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OE Press: 2016 / November

OE Press: 2016 / November (74)

Thursday, 01 December 2016 10:34

Hyperdynamics inks drillship for Guinea

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Hyperdynamics Corp. has signed drilling contract with Pacific Drilling for the Pacific Bora drillship for drilling offshore Guinea in Q2 2017.

The Pacific Bora is currently located in West Africa, has just finished a contract for a major American exploration and production company. The drillship is expected to arrive shortly before the target spud date for the Fatala-1 well. Hyperdynamics' contract with Pacific Drilling enables us to include as many as three additional wells under the same favorable terms and conditions.

"This contract underscores our commitment to drilling our next exploration well offshore the Republic of Guinea next year," said Ray Leonard, Hyperdynamics president and CEO. "Since the signing of a preliminary Letter of Award with Pacific Drilling a month ago, we have also achieved several other crucial milestones that will enable us to begin drilling the Fatala-1 prospect this spring. 

"Long-lead time equipment and materials that are being turned over to Hyperdynamics by former operator Tullow Oil are currently being inspected at a storage yard in Ghana before shipment to Guinea. We are in the process of tendering for the major services that will be needed for our drilling operations as well as for support services such as boat and helicopter transportation.

"We are continuing to hold discussions with prospective working interest partners, including major multinational energy companies and independents, to share project-related costs and risks and to enhance project technical competencies. We are also exploring options to raise equity through a share offering," Leonard said.

Wednesday, 30 November 2016 10:13

Newfoundland calls bids for Labrador South

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The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) has issued a Call for Bids in the Labrador South Region under its Scheduled Land Tenure Regime.

Call for Bids NL16-CFB03 (Labrador South Region) covers 10 parcels over a total 2.2 million hectares.

C-NLOPB says the sole criterion for selecting a winning bid will be the total amount of money the bidder commits to spend on exploration of the parcel during Period I (the first period of a nine-year license). The minimum bid for the parcel offered is $10 million in work commitments.

Anyone wanting to apply has until either 8 November 2017 or a minimum 120 days after the completion of an update to the Labrador Shelf Offshore Area Strategic Environmental Assessment (SEA), whichever is later, to submit sealed bids for the parcels offered in Call for Bids NL16-CFB03.

Read more

Winners named for C-NLOPB deepwater bid round

Wednesday, 30 November 2016 09:54

Energean moves to develop Katakolon, off Greece

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Energean Oil & Gas's exploration license over the West Katakolon field has been converted to a 25-year exploitation license with immediate effect.

The West Katakolon Exploitation area is part of the Katakolon Concession Area and covers 60sq km area with about 10 MMbbl recoverable oil. Energean will be the operator of the field development. 

West Katakolon is the third oil and gas field to go into development in Greece, following on from the Prinos oil field and South Kavala gas field, both of which are offshore in the North Aegean Sea. Both fields are operated by Energean.

A field development plan (FDP) for Katakolon will be submitted to the Ministry of Energy by the end of February. Drilling is planned for 2018 and will use extended reach drilling (ERD) technology to drill from onshore to offshore reservoirs.

The FDP for West Katakolon will be Energean’s third offshore plan in process over the next few years alongside those for the 15 MMbbl Epsilon oil field, also in the Prinos concession, and the much larger proven Karish and Tanin gas fields, offshore Israel. Energean recently announced the acquisition of the world-class 2.4 Tcf resource Karish and Tanin fields from Delek Drilling and Avner for US$148 million.

Mathios Rigas, CEO of Energean, commented: “The progression of West Katakolon into its development phase is an important milestone for both Energean and Greece. It will be the first ever hydrocarbon production program in the west of the country and a major boost to the economy following the challenges of the last few years. We are committing to the US$50 million investment in Katakolon, as a first step in seeking to open up the oil and gas opportunities in this highly promising territory – an area with similar geology to the wider Adriatic Zone, well known for its prolific hydrocarbon systems in Italy, Albania and Croatia.

“Energean has up to 5000 b/d production from Prinos. The firm is aiming to increase its production to 10,000 b/d by 2018 through an ongoing US$ 200 million investment program across its portfolio with low break even costs.

The firm has acquired two new licenses in Western Greece, two blocks offshore Montenegro and one more onshore Western Greece, and most recently it purchased the Karish and Tanin gas fields. 

Wednesday, 30 November 2016 09:41

Aibel lands Troll C FEED study

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Aibel has been awarded a front-end engineering and design (FEED) study into the installation of a new gas module on Statoil's Troll C platform offshore Norway.

The contract also has an option for the implementation of the project itself. The assignment comprises the design and build of a new gas module on the Troll C platform.

Work on the FEED study begins immediately and is due to be completed in May 2017. The option in the contract is for the actual implementation phase – project planning, purchasing, fabrication and installation – which would continue until the end of 2019.

The work includes project planning, building and installation of the module, as well as associated work on the platform. The client is Statoil.

The study will be performed at Aibel’s office in Bergen, which has extensive experience of modification work on the Norwegian continental shelf. The implementation phase option would also be managed from Bergen, while the module would be built at Aibel’s yard in Haugesund. 

“The Troll C assignment is very important to us and demonstrates our strong and improved competitiveness in what is still a challenging market. This assignment will demonstrate our strengths when it comes to jobs that combine expertise at modification and the building of new modules,” says Aibel’s EVP for Modifications and Yard Services, Bjørn Tollefsen.  

The contract is valued at more than US$70.5 million (NOK 600 million), including the option. Up to 40 employees will be engaged on the project during the FEED phase.

Image: Troll C, from Statoil, by Oyvind Hagen. 

Tuesday, 29 November 2016 18:32

Africa Energy, Pancontinental in Namibia farmout deal

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Africa Energy Corp. has entered into a farmout agreement with a subsidiary of Pancontinental Oil & Gas pursuant to which Africa Energy will acquire a 10% participating interest in Petroleum Exploration License 37 offshore, Republic of Namibia (PEL 37). 

Under the terms of the farmout agreement and similar to the terms of Pancontinental's participating interest, Africa Energy's participating interest share of all joint venture costs, including the drilling of the first exploration well on PEL 37, will be fully carried through the current exploration period by a joint venture partner. Africa Energy has agreed to pay Pancontinental US$1.7 million at close of the farmout agreement, and an additional $4.8 million upon spud of the first exploration well. Completion of the farmout agreement is subject to receipt of all requisite government approvals, other regulatory approvals, third party consents, partner approvals, and finalization of due diligence procedures.

"I'm very pleased to announce our acquisition of a 10% fully carried interest in PEL 37, offshore Namibia,” said James Phillips, president and CEO, Africa Energy. “The block contains a series of extensive base of slope fan prospects with significant combined resource potential. The fans directly overlie a mature oil-prone source rock of Aptian age, which was recently proven by the 2013 Murombe-1 and Wingat-1 wells in which the latter well recovered light oil. Africa Energy's technical team has experience in these West African Cretaceous fan plays and we look forward to the drilling of a well in this play."

Tuesday, 29 November 2016 16:22

IHS: Decom spend to hit $13 billion/yr by 2040

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The decommissioning of aging offshore oil and gas platforms, subsea wells and related assets is increasing dramatically, with more than 600 projects expected to be disposed of during the next five years alone. This rapid trend toward decommissioning is causing spending to rise significantly, according to a new study by IHS Markit.

Image of Thialf, from HMC.

IHS Markit expects spending on decommissioning projects to increase from approximately US$2.4 billion in 2015, to $13 billion per year by 2040, or an increase of 540%, says the new IHS Markit Offshore Decommissioning Study Report. 

An additional 2000 offshore projects will be decommissioned between 2021 and 2040, the report noted, and total expenditures from 2010 to 2040 will amount to $210 billion. During the next five years, Europe will absorb approximately 50% of global decommissioning spending as the industry removes major offshore structures from the North Sea. Each year, the industry currently decommissions an average of 120 projects on a global basis, IHS Markit said.

“In terms of decommissioning, the global offshore industry is headed for a perfect storm,” said Bjorn Hem, senior manager of IHS Markit upstream costs and technology service and one of the study’s authors.

“We see increasingly stringent decommissioning regulations coming into force at the same time that the inventory of structures nearing end-of-life status is getting larger and more complex,” Hem said. “At the same time, the providers of decommissioning services are very fragmented—there are no dominant players, so this makes it even more difficult for offshore E&P (exploration and production) companies and offshore service companies to accurately predict decommissioning costs and risks.”

According to the IHS Markit report, as E&P activity has shifted to deeper waters, harsher environments and increasingly complex projects, some of which comprise hundreds of wells and miles of risers tied back to a few ultra-large platforms, operators now face enormous challenges when planning the removal of these assets. Some of these decommissions can cost billions of dollars and take years to successfully dispose of, and decommissioning delivers no return on investment or revenue, but instead carries significant environmental and regulatory liabilities.

“The effective decommissioning of offshore platforms, subsea wells, and related assets is one of the most important business challenges facing the oil and gas industry today and in the future,” said Bill Redman, senior director of upstream costs and technology commercial strategy at IHS Markit. “Decommissioning represents a considerable shift in terms of sustainable business planning for most operators.”

“Despite E&P activity in open water that dates back more than 60 years, the offshore decommissioning industry is still essentially in its infancy, and as a result, decommissioning activities play only a minor, if any, role in many operators’ or vendors’ business plans,” Hem said. “However, due to the increasing number of assets that are destined for decommissioning, along with the increasingly stringent regulatory and environmental considerations relative to offshore operations, this is quickly becoming a business priority for offshore operators.”

Key environmental issues in decommissioning include dealing with any potential direct effects on the marine ecosystem, ensuring the appropriate use and containment of hazardous substances, and addressing waste management issues, including seabed debris accumulated during the life of the platform. Items typically involved in decommissioning include surface facilities, called topsides, as well as subsea installations, pipelines and wells. These topsides structures can vary greatly in size and function, from one small well/wellhead to massive deepwater installations, including large processing and storage facilities, and staff accommodation facilities.

Navigating the myriad environmental and waste management regulatory requirements that individual countries have regarding decommissioning is a significant operational challenge for operators and offshore vendors, the IHS Markit report said, and that equation is getting even more complex as decommissioning activity shifts from individual assets to entire fields, and to larger, more complex structures.

Historically, the Gulf of Mexico (GOM) and the North Sea regions, which entered the oil and gas industry first, have dominated decommissioning demand. Older offshore installations also exist in other regions, such as the Middle East, but because of their longer field life, IHS Markit expects these assets to operate for many years to come.

According to the IHS Markit report, the Gulf of Mexico has been the largest region in terms of the number of platforms decommissioned (approximately 4000), and with more than 5000 oil and gas structures in place, the GOM also has the largest number of platforms to be decommissioned. Since these offshore facilities provide significant habitat for marine life, the GOM is home to the largest artificial reef system in the world. Many global operators participate in Rigs to Reef programs, which allow the repurposing of decommissioned rigs as artificial reef structures.

“While North America is the largest market for decommissioning, the European region has the largest amount of offshore decommissioning spending, based on the size and volume of the structures being decommissioned in the North Sea, including concrete gravity-based structures (GBSs),” said Grigorij Serscikov, senior manager, Upstream Oil Gas at IHS Markit, and another author of the study. Statoil, Total, Chevron, ExxonMobil and ConocoPhillips round out the top-five operators globally in terms of spending by operator, according to the IHS Markit report.

Beyond North America and Europe, Angola and Nigeria will drive decommissioning spending in Africa, while shallow-water Australia will drive demand in the Asia-Pacific region. Mexico and Brazil will be the focus of decommissioning demand in Central and South America, IHS Markit said.

Decommissioning costs also vary across a wide range of platform types, from unmanned production units to large multi-platform complexes. Those costs often differ even for similar facilities, as many projects have their own level of specialized decommissioning requirements.

In general, historical decommissioning costs for rigs in the Gulf of Mexico have been in the $500,000 to $4 million range for shallow-water structures. Platforms included in this category can vary from single-pile, one-well platforms that are located in several feet of water, to larger, four-pile structures in water depths up to 120m.

Costs naturally increase with water depth and size, as well by type, complexity and size, IHS Markit said. A four-pile structure in 15m of water depth typically costs just under $2 million in decommissioning and removal, whereas a structure in 100m of water depth will cost nearly double that to dismantle. The North Sea involves much larger structures and costs typically are higher. For example, one gravity-based system with a 22,500-ton topsides and an 180,000-ton substructure has an estimated decommissioning cost of $2 billion.

Tuesday, 29 November 2016 10:23

Job cutting continues in UK

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Two thirds of companies in north east Scotland have made job cuts in the past year, but optimism that the end could be in sight has risen, according to a survey. 

The annual 25th Oil and Gas survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute, says the job cutting, including permanent and contract staff, has been higher than at any time in the history of the survey, which was launched in 2004. 

More than two-thirds of employers shed staff over the past year - by 15% at operators and 7% at contractors – and fewer companies are working at above optimum levels than ever before, the survey says.

But, optimism is on the rise, it found, and a study by business consultants KPMG said there could be increasing merger and acquisition activity in the industry as companies move from “survival mode” and look to the future. 

Oilfield services companies that have adapted their businesses during the downturn and have relatively stable trading patterns are beginning to think strategically about how to position themselves for future growth opportunities. With fragile stability returning to oilfield spend and activity, KPMG expects to see a modest revival in M&A activity in the service sector through 2017 and 2018.

Short to medium term deal activity will be driven by technology and solutions, rather than capacity requirements; and the relative weakness of sterling should provide a boost to inward investment in the UK.

Alan Kennedy, KPMG partner and UK head of oilfield services, said that the growing sentiment in the sector was that the market had stopped getting worse, prompting companies to start looking ahead to new opportunities.

“There is a growing view that things have stopped getting worse, at least in some areas of the sector. Companies that are in reasonable shape in terms of their balance sheets, have sorted out their finances and have stabilized their trading at today’s lower level are beginning to think strategically again and looking ahead three to five years. M&A growth through acquisition is a big tool in the box for them when there’s limited organic growth to be achieved through new projects in the current market.

“The market themes that we expect to see through 2017 and 2018 are global integration of services over the life of field, diversification into downstream and adjacent space, non-cash mergers and private deals, as opposed to auctions.”

According to the 25th Oil and Gas survey, some optimism is returning to the business, with signs that the rate of job cutting could slow in the year ahead. Six months ago, operators were predicting a 17% reduction in numbers which has now fallen to 5%, with a similar reduction from 2% to 1% by contractors.

Furthermore, 12% of contractors are more confident about their activities in the UKCS in the current year, compared to 7% in May, while 47% - down from 75% - are less confident.

Two out of three respondents believe the sector has already reached the bottom of the current cycle, or will do so within the next year, and a further 25% feel it will be within the next one to two years.

According to the survey, 43% of respondents reduced pay in the past year, including 15% who cut it by average of 10%. Some 40% of firms surveyed - compared to 25% in the previous survey - reported making significant changes to terms and conditions, including salary and bonus payment reductions, as well as changes to shift pattern and working hours, pension contributions, medical plans and benefits packages.

James Bream, research & policy director at Aberdeen & Grampian Chamber of Commerce, said: “We're likely to remain in an uncertain position through 2017 and ‘the bottom’ will arrive at different times and feel different for each company. 

“It is clear that companies are striving to become fitter, leaner and they are working hard to look for new markets to secure their future and employment levels where that is within their control.”

Historic trends 

In the spring of 2013, a peak of 79% of contractors were working at or above optimum levels. This has steadily declined and only 12% of contractors have been working at or above optimum levels, the lowest figure since the survey began.

Just under 80% of contractors said they would “definitely” or “possibly” be more involved in decommissioning in the next three to five years, and 53% said they would “definitely” or “possibly” be more involved in renewables.

Seventy percent expect to be involved in unconventional oil and gas activity in the UK, with 64% involved outside the UK.

Current industry challenges

Despite most firms (58%) expecting the decision to leave the EU to have no impact, almost a third (31%) expect the result to have a negative impact and 8% felt that the impact would be extremely negative. Only 3% predict a positive impact.

Ninety one percent of firms said the oil price fall since 2014 has had a negative impact on their businesses, with almost three quarters reporting the effect as extremely negative. Seven percent reported no impact and 2% reported a positive effect.

The Oil & Gas Authority (OGA), which was established as an independent government company in October, appears to be starting to have an effect.

Forty percent of operators said its creation has had a positive impact on their businesses.

Of those asked if skills shortages might arise in the future because of poor workforce planning, 39% said “yes” but thought it could be avoided. A further 27% also thought it was the case, but was unavoidable

*The 25th Aberdeen & Grampian Chamber of Commerce Oil and Gas Survey is independently conducted by the Fraser of Allander Institute. The survey was conducted in September 2016 and represents the views of 130 firms employing a total of 308,661 employees in the UK.

Tuesday, 29 November 2016 09:04

GustoMSC launches new drillship design

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Dutch vessel designer GustoMSC has unveiled a new mid-water drillship design, the Scylax.

The "fit-for-purpose" vessel is described as a compact deep water drilling unit based on a single derrick or drilling mast set up with off-line stand building, dual BOPs.

The vessel, designed with a focus on "essential functionality" would be capable of working in up to 10,000ft water depth.

"Whereas ultra-deep water units feature ever increasing hook loads and capacities, these requirements can be reduced for a large amount of the wells in deep-water," says GustoMSC. 

"Designing the Scylax based on these rationalized requirements allows for different choices to be made in the design, reducing building and operating costs."

Drilling equipment packages of all major manufacturers can be readily integrated into the design.

The design also includes maximized usable deck areas resulting from the integrated design and dedicated use, in-hull riser storage and in-hull mud and bulk systems. Protected walkways, add to the operational safety and efficiency. 

Monday, 28 November 2016 14:06

PSA investigating Scarabeo 5 fire

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The Petroleum Safety Authority Norway (PSA) has launched an investigation into a fire which broke out in an engine room on the Scarabeo 5 drilling unit on 22 November 2016.

A team from the PSA traveled out to the rig, which is working on the Njord field in the Norwegian Sea, on 24 November. It will also assist the police inquiry into the same incident.

Scarabeo 5 is operated by Saipem Norwegian Branch. The operator on Njord is Statoil.

The goals of the PSA investigation include clarifying the course of events and identifying the direct and underlying causes in order to contribute to lessons learnt and experience transfer.

On 22 November, Statoil reported the fire aboard the vessel, in which a total of 106 personnel were on board with all accounted for following the incident. A total of 33 persons have been transported from the rig by helicopter, of which 14 of these were flown to a nearby installation and 19 to shore in Kristiansund, Statoil said

Read more:

Fire aboard Scarabeo 5 out

Monday, 28 November 2016 10:44

BW Offshore takes Addax to task

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Floating production firm BW Offshore has started an arbitration process against Addax Petroleum Exploration over payment for use of the floating production, storage and offloading vessel (FPSO) Sendje Berge. 

BW Offshore says Addax as "for some time not paid the company the full contractual rate for the FPSO Sendje Berge." BW Offshore says it considers the arguments for not paying the full rate unjustified, although it doesn't outline what these are. It has submitted a claim for US$52.6 million. 

Meanwhile, the firm has been told that its contract with Petronas for the FPSO Berge Helene will not be extended beyond May 2017 (it had previously been extended out from Q2 2015). Berge Helene has been producing the Chinguetti field offshore Mauritania. 

BW Offshore has also been told by Statoil that the Norwegian oil firm will not exercise options for extension of its contract beyond June 2017, due to a change in the operating model on the Peregrino field. BW Offshore operates the Peregrino FPSO, but doesn't own it.

Work on the Catcher project, meanwhile, remains within budget with first oil expected in the 2H 2017.  

"We are pleased to see positive developments in several of our focus areas", said Carl K. Arnet, the CEO of BW Offshore. "The Catcher project is progressing well, the fleet performance is good, and our cost cutting initiatives are paying off with full effect from 2017. BW Offshore has established a solid runway and is well positioned to pursue value creating opportunities." 

The firm said its cost reduction and efficiency program was progressing as planned. EBITDA for the third quarter was $76.9 million, a decline of $7.7 million 

(9%). The reduction in EBITDA for the third quarter compared with the previous quarter was mainly a result of no further loss of hire insurance for Cidade de São Mateus which ended in May.

Operating profit for the quarter amounted to $19.2 million, a decrease of 23%. 

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