwater and ultra-deepwater areas of the Gulf of Mexico are brought into production. The 2015 budget request provides robust support that will enable the Bureau to keep pace with industry activity and the technology developments that are helping to drive this anticipated growth.

NYC-based PIRA Energy Group believes that recent economic softness will be temporary and we continue to expect above-trend growth in 2014. On the week, pretty close to flat U.S. stock profile, while Japanese crude stocks built sharply. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Economic Softness Will Be Temporary

PIRA believes recent economic softness will be temporary and we continue to expect above-trend growth in 2014. While flat price has ignored weaker economic data, crude stock builds are forecast to somewhat undermine bullish sentiment. Global refinery runs will bottom in April and then move sharply higher by midyear. Light product inventories will remain low, but diesel cracks will seasonally ease while gasoline cracks strengthen. Political risks to supply are growing, raising the probability of even larger MENA disruptions than PIRA is assuming.

Pretty Close to Flat U.S. Stock Profile

Commercial oil inventories decreased a slight 0.50 million barrels this past week, all of which was in products. This is the seventh consecutive week of product stock declines. Large product stock declines are quite typical in February because it is a strong product demand month. In fact, last year's product inventory decline during February was even larger with this past week's decline being 7.0 million barrels.

Japanese Crude Stocks Build Sharply

Total commercial stocks jumped 7 MMBbls with crude moving higher by nearly 8 MMBbls due to a surge in implied imports. Finished product stocks fell largely due to a strong draw on kerosene but also smaller draws on the other major products. Gasoil demand was very strong at 992 MB/D, the third highest level in a year. The indicative refining margin was modestly lower with all the major cracks weakening slightly.

Prices Will Be Under Some Downward Pressure

Brent crude prices remain supported by relatively tight global supply-demand balances due to continued supply disruptions and low stocks. United States crude prices relative to Brent will be choppy with WTI stronger with new pipelines, while the entire USG complex will see inventory builds during U.S. refinery maintenance before tightening again later in the 2nd quarter. European distillate cracks will trend lower as demand seasonally eases and currently tight inventories build back when Atlantic Basin runs ramp up after maintenance. Gasoline cracks are likely to increase significantly over the next few months with Atlantic Basin inventories expected to be lower than last year.

December 2013 DOE Revisions

DOE recently released its final monthly December 2013 (PSM) U.S. oil supply/demand data. While demand was revised lower by 519 MB/D, strong year-on-year gains continued. Total commercial inventories were revised higher by 8.5, with all the upward revision in products. Inventory levels of both crude and product were in deficit compared to year-ago, with that deficit having grown from end-November comparisons.

Severe Winter Weather Impacts Rail Performance

Every few years, severe winter weather causes major problems for rail transportation. This winter the weather problems have caused a record deterioration in service performance for the major U.S. railroads. These problems have contributed to the slight decline in U.S. crude by rail volumes since early December 2013. It will take two or three weeks for the rail system to recover from the cumulative effects of the weather, assuming that the rest of the winter returns to “average.” So the impact on crude by rail volumes will continue to be felt until mid-March, at a minimum.

U.S. Propane Exports Set a Record

U.S. propane exports set a new record in 2013 and are expected to increase further during the course of 2014. This will tend to keep inventories relatively low during the upcoming year, especially with stocks ending 1Q at around a record low for the period. As the season ends it will be necessary for the European and Asian chemicals operations to pick up the pace of LPG feedstock usage.

The Output of Ethanol-Blended Gasoline Soars

The production of ethanol-blended gasoline increased to a two-month high of 8,364 MB/D the week ending February 21 from 8,069 MB/D in the preceding week. U.S. ethanol output climbed for the third consecutive week, reaching 905 MB/D for the first time in five weeks.

Russian Gas Risks Greater for Central Europe; Oil Risks Minimal

The Ukrainian corridor for Russian gas exports is not as important as it used to be, but it still plays a central role in European gas supply. PIRA's analysis of pipeline flows shows that Russia can divert a little over half of the gas it moves through Ukraine to locations all over Europe. Spare capacity in the Nord Stream (Baltic) pipeline to Germany and the Yamal pipeline through Poland will allow Western Europe to receive most of the gas it needs. Central Europe and the Balkans could face some scarcity if the Ukrainian route were to temporarily disappear, but this is considered unlikely. For oil, there is less potential impact than with gas since most Russian oil exports go by tanker from Russian ports in the Baltic and Black seas.

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.

Petrobras announces that it has completed drilling wildcat well 1-BRSA-1205-RNS (1-RNS-158), located in deep-waters of the Potiguar Basin. The results confirm the discovery of intermediate oil (24º API), as previously announced to the market on December 17, 2013.

The well, informally referred to as Pitu, is located at a water depth of 1,731 meters, 55 km off the coast of the state of Rio Grande do Norte.
The well reached the total depth of 5,353 meters and detected a hydrocarbon column of 188 meters. A formation test was carried out, which confirmed the reservoir's satisfactory permeability and porosity.

Based on the results obtained, the consortium will proceed with the exploratory activities, with the aim of proposing a Discovery Evaluation Plan to Brazil's National Petroleum, Natural Gas and Biofuels Agency (ANP).

Petrobras is the operator of concession BM-POT-17, with an 80% interest, in partnership with Petrogal Brasil S.A., which holds 20%.

As a result of the on-going farm-out process and after obtaining the necessary approval from Brazilian authorities, BP Energy do Brasil Ltda will join as a concessionaire and the interests of the consortium members in BM-POT-17 will be as follows: Petrobras - 40% (operator), BP Energy do Brasil Ltda - 40% and Petrogal Brasil S.A - 20%.

Hicks Equity Partners ("HEP"), a private equity firm led by the Thomas O. Hicks family, has announced that its portfolio company, Directional Rentals, Inc., has acquired Reamco, Inc., a company based in Lafayette, La., that manufactures, rents and refurbishes downhole drilling tools and related products used in the drilling industry.

Directional Rentals, Inc., a leading oilfield services company, has also been renamed Drilling Tools International ("DTI") to more accurately reflect the company's mission of renting, manufacturing and selling drilling tools used in bottom hole assemblies to the world's leading oilfield services companies, independent directional drillers and exploration companies, both onshore and offshore.

Reamco specializes in the manufacture and refurbishment of stabilizers, drill collars, reamers and related products and also offers grinding and hardfacing capabilities. Through this strategic acquisition, DTI will expand its machining capabilities and offer even better customer service by shortening turnaround time and improving quality on essential tool repairs. Reamco maintains key certifications from the American Petroleum Institute (API) and is ISO certified.

Reamco's previous owners, Brent Milam and Ashley Lane, have become shareholders in DTI and have joined the company's management team. Milam founded Reamco in 1985 and has served as the company's president since that time. Lane was instrumental in Reamco's founding and returned to the company as chief executive officer (CEO) in 2011 after leading Drilling Logistics, Inc. for several years.

Thomas O. Hicks, chairman and CEO of Hicks Equity Partners, said, "We are delighted by DTI's progress since we acquired the company in 2012. Wayne Prejean and his team have done an outstanding job meeting the needs of a dynamic marketplace and positioning the company for future growth. Likewise, Brent and Ashley have also built an excellent company in Reamco and have cultivated a well-deserved reputation as a leading downhole tool manufacturing company. The combination of these two world class entities creates a more competitive industry participant with expanded capabilities that we expect to drive growth in the international drilling markets."

DTI CEO, Wayne Prejean, added, "The acquisition of Reamco is a 'win-win' that strengthens our strategic position and capabilities through an enhanced ability to aggressively pursue new markets such as deep water drilling. In particular, our customers will benefit as we bring more maintenance and repair operations in-house, allowing us to more efficiently deliver the services they need. We look forward to growing Reamco through key investments in its facilities, equipment and people, which is the true strength of our company."

Milam said, "I am excited to join forces with Wayne Prejean, the DTI team and Hicks Equity Partners. I have dedicated much of my professional career to the development of this company and could not have asked for better partners as we look towards the next phase of our growth.

Lane added, "With the opening of our new sales office in the North Sea and the horsepower and asset base of DTI, I look forward to substantial growth in Europe, West Africa and the Middle East."

Bracewell & Giuliani LLP served as legal counsel to DTI and KPMG provided accounting and tax advice with respect to the transaction.

President Obama's fiscal year 2015 budget request, announced today, includes $169.8 million to fund the Bureau of Ocean Energy Management (BOEM), which is charged with managing the Nation's offshore energy and mineral resources in a way that promotes efficient and environmentally responsible energy development through oil and gas leasing, renewable energy development, and a commitment to rigorous scientific studies. 

"BOEM’s priorities fully support the Administration's vision for creating growth and opportunities as we pursue our mission. Our modest increase in the President’s request reflects careful analysis of the resources needed to advance renewable and conventional energy, manage non-energy OCS mineral resources and invest in what’s needed to grow the economy." said BOEM Director Tommy P. Beaudreau.

The budget requests continued funding to fulfill BOEM's program implementation responsibilities, which include leasing and planning for conventional energy development through implementation of the Five Year Outer Continental Shelf (OCS) Oil and Gas Leasing Program, planning for individual lease sales and conducting post-sale review of companies' exploration and development plans.  BOEM also manages the development of offshore renewable energy resources - including implementation of the Secretary's "Smart from the Start" initiative to accelerate leasing in offshore wind energy areas off of U.S. coasts.

In support of both its conventional and renewable energy programs, BOEM conducts extensive analysis, including environmental review, resource assessment, and economic analysis.  Applied research through BOEM's Environmental Studies Program supports science-based decision-making.  

The budget proposes an increase of $2.9 million above the FY 2014 enacted level and a $3.4 million increase in net appropriations. This includes $2.5 million for a  programmatic environmental impact statement (EIS) for the 2017-2022 Five Year Program. The programmatic EIS is mandated by the National Environmental Policy Act and is required by the OCS Lands Act. Development of the EIS involves scoping, development of alternatives, Federal and state agency coordination, public comment, comment analysis and response, as well as final publication.

Additional details on the President's FY 2015 budget request are available online at http://www.doi.gov/budget/appropriations/2015/highlights/index.cfm.

Subsea 7 S.A. (Oslo Børs: SUBC) has announced the award of a US$75 million three-year subsea construction services contract by ExxonMobil Canada Properties.

The contract supports the Hebron heavy oil field development, located in the Jeanne d'Arc
Basin 350 kilometres southeast of St. John's, Canada.

The contract scope includes the project management, engineering and installation of two Offshore Loading Systems in a water depth of 92 metres. Engineering and project management will begin immediately from Subsea 7's offices in St John's.

Stephen Henley, Managing Director of Subsea 7 Canada, said: "This contract award further enhances our construction capability across offshore Canada, building on the successes of our subsea engineering and construction work for our clients in the region."