News

25 July 2018

ExxonMobil expects more oil from Stabroek Block offshore Guyana

ExxonMobil has increased its estimate of discovered recoverable resources for the Stabroek Block offshore Guyana from 3.2 billion to more than four billion oil-equivalent barrels. The company has advanced its evaluation to support the third phase of development and consideration of two additional phases.

The increase comes after testing was completed at the Liza-5 appraisal well, part of the Ranger well, and after the incorporation of the eighth discovery, Longtail, into the Turbot area evaluation, and completion of the Pacora discovery evaluation.

ExxonMobil senior vice president Neil Chapman said: “Outstanding resource quality across these opportunities combined with industry-leading project execution capabilities will provide great value to resource owners, partners, and our shareholders.

“Continued success in Guyana and progress in other upstream growth projects in the US Permian Basin, Mozambique, Papua New Guinea and Brazil are giving us additional confidence in achieving our long-term earnings growth plans that we outlined in March.”

The Liza-5 well successfully tested the northern portion of the Liza field and, together with the Payara field, will support the third phase of development in the country. ExxonMobil will aim to sanction the Payara field development next year, using a floating production, storage and offloading (FPSO) vessel to produce 180,000 barrels of oil per day (bpd) from 2023.

The Stabroek Block has a total area of 6.6 million acres or 26,800 square kilometres. Esso Exploration and Production Guyana, an affiliate of ExxonMobil, operates and owns 45% interest in the offshore oil block. Hess Guyana Exploration holds 30% stake and CNOOC Nexen Petroleum Guyana owns the remaining 25%.

Hess CEO John Hess said: “The Stabroek Block is a massive world-class resource that keeps getting bigger and better. Since the end of 2016, the estimate for recoverable resources on the block has quadrupled and we continue to see multi-billion barrels of additional exploration potential on the block. We believe the investment opportunity in Guyana has the potential to be transformative for our company and create significant value for our shareholders for many years to come.”

The first development project offshore Guyana, Liza-1, will use an FPSO vessel to produce 120,000 bpd, beginning in early 2020. Liza-2, which is to be sanctioned by the end of this year, will use an FPSO vessel designed to produce up to 220,000 bpd and is expected for production by mid-2022.

The Longtail well has established the Turbot-Longtail area as a possible hub for recovery of more than 500 million barrels. This estimate could increase after additional prospects are drilled in the area.

Combined, the discoveries on the Stabroek Block have thus far established the potential for up to five FPSOs producing over 750,000 bpd by 2025. There is potential for additional production from other undrilled targets, and plans for rapid exploration and appraisal drilling, including at the Ranger discovery.

25 july 2018

Saudi Aramco aims to buy majority stake in SABIC petrochemicals

National oil and gas company Saudi Aramco has proposed purchasing a controlling stake in petrochemicals manufacturer Saudi Basic Industries Corp (SABIC), taking as much as the entire 70% stake owned by Saudi Arabia’s Public Investment Fund (PIF), according to Reuters.

The oil and gas company confirmed the reports, saying it was attempting the purchase of a ‘strategic stake’ in SABIC from the national sovereign wealth fund.

Saudi Aramco will buy 50-70%, from the PIF making it the majority owner. Some of Wall Street’s largest financial institutions are offering loans to oil giant for the acquisition, according to sources who wished to remain anonymous.

A final decision has not yet been made on how much of stake Saudi Aramco will take as discussions are still in the early stages. A company spokesperson declared to Reuters last week that it is engaged in “very early stage discussions” with the PIF to acquire “a strategic interest in SABIC by way of a private transaction”.

SABIC is the world’s fourth-biggest petrochemicals firm and has a current market cap of SAR385.2bn ($103bn). Saudi Aramco has announced it does not plan to buy the remaining 30% shares, which are listed on the local stock exchange. If completed, Saudi Aramco chief executive Amin Nasser said the acquisition could have implications for the timeframe of the company’s planned IPO, set for later this year.

The oil and gas giant aims to boost investments in refining and petrochemicals to secure new markets. It sees growth in chemicals as crucial to its downstream strategy to cut the risk of an oil demand slowdown.

The plan is to raise Saudi Aramco’s refining capacity to between eight to ten million barrels per day (bpd), and double its petrochemicals production by 2030. Currently, it is at around five million bpd. Saudi Aramco is the world’s largest oil producer, pumping around ten million bpd of crude oil.

24 july 2018

Halliburton shares sink amidst Permian Basin pipeline constraints

Shares of multinational oilfield services giant Halliburton fell the most in nearly four years, as investors forecast production capacity to continue outpacing demand.  Permian Basin pipeline constraints, road, and rail transport issues have been cited as the primary reason for the demand lull.

The company said that some customers were reducing operations and lowering their rig count because increased production in the Permian Basin in Texas and New Mexico, US, had ‘bottlenecked’ supply as companies cannot transport the surplus oil to Gulf markets using the existing infrastructure.

Over the first and second quarters of 2018 Halliburton’s market share in the Permian Basin fell by around 7%, according to preliminary data from analyst Primary Vision – which tracks US hydraulic fracturing spreads.  Share prices fell 8.1% to $41.53 in afternoon trade.

Halliburton CEO Jeffrey Miller said: “In some ways, we’re a victim of our own success, as we develop longer laterals with better production. As a result, we expect this area to have temporary softness in the back half of 2018, but it’s poised to regain activity as a calendar turns to 2019 and additional Permian Basin pipeline capacity is available.

“I expect that these temporary efficiency drags will create headwinds for additional upward pricing in the third quarter. Our competitors’ new and uncontacted equipment is also creating pricing pressure in some areas. We will continue our efforts to optimize pricing and utilization, pursue continued technology implantation and control cost to maintain our industry-leading returns.”

Miller added the company expects a further 4% share hit to revenue in the current quarter. The bottlenecks have also driven down the price of regional crude relative to US benchmark oil as well as threatening to decrease demand for oilfield services and equipment, of which Halliburton is the largest US supplier, according to consultancy firm Rystad Energy.

The fall in market share comes at a time when Halliburton has experienced a 24% year-on-year rise in revenue for Q2. The company continues to benefit from soaring US oil production – a record 11 million barrels per day this month across the country. However, the Permian Basin pipeline constraints have knocked more than 20% off Halliburton’s shares since May.

The US-based company’s operations are more heavily weighted toward domestic production, which is the reason the Permian pipeline bottlenecks have made the company more vulnerable than its rivals, such as Schlumberger, which missed its quarterly revenue forecasts last week.

The surge in production, coupled with crude oil prices doubling since early 2016, means the US should become the world’s largest oil producer this year. Tortoise Energy Infrastructure managing director Rob Thummel said: “If the Permian was part of OPEC, it would be the fourth-largest OPEC member, right behind Saudi Arabia, Iran, and Iraq. By the end of the year, the Permian probably overtakes Iran.”

24 july 2018

Workers conclude latest strike on Total North Sea platforms

Around 40 rig workers have concluded the first of five planned strikes on the Alwyn, Elgin and Dunbar platforms, which are part of Total North Sea oil and gas operations. It commenced on Monday with production halting for 24 hours, according to UK labour union Unite.

A Unite spokesperson said that the union and Total failed to agree on work shifts and pay, and no fresh talks are currently planned. Two further 12-hour strikes will take place on 30 July and 13 August, while more 24-hour strikes are planned for 6 and 20 August.

Unite regional officer John Boland told Offshore Technology: “Unite members on the Alwyn, Dunbar and Elgin platforms operated by Total E&P took part in the first of a series of 24-hour and 12-hour strikes commencing 23 July. The dispute concerns the company’s wage review and its plans to force workers to increase their offshore working time to three weeks on three weeks off.

“The strike action stopped at 0600 this morning [Tuesday], but the overtime ban continues. It will take between 12 and 24 hours for full production to resume. At present, there are no planned talks.”

Gas traders said the strikes had curbed gas flows to shore, boosting the instant delivery wholesale gas price by 1.9% to 58.3 pence per therm.

A spokesperson for Total North Sea said that the strikes went ahead “despite the new proposals that were made by the company”.

She said: “What is at stake here is to ensure the long-term sustainability of our business in the North Sea, to enhance overall safety and remain the most efficient in our operations. However, we’re pleased to be able to continue discussions with staff at the Shetland Gas Plant and remain committed to further consultation and open dialogue with offshore staff.”

Total wants to extend the employee rosters from a two-week rotation to three in order to bring it in line with the rota system at its newly acquire Maersk fields.

Combined, the three fields account for around 10% of the UK’s gas output, and produce around 45,000 to 50,000 barrels per day.

It is not just Total North Sea operations that are experiencing industrial action recently. Unite members at Aker Solutions have announced their decision to strike at Equinor’s non-producing Mariner platform, with GMB members at Mariner also voting in favour of industrial action. It is reported that Aker Solutions had offered an enhancement worth up to £8,000 per employee. Last week, 1,600 Norwegian rig workers ended industrial action at the Knarr oil and gas field operated by Shell.

24 july 2018

Brent crude prices rebound on growing US-Iran tensions

Brent crude prices have recovered from earlier losses in the wake of growing tensions between the US and Iran, as the US attempts to restrict Iran oil imports. Markets are also gripped with concerns over signs of oversupply.

Brent crude futures rose six cents to reach $73.12 per barrel, while US West Texas Intermediate crude decreased by three cents, trading at $67.86 after falling 37 cents the previous day, Reuters reported. The markets inched up on 23 July after US President Donald Trump issued a warning on a social media platform that Iran would face dire consequences if it threatened the US.

Brokerage OANDA APAC trading head Stephen Innes was quoted as saying: “While oil prices were the primary beneficiary of the weekend’s headline battle between President Trump and Iranian President Rouhani, that boost started to fizzle as traders then veered to oversupply concerns.”

The US has been demanding countries to cut all Iran oil imports, starting this November. Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and produces 3.75 million barrels per day.

On a weekly basis, traders are expecting stockpiles at the delivery hub at Cushing, Oklahoma to fall for the tenth consecutive week. Recently, finance ministers and central bank governors from G20 group, which represents the world’s 20 biggest economies, noted that risks to global growth have increased due to China-US trade tensions, among others.

Freight Investors Services fuel oil broker Matt Stanley said: “It is surely only a matter of time before something tangible yields from the ongoing trade war stories and it probably won’t be a pretty outcome.”

23 july 2018

Cyprus vows to safeguard ExxonMobil offshore oil and gas search

Cypriot Energy Minister George Lakkotrypis has announced that the government will do everything necessary to ensure ExxonMobil’s offshore oil and gas search runs smoothly, despite threats from Turkey. The US oil giant, together with Qatar Petroleum, holds an exploration licence for Block 10 located in the south-west of Cyprus’s exclusive economic zone (EEZ). Lakkotrypis added that the dispute with Turkey should not hinder the government’s energy programme.

He said: “The procedures for Exxon to obtain the necessary permits are proceeding as planned and two wells will be carried out in Q4. What’s important is that we progress according to our timeframe and planning.” Asked whether the US Air Force will be deployed to monitor ExxonMobil’s drilling activity, as reported in Cyprus’s largest daily newspaper the Phileleftheros, he added: “We take all necessary measures so that the two drills will proceed without any unforeseen developments. That is why you see that we are diplomatically more active as the time for these drills gets closer.”

An ExxonMobil drillship is expected to arrive in September to kick off the exploration.

GlobalData upstream analyst Luis Pereira told Offshore Technology: “Earlier this year, Italian energy company ENI announced the Calypso gas discovery in Block 6, which is forecast to contain six to eight trillion cubic feet of gas. “Meanwhile, the Aphrodite gas field discovered in 2011 has an estimated four to five trillion cubic feet of recoverable gas. Recently, there have been talks between Cyprus and Egypt to bring the production from the Aphrodite field to Egypt by pipeline.”

The Turkish Government in Ankara has consistently warned multinational oil companies against drilling offshore of Cyprus while the territorial dispute remains unresolved. Turkish warships blocked the passage of a drillship commissioned by ENI back in February, which planned to drill in Block 3 of the EEZ, located east of the island.

At the time, European Council President Donald Tusk told Turkey to “avoid threats or actions against any EU member and to commit to good-neighbourly relations, peaceful settlement of disputes and respect of territorial sovereignty”.

However, Lakkotrypis remained adamant that the two issues are not linked to the latest offshore oil and gas search.

He said: “We continue with our plans, that cannot be changed because of contractual obligations and, as the President of the Republic said a few days ago, under no circumstances should developments in the Cyprus problem affect our energy programme.”

Cyprus has thus far carried out three licensing rounds, awarding exploration licences for eight of the offshore blocks in the EEZ. Turkey, which occupies 37% of the island’s territory, does not recognise the Republic of Cyprus’s EEZ and claims that Turkish Cypriots also own the island’s resources.

In response, the Cypriot Government agreed that energy wealth will be shared among ‘all Cypriots’ once a solution is reached, adding that the division should not impede its right to explore oil and gas. A UN envoy will travel to the island to see if a new round of peace talks after the Swiss Summit last July proved unsuccessful.

23 july 2018

Tendeka completes field trial of sand control technology

Tendeka has completed a successful field trial with a major operator to test its sand control technology Cascade³. Cascade³, a well screen and flow control completion system, blocks sand production caused by adverse flow conditions such us back-flow, cross-flow and water-hammer during shut-ins by utilising intrinsic check-valves built into the lower completion.

The tool’s high-density array of non-return valves enable high injection rates with low back pressure. The three-year R&D project was initiated in 2014 by the operator in partnership with Tendeka to develop a cost-effective solution to increase life expectancy of water injection wells and improve oil production and recovery.

Tendeka chief technology officer Annabel Green said: “The overall objective of Cascade³ is to prevent the production of sand into the well bore in water injection wells. Conventional sand control techniques are often not effective in the transient conditions that exist when injection pumps are shut-down, and many injector wells can suffer a loss of injectivity due to sand fill.

“Deploying Cascade3 not only eliminates this failure mode but it also means that more expensive gravel packing solutions are not required.”

The project ended in March with a field trial in a saltwater disposal well in the Permian Basin, West Texas. As this contained unfiltered and untreated produced water, it provided a suitable test lab to examine valve performance.

Evaluation of the capabilities of Cascade3 technology was carried out by simulating the effects of water-hammer and cross-flow, and exposing the equipment to long-term injection in a downhole environment. The well now has been put on full-time water disposal duty to observe the long-term effects of injection on the valves.

Green added: “Without sustained water injection, several offshore Gulf of Mexico fields are at risk of losing production as reservoir pressure falls below the bubble point. The field trial has shown that this technology can safeguard injection rates over a longer period of time.”

“The potential CAPEX savings related to fewer injection wells drilled or re-drilled over the life of these offshore oil and gas assets is considerable. This relatively simple and easily installed technology will provide operators with improved pressure support and sweep, ultimately increasing oil recovery.

“Although developed for the extreme environments in the Gulf of Mexico the same issues are encountered in many oil producing basins and the technology can be broadly applied.” Presently, Cascade3 is slated for installation in three wells in Africa, and plans are underway for its implementation at a deepwater asset in the Gulf of Mexico.

20 july 2018

Climate lawsuit against oil companies dismissed

A lawsuit filed by New York City against major oil companies has been dismissed. The case would have held the firms accountable for climate change caused by the carbon emissions produced from burning fossil fuels. Specifically, the claims were brought against Chevron, BP, ConocoPhillips, Exxon Mobil and Royal Dutch Shell.

US District Judge John Keenan dismissed the charges on Thursday, primarily on the grounds that climate change is a global problem and thus too large a decision for a state court. He added that it is more the role of the federal government and foreign policy to address the issue.

In defence of his rejection he wrote that “climate change is a fact of life, as is not contested by defendants”, adding that the problems which result from global warming “are not for the judiciary to ameliorate…solutions thereto must be addressed by the two other branches of government”.

New York City is planning to appeal the decision, according to Seth Stein, spokesperson for the city’s Mayor Bill de Blasio. In a statement, Stein said the mayor “believes big polluters must be held accountable for their contributions to climate change and the damage it will cause New York City”.

The city has said the firms have long been aware of the damaging effects of their carbon emissions, though they have continued to deny the links to global warming in an attempt to promote fossil fuels and maintain financial and business gains.

The firms accused cited numerous grounds for the case’s dismissal. One was that under the federal Clean Air Act, only the country’s Environmental Protection Agency is authorised to pursue pollution lawsuits.

This argument was supported by Judge Keenan, who said that climate change is too widespread a problem to be settled in court, adding that the charges “implicate countless foreign governments and their laws and policies”. Chevron lawyer Theodore Boutrous applauded Keenan’s ruling, saying he “got it exactly right”.

Similarly, a statement from Shell said the decision “reaffirms our view that climate change is a complex societal challenge that requires sound governmental policy and is not an issue for the courts”, while ConocoPhillips spokesperson Daren Beaudo said climate change is “a global issue that requires global policies and solutions”.

New York City first pursued legal action against the oil companies in question in January this year, suing them on the grounds that they caused current and future damages to the city through contributing to climate change. The suit claims that together the five companies produced 11% of all global warming gases through the oil and gas products they sold over the years.

The monetary damages sought are said to be in compensation for the billions spent on safeguarding the city against hazards of global warming such as flooding. As the lawsuit states, the New York is attempting to “shift the costs of protecting the city from climate change impacts back onto the companies that have done nearly all they could to create this existential threat”.

Plans to divest fossil fuel investments from the New York’s $189bn public pension funds over the next five years have also been announced. A similar lawsuit was filed in California last year, with the counties of Marin and San Mateo and the city of Imperial Beach collectively suing a group of fossil fuel companies over damages caused by climate change.