NYC-based PIRA Energy Group believes that China’s crude imports soared while India’s oil demand surges ahead. In the U.S., a large crude stock build overwhelms a product inventory decline. In Japan, crude runs increased, imports fell back and stocks drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

China’s Crude Imports Soared While India’s Oil Demand Surges Ahead

Oil prices will consolidate recent gains and then move higher in a step ladder fashion as price must inevitably be high enough to remunerate new supply to meet growing demand. India’s oil demand growth is likely to keep pace with refinery capacity additions through 2017, which will translate to a leveling off in net product exports. China’s teakettles lift crude imports to new record high. Asian imports of U.S. LPG are set to rise, helping to meet robust demand growth partly driven by new PDH plants in China and helped by improved economics after the Panama Canal expansion. Asian margins should stay healthy through midyear before easing as gasoline season winds down and rising crude prices eat into margins.

Resilient WCSB Exports Provide Little Relief for Rebalancing North American Supply

Reeling from a year of low prices and a warm withdrawal season, Canadian producers have further reduced capital expenditure budgets in the face of weak pricing. Despite reduced production budgets, declining rig counts and growing layoffs in the patch, Canadian producers have reported strong production numbers over the past several months — notwithstanding weak in-basin pricing and glutted WCSB storage levels. There are a number of exogenous factors that suggest this resiliency will likely continue, with front-loaded Canadian production gains and limited delivery options fortifying gas-on-gas competition in western Canada as well as in the U.S., particularly the Midwest. All told, relatively robust exports from Canada will provide little help in rebalancing the U.S. market.

Italian 2017 Prices Under Pressure, as Enel Catching Up with Forward Hedging

During its presentation to the financial community on March 23, Enel indicated that the open position for 2017 is relatively wider, having hedged only 22% of its Italian coal and gas generation, instead of 35% for the year ahead in 2015. As Enel hedges a higher portion of their fleet in the upcoming months, we can expect further weakness for 2017 Italian prices. However, there is the possibility — more bullish for prices — that Enel's expected total output for 2017 in Italy might be lower than in prior years, as a result of the announced capacity closures.

Coal Market Shifts Lower; Labor Strike Premium Finally Priced Out

The coal market moved notably lower last week, with falling oil prices, a rising U.S. dollar, and further distance from the perceived threat of a labor strike providing the downward impetus for pricing. API#2 (Northwest Europe) prices in particular moved lower, as the labor strike risk was finally priced out of the market. Interestingly, API#4 (South Africa) prices moved up marginally last week, widening their premium over FOB Newcastle (Australia) pricing. PIRA retains the belief that this premium is unsustainable, particularly as India’s import demand continues to wane, although weak dry bulk fright rates aid South Africa coal’s competitiveness into the Asian market.

North American SO2/NOx Quarterly Update

2015 emissions for CSAPR SO2 and NOx markets were below program caps, allowing for bank builds. The seasonal NOx market is looking forward to EPA’s final CSAPR Update rule, which would set tighter limits beginning in 2017. PIRA’s analysis shows a pathway for compliance between expected retirements and optimizing existing controls, although a few states may still exceed their budgets. PIRA does not expect the Supreme Court to halt MATS implementation; coal retirements this year are clustered in April, when the first MATS extension expires. Litigation over EPA’s Regional Haze FIP for TX has commenced, with EPA attempting a venue change; meanwhile, EPA has now targeted TX coal/lignite units for one-hour SO2 compliance. The 2015 Ozone NAAQS, finalized in October, are also facing legal challenges.

Egyptian Gas Producers Look for Higher Prices

BG, now a subsidiary of Royal Dutch Shell, is negotiating with Egyptian General Petroleum Corporation (EGPC) to price gas higher in the 9B concession area in Egyptian Mediterranean waters. A source close to the negotiation process said that the BG, with a representative from Royal Dutch Shell, leads the negotiations regarding pricing of gas produced from 9B and agreed on the price with a condition of paying $1bn in dues to BG. He added that the Egyptian Ministry of Petroleum did not provide an answer regarding the payment of financial dues nor determine the amount they can pay and the timing of it.

Sluggish Global Manufacturing, But Improving Financial Markets

Globally, consumer spending data have been constructive, but manufacturing data have not. The former is expected to eventually bring about a turnaround for the latter. But that will not happen imminently, according to this week’s data releases.

Argo Terminal Full and Companies Told to Sell Stored Product in Excess of Contracted Volume

U.S. ethanol output declined to the week ending March 18 as plants are finally curtailing production due to near-record inventories. Total stocks declined, though PADD II inventory was up and the Argo terminal was full.

Big Reports Ahead

Agreement and consistency are two words rarely associated with Quarterly Stocks reports, except this go round. With 13+ billion bushels of on-farm storage available, getting a handle on that segment of stocks is always difficult, but for the most part there seems to be a general agreement over a March 1st corn stocks number around 7.8 billion bushels, so to with the soybean stock estimate of 1.55 billion.

Large U.S. Crude Stock Build Overwhelms Product Inventory Decline

A shockingly large crude inventory was driven by the highest weekly crude imports since the start of 2015. Total product stocks had a net draw. Looking forward, we expect reduced refinery maintenance and overall lower crude imports to limit crude builds and, eventually, drive crude stock draws. Gasoline demand remains strong, while distillate demand weakened, and this drives our expectation of gasoline stocks outdrawing distillate stocks this week.

Should We Expect Lower North Sea Production Going Forward?

Given that gas prices are down by more than a third year-on-year, we can and do expect some production turndowns in the North Sea. These cuts will match similar patterns emerging in Russia, Algeria, and the Netherlands, which are going beyond the normal seasonal pattern that typically is shaped to match changes in seasonal demand.

Dry Bulk Freight Outlook Remains Bleak Despite a Recent Steel - and Iron Ore-Driven Uptick

The near-term freight rate outlook continues to be grim. The FFA market, following the jump in Chinese steel and iron ore prices, marked up paper Cape rates at the start of the second week in March. However, as the physical market weakened, the rate gains were quickly marked back down. We have a neutral outlook for rates in 2Q and 3Q. However, we continue to be mildly bullish on Cape rates in 4Q. We expect more iron ore supply coming into the market in late 2016 driving down iron ore prices and making imported iron ore more competitive than Chinese domestic iron ore.

Global Equities Mixed

Global equities posted an aggregated modest decline of 0.5%, week-on-week. In the U.S, many of the tracking indices gave ground, though utilities moved higher and technology was fractionally higher. Many of the longer-term trends are still looking constructive. Internationally, all the tracking indices lost ground, though the Japanese index held up the best.

4Q15 U.S. Producer Survey: First Quarter-on-Quarter Losses in Two Years; More to Come

U.S. producers grew production through end-2015 despite increasingly challenging market conditions. That said, the gas price collapse in 4Q15 did drive the first quarter-on-quarter declines in more than two years. Although the completion of several major infrastructure projects in 4Q15 provided low-cost Appalachian producers access to out-of-basin markets, the drop in Gulf Coast cash prices from ~$3/MMBtu at midyear toward $1.50 by year end proved to be more influential. Both the companies surveyed by PIRA (“PIRA Group”) and the remaining non-group companies suffered quarter-on-quarter losses amounting to ~0.8 BCF/D. Moreover, the impact of expanded budget cuts and rig declines raise the odds of year-on-year losses ultimately taking hold.

Asian LPG Outperforms, Further Hampering Regional Demand

Asian LPG logged the best price performance of the three key regions last week. Propane prices improved by a strong 4.5% to $347/MT. Butane gained to $380/MT. Inexpensive naphtha continues to hamper LPG petrochemical demand. With propane just $20 under regional naphtha and butane near parity with the refined product, cracker economics continue to favor minimizing LPG in the feedstock pool.

Corn’s Bull Case

It would hardly be a stretch to say that market participants are not exactly thrilled with the corn market. If you’re a fund that’s been short since half past forever, the lack of movement is the reason for some complacency, but you’d still like to turn a profit. If you’re a producer who’s still staring at a negative cash flow as a result of this continued pricing, it’s the cause of some major consternation.

Ethanol Prices and Manufacturing Margins Lower

U.S. ethanol prices pulled back March 18, with Chicago prices giving up all of their gains for the week. Manufacturing margins declined slightly, as corn costs rose while co-product DDG values softened.

Japanese Crude Runs Increased, Imports Fell Back and Stocks Drew

Crude runs posted a third straight week of increase and have now almost fully recovered to their late-February level of 3.5 MMB/D. Crude imports fell back yet again and crude stocks drew 2.5 MMBbls. Finished product stocks also drew a bit with gasoline lifting aggregate demand. Margins remain good. Cracks were higher week-on-week and then eased in the last few days.

China Imports Lag Contracts, But Growth Is Finally Evident

What happens when the world’s biggest growth market fails to keep up with the growth in supply dedicated to that particular growth market? We are about to find out with the commissioning of the first train of the three-train 21.5 BCM/Y Gorgon project, the fourth Australian project to come on stream in 15 months.

Financial Stress Falls

For the sixth straight week, the S&P 500 rose on a weekly average basis, but it eased modestly from Friday-to-Thursday (almost all global financial markets were closed for Good Friday). All the other key indicators again improved. The most notable indication of easing stress has been the decline in the yield of BAA rated corporate bonds. The U.S. dollar has been mixed lately; commodities continue to gain, both overall and ex-energy; and the Japanese bond yield for 2-year and 10-year maturities continues to move deeper into negative territory.

Tight Oil Operator Review

As expected, activity slowed across all three of the major U.S. shale plays in 4Q15 given persistent weak oil prices. The outlook for 2016 looks further challenged on mounting financial constraints, not least of which may result from borrowing base redeterminations in April/May. Capex guidance for 2016 is down 50% from 2015, on top of the 40% year-on-year reduction in 2015. In the Bakken and Eagle Ford, operators are guiding towards a sharp decline in drilling and completion activity, and production guidance in these plays is down 8-12% year-on-year for 2016. In the Permian, drilling activity is also slowing, but operators still expect production growth (~3%). Most operators plan to draw down on DUCs, although two of the largest operators in the Bakken are building.

Seasonal Demand Lulls Shifts Trade and Pricing Patterns

As the market prepares for a 10% boost in volumes this year, it is also bracing for a new reality on the buy side. This reality is that the top buyers of LNG historically are buying proportionally less LNG than they did at the beginning of the decade. Such a shift has major implications for balancing the market in the current supply-laden environment, as it essentially puts the burden (or opportunity) on the rest of the buyers to soak up the volumes.

The Next Refinery Challenge: Meeting Tighter Sulfur Standards for Worldwide Transport Fuels

Lowering the sulfur levels in transportation fuels has been a key goal of environmental authorities in many parts of the world. Much has already been achieved, with the European Union and Japan at 10 ppm sulfur for both gasoline and diesel fuel for many years — 10 ppm is as close as practical to zero, an environmental target. These programs will broaden this year and next in some key global markets.

Front-loaded Concessions Required to Limit U.S. Seasonal Build?

The year’s first injection failed to elicit much reaction from the market — either from buyers, in response to the below consensus build, or from sellers, calling attention to the premature end of the heating season. Notwithstanding the probable noise accompanying next week’s futures contract expiry, prices will likely range close to seasonal lows until clearer signs of rebalancing emerge. And at present, the fundamentals are simply not cooperating.

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.

UTEC Survey, an Acteon company, has appointed Zamil Group as its partner agent in the Kingdom of Saudi Arabia.

The appointment allows UTEC Survey to support projects undertaken by its clients actively involved with ARAMCO ‘LTA’ contracting agreements. These contracts include significant offshore brownfield support projects involving pipeline and platform infrastructure upgrades over a seven-year cycle.

UTEC Survey Regional Manager, Sean Fowler commented that: “We were extremely selective in choosing the correct partner to work with in Saudi Arabia. Since 1930, Zamil have created Saudi Arabia’s largest and most diversified trading organizations. Their core values and innovative spirt are aligned with UTEC. Additionally, Zamil provide us with enhanced capabilities through their vessel fleet and marine services division.”

Commenting on the agreement, Zamil Group said: “We are delighted to represent UTEC in Saudi Arabia providing gateway services into the world’s largest oil producer, ARAMCO. We look forward to developing new opportunities and a long and mutually beneficial relationship.”

For further information, click here.

New guidance approach supports industry in the safe and effective deployment of next generation drone and unmanned aircraft systems (UAS) technology that can significantly improve productivity gains through reducing risk exposure, survey times and in-service inspection costs of offshore, marine and onshore infrastructure.

Lloyd’s Register’s first phase of its guidance notes for drones and Unmanned Aircraft Systems (UAS) is launched today, giving operators in the energy and marine industries confidence in using UAS for offshore, marine and onshore surveys and in-service inspections.

“We are developing these guidance notes to provide a consistent approach to risk in UAS and drone deployment, offering practical operational considerations relating to regulations, personnel, quality, safety, hardware, software and operations,” says Lloyd’s Register’s Chief Technology Officer, Nial McCollam.

McCollam highlights: “Technology and innovation in the area of digital data, sensing technologies, unmanned systems and robotics are here to stay. We see an exciting and important journey ahead, and anticipate our efforts to increase and continue.”

UAS, commonly known as drones, provide an effective alternative to traditional methods of in-service operational assessment and survey, especially structures and assets at significant heights, difficult to access locations and hazardous environments.

Major operators such as Shell and Maersk Drilling are among early adopters of innovative technology with safety and quality as a priority.

“Shell views human and environmental safety as paramount in all of its operations. The use of robotic technology for inspection purposes reduces the need for personnel working in enclosed spaces and at heights. Minimizing risk across the industry by utilizing cutting edge technology in this way is of great importance to Shell,” says Adri Postema, General Manager of Shell Shipping and Maritime, Technology.

To unlock this potential, collaboration among industry partners throughout the value chain will be critical. In collaboration with Lloyd’s Register, Maersk Drilling and partners have conducted a number of pilots to assess UAS capabilities for inspection at heights and difficult areas.

“We can see the technology has many potential applications, and it has triggered ideas on new applications. One area we want to focus on is the safety aspect of this new technology, and how we integrate it with existing safety processes, and ensure we use it to enhance safety, and to limit the introduction of new risks. It only takes one or two accidents or near miss reports to set a bad record for robotics and unmanned systems in the industry, so the guidance notes will help the industry take into consideration important considerations,” says Jan Holm, Managing Director of Maersk Drilling Singapore.

The guidance notes from Lloyd’s Register will be updated regularly to provide industry with the latest practical information on issues such as how best to use UAS for inspection in confined spaces which is particularly relevant in energy and marine applications where Class surveys are needed, and which also improves safety for human life.

“In the past, small commercial UAS technology can be traced back to remote-controlled hobby aircraft, requiring significant skills to operate. However, rapid advancements in hardware and software including air stabilization, pre-flight planning tools, obstacle detection and avoidance technology have transformed these small aircraft into viable business tools that is likened to high-definition eyes in the sky,” says Chris Chung, Head of Strategic Research at Lloyd’s Register.

UAS are piloted remotely or autonomously, which reduces the need to send personnel into high-risk and challenging environments. This provides a real opportunity to decrease the number of falls and fatalities that occur due to traditional methods of working at heights, as reported by the US Bureau of Labor, Safe-Work Australia and the UK’s Health and Safety Executive.

Unlocking further potential


In March 2016, the Lloyd’s Register Foundation convened an international panel of industry and academic experts for a two day workshop on Robotics and Autonomous Systems (RAS) to identify current state of the art and the white space where the Foundation can add significant impact and contribution in line with its charitable objectives. The review will be published as part of the Foundation’s Foresight Review series of reports later this year. The Foundation is expecting to make a significant grant investment in RAS to deliver the findings from the report.

”We have been looking into robotics and unmanned systems for years, not just on the technology but also on design codes, policies and guidelines on safe and sustainable deployment. We see UAS as part of the unmanned systems and robotics story, which also includes underwater and ground-based systems,” highlights Chung.

“In addition to tried and tested applications such as safely inspecting assets of flare stacks and other outdoor critical infrastructure, we are collaborating with industry to enable inspection of the undersides of offshore structures maritime vessels and confined spaces such as storage tanks,” says Chung. “With increasing capabilities, we believe UAS will in the future have the ability to autonomously follow a pre-defined flight path, enabling higher measurement accuracy and repetition of collecting more relevant data and operational defects while inspecting and data-gathering in real-time.”

UAS also has a fundamental part to play in emergency response and improving situational awareness.

“A major challenge in any emergency situation is the lack of timely and accurate information on which to base informed decisions. In such instances, UAS can be used to gather data without sending in personnel, or at least limiting their risk exposure,” says Chung.

You can find out more about our UAS work with industry here.

Bourbon announces that it has taken delivery, as scheduled, of the Bourbon Arctic from the Vard Brattvåg shipyard (Norway) and completed her first anchor handling operation. The vessel was engaged in the disconnection and unmooring operation of the ‘Island Innovator’ located at the Fosen field in the central North Sea.

As a large AHTS (Anchor Handling Tug Supply) vessel, the Bourbon Arctic is specially designed to operate in remote areas all over the world and equipped for advanced anchor handling and towing operations. Capable of intervening in the most complex environments, she boasts a bollard pull of 307 t in boost mode and 193 t in diesel electric mode, this being among the highest Bollard Pull in the world in this mode. Her winch and storage capacities may have no equivalent on the market. It is thanks to her exceptional capacities that it has been chosen by Lundin Petroleum.

Capable of intervening in the most complex environments, she boasts a bollard pull of 307 t

Extremely versatile, she can perform numerous tasks in addition to anchor-handling, such as supply duties, oil recovery, standby operations, firefighting, rescue (up to 300 survivors) and ROV operations. With a strengthened hull and enhanced winterization equipment (Ice class), she is perfectly suited for work in temperatures down to -20° C while ensuring maximum safety conditions.

She has large passenger accommodation capacities (SPS class) as she can welcome for up to 60 persons (including crew) and has the flexibility to be used as a floatel when not engaged in anchor-handling operations. Classified as a Clean Design vessel, Bourbon Arctic complies with the most stringent requirements with regards to emissions to the air and discharges to the sea. The vessel is equipped with a dual propulsion system allowing her to adapt power needs to the type of operation with diesel electric mode, resulting in reduced fuel consumption compared to conventional AHTS.

“I have been onboard the vessel for nine days and I am greatly impressed; BourboN has really stepped up on most levels with this vessel. It’s easy to see that, once completed with an ROV and a first class ROV operator, this could be a very good vessel for most of our marine operations.” adds Sigmund Hertzberg, Senior Marine Supervisor of Lundin Norway AS.

“We are proud to take delivery of the Bourbon Arctic and to have already demonstrated her strengths: Commissioned by Swedish independent firm Lundin Petroleum for a mission early March, this unique AHTS has performed anchor handling operations utilizing its extreme capacities. BOURBON ordered this vessel in 2014 in order to complement the range of services we offer to the most demanding clients. Thanks to her unique winch and storage capacities and to her highest standards (clean & comfort class, DP 2, dual propulsion), she is the most powerful vessel in Bourbon’s fleet.” explains Gaël Bodénès, Chief Operating Officer of Bourbon.

On March 16th, the UK government effectively abolished the Petroleum Revenue Tax (PRT) and reduced the supplementary charge tax from 20% to 10% - a measure which could result in ~£1bn tax break over the coming five years. The government’s aim is to encourage investment in infrastructure and new developments, as well as support production from existing fields in the UKCS. However, is this just too little too late?

With production in decline, the UK oil & gas industry has been severely impacted by a longer than anticipated suppression in oil price. This has led to widespread job cuts, reducing the workforce by approximately 26% (65,000 jobs lost). Ultimately, a change in taxation regime is not going to dramatically alter the fate of production operations within the North Sea. What is required is substantially increased investment, this is only likely to occur as a function of higher oil prices. Operators also require support in ensuring that production infrastructure is maintained – and accessible – to allow future additions through satellite developments. Widespread decommissioning could put this under threat, potentially limiting future field activities and ultimate recovery in the UKCS.

The current downturn does provide some upside for service providers – the UK is expected to the largest decommissioning opportunity in the coming decade. Douglas-Westwood’s new North Sea Decommissioning Market Forecast 2016-2040 predicts that between 2016 and 2040 $44-$50 billion (bn) will be spent on decommissioning activity on the UKCS. This is over half of all forecast decommissioning expenditure in the report which also considers Denmark, Germany and Norway. The UK has the largest volume of installed infrastructure, as well as the oldest platforms. DW believes that decommissioning could play a key role in ensuring ongoing activity for service companies within the North Sea.

Ultimately, the UKCS has specific issues and challenges that will not be solved by broad-brush fiscal policy from Westminster. The need for the industry to work together to find collaborative solutions has never been greater.

Joes Eduardo Ribeiro, Douglas-Westwood London

Conductor Installation Services Ltd (CIS), an Acteon company that provides hammer services to install conductors and drive piles, announced that James Chadd has been appointed Managing Director. As of 1 April 2016, Chadd will be responsible for overseeing the fulfilment of all strategic initiatives, as well as driving day-to-day execution of business globally.

“Having worked with James since founding the company in 2005, I am extremely confident that he will continue to build upon CIS’s solid track record of achievement and service excellence,” said Andy Penman, outgoing Group Managing Director of CIS. “In addition to his valuable skill set and in-depth knowledge of the global conductor- and pile installation industry, his commitment to the growth and development of CIS makes him the ideal choice for this leadership position.”

Prior to his promotion, Chadd served as Group Technical Sales Manager for the past eight years. During this time he carried out business development and technical sales outreach in Europe, Sub Saharan Africa and the Middle East. Previously, he worked as Offshore Conductor Installation Supervisor before being promoted to the post of Technical Sales Engineer in 2006. Before joining CIS, Chadd worked as a Conductor Installation Engineer in the field – both onshore and offshore - installing conductors and piles around the world for nearly four years for BJ Tubular Services.

CIS, a member of Acteon’s Conductors, Risers and Flowlines group, provides conductor and pile installation services associated with construction projects carried out in the global oil and gas industry. These services are carried out both onshore and offshore to, for example, create foundations for new wells, platforms, bridges and jetties.

The range of services provided by CIS supports the Acteon Group’s commitment to defining subsea services across a range of interconnected disciplines.

Operators are seizing the opportunity to keep offshore structures in the region operating beyond the end of original design life

The Middle East faces a substantial challenge to keep hundreds of ageing offshore oil and gas structures operating safely and legally beyond original design life. “There are at least 700 to 800 fixed platforms and bridges in the region,” said Anupam Ghosal, regional manager for Middle East and India, DNV GL - Oil & Gas. “More than 70% are older than 25 years; some exceed 40 years. United Arab Emirates (UAE) alone has about 450.”

Life extension of ageing structures ensures continued operation within regulatory requirements, and helps to limit future operational expenditure (opex). “Constraining opex is vital to economically viable but safe operations,” he added. Operators in the Middle East are at different stages of implementing controlled approaches to asset integrity management (AIM) and structural integrity management (SIM) systems. Ghosal observed: “Several are in the planning stage. DNV GL is engaged in the process with quite a few customers in the region.”

Operators are seizing the opportunity to keep offshore structures in the region operating beyond the end of original design life. Photo: ADMA-OPCO

The Abu Dhabi Marine Operating Company (ADMA-OPCO), a major producer of oil and gas from offshore Abu Dhabi, is in the vanguard of Middle East operators addressing life extension opportunities; some of its earliest structures are more than 50 years old. “We have an extensive fleet of structures undergoing continuous brownfield project developments to ensure sustainable oil production over the extended field-life,” explained Dr. Tarek Omar, civil/structural engineering team leader, ADMA-OPCO. “Of these assets, 70% have already reached design life, and ADMA has taken a strategic decision to lead in the area of managing their integrity.”

Case study: ADMA-OPCO

ADMA-OPCO has developed a comprehensive structural management system (SMS) framework based on a fully quantitative approach. All changes are monitored and managed through an in-house developed management of change (MOC) system for structures which meets all the company’s requirements. ADMA's SMS uses a fleet management system (FMS) to manage the quantification and risk ranking of its fleet.

Continuous improvement is important, Ghosal agreed: “Technological advances provide opportunities to produce more hydrocarbons economically from existing structures. Low oil prices create the need to extract best value from current facilities. Other drivers include improved data on reservoirs, heightened regulation, updated design standards and knowledge, advances in risk management, and enhanced focus on safe operations.”

ADMA-OPCO plans to further increase effectiveness of SIM by: mandating use of the management of change system company-wide; continuously updating structural assessment methods; and continuous interaction and joint innovation with industry partners.

Greater activity around asset and structural integrity will generate substantial know-how for the Middle East and elsewhere. ADMA-OPCO’s structures, for example, are forecast to be among the industry’s longest lasting, Omar said. The company is actively taking key initiatives in joint industry R&D projects, and in adopting international standards for structural management. One key learning from ADMA-OPCO’s SMS is the importance of an effective MOC process and sophisticated inspection in capturing the risks, Omar said. “This earned continuous support from company management to make it a company-wide culture.”

One solution does not fit all

Another lesson is that one-size does not fit all when developing an SMS, he added. “Each company and region has its own special requirements and a structural management system needs to cater for these.” Ghosal commented: “Operators here face challenges encountered elsewhere in the world, but also ones that are specific to, or more pronounced, in this region, such as sour gas. DNV GL has had a presence here for more than 30 years and understands local needs.”

DNV GL’s software, database, quantitative and qualitative approaches, and other expertise in capturing, analyzing and managing information for SIM assists customers to scope, design and implement life extension strategies. The company’s ‘missing data methodology’ addresses the absence of historic documentation, a common challenge for operators in the region.

Key structural integrity goals

Engineering experts at oil and gas companies operating in the Middle East see ageing effects in grouted piles as one of the top structural integrity management (SIM) challenges. This emerged from interviews by DNV GL, and in a survey at its annual Ageing Structures Day in September 2015.

Some operators also expressed a desire to see regional acceptance criteria formulated for SIM of existing fixed structures, but with operators having flexibility to respond to local circumstances.

For offshore Abu Dhabi, they wanted to know: how lateral pile capacity might be enhanced in carbonaceous rocks; more about the seismic vulnerability of platforms; and, how a spectrum of site-specific responses might be formulated.

Others were interested in the implementation of online health-monitoring. Respondents saw a need for engineering studies to verify requirements for replacement of degraded appurtenances such as riser- and conductor-protectors.

Region-specific guidance on the below elements is useful when developing life extension strategies for ageing offshore structures.

1 Wave spectra suitable for benign sea conditions in the Arabian Gulf to predict fatigue reliability and to assess the remaining fatigue life of structures.

2 Corrosion mitigation strategies for structures and critical appurtenances to optimize the operating expenditure of ageing offshore structures.

New technology to acquire missing data on actual pile penetration depth and ageing grout strength to assure drilled and grouted foundation integrity.

Fugro is to supply ROV drilling support services on board the Ocean Guardian MODU under a new contract awarded by Dana Petroleum (E&P) Ltd.

Operating one of its fleet of FCV 600 ROVs, specifically designed for North Sea drill support activities, Fugro will carry out drilling and completions projects at the Dana-operated Western Isles developments in the northern North Sea.

Ocean Guardian. Photo Credit: Diamond Offshore

The scope of work covers standard drilling support, which begins this month, and intervention tooling support, with all ROV tooling designed and supplied by Fugro. This ensures 100% compatibility with the FCV 600 class of ROV and American Petroleum Institute (API) tooling standard 17D.

“This award from Dana Petroleum strengthens Fugro’s North Sea drill support business in the current challenging market,” said Mark Ward, Drill Support and ROV Project Manager at Fugro Subsea Services Limited. “It also recognises our objective to minimise operational costs without impacting on efficiency or safety standards. We are looking forward to assisting Dana Petroleum in meeting its targets.”

Fugro has been operational on board the Ocean Guardian since the summer of 2012 and completed a number of successful projects in the North Sea, Western Isles and West of Ireland, achieving a high level of productivity and receiving positive client feedback.

Aker Solutions secured a global framework agreement to deliver engineering and project management services at BP-operated subsea oil and gas fields.

The contract has a fixed period of five years and may be extended by two years. It covers subsea engineering services, asset integrity management and operations support.

"We are delighted to partner with BP in finding cost-effective solutions to boost productivity and optimize the infrastructure of the company's subsea fields," said Luis Araujo, Aker Solutions' chief executive officer. "We have provided subsea operations support to BP in the UK for more than 15 years and look forward to building on this partnership with a global agreement."

Aker Solutions will execute the work through a global delivery model.

Both parties agreed not to disclose the contract value.

Prysmian Group, a world leader in the energy and telecom cable systems industry, appointed Cristiano Tortelli, who joined the Group as Senior Vice President, to lead the newly created Oil & Gas Business Area that incorporates all of the Group’s activities in the industry, including umbilicals and flexible systems, down-hole technologies and core cables.

“The new Business Area will operate across the entire Oil & Gas supply chain. Technology will play a key role in meeting the new industry challenges, supported by a strong project management organization”, stated Cristiano Tortelli. “In the context of today’s oil prices, collaboration with Oil Companies and Industrial Service providers will be a key strategy in redefining the new industry standards, as well as a means to simplify the way capital projects are executed”, he added.

Cristiano Tortelli has a long international experience in the Oil & Gas industry. During his career he covered several key roles in GE Oil & Gas. Later he joined Air Liquide Group leading globally the Engineering & Solution organization.

The Bureau of Ocean Energy Management (BOEM) has announced its first step toward potential leasing for commercial wind energy development in federal waters offshore California. BOEM has completed an initial review of an unsolicited lease request from Trident Winds, LLC (Trident Winds) for a floating wind energy project offshore Morro Bay, California, deemed the request complete, and will soon issue a Federal Register Notice to determine if there is competitive interest in the area.

“Today’s announcement marks an important step in facilitating the responsible development of clean offshore energy to power homes and businesses in the Golden State,” said BOEM Director Abigail Ross Hopper. “BOEM will work closely with the state of California, industry and a broad range of stakeholders to ensure that our leasing process is conducted in a thoughtful, engaged, and transparent manner.”

Image credit: BOEM

As part of its review, BOEM confirmed that Trident Winds is legally, technically, and financially qualified to hold an offshore wind energy lease in federal waters. BOEM’s receipt of an unsolicited lease request is the first step in a leasing process that will include environmental analysis and extensive stakeholder engagement.

The Trident Winds request, received on January 14, 2016, is the first formal interest in obtaining a lease for wind development in federal waters off California. The proposed a project would generate up to 800 megawatts (MW) of power using about 100 floating foundations, each supporting a turbine that could produce up to 8 MW. A single seafloor transmission cable would bring the electricity to shore. The proposal may be expanded to generate 1,000 MW at a later date, if additional transmission capacity and market off-take can be obtained. The project would be located about 33 nautical miles northwest of Morro Bay in water depths of 2,600‐3,300 feet. The proposed lease area is 67,963 acres.

"As California moves forward to meet 50 percent of the state's energy needs with clean, renewable energy by 2030, wind power will play an important role," said Commissioner David Hochschild of the California Energy Commission. "This offshore wind project proposal, the first of its kind, marks another important milestone."

The next step in BOEM’s process is to publish a Federal Register Notice to determine if there is competitive interest in the area requested. The Notice also requests the public and interested stakeholders to comment and provide information on site conditions, commercial, military or other uses of the area and potential impacts of the proposed Trident Winds project. BOEM expects to issue the Notice this summer.

BOEM will use the information and expressions of interest received during the comment period to determine whether there is competitive interest in the area. If BOEM determines there is competitive interest, it will initiate the competitive leasing process. If no expressions of interest are received, BOEM will proceed with the noncompetitive leasing process. BOEM will also use responses to the Notice to inform decision-making about the proposed project and to identify potential issues for National Environmental Policy Act analysis.

To date, BOEM has awarded eleven commercial wind energy leases in federal waters off the Atlantic coast, including nine leases issued as a result of competitive lease sales (two leases in an area offshore Rhode Island-Massachusetts, two offshore Massachusetts, two offshore New Jersey, two offshore Maryland, and one offshore Virginia). Competitive lease sales generated $16.4 million in winning bids for more than a million acres in federal waters. Floating turbine platforms anchored to the seafloor, as proposed by Trident Winds, offer an alternate technology for generating wind power in the deeper waters off the Pacific coast.

A copy of Trident Winds unsolicited lease request and additional information on the BOEM wind energy leasing process, can be viewed at www.boem.gov/california/.

Okeanus Science and Technology (Okeanus) announced the addition of the POS MV Surfmaster (POS MV) by Applanix, a Trimble Company, to their portfolio of positioning equipment available for rent. The POS MV brings Okeanus clients georeferencing capabilities with acute accuracy in difficult conditions.

The POS MV produces accurate altitude, heading, heave, position, and velocity data of marine vessels and onboard sensors. Alongside compatibility with multibeam sonar systems, the POS MV offers georeferencing for both manned and unmanned platforms. The POS MV system provides accurate results in challenging settings for harbor mapping, seafloor mapping, dredging, wreck and salvage charting, and surface mapping. A full six degrees-of-freedom position and orientation is achieved through its combination of GNSS data with angular rate and acceleration data from an inertial measurement unit (IMU), and heading from GPS Azimuth Measurement System (GAMS).

The POS MV enhances the current positioning equipment offerings to track underwater assets with the highest level of precision. Equipment rental packages from Okeanus can be completed by integrating the POS MV with the Kongsberg M3 Multi-beam Sonar; USV sonar applications with RTK water level; vessel mount ADCP surveys; and vessels of opportunity, single beam and multi-beam. Okeanus’ portfolio available for rent includes metocean, water collection, geophysical, hydrographic, flotation, positioning, launch and recovery, and sediment sampling equipment.

"We are extremely excited to add this new POS MV system to our fleet of rental equipment,” said Benton LeBlanc, President and General Manager of Okeanus. “This system adds a new dimension to our growing line of marine positioning equipment, and it is a great compliment to some of our other remote sensing product offerings. Being able to provide all of the necessary components to our customers who are actively engaged in performing single beam and multi-beam surveys allows us to offer turnkey solutions in a rental capacity which gives our customers more flexibility in this economic climate by eliminating the need to invest valuable capital into the acquisition of these highly technical assets."

Schlumberger Limited (NYSE: SLB) and Cameron International Corporation (NYSE: CAM) jointly announces that Chinese Ministry of Commerce (MOFCOM) has cleared their proposed merger without any conditions.

MOFCOM approval represents the last major closing condition to the proposed merger. As a result, the parties intend to close their transaction on April 1, 2016.

The closing of the proposed merger remains subject to the satisfaction or waiver of the remaining closing conditions contained in the merger agreement. Until that time, the companies will continue to operate as separate and independent entities and continue to serve their respective customers.

For decades, coal has been the dominant energy source for generating electricity in the United States. EIA's Short-Term Energy Outlook (STEO) is now forecasting that 2016 will be the first year that natural gas-fired generation exceeds coal generation in the United States on an annual basis. Natural gas generation first surpassed coal generation on a monthly basis in April 2015, and the generation shares for coal and natural gas were nearly identical in 2015, each providing about one-third of all electricity generation.

Source: US Energy Information Administration

The mix of fuels used for electricity generation has evolved over time. The recent decline in the generation share of coal, and the concurrent rise in the share of natural gas, was mainly a market-driven response to lower natural gas prices that have made natural gas generation more economically attractive. Between 2000 and 2008, coal was significantly less expensive than natural gas, and coal supplied about 50% of total U.S. generation. However, beginning in 2009, the gap between coal and natural gas prices narrowed, as large amounts of natural gas produced from shale formations changed the balance between supply and demand in U.S. natural gas markets.

Source: US Energy Information Administration

Coal and natural gas generation shares over the past decade have been responsive to changes in relative fuel prices. For example, particularly low natural gas prices throughout much of 2012 following an extremely mild 2011–12 winter led to a significant rise in the natural gas generation share between 2011 and 2012, often displacing coal-fired generation. With higher natural gas prices in 2013 and 2014, coal regained some of its generation share. However, with a return to lower natural gas prices in 2015 favoring increased natural gas-fired generation, coal's generation share dropped again.

Environmental regulations affecting power plants have played a secondary role in driving coal's declining generation share over the past decade, although plant owners in some states have made investments to shift generation toward natural gas at least partly for environmental reasons. Looking forward, environmental regulations may play a larger role in conjunction with market forces. Owners of some coal plants will face decisions to either retire units or reduce their utilization rate to comply with requirements to reduce carbon dioxide emissions from existing fossil fuel-fired power plants under the Clean Power Plan, which is scheduled to take effect in 2022 but has recently been stayed by the Supreme Court pending the outcome of ongoing litigation.

Beyond the growing market share for natural gas-fired generation over the past decade, coal's generation share has also been reduced by the growing market share of renewables other than hydroelectric power, especially wind and solar. Unlike the growth of natural gas-fired generation, which has largely been market-driven, increased use of nonhydro renewables has largely been driven by a combination of state and federal policies. The use of renewable energy sources such as wind and solar has also grown rapidly in recent years so that generation from these types of renewables is now surpassing generation from hydropower.

The March 2016 STEO expects that the combination of market forces and government policies will continue to stimulate the use of natural gas and nonhydro renewables for power generation. In EIA's forecast, natural gas provides 33% of generation in 2016 while coal's share falls to 32%. The expected share of nonhydro renewables increases to 8% in 2016, with hydropower's share at 6%.

Principal Contributor: Tyler Hodge

Leading United Arab Emirates shipyard Grandweld has secured its position as the number one regional shipyard for the offshore segment, completing construction of a total of 17 vessels over the space of the last year. Latest projects include advanced crew boats, dive maintenance and support vessels, and work crane boats for a who’s who of Middle East energy firms and offshore contractors.

Grandweld, which has been operating from its Dubai base since 1984, specializes in vessels custom built to conduct complex operations in the region’s challenging offshore environment.

These range from three recently delivered work crane boats for Kuwait Oil Company - optimized for duties such as heavy lifting, oil-pollution control, SPM hose handling, and supply to remote areas – to two modified 42 meter long crew boats (FNSA-3 and FNSA-4) for Fujairah National Shipping Agency. The latter vessels are capable of speeds in excess of 30 knots and customized to execute operations such as security duties, fast transportation of offshore personal and cargo, and the rapid supply of fuel and freshwater.

“The Middle East is a unique environment, with unique challenges and opportunities,” states Mr. Jamal Abki, General Manager Grandweld Shipyards. “We have a history of producing vessels that excel here. We use that understanding to continually enhance our offering, while building new relationships with international clients who can benefit from our expertise when it comes to meeting their own exacting requirements.

“Our integrated proposition is efficient, flexible and modern, while our in-house engineers and project managers are world class. In addition, we invest heavily in research and development to enhance our own designs, as well as using respected external designers when desired. This ensures our vessels are leading the way in operational efficiency, reliability and performance - something the industry clearly appreciates.”

Further noteworthy deliveries over the last months include three 34.3 meter aluminum crew boats to Jana Marine Services, a 50 meter Dive Maintenance & Support Vessel to Abu Dhabi National Oil Company (ADNOC), and the 42 meter crew boats Stanford Volga and Stanford Niger, which are capable of carrying 83 people at speeds of 25 knots.

“It’s an exciting time for the business, and our customers,” concludes Jamal Abki. “As the offshore trend points towards more optimized, complex vessels, our knowledge and experience allows us to respond with advanced newbuilds that deliver added performance and competitiveness for our clients.

“We’re now looking forward to building on our leading market position over the space of the next 12 months, and beyond.”

INDUSTRY CAUGHT IN CATCH 22, SAYS DNV GL

Only one in five oil and gas companies see themselves as highly digitalized today. However, close to half of senior oil & gas professionals1 (45%) already see solid or high potential for big data and analytics to transform the operating efficiency of the industry in 2016, according to research by DNV GL, the leading technical advisor to the oil and gas industry.

The research among over 900 senior oil and professionals reveals that despite it’s potential, only 36% plan significant or moderate investment in big data and analytics in 2016.The IT related technology expected to by most respondents to have significant or high investment is cyber security attack / prevention (44%), followed by automation / remote operation (43%).

“Early adopters are emerging, but many in the industry are still at early stages of maturity in data analytics and data-based decision making. The industry is in something of a ‘Catch 22’ situation; close to half of seniors in our industry see solid or high potential for big data and analytics to transform the industry’s operating efficiency in 2016. However, investment seems to be lagging just when we need it most. Our in-depth interviews point to cost constraints and uncertainty about the cost-saving potential of digital technologies as the key reasons,” says Nada Ahmed, Senior Engineer at DNV GL – Oil & Gas.

“As for other areas of innovation, collaboration could prove essential to bridge this digital gap and ensure experience transfer in the conservation of data, efficiency drivers and ways to ultimately leverage the opportunities big data represent for the industry,” adds Ahmed.

DNV GL has identified key opportunities to reduce costs by optimizing day-to-day operations2:

Condition monitoring for more effective maintenance and inspection regimes, dictated by specific, industry, historical and real-time data. Replacing planned maintenance with preventive maintenance, driven by early warnings from sensor data, can significantly reduce downtime.

Instant information from wells can provide timely decisions on underperforming wells and other potential issues that, if not dealt with, could lead to enormous costs.

Detecting anomalies while drilling and during operation can also lead to more effective decisions for cost savings.

Elisabeth Tørstad, CEO of DNV GL – Oil & Gas, says: “Our customers say that a number of challenges need to be addressed to capitalize on the opportunities within Big Data; robust strategies to capture, manage and utilize critical data, access to reliable, trustworthy data, and stringent security to minimize security breaches. We are working with the industry to help it manage the risks and leverage the opportunities associated with digitalization.

“Cyber-attacks on in the oil and gas industry have grown in stature and sophistication in recent years, making them more difficult to detect and defend against, and costing companies increasing sums of money to recover from,” adds Tørstad.