23 MARCH 2020

Shell cuts spending for better financial stability

Royal Dutch Shell has announced it will reduce costs and spending to maintain financial stability during the coronavirus pandemic. The UK/Netherlands based company said it needed to be “well-positioned for the eventual economic recovery”.

It said it will reduce its capital expenditure for 2020 by $5bn, to $20bn or less. It originally planned to spend more than $25bn. Moreover, the company said it will also cut £3bn-£4bn from the previous year’s operating costs.

In a statement, the company said: “Shell is still committed to its divestment programme of more than $10bn of assets in 2019-20 but timing depends on market conditions.” Because of these delays, Shell will not buy back shares as planned.

Shell CEO Ben van Beurden said: “The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past.”

“In these very tough conditions, I am very proud of our staff and contractors across the world for maintaining their focus on safe and reliable operations while also ensuring their own health and welfare and that of their families, communities and our customers.”


23 march 2020

RMT union warns of ‘catastrophic’ job losses due to coronavirus

UK-based offshore energy workers’ union RMT is urging the British Government to help the offshore industry through the coronavirus pandemic. It says it needs help to prevent “catastrophic” job losses and skills shortages in UK offshore.

The union wants the government to make a new offshore oil and gas industrial strategy, working with offshore unions and industry.

It says this would preserve the offshore oil and gas industry and jobs in the sector, especially in Scotland. The industry has taken a hit due to the coronavirus Covid-19 outbreak and the collapse in the price of oil.

According to RMT, the UK may need to increase its reliance on imported fossil fuels as the coronavirus outbreak continues.

RMT General Secretary Mick Cash said: “We are hearing that exploration projects on the UK continental shelf are being delayed or cancelled as oil gas prices plummet to unsustainable levels. This is threatening to take some operators to the wall, along with the contractor and supply chain workers maintaining their assets.

“Government and industry’s ‘Vision 2035’ strategy now looks in serious jeopardy and we agree that immediate government intervention, co-ordinated with trade unions, industry and the Scottish Government, is essential in order to protect jobs and skills across the supply chain, as well as the investment needed to preserve the North Sea’s importance to the national energy mix.

“Norway’s state energy company Equinor has set up a department specifically to respond to COVID-19 with the overriding aim of preserving oil and gas production and the jobs it supports in the North Sea today.”


20 March 2020

Equinor and SOCAR confirm oil discovery in Caspian Sea

The State Oil Company of the Azerbaijan Republic (SOCAR) and Norway’s Equinor have confirmed their discovery of the Karabagh oil field offshore Azerbaijan, in the Caspian Sea.

The oil field is located 120km east of Baku in the Azerbaijan sector of the Caspian Sea. The reserve is in the open sea, at water depths of 150m-200m. The field is close to the SOCAR-operated Shallow Water Gunashli field and the BP-operated Azeri Chirag Gunashli field.

Equinor and SOCAR each own 50% of the Karabagh field. The estimated size of the discovery is large enough to pursue commercial development, according to SOCAR.

The Dada Gorgud semi-submersible drilling rig made the first appraisal well at the oil field. Spudding started on 23 December last year, drilling in water depths of 180m. The discovery reservoir is located 3.4km below the surface of the Caspian Sea.

SOCAR president Rovnag Abdullayev said: “Karabagh is the first oil field discovered during the independence period of our country and its oil reserves estimated more than 60 million tons.

“The successful delivery of the appraisal well to the target safely and on time is the result of effective collaboration of SOCAR and Equinor. Development of the Karabagh field will significantly contribute to Azerbaijan’s oil incomes. The field proudly bears the name of the heart of our Motherland – Karabagh.”

SOCAR and Equinor have collaborated on several projects since 1994.

In May 2018, SOCAR and Equinor signed an agreement related to the appraisal and development of the Karabagh oil field.

Earlier this year, SOCAR and BP began drilling in the Shafag-Asiman block, offshore Caspian Sea in the Azerbaijan sector.


19 march 2020

BW Offshore secures BW Pioneer FPSO contract on Gulf of Mexico fields

BW Offshore has secured a contract for the lease and operation of the BW Pioneer, a floating production, storage and offloading (FPSO) vessel. It will operate on the Cascade and Chinook fields in the US Gulf of Mexico for the next five years.

The latest contract comes with an additional five-year extension option. The company has not stated the value of the contract.

This contract is a direct continuation of the current contract with MP Gulf of Mexico. The company is a joint venture between Brazilian firm Petrobras and US independent energy company Murphy Oil.

The firm period of the contract, beginning this month, will keep the vessel working on the field until March 2025.

The Cascade and Chinook fields are located in the Walker Ridge block, about 300km south of the Louisiana coast.

BW Offshore operates 15 vessels including the BW Pioneer, the first FPSO facility in the US Gulf of Mexico. The Pioneer works at a depth of approximately 2,500m.

The FPSO is specified to have 500,000 barrels of oil storage capacity. It has a processing capacity of 80,000 barrels per day, and 16m cubic feet per day of natural gas export capacity.

BW Offshore CEO Marco Beenen said: “We are very pleased to have reached a long-term agreement with MP GOM for the BW Pioneer, confirming our strong relationship with MP GOM on the Cascade and Chinook fields.”

In October last year, BW Offshore revised development plan for Ruche project, including the Hibiscus discovery, located in the Dussafu Marine licence offshore Gabon.


19 march 2020

Neptune makes oil discovery at Schwegenheim exploration well, Germany

Exploration firm Neptune Energy has discovered oil at the Schwegenheim exploration well in the Rhine Valley, Germany.

Drilled to a depth of 2,600m, the well encountered two oil-bearing layers. The drilling programme was carried out between September and November last year.

The exploration company, based in the UK, said that the well has now been safely suspended.

Neptune Energy operates the production licence of the Schwegenheim exploration well. The license is owned by Neptune Energy and Palatina GeoCon, with an ownership of 50% each.

Neptune Energy Germany managing director Andreas Scheck said: “The Bunter Sandstone reservoir, as an equivalent to the nearby Römerberg structure, was dry but two secondary target upper layers showed oil indications.

“During production tests, we have already transported 1,500 bbl of crude oil to the refinery in Karlsruhe. While initial results have been positive, further assessment is required before it can be determined that oil can be produced economically from this structure in the long-term.”

With the successful discovery, Neptune will apply to the responsible mining authority in the Rhineland-Palatinate state in order to receive necessary permits on further production measures in Schwegenheim.

Last month, Neptune Energy produced first gas from the L5a-D4 well in the deepest producing gas field in the Dutch North Sea.

In July last year, Neptune Energy and its joint venture partners BP and JAPEX awarded an engineering and construction contract to TechnipFMC for the Seagull development oil project in the UK North Sea.


19 march 2020

Coronavirus Covid-19: Oil prices rebound after hitting lowest point

Oil prices sprang up nearly 7% on Thursday after a three-day low. However, the coronavirus pandemic and oil supply surge still weigh heavily on the market.

According to Reuters, Brent crude LCOc1 jumped up by $1.43, or 5.75%. It stands at $26.33 a barrel, after sinking to $24.52 yesterday.  US crude CLc1 gained $2.40, selling at $22.77 per barrel. This 11.8% gain comes after a 25% plummet the day before, reaching an 18-year low.

According to analysts, gains are not expected to last. Oil demand is still crashing due to the Covid-19 pandemic, compounded by the collapse of an agreement for supply cuts proposed by the Organisation of the Petroleum Exporting Countries (OPEC).

Because of this, price war between major oil producers Saudi Arabia and Russia continues to cause oversupply issues. Saudi Arabia is currently pumping at a record rate of 12.3 million barrels per day.

Yesterday, US senators pressured the Saudi Arabian envoy to the US to end the price war. US companies stand to lose millions while oil prices stay low. Separately, senators urged President Donald Trump to impose an official ban on oil from the two countries.

OANDA New York senior market analyst Edward Moya was quoted by the news agency as saying: “Monetary and fiscal stimulus will do little in returning energy demand back to normal but it will build confidence that the global economy will be in a better position once it is behind the virus.”

Coronavirus global impact

The Covid-19 death toll has increased to more than 8,800 globally. A total of over 218,800 confirmed cases and 84,000 recoveries have been reported as of the end of 18 March.

The World Health Organization noted that 80% of global coronavirus cases were reported in the Western Pacific and European regions.

The agency urged isolation, testing and treatment of every suspected case, along with tracing of every contact, in all countries.


18 march 2020

Lundin announces oil discovery in Norwegian waters

A subsidiary of Lundin Petroleum has announced the discovery of at least 12 million barrels of oil equivalent (MMboe) from an exploration well in the North Sea.

Lundin Norway said it found 12 to 71 MMboe at the Iving exploration well. Of this, it says around 85% is light oil. Peak flow was around 3,000 barrels of oil per day.

Lundin drilled the well with two sidetracks to give more data and a wider sample. The oil column is at least 45m thick, but the drill also encountered a 34m gas column above it.

It has installed permanent pressure gauges in the well to help assess reservoir connectivity.

Lundin found further gas and oil in the Evra well. It said further appraisal is required to estimate the potential volume held in of 8m of reservoir Eocene/Palaeocene-age injectite reservoir sands.

The semi-submersible Deepsea Bergen rig drilled the Ezra and Iving exploration well in the PL820 S license. It is 8km northwest of the Balder and Ringhorne fields, and Lundin said it will consider tying the reserve back.

MOL Norway operated the licence and has a 40% interest in the area. Lundin retains 40%, while Pandion Energy and Wintershall DEA have 10% interest each.


18 MARCH 2020

Hess reduces 2020 capital and exploration budget by $800m

Energy company Hess has decreased its capital and exploration budget, and taken a billion-dollar loan. It says these moves strengthen its position and financial liquidity in response to the recent oil prices crash.

On Tuesday, Hess announced it had revised its projected 2020 capital and exploratory budget down by $800m. It will now spend $2.2bn this year, instead of the expected $3bn.

It has also announced a $1bn three-year loan agreement with JPMorgan Chase Bank.

To make the majority of savings, a six rig drilling programme in Bakken, US, will move to using one rig. It is expected to be completed by the end of May this year.

Net production in Bakken this year is set for around 175,000 barrels of oil equivalent per day (boepd) this year. Previously, the guidance said it would produce more than 180,000 boepd.

Focus on Guyana

As well as these measures, Hess will push back most discretionary exploration and offshore drilling. Its main exception is in developing wells in Guyana.

Hess Corporation CEO John Hess said: “With 80% of our oil production hedged in 2020, our significantly reduced capital and exploratory budget and our new three-year loan agreement, our company is well-positioned for this low price environment.

“Our focus is on preserving cash and protecting our world-class investment opportunity in Guyana.”

Overall net production of the company for this year is forecast to be between 325,000 to 330,000 barrels per day (bpd). This is a downward revision from previous guidance of between 330,000 to 335,000 bpd.

Hess is a partner in the Stabroek Block offshore Guyana. This is operated by Exxon Mobil, who recently made a 16th oil discovery there.

In April 2018, Hess subsidiary Hess Guyana (Block B) Exploration signed an acquisition agreement with Esso Exploration and Production Guyana to purchase a 15% participating interest in the Kaieteur Block.