Petrobras left reeling as heads start to roll

Chief executive Maria das Gracas Foster and ve directors resign in the wake of pressure over the corruption scandal surrounding
Pages 6&7
Brazils state-controlled oil giant.

THE INTERNATIONAL OIL & GAS NEWSPAPER

upstreamonline.com

VOL 20 WEEK 5 6 FEBRUARY 2015

New platform on cards for Buzzard

Nexen Petroleum is pre-qualifying fabricators for the potential construction of a new platform for its prolic
Buzzard oileld in the UK North Sea.
Page 5

Race starts for

Talismans
Ca Rong Do

Thorny issue
Huskys rethink of
West White Rose
project plans set to
anger locals. Page 4

Guyana bound
ExxonMobil moves
Deepwater Champion
from US Gulf to drill
wildcat.
Page 8

LEADING international engineering

contractors are preparing to submit
bids for the supply of a
tension-leg wellhead
platform bound for
Talisman Energys
Ca Rong Do (Red
Emperor) oil and
gas project off
Vietnam. Page 9

Shift shock
UK unions in threat
over North Sea rotas
and job cuts. Page 16

Texas trauma
US states onshore rig
count could drop
below 300.
Looking ahead:
Talisman
chief executive
Hal Kvisle

Pages 38&39

Photo: REUTERS/
SCANPIX

Six contractors battle for

ONGC subsea prize
Pages 2&3
NEWS

COMMENT

10

POLITICS

12

Pushing the boundaries

s
at Brent Delta

WORLD

Page 53

Pages 28 to 30
0
14

SHALE

38

LNG

$7

Rise per barrel of

Brent oil futures
versus the same
time last week.

42

CLASSIFIED 46

FINANCIAL

%(67,1&+,1$
$1'/($',1*,17+(:25/'

ZZZFKLQDVZVFRP

52

6 February 2015

NEWS
BRIEFS
NORWAY

Goliat FPSO
near sailaway
ENIS delayed Goliat
oating production unit
was nally being readied
for sailaway to Norways
Barents Sea as Upstream
went to press.
The Dockwise Vanguard
vessel was set to depart
Hyundai Heavy Industries
yard in South Korea,
aiming to arrive in Norway
in April.
Aibel will then carry out
hookup and
commissioning work on
the cylindrical oater,
designed by Sevan Marine.
First oil is due to ow in
mid-2015, about 18 months
late.

MAURITANIA

Chevron does
farm-in deal
CHEVRON has taken a 30%
stake in three deep-water
blocks off Mauritania after
striking a farm-in deal
with operator Kosmos
Energy.
Blocks C8, C12 and C13
will host their rst probe
this year, targeting the
2 billion barrel Tortue
prospect.
A second well will test
the 300-million barrel
Marsouin prospect.

CANADA

Acreage calls
for province
CANADAS authorities have
issued two separate calls
for nominations for acreage
off Newfoundland and
Labrador.
The calls cover the
Labrador South region and
the South Eastern
Newfoundland region.
Companies have until 30
April to nominate lands
that may be included in
future licensing rounds
covering these two areas.

NIGERIA

Nembe set to
boost output
NIGERIAN crude exports
looks set to rise by 150,000
barrels per day as Shell
reopens the Nembe
trunkline following
sabotage in mid-January.
Nembe coming back
onstream follows Shells
re-opening the
TransForcados crude
export line.

How can someone execute an offshore

project of this scale at such low prices?
A rival contender questions Swibers
low bid for ONGCs Daman contract

INDIA

Six target race for ONGC

Interested
contractors at
pre-bid meeting
for work on S1
and Vashishta
developments
NISHANT UGAL
New Delhi

AT LEAST six leading international

subsea contractors or consortia are
understood to be in the frame for
the subsea installation work tendered by Indias state-owned Oil &
Natural Gas Corporation (ONGC) for
the S1 and Vashishta gas elds off
the countrys east coast.
Sources close to the tender process said Frances Technip, Italys
Saipem, Oslo-listed Subsea 7 and
Malaysias TL Offshore have shown
a strong initial interest and are
likely to bid.
Indian engineering giant
Larsen & Toubro (L&T) is believed
to have teamed up with McDermott of the US, while Netherlands-based Allseas could bid in a
consortium with Singapores
Emas, sources added.
Interested contractors attended
a pre-bid meeting in Kakinada on
28 January, sources said.
One source said more than 10
subsea contractors attended, but
added that no more than six are
likely to submit bids.
There are half a dozen serious
contenders, he claimed.
Sources suggested that Abu
Dhabis National Petroleum &
Construction Company (NPCC)
was also present at the bid meeting, but cannot handle deep-water
projects.
NPCC does not qualify on its
own for the subsea installation
project, but they could tie-up with
a deep-water player, claimed a
source.
Similarly, L&T has no experience
of handling complex subsea
projects, but its its domestic fabrication strength could make it a
worthy partner.
L&Ts Kattupalli fabrication
yard on the east coast could prove
advantageous for the offshore installation project, one source said.
Bids are likely to be submitted
next month, but some contractors

believe the process could be delayed, due to a subsequent delay in

a separate tender covering the
subsea production systems.
The S1 and Vashishta workscope
envisages installation of 42.7 kilometres of dual rigid pipelines from
the Va-1 deep-water eld in the
Vashishta area to the Odalarevu
onshore terminal in Pradesh.
In-line tees are included in the
workscope to allow the tie-in of
wells from the S1 eld, and there
is also a requirement for installation of a separate dual rigid pipeline running 4.4 kilometres from
Va-1 to the Va-2 eld.
The subsea contractor will also
be required to install umbilicals,
subsea control units and a pipeline end manifold near the Va-2
eld. The Vashishta wells will be

located in water depths between

500 and 700 metres, while S1-B will
sit in 250 to 300 metres of water.
Gas will be sent to a proposed onshore processing facility through
twin 14-inch production pipelines
in a daisy-chain arrangement
between the onshore terminal
and the associated subsea wells.
Sources suggested earlier that
the subsea job could be valued at
more than $250 million plus.
However, the crude price slump
could lead to lower valuations for
the project, one source said.
The tender was previously oated in 2012, but was later cancelled.
Sources said the earlier effort
failed because of limited participation by subsea players, with Malaysias TL Offshore and a consortium
involving L&T and Technip the

only two bidders. ONGC headed

by chairman Dinesh Kumar Sarraf
issued a separate tender last year
covering engineering, procurement and construction of the subsea production systems required
for the deep-water eld.
Three to four leading contractors
are believed to be in the fray for the
SPS project, one source said.
The SPS tender covers multiple
wellheads and christmas trees,
diverless subsea connectors and a
controls system, including all
subsea distribution units, umbilical termination assemblies and
umbilical termination distribution assemblies.
S1 and Vashishta have in-place
reserves of 8.3 billion and 12.9 billion cubic metres of gas, respectively.

Giant eyes east coast elds to help 80% output increase

INDIAS state-owned Oil & Natural Gas Corporation (ONGC) hopes
to increase its domestic gas production to 116 million cubic metres per day by 2019, after east
coast gas elds start producing.
ONGC chairman Dinesh Kumar
Sarraf said the company is targeting an 80% increase up from 64
MMcmd. The agship east coast

deep-water block KG-DWN-98/2

and nearby gas elds including
G4, G1 and GS15, S1 and Vashishta
are likely to together add more
than 30 MMcmd of gas production
in another four to ve years.
ONGC plans to develop various
KG-DWN-98/2 nds in three clusters, including nearby areas.
Similarly, ONGCs gas output is

also likely to increase from multiple west coast projects, such as

the third phase of the Mumbai
High re-development, the Daman
project, the Bassein development
and other cluster elds.
The Daman project is considered as the most promising on the
west coast, one source claimed.
The project involves further de-

velopment of the B-12 and C-24 marginal gas elds, which could together produce more than 10 MMcmd in
another two to three years.
However, ONGC is yet to take a
decision on developing the technologically challenging UD-1
ultra-deep-water discovery on the
east coast, which could further
boost domestic production.

6 February 2015

116 MMcmd

ONGCS TARGET
for domestic gas
production by 2019.

C subsea contract
Projects: ONGC chairman Dinesh Kumar Sarraf
Photo: BLOOMBERG

Tender out for S2AB and G-1-9 well duo

INDIAS Oil & Natural Gas Corporation (ONGC) has
issued a tender for the tie-in of the S2AB subsea
well and procurement and installation of exible
owline and umblicals for the G-1-9 subsea well
off the countrys east coast.
The workscope envisages pre-commissioning
and commissioning of S2AB and G-1-9, one source
said.
Both wells are also required to be tied-in to
existing facilities at the G-1 and GS-15 project.
ONGC oated the tender on 26 January and bid

documents are on sale. A pre-bid meeting has

been organised in Kakinada on 16 February, after
which the nal bid submission date will be
decided, sources said.
The subsea project is likely to be carried out in
two phases, with the S2AB subsea well tied in by
end of May this year, and the procurement and
installation of exible owline and umblicals for
G-1-9 targeted for May 2016.
The subsea project is likely to be awarded in
another two months.

Swiber takes lead in

battle for Daman job
WEST COAST
DEVELOPMENT
Aggressively low bid
could snare contract
SWIBER is in pole position to secure a contract from Indias stateowned Oil & Natural Gas Corporation (ONGC) to provide seven new
wellhead platforms and associated infrastructure for the Daman
gas eld development off the
countrys west coast, writes
Nishant Ugal.
Sources close to the tendering
process told Upstream that
Singapore-based Swiber emerged
as the lowest bidder in the Daman
development tender, with an
aggresive bid of just above
$300 million.
Swiber is (the lowest bidder) for
the Daman project and they have
quoted about $308 million, one
industry source said.
A source from one of the rival
bidders claimed Swibers offer was
a shock and came far below his
companys estimate for the
projects value.
Nevertheless, a letter of intent
is likely to follow soon, sources
claimed.
Three other bids were opened by
ONGC, with domestic engineering
giant Larsen & Toubro (L&T)
emerging as a distant second,
quoting $449 million, one source
said.
Third in line was a consortium
involving US player McDermott
and Indias Pipavav Shipyard with
$458 million, while a pairing of
Malaysian players SapuraKencana
and TL Offshore came in highest
at $512 million, sources added.
Some rival contenders questioned how Swiber could make
money on the job. How can someone execute an offshore project of
this scale at such low prices? one
asked.
However, another source pointed out that Swiber is keen for offshore jobs in India and has simply
bid aggressively.
The workscope includes seven
new offshore wellhead platforms,

101.5 kilometres of well uid pipelines and a new riser platform,

said industry sources.
Only last month, following the
slump in crude prices, ONGC put
on hold all projects valued at more
than $8.3 million where technical
bids were opened last year.
However, it revised terms on 23
January saying its tender committee would recommend whether to process a particular tender or
go for re-tendering, keeping in
mind the companys operational
and commercial interest.
ONGCs most recent notication
added that while processing specic projects, the tender committee will keep in mind the crude
price slumps impact on bids, one
source claimed
Technical and price offers for
Daman were submitted last November.
The project involves further development of the B-12 and C-24
marginal gas elds, which could
together produce more than 10
million cubic metres per day of
gas in another two to three years.
ONGC requires three new wellhead platforms B12-11, B12-13
and B12-15 for the B-12 eld.
Four more platforms, C24P2,
C24P3, C24P4 and C24P5, would be
installed at the C-24 eld, sources
said.
The Daman workscope also includes the installation of a new
riser platform, C24RP, which
would be bridge-linked to the existing C24P1 platform.
ONGC had initially envisaged a
completion deadline of mid-2016
for the entire Daman project,
which was believed to be unrealistic by contractors.
However, the operator has extended the project completion
schedule for the nal phase of
Daman by more than six months
to March 2017, industry sources
said.
The Daman offshore gas elds
lie in the Tapti-Daman block in
the Mumbai offshore area, about
60 kilometres off Daman.

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NEWS

6 February 2015

Anadarko
wells
success

CANADA

Delayed decision: Husky Energy chief executive Asim Ghosh

Photo: REUTERS/SCANPIX

Storm brews over Huskys

West White Rose rethink
Switch by company to all-subsea solution would leave new
drydock without work and enrage politicians
IAIN ESAU
London

CALGARY-based Husky Energys

decision to look closely at developing its West White Rose eld off
Newfoundland, Canada via subsea
wells instead of a platform is set
to have a dramatic effect on local
content in the province.
If an all-subsea solution is chosen, it will cause a political storm
in the province because it will
leave a new drydock established
in Argentia specically to build
West White Roses concrete gravity-based structure without
work and quash job expectations.
In December, in light of collapsing oil prices, Husky said it was
taking time out on plans priced at
$4.1 billion to tap the asset via a
large deck sitting on a concrete
gravity-based structure plus three
subsea production centres.
Speaking to investors, chief operating officer Ron Peabody said:
At West White Rose, we have deferred a nal investment decision.
We are going to take some time
to identify further cost efficiencies
with a proposed xed platform and
also to evaluate alternative options, including a sub-sea development concept.
The company told the market it
would not be taking a nal investment decision in the second quarter of this year, as originally
planned, but did not specify a date.
However, one source told

Upstream the partners will defer

making a nal investment decision until at least the second quarter of next year, implying rst oil
owing in 2020 or beyond.
Given this breathing space, the
opportunity exists for the co-venturers to revisit the concept because obviously a subsea development would have a lower capital
cost, said the source.
The partners will look at the
tea leaves and either decide to go
back to the platform concept next
year or switch to subsea.
As the oil price collapsed, Husky
decided to stress-test West White
Rose based on its ability to generate a 15% rate of return at a $60 oil
price.
The original platform concept
aimed to exploit 120 million to 150
million barrels of oil so it was a
fairly capital intensive strategy to
get a modest amount of oil, remarked a project watcher.
However, what makes this development solution work at higher
oil prices is that it would be a hub
platform for future satellite elds
gas as well as oil.
The thing is, you cannot take
these future reserves into account when making a nal investment decision, explained
the source, which causes particular problems at lower oil prices
when the scheme begins to lose

its attraction. If the resource

size had been bigger, the partners
would probably have stayed with
the (original) plan, said the
source.
The partners will get the oil
out of the ground but if you go
subsea then youve got a pretty big
drydock for something... there is
going to be a knock-on effect.
In late 2013, Newfoundlands
Department of Natural Resources
stated that the local employment
benets from the platform-based
solution were signicantly enhanced compared to an all-subsea concept.
The department said this solution would generate employment
equivalent to 12,000 person years,
including about 250 new platform
positions, over its lifetime.
The development phase of the
project was expected to generate
2800 person years of employment
including 500 jobs at the dry
dock in the province.
An all-subsea concept would
still see output routed to markets
via Huskys SeaRose oating production, storage and offloading
vessel but would involve Husky
needing to charter a rig for longer
to drill development wells.
More glory holes would also
have to be created to prevent the
subsea production system being
hit by iceberg scouring. Produc-

tion from West White Rose was

expected to peak at about 37,000
barrels per day.
The decision to review West
White Rose left the contractors
for the platform deck and substructure hanging in the air.
Industry sources told Upstream
that Samsung Heavy Industries
was tipped to provide the
23,000-tonne deck, which had
ballooned in weight from 14,000
tonnes originally.
A consortium of Canadas SNCLavalin and Spains Dragados was
said to have been primed to build
the 172,000-tonne concrete substructure.

WEST WHITE ROSE

Contracts awarded or close
to award based on wellhead
platform concept:
Topsides: frontrunner was
Samsung Heavy Industries
Concrete sub-structure:
frontrunner was SNC
Lavalin/Dragados
Drydock construction:
Dexter Construction
Detailed engineering
(topsides): Mustang
Detailed engineering
(civil/marine): Arup

HOUSTON-based Anadarko Petroleum has completed two

positive appraisal wells on its
Paon oil and gas discovery off
the Ivory Coast and is pressing
ahead with early development
studies.
In its latest operations report, the company said drilling
results at Paon in licence CI-103
continued to be encouraging in
terms of oil, although more gas
was found than expected.
The Paon-3AR well was
drilled 3.7 miles down-dip from
the discovery well and hit
more than 94 feet of pay.
This well established an oil/
water contact and appears to
be in communication with the
Paon-1X discovery well, said
Anadarko.
As a result of this success,
the operator decided to accelerate drilling of its next appraisal well, Paon-4A.
This well, six miles east of
Paon-3AR, penetrated more
than 37 feet of pay in the targeted section and dened the
eastern extent of the reservoir.
The discoverys partners and
the government are now discussing additional appraisal
drilling activity for Paon this
year, which would include a
drill stem test.
Bob Daniels, head of deepwater exploration, told analysts:
We think we have enough resources here to move forward
with conceptual development
planning.
He said: The one thing that
has changed slightly is there is
more gas than we originally
thought.
Daniels added: The gas is going to be more valuable to us
than the liquids. There is a very
good gas market and were in
discussions with the government about how we would get
the gas into the country and
what pricing we could expect
because that would be critical
as we make our decisions.

NNPC cuts
budget
THE Nigerian National Petroleum Corporation (NNPC) has
cut 40% from its initial 2015
capital budget of $13.5 billion
for funding obligations to major joint venture partners to
give a new total of $8.1 billion.
NNPC normally pays 60% of
joint venture funding reecting its equity share, or 55% in
the case of Shell-operated assets, but the steep fall in the oil
price is understood to have
prompted a budget revision.
Recently-appointed NNPC
group chief executive Joseph
Dawha said three deep-water
projects and one shallow-water
project may be delayed or cancelled as a direct result of oil
price declines.
The National Bureau of Statistics said oil output had already fallen to 2.15 million barrels per day by the end of 2014,
down from 2.26 million barrels
per day in January 2014.

NEWS

6 February 2015

UK NORTH SEA

Buzzard phase 2 stirs wings

Nexen pre-qualifying fabricators for
possible construction of new platform
ROB WATTS
and IAIN ESAU
Aberdeen and London

NEXEN Petroleum is pre-qualifying fabricators for the potential

construction of a new platform for
its prolic Buzzard oileld in the
UK sector of the North Sea.
Sources said the Chinese-owned,
Calgary-based operator is seeking
yards capable of building equipment for a new bridge-linked platform comprising a jacket weighing about 7000 tonnes and a deck of
about 8000 tonnes.
The project is being studied to
access new resources on the
200,000 barrel-per-day eld as part
of a second phase development.
Pre-qualication documents are
expected to be delivered to the operator within the coming weeks,
Upstream understands, and Nexen
could visit its preferred yards this
quarter to assess capabilities and
yard availability.
One source said a gure in the
region of 55 million barrels of oil
equivalent was being targeted, although this could not be conrmed. A second phase of Buzzard
has been on the cards for several

years but it is unclear, particularly

in light of the collapse in global oil
prices, exactly what the latest developments mean for the eld.
Some sources told Upstream
they expect Nexen to issue invitations to tender to yards in spring
or summer, with one saying Nexens move is denitely more than
a pricing exercise.
However, others were adamant
the economics of Buzzard phase
two are a stumbling block and a
good deal of work is required to
bring down costs, and suggested
that Nexen receiving scal incentives from the UK government
would be essential to getting the
project off the ground.
Referring to Buzzard in the context of the current challenges faced
by the North Sea, one source said:
Who can tell right now whether it
will go through to the end?
If Nexen does proceed, Heerema
Fabrication Group (HFG) and Lamprell are said to be interested, and
would be leading candidates for
the jacket and deck respectively,

after both carried out similar jobs

previously for the operator.
HFG carried out work on Buzzard
phase one and the $2 billion Golden
Eagle project, while Middle Eastbased Lamprell delivered two
decks for Golden Eagle.
OGN Group and BiFab, both of
the UK, and Spains Dragados are
also understood to be interested.
Nexen, which is owned by Chinese state oil company CNOOC Ltd,
said: Total production from Buzzard to date has surpassed 486 million barrels of oil. At the time of
original eld sanction, we expected to produce a total of 486 million
barrels. Seven years on, the eld
continues to exceed our original
expectations. Nexen is exploring
new opportunities to further develop the eld. However, this will
require more scrutiny given the
current oil price environment.
Buzzard is located in UK blocks
19/10, 20/6, 19/5a and 20/1S in, 60
kilometres north-east of Aberdeen.
The eld started in production in
2007.

Project: Nexens Buzzard platform

Photo: NEXEN

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NEWS

Rise and
fall of the
rst lady
MARIA das Gracas Foster was
the rst woman to lead
Petrobras and has been
routinely ranked as among the
worlds most powerful female
business leaders, writes Fabio
Palmigiani.
She took the helm of the oil
giant in February 2012 after a
long 33-year career at Petrobras,
in which she started as a trainee
in 1978.
Her technical background was
meant to benet the companys
management style and offset
the governments political
intervention in business
decisions.
Before her appointment to the
top job, Gracas Foster presided
over Petrobras subsidiaries
Petroquisa, Gaspetro and BR
Distribuidora, before she was
nominated as gas and energy
director in 2007.
She has been a personal friend
of Brazilian President Dilma
Rousseff for over a decade.
They met in the 1990s and
started working together in
2003, when Rousseff was
appointed as the countrys
Mines and Energy Minister by
former President Luiz Inacio
Lula da Silva.
She moved up the company
ranks rapidly during Rousseffs
seven-year tenure as Petrobras
chairwoman, gaining power
and visibility while gas and
energy director.
Gracas Foster was handpicked
by Rousseff to replace Jose
Sergio Gabrielli as Petrobras
chief executive a little over a
year after she took office.
Her rst steps included
seeking to pursue a more
realistic approach to Petrobras
daily operations. She cut
production growth estimates,
toughened negotiations with
suppliers and even criticised
previous managements for
missing targets.
However, investor
enthusiasm waned as she failed
to secure government support
for the elimination of fuel
subsidies that have caused more
than $44 billion in operating
losses over the past four years.
Even though Gracas Foster
has not been personally accused
of any role in the corruption
scandal that has engulfed the
company, its huge impact on the
company eventually made her
position untenable.
Her departure comes at a time
when Petrobras is increasing
domestic oil production and
cutting investments.

She (Gracas
Foster) has
been a
personal
friend of
President
Dilma
Rousseff for
over a
decade.

6 February 2015

GRAFT SCANDAL

Bloodbath
in Brazil
Petrobras chief executive
Gracas Foster resigns along
with ve directors following a
closed-door meeting with
countrys President Dilma
Rousseff
FABIO PALMIGIANI
Rio de Janeiro

Room at the top: Petrobras directors believed to have resigned are, from left, Formigli, Barbassa, Cosenza, Figueiredo and

PETROBRAS chief executive Maria

das Gracas Foster and ve directors
resigned this week, succumbing to
the massive pressure created by
the corruption scandal that has
mired the state-controlled oil
giant.
The official announcement of
their resignations occurred one
day after Gracas Foster had a
closed-door meeting with Brazilian President Dilma Rousseff in
federal capital Brasilia to discuss

the future of Petrobras. Petrobras

informs that its administrative
council, in a meeting scheduled for
next Friday, 6 February, will elect
new executive board members in
face of the resignation of the chief
executive and ve executive directors, Petrobras said in a brief statement.
Petrobras did not specify which
directors have resigned, but it appears that upstream director Jose
Miranda Formigli, downstream
Meeting:
Brazilian
President
Dilma Rousseff

Photo: REUTERS/
SCANPIX

director Jose Carlos Cosenza, gas

and energy director Jose Alcides
Santoro, engineering director Jose
Figueiredo and nancial director
Almir Barbassa are also leaving.
Gracas Foster has been under
enormous pressure for months, but
her situation deteriorated in December when the corruption scandal worsened, with allegations that
at least 23 Brazilian engineering
and construction rms paid bribes
to former Petrobras directors to win
contracts with the oil giant.
Two former Petrobras directors,
Paulo Roberto Costa and Renato
Duque, were arrested last year as
part of the federal police investigation known as Operation Car
Wash, which was targeting fronts
for money laundering.
Later on in the investigation, a
connection was discovered between black market dealer Alberto
Youssef and Costa, which widened
the investigation to Petrobras and
to dozens of contracts signed between 2004 and April 2012.

With the irregularities at Petrobras on the radar, consultancy

PricewaterhouseCoopers adopted
a cautious stance and refused to
sign off the companys third quarter results. After two months of
delays and many deliberations on
how to announce losses connected
to contracts allegedly inated by
bribes, Petrobras nally published
its unaudited third quarter results
in late January, but chose not to
book a massive write-down.
Gracas Foster warned that Petrobras considered booking as much
as 88.6 billion reais ($32.5 billion) in
losses in the third quarter related
to corruption, which apparently
made Rousseff extremely angry.
The size of that potential loss
was cited by some as the nal nail
in the coffin for the outgoing Petrobras leadership.
The estimated amount included
31 appraised assets, mainly in the
downstream segment, in which
Petrobras and independent rms
estimated their fair value was low-

NEWS

6 February 2015

Statoil opts for Eldar Saetre, the inside man

AFTER searching for a new chief
executive for more than three
months, Statoil has decided to
hand the reins to company veteran Eldar Saetre, writes Beate
Schjolberg.
Saetre, who turns 59 in a few
days, has been acting in the job
since Helge Lund stepped down in
mid-October.
At the time, Saetre was adamant that he was not a candidate
for the permanent position because of his age. I meant what I
said in October, as I had seen over
many years how demanding this
job is, Saetre said after he was appointed on Wednesday.
But as I entered the role, something happened that gave me inspiration, enjoyment and a lot of
energy, and I experienced good
support both inside and outside
the organisation.
In December the board asked
him to rethink his stance, and
Saetre agreed to accept.
He has been with Statoil for 35
years, more than 10 of them in the
top management, where he for
several years held the post as chief
nancial officer. Eldar Saetre was

Choice: new Statoil chief executive Eldar Saetre, right, with

his predecessor Helge Lund
Photo: REUTERS/SCANPIX

our rst choice, said Statoil chairman Svein Rennemo.

The industry and company are
facing demanding challenges.
Eldar stands out with his long experience and ability to create
change. Those are qualities we need
in times like these.
Statoil used external advisors to
nd the best candidate and
searched both inside and outside
the company. This is the rst time

an internal candidate has been

picked for the top job since Statoil
was founded 42 years ago.
Saetre said Statoils overall strategy will continue to form the basis
for his work, and pointed to three
areas where he will put in extra efforts.
Firstly, the company will
strengthen and extend its position
on the Norwegian continental shelf
and continue to work to improve ef-

ciency. Secondly, it will keep looking for signicant and protable

assets abroad in areas where it has
special competitive advantages.
Thirdly, it will keep adjusting to
a low-carbon future by focusing on
carbon-efficient operations and renewable energy.
Our industry is currently experiencing large uncertainty.
Statoil started the work to improve our competitiveness early. We
have our work cut out for us, but we
are well prepared to tackle these
challenging times, said Saetre.
Saetre will get an annual salary
of Nkr7.7 million ($1 million), of
which Nkr5.7 million will be pensionable.
His retirment age will be 67, but
he will have the right to retire from
62.
The appointment was generally
well received among analysts. His
advantages include an intimate
knowledge of the company and
the ongoing improvement programmes, strong backing internally, and good relations with
shareholders and the nancial
community from his time as chief
nancial officer, analysts said.

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Photos: AFP/SCANPIX

er than book value, raising doubts

about how much they were really
worth.
Speculation about a new head for
Petrobras has suggested that Rousseff may choose either Henrique
Meirelles, the ex-central bank
president under the Administration of former President Lula da
Silva, Roger Agnelli, who was chief
of Brazilian iron ore miner Vale for
over a decade, or Rodolfo Landim,
former partner of entrepreneur
Eike Batista and former boss of independent OGX.
It is clear that any substitute to
Gracas Foster is likely to be someone with industry credentials and
capable of conducting a house
cleaning at the company, Eurasia
Group wrote in a note.
Petrobras stock, which surged
more than 15% on Tuesday this
week amid rumours that Gracas
Foster was to be removed from the
top spot, was up another 2% on
Wednesday afternoon on the Sao
Paulo stock exchange.

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NEWS

Shell adds
to Gulf
resources
ANGLO-Dutch
supermajor
Shell has made a discovery at
its Gettysburg prospect in the
deep-water Gulf of Mexico, potentially adding resources to
the planned Appomattox development, writes Luke Johnson.
Shell drilled the well, dubbed
Gettysburg West, in De Soto
Canyon Block 398 with drillship Noble Globetrotter I in 7579
feet of water. Operations
wrapped up late last year.
It was one of Shells four discoveries made in the Gulf in
2014, following previous successes at Rydberg Deep, Kaikias
and Power Nap.
Chief nancial officer Simon
Henry said the company is assessing the potential of the
prospect, which lies less than
six miles (9.6 kilometres) from
Appomattox, which opened the
Jurassic Norphlet play.
Appomattox is expected to
be developed via a semi-submersible facility with a capacity of around 150,000 barrels of
oil equivalent per day. A nal
investment decision is expected sometime this year.
Shell reckons Appomattox
has more than 700 million barrels of potential resource. That
number is unchanged since the
company announced its Rydberg nd last July.
Shell plans to continue drilling in the Norphlet later this
year with the Fort Sumter well,
located about nine miles west
of the Rydberg discovery in the
Mississippi Canyon area of the
US Gulf.
Shell owns an 80% stake at
Gettysburg and Nexen, a subsidiary of Chinas CNOOC Ltd,
owns 20%.

Petrobras
Farfan nd
BRAZILS Petrobras has discovered a new light oil accumulation in the deep waters of the
Sergipe-Alagoas basin.
Drilling of the Farfan-3 appraisal well in Block BMSEAL-11 hit a 68-metre thick
reservoir located in a shallower
section than a previous nd
made in the Farfan area in August 2013.
Farfan-3 is being drilled 10
kilometres away from the
maiden discovery in 2467 metres of water by the Diamond
Offshore semi-submersible rig
Ocean Courage.

Murphy cuts
Urca stake
US INDEPENDENT Murphy Oil
has farmed down a 15% stake in
the Urca wildcat in the deepwater Gulf of Mexico.
Murphy said it now operates
Urca, located in Mississippi
Canyon Block 697, with a 35%
interest. It previously held a
50% stake, with Brazils Petrobras owning the other half.
Murphy said the new partner
was a partner that weve
worked with internationally.

6 February 2015

GUYANA

Guyana-bound: Transocean drillship Deepwater Champion seen here in Istanbul

Photo: REUTERS/SCANPIX

ExxonMobil attention
turns to Liza prospect
Supermajor moving drillship from Gulf of Mexico to spud wildcat in
rst of two prospects eyed in block shared with Shell
NOAH BRENNER
Houston

EXXONMOBIL is pulling the Transocean drillship Deepwater Champion out of the Gulf of Mexico to
spud a closely watched wildcat off
Guyana.
The rig is due to leave the Gulf
in a week or so according to
sources familiar with the operation and is planned to arrive off
Guyana in time to spud the Liza
prospect on the Stabroek block
around 1 March.
Deepwater Champion has been
leased to ExxonMobil at a dayrate
of $677,000 since June 2012 and remains under contract through
November this year.
However, over the past year or

so, the rig has been subleased to

offshore player Freeport McMoran
Oil & Gas, which used it to drill
successful wells at the Holstein
Deep, Copper and Dorado prospects.
The sprawling Stabroek block
covers almost 27,000 square kilometres and spans the entire
length of Guyanas maritime border in water depths ranging from
200 to 3000 metres.
The block is held 50:50 by ExxonMobil and Shell, with ExxonMobil
as operater.
Liza itself is situated in 1750 metres of water on the far eastern
edge of the block. The prospect is

a large amplitude-supported Upper Cretaceous fan play at a total

depth of more than 5400 metres.
It is the rst of two prospects
being eyed by ExxonMobil on the
acreage.
The second prospect, dubbed
Ranger, is a potential Upper
Jurassic carbonate build-up with
draped Lower Tertiary clastics,
but it is believed that ExxonMobil
will acquire additional 3D imaging before drilling a wildcat
there.
The well is one of three highprole exploration wells targeting
the emerging Atlantic conjugate
margin play in the Guyana-

Suriname fears lack of interest in bid round

THE incoming head of Surinames statecontrolled Staatsolie has warned of lacklustre
interest in the countrys latest offshore bid
round.
Rudolf Elias, who is about to take over as
managing director of Staatsolie, said low oil
prices had reduced interest in frontier acreage in
the emerging Atlantic conjugate margin play.
We have three blocks at this moment on bid
but due to oil prices the appetite is not that big,

he told the TT Energy Conference in Port-ofSpain. Suriname began marketing Blocks 58, 59
and 60 last year. Blocks 59 and 60 each cover
about 2.4 million acres and lie in less than 100
metres of water to the south of the block held by
UK explorer Tullow Oil and Japans Inpex.
Block 58 covers about 1.4 million acres and lies
along the countrys western maritime border to
the west of Block 53, where Apache is awaiting a
rig to spud the rst well.

Suriname basin in the next few

months. Apache is bringing in the
Stena drillship Drillmax from the
Gulf of Guinea to drill a wildcat on
Block 53 off Suriname later this
month or early in March.
Block 53 covers 3508 square metres, in water depths ranging
from 500 to 1800 metres, about 130
kilometres off the coast.
Apaches work commitment on
the block includes 3D seismic and
two exploration wells, to be completed before April 2016.
The US independent farmed
down a 25% stake to Spains Cepsa
in 2013 and then a further 30% interest to Malaysian state oil company Petronas, leaving Apache
holding 45% and operatorship.
In shallower waters, Japans Inpex and Canadas CGX Energy
have teamed up to contract Japan
Drilling newbuild cantilever jackup Hakuryu-12 through a rig-sharing programme.
Inpex will use the rig rst to
drill an exploration well in Block
31 off Suriname in the second
quarter, to be followed by one
probe from CGX at the Corentyne
licence in Guyana.

NEWS

6 February 2015

VIETNAM

Players prepare to ght

for Red Emperor TLWP
Contractors
readying bids for
Talisman project
that is set to use
a tension-leg
wellhead
platform tied
back to FPSO
RUSSELL SEARANCKE and
XU YIHE
Wellington and Singapore

SEVERAL leading international

engineering contractors are preparing to submit bids for the supply of a tension-leg wellhead platform bound for Talisman Energys
Ca Rong Do (Red Emperor) oil and
gas project in Vietnam.
Well-placed sources said the invitation to bid was recently issued
and that three or four renowned
contractors have received the bid
document, understood to be Modec, Floatec, and possibly Aker
Solutions and Wood Group Mustang.
The tension-leg platform is destined to be the rst of its kind for
Vietnam, albeit on a smaller scale
than other such facilities around
the world.
It is nevertheless a prestigious
project, and the Vietnamese authorities have decided that it will
be built in Vietnam.
Sources said the countrys leading offshore construction company, PetroVietnam Technical
Services Corporation (PTSC), will
be tasked with fabricating the
platform at its Vung Tau base as a
sub-contractor to the selected
main contractor.
The hull will weigh about 5000
tonnes and the topsides deck
somewhat less.
The platform will oat in water
depths of up to 350 metres, and
will host up to 12 wells, including
oil producers, a water injector and
a gas injector, said sources.
The platform will be moored to
the seabed with steel cables. Rath-

Seafront: the beach at Vung Tau, Vietnam

er than being used in a standalone

fashion with full processing capability, it will be connected to a
oating production, storage and
offloading vessel.
Sources said Talismans intention is to award the TLP contract
in the third quarter of this year.
A spokesman for the Canadian
independent
conrmed
to
Upstream that the development
concept for the eld is a tension
leg wellhead platform plus a
leased FPSO.
We received approval of the reserves assessment report from the
government of Vietnam in September 2014, and of the outline
development plan from PetroVietnam in January 2015, said the
Talisman spokesman. We are

RED EMPEROR
Development concept: Tension-leg wellhead platform and
oating production, storage and offloading vessel.
Water depths: Between 130 metres and 350 metres.
Location: Block 07/03, Nam Con Son basin.
Operatorship: Talisman acquired its 55% operating interest in
2013 from Premier Oil and Pitkin Petroleum.

continuing our progress towards

sanctioning the project in the second half of 2015.
Talisman is said to have provisional targets to award engineering, procurement, construction
and installation contracts for both
production units in the third
quarter this year.
The FPSO will be the subject of
its own bidding exercise which
should begin soon.
In terms of front-end engineering and design, Talisman is said to
be offering three separate packages covering the TLWP, the top
tensioned risers and the subsea
scope.
The operator has received bids
for the top tensioned risers from
IntecSea Engineering, Wood
Group Kenny and 2H Offshore.
IntecSea, Wood Group Kenny
and possibly Technip are understood to be standing by to submit
offers for the subsea FEED, which
covers a mix of owlines and other hardware.
Other unconrmed project
targets include rst oil in the
second quarter of 2018 and development drilling pencilled in to
begin in the third quarter of 2017.

Photo: RUSSELL SEARANCKE

All of this activity is dependent on

the inuence of Spanish major
Repsol, which has agreed to acquire Talisman for $13 billion, and
the direction of the oil price, said
sources.
The Canadian operator has so
far indicated that Red Emperor
contains 67 million barrels of oil
equivalent on a gross proven and
probable contingent basis.
Talisman believes Red Emperor
has received oil from an eastern
source within its neighbouring
Block 136 where two wells were
recently drilled using the drillship Discoverer Seven Seas.
At least one of those wells was a
success, and Talisman retained
the rig to drill a sidetrack well into
a second exploration location
from the initial well.
Talisman has indicated that
Red Emperor can be a receiving
station for any commercial
discoveries in its blocks 136 and
135.
The co-owners of Block 07-03 are
operator Talisman with 55%, Pearl
Energy on 25%, PetroVietnam
Exploration & Production with
15% and Pan Pacic Petroleum
on 5%.

DISCOVER THE DORIS DIFFERENCE

www.doris-engineering.com

Jack-up
MOPU in
the frame
CANADIAN-Chinese joint venture Husky-CNOOC Madura is
considering using a jack-up
mobile offshore production
unit on its MAC gas eld in the
Madura Strait production sharing contract off East Java, Indonesia, writes Ruth Chen.
The MOPU for MAC, where
expected production is 64 million cubic feet per day of gas,
according to sources, would be
chartered for up to four years.
In what appears to be a very
preliminary pre-tender stage of
planning for development of
the MAC eld, Husky-CNOOC
has approached the market directly and is in the midst of
developing the technical specications for the MOPU. More
official enquiries are expected
to be initiated this quarter.
As yet, there is no estimated
delivery schedule or nal investment decision date for the
MOPU.
One contender could be the
250-foot MOPU Maleo Producer
that is currently operating
nearby in the Madura Strait for
Santos.
The unit, which is tied into
the main East Java gas pipeline
via a seven-kilometre spur, is
on charter until 2017.
Maleo Producer is not likely
to be redeployed before the end
of this charter, said sources.
This three-legged MOPU,
converted from a jack-up drilling rig, today handles an estimated 110 MMcfd of gas from
Maleo, off Madura Island.
Any MOPU in operation that
was to be chosen for MAC will
require refurbishments including installation of a tailormade gas compression module
in a yard.

Oilex gets
extension
TIMOR-Lestes authorities have
once again extended the expiry
date of Oilexs offshore exploration permit which is the subject of a near two-year dispute.
Oilex and its joint venture
partners applied in April 2013
to terminate Block JPDA 06-103
due to tenure uncertainties
provoked by ongoing legal proceedings between the TimorLeste and Australian governments.
Oilex said the authorities
have suspended the expiry
date of the production sharing
contract until 15 April 2015 for
the purpose of resolving a nal
position on this request.
The joint venture has already
drilled two wells in the permit,
both of which were dry wells.

10

6 February 2015

COMMENT
Skills must be saved,
whatever the future

HE value of oil has

spiked in recent
days but BP chief
executive Bob
Dudley warns the industry
must face a new phase of
lower prices that could go on
for months if not years.
The comments by Dudley
came at the fourth quarter
nancial results, which
across the sector have
shown the nancial damage
done to company balance
sheets by the plunge from
$110 to mid-$50 per barrel oil,
but more importantly
required companies to lay
out their strategies for the
year ahead.
The prot gures have
been mixed, with
ExxonMobil showing
income down by 21% but
above expectations due to
tax benets and a favourable
arbitration ruling in
Venezuela.
Shell reported a rise in
earnings, but that was
because the last quarter of
2013 had been unusually
troubled.
Chevron unveiled a 29%
fall to $3.5 billion while BP
produced a $1 billion loss
but still raised the dividend
to 10 cents.
Basic income gures were
uniformly depressed by the
sharp seven-month fall in oil
prices, but decisions on
spending ranged from
ConocoPhillips
announcement to cut by a
third to saying nothing at all
the latter course was
taken by ExxonMobil.
Meanwhile, Shell said it
would take $15 billion worth
of costs out of the business
across the three years to 2017.
But the Anglo-Dutch
operator indicated that 2015
spending might be roughly
the same as in 2014 as it
watches and waits on the
future direction of oil prices.
Analysts and traders want
to know that the oil
companies are taking the
latest downturn seriously,
and the easiest way to
demonstrate this is to unveil
sweeping cuts to capital
expenditure.
Another route would be for
oil companies to cut
dividends, but they are
aware this would go down
very badly with investors.
Shell has said it will freeze
its dividend payouts at
current levels while
ExxonMobil, Chevron and
Shell intend to trim share
buyback programmes. The

oil and gas operators have

already started to make job
cuts, but mainly of a fairly
limited nature.
One exception has been
BP, which took a $1 billion
charge in December
specically to be used to pay
for thousands of
redundancies, while the oil
services sector has already
seen thousands of job cuts
unveiled.
This kind of shake-out,
plus action to reduce rig and
other rates, may help tackle
the huge ination that
swept the industry during
three years of $100-plus oil
prices.
However, the oil and gas
industry also needs to be
wary about losing a whole
generation of highly
experienced technicians.
There is already a skills
shortage in the sector, and
bright young engineers are
often more attracted by
what they see as

Is the recent
upward blip a
signal that the
worst is over
already?
technologies of the future in
the internet sector, to say
nothing of other areas of
energy, such as solar and
wind, rather than devoting
their lives to petroleum.
A report out this week
from safety organisation
DNV GL shows senior
executives complaining that
skill shortages and an ageing
workforce represent the
third-largest barrier to
growth, behind oil prices
and a weak global economy.
Ultimately there is a
difficult balancing act here.
Wall Street and the City are
xated on dividends being
maintained in the shortterm, but the industry needs
to ensure oil and gas
production can be
maintained longer-term.
And that takes us back to
whether Dudley is right that
we are in a new phase of low
oil prices or is the recent
upward blip a signal that the
worst is over already?
Whatever happens, as oil
companies cut costs and
service companies prepare
for lower returns, they
should try to avoid throwing
out the industry jobs baby
with the over-heated
bathwater.

For the rst time in half a century, the

Nigerian elites head for national
elections without agreement... over
how to proceed.

Fear leads way in

Nigeria poll race
Country locked in
political and
economic
turmoil as it
staggers
towards the
polling stations

OT since 1959 has an

incumbent party lost
a Nigerian election,
but as 68 million
registered voters prepare to
elect a new president on 14
February the chances of
opposition leader Muhammadu
Buhari, a northerner and
former military head of state,
coming to power grow ever
stronger.
President Goodluck
Jonathans ruling Peoples
Democratic Party (PDP) remains
the largest party machine in
Africa and certainly cannot be
ruled out.
However, in recent weeks key
players have deserted,
including Governor Rotimi
Amaechi of Rivers State, the
second-richest of Nigerias 36
states, who can bring huge
resources to Buharis All
Progressive Congress (APC),
splintering the PDPs
traditional Niger Delta support
base.
It is hard to distinguish party
differences in oil and gas policy.
Both seek to push the reforming
Petroleum Industry Bill, with
the APC preferring the more
radical, unreconstructed
version though most believe
that once in office they would
feel the same pressure to dilute
and delay.
Speaking for the majors,
Lagos Chamber of Commerce
director Muda Yusuf claimed
this week that 50% of proposed
deep-water developments were
deemed uneconomic due to
persistent uncertainties in the
wake of legislative delay and
this was before the oil price had
reached its present depths.
Despite the rising tide of
pipeline vandalism in the
creeks, Shell had last year
passed nal investment
decisions on the TransNiger
loop and the Gbaran-Ubie phase
two projects, designed to bring
more gas from OML-28 into the
Bonny LNG export facility.

Power play: Nigerian opposition leader Muhammadu Buhari

Photo: REUTERS/SCANPIX

However, both must now

navigate chief executive Ben
van Beurdens resolve to cut $15
billion from group spending
over the next three years.
With Nigerian banks exposed
to $2.5 billion worth of debtequity arrangements in support
of indigenous companies taking
on assets in the Delta,
contractors are wondering if
the promised workload really
can lter down in a climate of
lower oil prices.
On top of that, Nigerian
National Petroleum Corporation
executive director David Ige
reckons $10 billion is lost
annually to crude theft, while
repeated gas line sabotage is
wrecking power generation
targets and undermining the
countrys regional reputation as
a reliable gas supplier.
And it is the Delta,
historically a PDP stronghold
dominated by ethnic Ijaw
militants, which ought to prove
pivotal in realising Jonathans
dream of serving a second term.
Despite some militants
breaking ranks, most back
activist claims that without a
Jonathan victory, the oil will
cease owing and Nigeria will
be made ungovernable.
The North is rattled by that.
Why, asks the APC, did
Jonathans security apparatus

remain silent when celebrated

ex-militant commanders
Tompolo, Boyloaf and Asari
Dokubo told Bayelsa Governor
Seriake Dickson they would
wage war to take back their oil
if the North regained power?
Meanwhile, the brutal
success of Boko Harams
terrorist insurgency in the
remote north-east has
shattered the countrys
tradition of peaceful religious
co-existence.
Fear has spread through the
Middle Belt and into the
Christian south, leaving the poor
northern peasantry without an
effective champion a role that
Buhari hopes to play.
The latest Gallup survey
indicates only 8% of opposition
supporters have faith in the
integrity of the Electoral
Commissions polling
arrangements, with just 13% of
the wider electorate feeling
condent of the outcome.
This contrasts with a 51% vote
of condence recorded for the
2011 elections.
For the rst time in half a
century, the Nigerian elites
head for national elections
without agreement between
the political factions and
business networks over how to
proceed.
These are anxious times.

6 February 2015

11

13%

PERCENTAGE OF the
Nigerian electorate condent
that the February 14 poll will
be free from corruption.

Petrobras
requires
openness

SIDETRACK

Washed up: Petrobras chief executive Maria das Gracas Foster tendered her resignation this week following months of
intense scrutiny as the Car Wash scandal unfolded
UPSTREAM/RYTIS DAUKANTAS

Myanmar set to reap benets of a more

accommodating approach to players

YANMAR has been

widely touted as
Asias new
upstream hotspot
and it remains on track to
become so, despite the
languishing crude price.
The Myanmar authorities are
listening to oil companies and
have realised that there is
always room for negotiation
rather than risk losing
potentially lucrative
investments.
The Ministry of Energy is
doing what the authorities in
other nations have not and will
not considering improving
terms of production sharing
contracts for a previous offshore

licensing round for which

winning players have already
been selected.
It is true that most of these
deals are not yet signed so
companies could still walk, but
the ministry is receptive to
players looking to revise their
proposed work programmes and
those seeking sweeter PSC terms.
The authorities have already
moved to iron out taxation
issues that have delayed the
signing of contracts to Shell and

Total, and these could be signed

before the end of this quarter,
ministry officials say.
Myanmar has already
attracted heavy-hitters to its
2013 offshore licensing round
which resulted in winners being
announced for 20 of the 30
blocks on offer.
Of course the geology has to
be exciting to tempt players. But
companies also want exible
contract terms that make
exploration and production
attractive, and this entails
having ready customers for
produced hydrocarbons.
And in the Bay of Bengal,
hydrocarbons likely equals gas,
either dry or with condensate.

Myanmar wants gas from

newly-discovered elds to be
committed to the domestic
market until demand is sated
but, going forward, exports via
pipeline or as liqueed natural
gas would be sanctioned.
Myanmar is already faced
with the possibility of Thai
upstream company PTTEP
postponing its Block M-3
offshore project that was set to
ow gas this decade, and the
authorities are therefore right in
moving to sign new PSCs.
It remains to be seen whether
there is any backlash from
existing acreage holders that
would also like to have their
contract terms improved.

HE decline in the
value and prestige of
Brazils Petrobras
provides a salutary
tale about the dangers of
state-led industry, writes
Gareth Chetwynd.
Five years ago, Petrobras
seemed to show the virtues of
a modern version of the
dirigiste model, combining
state planning with
competent management. The
years following a otation of
Petrobras stock saw the
companys market value soar
to almost $300 billion.
Petrobras is worth about a
quarter of that now, hit by
government-pricing policies
and the fallout from the
corruption scheme unearthed
at the company.
The rout can be traced to a
2010 stock otation used as an
opportunity to increase
government control.
The oil-for-shares
mechanism that the
government used enraged
minority shareholders and left
Petrobras overburdened with
the sheer scale of its pre-salt
development commitments.
The road since then, with
nationalist restrictions on
competitors and onerous local
content requirements,
masked the kickback scheme
now grabbing the headlines.
This weeks decision to
replace the Petrobras board
was overdue, and will provide
a much-needed fresh start for
the oil company.
There are still signs that the
last straw for President Dilma
Rousseff was the failure by
former chief executive Maria
das Gracas Foster to manage
the ow of information about
the companys damaged
accounts, rather than her
taking responsibility for what
went on under her watch.
This is worrying. The only
way forward for Petrobras is
to go back to the levels of
transparency aspired to in the
years following the opening of
the oil sector, when the
company got its rst
independent board.

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THE INTERNATIONAL OIL & GAS NEWSPAPER

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12

6 February 2015

POLITICS
Sudanese
conict
warning

UK

SOUTH Sudan will review

charges levied on the export of
oil through Sudan to the Red
Sea export terminal currently pegged at $25 per barrel in
order to stave off nancial and
political collapse, according to
Juba-based Petroleum Minister
Stephen Dhieu Dau, writes Barry
Morgan.
Citing the fall in oil prices
globally, Dau explained that
the $25 tariff, non-negotiable at
the time, was designed to expedite repayment of a $3 billion
compensation package for Sudan agreed following independence in July 2011.
Nonetheless, Dau will appeal
to the African Union High Implementation Panel for South
Sudan, the original peace mediators, for assistance because
a fundamental change of circumstances had resulted in
South Sudan facing implosion
in the wake of its scal burden.
The move comes amid fresh
fears expressed this week by
the International Crisis Group,
comprising the UK, US and
Norway, that the multitude of
merged conicts in Sudan
and South Sudan could drag
their East African neighbours
into a regional war.
A report released on 29 January said cross-border conicts
risked drawing in alliances
with neighbouring countries
whose heads of state back one
faction or another, and that this
was causing discord within the
regional Intergovernmental Development Authority.

Chief of regulator
claims broad
consensus in
place but
industry body
says progress is
too slow

Tanzanian
shake-up
THE upstream policy-making
apparatus in Tanzania is facing
a shake-up, some two years after major changes were introduced at ministerial level and
within state-owned Tanzania
Petroleum Development Corporation (TPDC), writes Barry
Morgan.
President Jakaya Kikwete
late last month reshuffled Sospeter Muhongo out of the Energy & Minerals portfolio in
the wake of a protracted graft
scandal involving the state
power utility Tanseco, appointing George Simbachawene in
his place but allowing Muhongo to resign while protesting
his incorruptibility.
Several politicians within the
energy sector including Muhongo may be liable to criminal
penalties in connection with
the Tegeta Escrow Account
scandal, in which an estimated
$200 million was misappropriated, according to the Dar es
Salaam subsidiary of international law rm Clyde & Co.

The progress of implementation has been

pedestrian. Must we wait until 2016 before
we have the new government company
established and fully operational?
Oil & Gas UK chief executive Malcolm Webb

Hard work can secure Nort

ROB WATTS
Aberdeen

THE head of the UKs new Oil &

Gas Authority (OGA) has predicted
a bright future for the North Sea if
industry, government and the
new regulator pull together to
turn a broad consensus and
alignment about how to solve its
current problems into action.
Only weeks into his job, OGA
chief executive Andy Samuel told
politicians and industry leaders
that one area where urgent work
was required was to bring down
costs.
But he emphasised that, possibly more importantly, the mature
basin needed to become a more efcient and cost-effective place to
work in the longer-term.
There is very broad consensus
and alignment... in terms of what
we need to be doing to preserve
the offshore E&P industry, Samuel told an emergency summit in
Aberdeen looking at ways to help
the North Sea cope with the oil
price slump.
Industry, with support, has a
lot of work to do on costs and particularly I would suggest on
efficiency. It is important we dont
just go for short-term measures
we need to go for the long-term
sustainable measures to make sure
we produce for many decades.
The former BG Group executive
said other collective priorities
were the rapid implementation of
the Wood Review recommendations, the need for continued scal reform and for a widespread
cultural transformation of the
way we work. Samuel told the

Long-term view: government and industry met in Aberdeen to discuss the North Sea

summit, attended by Scottish

First Minister Nicola Sturgeon
and UK Secretary of State for
Scotland Alistair Carmichael,
that work to establish the agency
was on target and announced the
appointment of three of six new
director roles.
However, Malcolm Webb, chief
executive of industry association
Oil & Gas UK, criticised the pace
at which the regulator was being
set up and questioned why it
could not be up and running autonomously before next year.

The progress of implementation

has been pedestrian, Webb told
the summit. Must we wait until
2016 before we have the new government company established
and fully operational?
Samuel said: We are very much
on track for our launch on 1 April
when we will become an executive agency in the Department of
Energy & Climate Change (DECC),
although the intention is we will
behave and act like a governmentowned company from day one. I
have been getting very, very good

support from within government

on this.
Samuel was appointed late last
year and started work on 1 January.
The OGA is due to be up and running initially from 1 April this year
within the DECC before gaining
full autonomy as a governmentowned company a year later.
The body will take over the bulk
of licensing and stewardship duties currently carried out within
the DECC and will be central to
driving a new tripartite strategy
with industry and the govern-

Gazprom cements inuence in Kyrgyzstan with gas deal

RUSSIAN gas monopoly Gazprom
is planning to invest more than
$500 million to expand gas supply
infrastructure in Kyrgyzstan,
writes Vladimir Afanasiev.
This follows the purchase of a
controlling stake in local monopoly gas operator, Kyrgyzgaz, in 2014
for the symbolic amount of $1.
According to Gazproms plan, gas
pipelines will be laid to more than
400 cities, towns and villages, allowing about 60% of the Kyrgyz
population to have access to gas by
2030, compared with 22% today.
Kyrgyz
Prime
Minister
Djoomart Otorbayev said last week

during a meeting with Gazprom

executive chairman Alexei Miller
in the Kyrgyz capital Bishkek that
following implementation of the
plan, gas consumption is forecast
to rise ve-fold and exceed 1 billion
cubic metres per year.
Besides the gas network expansion, Gazprom is also expected to
build a trunk pipeline to deliver
gas from the north to the south of
Kyrgyzstan to allow it to halt gas
imports from Uzbekistan, at an
estimated cost of $700 million.
Northern regions of Kyrgyzstan,
which has no common border with
Russia, are currently supplied with

gas from Kazakhstan under swap

arrangements with Gazprom.
However, southern regions depend solely on gas imports from
Uzbekistan that have been erratic
in recent years, as Kyrgyzgaz was
late with payments.
Gazprom has reportedly already
signed a contract with Uzbek gas
operator Uzbekneftegaz for the
import of 100 million cubic metres
of gas to the south of Kyrgyzstan
during this year.
According to the Russian gas
giant, besides securing Kazakh
and Uzbek supplies, it is planning
to resume appraisal and explora-

tion efforts at two elds in the

country, Mayli-Suu-4 and Kokart,
which were licensed to Gazprom
in 2008.
Both deposits are believed to
contain reserves of about 2.5 Bcm
of gas, according to local reports.
Gazproms growing role in Kyrgyzstan is expected to strengthen
Russian inuence in a nation that
is seen as key to Moscows policy in
Central Asia and Afghanistan.
Last year, the US had to hand
back its only Central Asian airbase
in the Kyrgyz town of Manas,
which had supported US operations in Afghanistan since 2001.

6 February 2015

13

300,000
th Seas future

THE NUMBER of barrels per

day of oil from Kirkuk oilelds that
the Iraqi central government has
included in its 2015 budget.

Khubbaz oileld retaken as Kurds

push back Islamic State ghters
IRAQI Kurdish peshmerga forces
have reportedly recaptured an
oileld in Kirkuk province from
Islamic State and freed 24 workers taken captive by the jihadists last week, writes Nassir
Shirkhani.
Peshmerga forces and police
cleared the Khubbaz eld a little
while ago and were able to enter
it after surrounding it for hours,
Brigadier General Sarhad Qader
said, adding that they also retook
eight villages.
The militants took over the
eld last Friday, triggering a response from the Kurds who have
been gaining ground against Islamic State in recent months.
The US-led coalition carried
out 10 air strikes in Kirkuk prov-

ince, hitting vehicles and buildings used by the jihadists.

The bulk of Iraqs oil production comes from elds in the
south, but Baghdad is counting
on production of 300,000 barrels
per day from elds in Kirkuk in
its 2015 budget, so any major loss
of output would be damaging.
The jihadists overran southwestern areas of Kirkuk during a

lightning offensive in June that

saw the group capture much of
Iraqs Sunni Arab heartland
north and west of Baghdad.
That offensive presented both
an opportunity for territorial expansion and an existential threat
to the autonomous Kurdistan Regional Government.
Several Iraqi army divisions
collapsed in the early days of the
Islamic States offensive, clearing
the way for the Kurds to take control of a swathe of disputed territory they have long wanted to
incorporate into their region over
Baghdads objections.
US-led airstrikes have helped
the Kurds make signicant territorial gains against the militants.

Victory: Kurdish peshmerga ghters at the Khubbaz oileld

Photo: REUTERS/SCANPIX

CONFLICT IN
KIRKUK
Iraq counting on output
from regions elds

UN struggles as Libyan conict heats up

Photo: AFP/SCANPIX

ment aimed at maximising economic recovery from the basin, a

cornerstone of the Wood Report.
Samuel announced that the
DECCs current head of offshore
licensing, exploration and development, Simon Toole, is to become the OGAs licensing and legal director.
The DECCs head of coal liabilities Ian McKenzie will become
chief implementation officer and
oil and gas human resources specialist Stuart Payne, previously
with Shell and Dana Petroleum,

has been appointed as director of

change and organisational development.
Recruitment efforts are under
way to ll the other three director
roles for offshore exploration and
production, policy, performance
and economics, and technology
and projects.
Samuel has been leading an
urgent commission on ways to
protect the North Sea sector and
is set to hand his report to UK Energy Secretary Ed Davey later this
month.

FIGHTING for control of Libyas

main oil ports and an oileld run
by Frances Total appears to be intensifying as the United Nations
seeks a ceasere to open the way
for peace talks between rival factions in Tripoli and in the east,
writes Vahe Petrossian.
An attack at the al-Mabrook
oileld in the centre of the country killed at least four local personnel, Total said. No other details were available.
The eld was producing
40,000 barrels per day of crude
before it was shut down in December following the closure of

Es Sider port. The main ports of

Es Sider and Ras Lanuf were
closed late last year after the
start of ghting between the
Libya Dawn group now in
control of Tripoli and the
elected government of Prime
Minister Abdulah al-Thinni
based in the east.
Libyan crude production has
crashed to about 350,000 bpd, allowing for little or no exports.
The North African producer used
to pump about 1.5 million bpd
before the late 2011 overthrow of
the Gadda regime.
UN special envoy Bernadino

Leon visited Tripoli early this

week to discuss fresh efforts to
resume negotiations. Earlier in
the year, some representatives
took part in UN talks in Geneva,
but the Tripoli authorities say
any viable negotiations have to
be held within Libya itself.
Leon appears to be promoting
the concept of a national unity
government, run by a head with
two deputies coming from each
of the rival groups.
However, the prospects for any
agreement appear to be slim until there is a clearer picture of the
military equation.

&RPSHWLWLYH6ROXWLRQV

IRU&RPSOH[3URMHFWV

V#ODPSUHOOFRP

14

6 February 2015

WORLD

We are also planning $3 billion in

divestments this year, most to take place
later on when we expect Brent prices to
recover a bit.
Outgoing Petrobras chief executive
Maria das Gracas Foster

BRAZIL

Roncador reservoir holds back Pet

Company aims to
drill new wells in
bid to intensify
water injection
at Campos basin
development
FABIO PALMIGIANI
Rio de Janeiro

BRAZILS Petrobras, rocked by the

shock resignation this week of its
chief executive and most of its directors, has admitted that challenging reservoir conditions are
limiting productivity at its large
Roncador eld and holding back
production growth.
These challenges are a major
reason why Petrobras only expects to increase domestic output
by 4.5% this year, athough the
company is adopting a new strategy to try to produce more hydrocarbons from the Campos basin
development and improve reservoir performance, which will include drilling more water injection wells.
While the corruption scandal
that led to the leadership resignations is the key corporate issue
faced by Petrobras, which has until April to le its fully audited
third quarter results or face the
risk of being declared in default on
billions of dollars of debt, it is also
facing the challenge of keeping its
operational performance on track.
Petrobras wants to keep output
growing for a second consecutive
year, and improving Roncadors
performance is key to that effort.
Petrobras installed two new
production units at Roncador last
year the P-55 semi-submersible
production platform and the P-62
oating production, storage and
offloading vessel.
Each unit can produce 180,000
barrels per day of oil, but are nowhere near that level.
The P-55 is currently producing
about 65,000 bpd from Area 3,
while the P-62 is producing close
to 34,000 bpd from Area 4.
We experienced a decit in
water injection at Roncador,
which led us to temporarily lower
the production potential of the
eld, but we are already working
to intensify water injection there
with the drilling of new wells,
said Petrobras exploration and
production director Jose Miranda
Formigli, speaking last week before the board resignations.
Roncador... requires a lot of
water injection. We expect pressure conditions to be normalised
within the next 12 months.
He also said the heterogeneity
and compartmentalisation of reservoirs in areas 3 and 4 at Roncador
were not expected in the original

Outgoing directors were planning year of strict controls and

EVEN before this weeks shock
resignation of its board of
directors, Petrobras had laid
plans to aggressively cut
investments, reduce the size of
its exploration programme and
prepare the sale of more assets
this year, as it sought to control
spending amid the corporate
scandal that has devastated the
company, writes Fabio Palmigiani.
The company is also expected
to take a cautious approach to
Brazils 13th licensing round,
outlining plans to be selective

this time. We will evaluate

each block on offer and then
decide if it is worth
participating. We have a high
reserves-to-production ratio,
said Petrobras exploration and
production director Jose
Miranda Formigli.
The Brazilian government is
working tentatively towards
offering hundreds of blocks in
the 13th round, due to take place
in the second half of this year.
Petrobras chief executive
Maria das Gracas Foster,

speaking last week before her

resignation, said the company is
revising its exploration
portfolio to control cash ow.
Petrobras currently has $25
billion in cash reserves and has
no intention to tap capital
markets.
The company expects to end
the year with between $8 billion
and $12 billion in cash,
depending on Brent crude prices
and the exchange rate.
We are also planning $3
billion in divestments this year,

most to take place later on when

we expect Brent prices to recover
a bit, said Gracas Foster.
The amount is pretty much
in line with the $3.5 billion we
sold in assets in 2014.
She added that Petrobras is in
no rush to publish the updated
version of its ve-year business
plan, saying the announcement
may only happen in June.
The motto for our 2015-2019
business plan is to resize
Petrobras taking into account
the projects we can fund, and

planning. Petrobras failed to mimic performance from areas 1 and 2,

resulting in lower productivity per
well at areas 3 and 4.
Formigli added: We are identifying new locations where we can
drill and complete additional
wells, and we hired an independent consultancy, Beicip-Franlab,
to complement our studies and
help us identify new opportunities to increase production.
He also revealed Petrobras
recently demobilised the Marlim
Sul FPSO from the nearby Marlim
Sul eld after failing to reach an
agreement with SBM Offshore on a
charter extension. The upside of
losing a unit is that we reduce our
operating costs. We are already

linking wells from the Marlim Sul

FPSO to the P-40 and P-56 units...
We expect to recover most of the
output in the second half, Formigli said.
Petrobras produced on average
2.034 million bpd in 2014 and is
targeting 2.125 million bpd this
year .
However, it produced 2.212 million bpd in December 2014, meaning it expects output to drop from
current levels for the year as a
whole.
The production forecast came
as a surprise because the company
is reportedly trying to avoid any
impact from the (corruption)
investigations on production
growth, while most of the growth

this year relates to the ramp-up of

existing platforms, therefore
apparently carrying lower execution risk, said Paula Kovarsky,
market analyst at Itau BBA investment bank.
According to Formigli, Petrobras intends to link 69 development wells in 2015, but suggested
many will be water injectors at
Roncador and the Parque das
Baleias complex, where the P-58
FPSO entered operations last year.
The P-58, together with the P-55
and P-62 at Roncador, were built at
Brazilian shipyards and were sent
to sea to start production for
Petrobras slightly incomplete.
Formigli conrmed that part of
the commissioning of the units

took place offshore, which also

affected their ramp-up.
These units demanded a great
level of offshore activity in order
to complete all systems, including
gas compression and water injection, he said.
Despite all the challenges, we
believe our production target for
2015 is feasible. It is actually a very
conservative outlook.
Petrobras is also preparing to
start up production via Brazils
rst dry-tree tension-leg wellhead
platform.
After a delay of more than a year
and facing adverse weather conditions, the P-61 TLWP is nally
expected on stream by the end of
the month at the Papa Terra eld.

6 February 2015

15

4.5%

PETROBRAS FORECAST
increase in domestic production
this year.

trobras output drive

In the spotlight: the P-55
production semi-submersible
is up and running at the
Roncador eld
Photos: ALEXANDRE BRUM

Stops at platforms to
hit production levels
PETROBRAS expects programmed
stops at dozens of offshore platforms in Brazil will take a higher
toll of the companys domestic oil
production this year, writes Fabio
Palmigiani.
We will have more maintenance
work this year than we had in 2014,
as we continue to improve our operational efficiency, said Petrobras
exploration and production director
Jose Miranda Formigli, speaking
before this weeks shock resignation
of most of the Petrobras board.
He added that programmed
stops last year cut output on average by 30,000 barrels per day of oil
per month and are expected to reduce production by about 50,000
bpd this year.
Last December, Petrobras carried out maintenance on the P-9
production platform in the mature Corvina and Congro elds.
It also temporarily shut down
output at the P-52 in the Roncador
eld, the P-57 in the Jubarte eld
and the Cidade de Niteroi oating
production, storage and offloading
vessel in the Marlim Leste eld for
well intervention.
The offshore work is part of the
Proef operational efficiency programme that contributed to add
additional production of 156,000

bpd on average in 2014 from old

systems installed in the Campos
and Espirito Santo basins. Nevertheless, Petrobras is counting on
high productivity per well in the
Santos basin pre-salt province to
make up for part of the expected
loss from maintenance stoppages.
Petrobras will continue to
ramp-up output at the Cidade de
Mangaratiba and Cidade de Ilhabela FPSOs in the Iracema
South and Sapinhoa North presalt elds, respectively. Each unit
can process 150,000 bpd and they
are scheduled to reach plateau later
this year.
The company will also deploy in
the fourth quarter the Cidade de
Itaguai FPSO in the Iracema North
pre-salt eld.
According to Formigli, these
new systems are expected to add
20,000 bpd per well on average,
but in some cases that may reach
as much as 35,000 bpd. Petrobras
produced 666,000 bpd from presalt horizons in December.
We will have a signicant increase in pre-salt production in
2015, the natural decline of our
elds remains under control, at
about 9%, and the Proef will continue to improve our operational
efficiency, said Formigli.

Local content remains key

lower spending in wake of corruption scandal

what can be built in Brazil and
abroad, Gracas Foster told
market analysts in a conference
call.
We are working not to visit
the debt markets in 2015 and
contract the minimum possible
debt in 2016 and 2017, said
Gracas Foster.
Petrobras plans to invest
between $31 billion and $33
billion this year, which
represents a 25% decrease from
the capital expenditure
originally eyed for 2015. Gracas

Foster said: The investment cut

ends up affecting our
production curve, and that has
immediate effects on our 2016
and 2017 targets.
We are predicting a domestic
output of 2.125 million barrels
per day of oil on average this
year, and we will build from
that on the following years.
The forecast takes into
account Brent oil prices of
between $50 and $70 per barrel,
and an exchange rate ranging
from 2.60 to 2.80 Brazilian reais

to the dollar. Gracas Foster also

said Petrobras intends to keep
gasoline and diesel prices
unchanged in 2015, despite the
Brent fallout. Derivative prices
are expected to contribute to
raise the companys cash
position, given that Petrobras is
a net importer.
Assuming no changes in
domestic prices and market
share maintenance, every $5
decrease in Brent price
increases our cash ow by $500
million, said Gracas Foster.

PETROBRAS is committed to local

content and will do as much as
possible to help the Brazilian shipbuilding industry to stay aoat,
but has admitted it may have to
pursue alternatives abroad in the
short-term.
The company recently invited
six Asian players to bid in a tender
for the construction of 24 topsides
modules to be installed on six replica oating production, storage
and offloading vessels in the presalt province.
The contract was previously
awarded to Iesa Oil & Gas, but the
Brazilian player ran into nancial
difficulties and lost it.
We are working to prevent
what happened with the Iesa contract from happening again, but
the risk is there and we have to
consider alternatives and how to
administer local content at our

projects, said Petrobras exploration and production director Jose

Miranda Formigli.
Petrobras chief executive Maria
das Gracas Foster, speaking before
her resignation this week, said
that while local content is very
important, the implications of the
alleged corruption scandal at
the state-controlled company
have drastically changed the situation.
The oil giant banned 23 Brazilian engineering and construction
companies from bidding in upcoming tenders over bribery allegations related to their business
with Petrobras.
We cannot pursue local content at any cost, because at the
same time that we try to achieve
our production goal, we have to
look out the interest of our shareholders, said Gracas Foster.

WORLD

16

6 February 2015

UK NORTH SEA

Budget is
approved
for 2015

Warning: Jake Molloy,

regional organiser of
UK offshore union
OILC-RMT
Photo: ROB WATTS

Unions pull-out threat

in row over shift rotas
RMT-OILC says it will stop co-operating with Oil & Gas UK
which could leave country breaching EU rules
ROB WATTS
Aberdeen

A BATTLE over changes to North

Sea offshore workers shift rotas
has intensied after a trade union threatened action that could
leave the UK in breach of European Union offshore safety legislation.
The RMT-OILC union warned it
will stop co-operating with Oil &
Gas UK on tripartite engagement
a key requirement of the EU Offshore Safety Directive if the
trade body fails to help stop an
onslaught of job cuts and changes to shift patterns by North Sea
operators.
If carried out, the action could
bring into question the UKs compliance with the directive, which
is currently being transposed by
the UK and other EU member
states into national law.
RMT regional organiser Jake
Molloy said: The workforce are
now questioning the unions efforts to work with Oil & Gas UK,

and this will inevitably bring into

question the ability of the industry and regulator to demonstrate
that the UK is meeting its obligations under the European Safety
Directive by demonstrating tripartite engagement.
If the onslaught continues
against our members we will have
no option but to walk away from
the so-called tripartite structures.
The directive obliges member
states to establish effective tripartite consultation mechanisms
between representatives from the
workforce, industry and the regulator to deal with safety matters.
Regulators transposing the directive into UK law have suggested that the cross-industry Offshore
Industry
Advisory
Committee (OIAC), under the auspices of the Health & Safety Executive (HSE), could continue in
its existing tripartite role, which

will also help the UK meet the requirements of the directive.

Robert Paterson, the health,
safety and employment issues
director at Oil & Gas UK, said: We
have been in discussions with the
trade unions all the way through
development of the EU Offshore
Safety Directive.
We have worked collaboratively and been mutually supportive
on a number of issues.
We would be very disappointed
if there was any departure from
tripartite relations. The regulations are in the nal form, due to
begin nal steps through parliament in the next few days and
expected to come into force in
July.
Given that safe production of
oil and gas is a priority for Oil &
Gas UK and the unions, I certainly
hope we can continue to co-operate constructively. An HSE
spokesman said: The directive

requires a mechanism for effective tripartite consultation to be

established. This requires worker
representatives, not strictly union
engagement.
Failure to establish such a
mechanism would mean the UK
had not implemented one aspect
of the directive.
Involvement of the existing
unions is the preferred mechanism and the one we consulted
on. Therefore we would not wish
to see any union withdrawal from
the proposed arrangements.
However, though the withdrawal of unions from the forum
would be unfortunate, it could be
argued that in maintaining OIAC
the UK is still delivering the intent of the directive... other mechanisms for worker representation
could be sought to ensure OIAC
remained effective.
The EU Offshore Safety Directive
is due to be implemented by July.

Industry needs a reality check warns Wood Groups Stewart

THE managing director of one of the North
Seas largest offshore employers has said the
industry needs a reality check over shifts.
Dave Stewart, UK managing director of
Wood Group PSN, which employs 12,000
people, including 5000 offshore, warned it
was not sustainable for workers to work
effectively 20 weeks a year on two-onthree-off rotas.
I think the industry has been working
inefficiently for too long and these
challenges have to be taken on board,

Stewart said at a summit in Aberdeen

exploring ways for the North Sea industry
to cope with lower oil prices.
John Taylor, of the Unite union, said:
Where there has been three-on-three-off,
or where there have been redundancies, not
one discussion took place with the safety
reps, not one discussion took place with
the workforce [to explore if] there was an
alternative.
Stewart replied: I fully agree with John,
you have to engage the workforce in that

discussion. But I think we have to get a

reality check in. I dont think it is
unreasonable to ask people to work more
than 20 weeks a year.
Talisman Energy Sinopec UK this week
became the latest operator to warn it was
considering introducing three-three rotas.
Meanwhile, contractors Petrofac and
Bilnger Salamis warned workers on
Marathons Brae elds and drilling company
Archer told workers on Shells Brent, that
jobs were at risk.

THE Bahar Energy Operating

Company developing the Gum
Deniz and Bahar elds off
Azerbaijan has approved a
budget and working plan
for 2015 including a rig
tender in mid-year, writes Kama
Mustafayeva.
According to project partner
Greenelds Petroleum Corporation, the budget provides for
gross operating costs of
$37.8 million and capital costs
of $31.0 million and is focused
on continued growth of oil
and gas production through
workovers and recompletions.
The Bahar Energy partnership, made up of Bahar and Socar, hopes to increase average
output this year to about 6408
barrels per day of oil equivalent
from 5778 barrels per day last
year.
The operating company is
planning to access a crane
barge for the installation of
equipment and materials to allow three additional gas well
workovers in the coming
months.
A 3D seismic survey is expected to be completed in February, followed by a rig tender
and the drilling of a new development well in the Gum Deniz
oileld.
Greenelds also said that the
operating company has
reached an agreement in principal for a new ve-year sales
contract for Bahar gas with
sales price continuing at $3.96
per thousand cubic feet.
Recoverable reserves at Bahar are estimated at 880 million cubic feet of natural gas
with small amounts of oil and
condensate.
Search the archive:
Bahar

Lundin eyes
triple jump
SWEDISH independent Lundin
Petroleum is on track to triple
production by the end of the
year as two new elds come on
stream.
The Bertam development off
Malaysia is due to begin production in the second quarter,
while Edvard Grieg in Norway
is on schedule for start-up in
the fourth quarter, chief executive Ashley Heppenstall said.
The two elds, plus two other Norwegian projects that
came on stream in the past
months, will boost Lundins
output to 75,000 barrels of oil
equivalent per day by the end
of this year, from an average of
24,900 boepd in 2014.
Lundin posted a loss of
$436 million in the fourth
quarter due to costs for six unsuccessful exploration wells,
asset writedowns and foreign
exchange losses.
Revenues halved to $135.2
million compared with the
same period of 2013 because of
lower oil prices.

WORLD

6 February 2015

17

ABU DHABI

Total gets 10% stake in Adco

Supreme Petroleum Council awards interest to French player in
40-year concession covering more than half of Abu Dhabis current
output, but other bidders are still waiting for a reply
NASSIR SHIRKHANI
London

ABU Dhabis Supreme Petroleum

Council (SPC) has awarded
Frances Total a 10% stake in the
Persian Gulf states major onshore
oilelds but kept other bidders
guessing about their role in the
coveted new 40-year concession.
The deal signed between Total and Abu Dhabi National Oil
Company (Adnoc) covers 15 onshore oilelds that pump more
than half of Abu Dhabis current
production of 2.7 million barrels
per day.
Adnoc said the French giant had
presented the best technical and
commercial offers.
More companies will be added
to the concession soon, it said.
While Adnoc negotiates with
bidders and recommends its preferred partners, the nal decision
is made by the SPC, the highest
energy decision-making authority
in Abu Dhabi.
International oil companies
have been negotiating for more
than a year with Adnoc for stakes
in the elds run by Abu Dhabi
Company for Onshore Oil Operations (Adco).
BP chief executive Bob Dudley
said his company had presented
proposals but has yet to hear back
from Abu Dhabi.
Total chief executive Patrick
Pouyanne said: Total is honoured
to be the rst international oil
company to be chosen... and to be
entrusted with the mission of
technical leader on two major
groups of elds.
Under its deal, Total was also
appointed asset leader for the Bu
Hasa eld and the Sahil, Asab,
Shah, Qusahwira and Mender
elds in the south-east, which
represent about two-thirds of
Adcos production.
Adnoc prequalied nine international oil companies to bid after
the previous Adco concession dating back to the 1970s expired in
January 2014.
ExxonMobil, Shell, BP and Total
had each held 9.5% equity stakes
in the Adco concession.
Adnoc took full control of the
Adco elds after the expiry of the
former concession, allowing the
rulers of Abu Dhabi to evaluate

proposals from the bidders. Competition for a stake has been erce,
with BP and Shell vying to renew
their partnerships. ExxonMobil
dropped out, choosing instead to
focus on development of the giant
offshore Upper Zakum eld, where
it had negotiated a per-barrel fee

increase to $2.85 from $1. Other

bidders include Korea National
Oil Corporation, China National
Petroleum Corporation, Italys
Eni, Norways Statoil and Japans
Inpex.
Adnoc has been seeking to
bring in some of its end-custom-

ers as virtually all of its oil production is sold to Asian reners

and future demand growth for oil
products is forecast to come mostly from the region.
Although Adnoc and Total declined to discuss terms of the new
deal, ExxonMobils Upper Zakum

fee is widely expected to have

served as a benchmark for the
new partnership terms.
The next phase of development
for the Adco elds is expected
to raise their production to
1.8 million bpd from the current
1.6 million bpd.

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Decision-making:
skyscrapers in Abu Dhabi
Photo: BERIT ROALD/
NTB SCANPIX

WORLD

18

6 February 2015

TAP puts
new team
in place

NORWAY

Activity: Statoil chief executive Eldar Saetre

Photo: HEIKO JUNGE/NTB SCANPIX

Statoil under pressure

to invest at Snorre eld
Norwegian authorities pushing for state-owned giant to invest in
huge increased oil recovery project despite protability concerns
OLE KETIL HELGESEN
Stavanger

STATOIL is being pressured by

Norwegian authorities to make
multi-billion dollar investments
in the ageing Snorre eld in the
North Sea even if the project fails
to meet the state companys internal return requirements.
Snorre 2040 is by far Norways
largest project for increased oil
recovery (IOR) from mature elds
and its initial investment costs
are expected to be between Nkr30
billion and Nkr40 billion ($4 billion to $6 billion).
The investment decision is to be
made in October this year.
Statoil and its partners have for
over 10 years postponed the investment decision for a new platform and dozens of new wells.
However, as time goes by, reservoir pressure drops and the cost
per barrel of additional oil to be
recovered increases.
Upstream has learned from informed sources that the current
rate of return of a project that
would target at least 300 million
barrels of oil is at 12% before tax.
This is far from Statoils public
requirement of an internal rate of
return (IRR) of 24% for non-sanctioned projects.
Statoil may have reduced its return requirements since its capital
markets day one year ago because
of the recent drop in oil prices, but
the company is reportedly still arguing that it requires a return rate
of 20% for Snorre 2040. The com-

SNORRE 2040
The Snorre eld has been producing since 1992.
The eld has a complex reservoir, and represents one of the
largest potential opportunities for increased oil recovery in
Norwegian waters.
When the original plan for development and operation was
submitted, the estimated recovery rate was 25%. So far, 35%
of oil has been produced and the estimated recovery rate from
existing infrastructure is 47% by 2040.
Partners aim to increase recovery to 54% by installing a new
platform and importing gas to the eld.
Concept selection was made in late 2013, and plans for the new
Snorre C platform are currently being matured. The target is for
a nal investment decision in fourth quarter of 2016 and
production start-up in fourth quarter of 2021.
Source: Statoil

panys 2015 capital markets day is

scheduled for 6 February.
However, Norwegian petroleum
law requires all protable resources to be developed.
US supermajor ConocoPhillips
has twice been forced to sanction
projects with an IRR of 10% to 12%
at the giant Ekosk eld, for the
Ekosk 2 and Ekosk water injection projects.
It is uncertain how much force
the government wants to use
against Statoil, which is 67% stateowned.
We believe that the Snorre
partners are obligated to make
socio-economic protable invest-

ments. This is where the disagreement lies, said directors Ingrid

Solvberg and Tomas Mork from
the Norwegian Petroleum Directorates (NPD) management team.
Statoils cost cutting plans and
its self-imposed and immediate
capital constraints are said to be
causing problems for the NPD.
Statoils interim chief excecutive Eldar Saetre told Upstream
last week he did not want tax cuts
on the Norwegian continental
shelf at the present time, even for
marginal IOR projects, arguing
that higher levels of activity could
undermine the companys efforts
to reduce costs in Norway. A

Statoil spokesman told Upstream

that the company is working on
maturing the concept to improve
the project economics.
There are no contradictions between Statoils and societys interests, he said.
The Ministry of Petroleum & Energy has several times in recent
months argued that companies are
obligated to produce all protable
resources, without being specic.
However, the ministry does not
want to say that it will force
Statoil to make the Snorre 2040
investment in October.
A ministry spokeswoman told
Upstream that Statoil has a goal
of improving the (projects) protability and is working on optimisation of Snorre 2040.
The ministry is keen to see an
economically robust solution for
the project.
Snorre partner Petoro also has a
relatively high protability requirement.
According to its mandate the
state-owned company should pursue a rate of return in line with
industry standards.
Still, Petoro has been arguing
that Snorre 2040 is a very protable project.
Earlier Petoro has seen solid
protability in the Snorre 2040
project. We will do a new review of
the protability in time for the investment decision, a Petoro
spokesman said.

SWISS-based Trans Adriatic

Pipeline (TAP) has put in place
a permanent team of top
managers as it prepares for the
nal construction phase of the
pipeline project to carry Azeri
gas to Europe by 2020, writes
Vahe Petrossian.
Ian Bradshaw who was
named TAP managing director
in early January, this week
announced two key appointments for the jobs of project
manager and operations director.
Both men replace senior
executives seconded by Statoil,
one of the main shareholders
in the company also owned by
BP, Socar, Fluxys, Enagas and
Axpo.
New project manager Norman Ingram, who replaces
Sigurd Hamre of Statoil, comes
from the BG Group and BP,
with whom he worked in several regions, including Azerbaijan, Turkey and Alaska as well
as Australia.
The companys new operations director is Martin Mair,
who was at Al Hosn Gas, looking after the eld development
and operation of the Abu Dhabi
National Oil Company sour gas
elds including the very
sour Shah gas eld development.
Bradshaw himself, who formally took over the managing
directorship on Monday, comes
from BG and Shell.
He replaced Kjetil Tungland,
who returned to Statoil after
more than four years at the
helm of TAP.
The 870-kilometre TAP line
will receive its rst gas from
the Shah Deniz 2 development
offshore Azerbaijan in 2020,
Bradshaw said.
Its 10 billion cubic metres
per year of gas will come from
the Trans Anatolian Pipeline
(Tanap) running across Turkey
from the Georgia border to
the Turkish-Greek border at
Kipoi.
Pipeline construction for
TAP starts next year, said the
company, which is nalising
tenders issued last year.
TAP ends in southern Italy,
from where supplies can be
shipped to Germany, France,
the UK and elsewhere.
The pipeline route through
Greece can facilitate supplies to
several eastern European countries.
The total amount of gas
to be exported by the Shah
Deniz 2 project is targeted at
16 billion cubic metres per
annum, with 6 Bcm per annum
being taken by Turkey en
route.
First gas from the eld is due
to ow in 2019, with rst supplies to Europe starting about a
year later.
Statoil, BP and Socar each
hold a 20% stake in TAP, with
Fluxys at 19%, Enagas on 16%
and Axpo holding 5%.

Search the archive:

TAP

WORLD

6 February 2015

19

NEW ZEALAND
Eyes on the
prize: Shell
New
Zealand
chairman
Rob Jager

Shell aims
to prove up
new Maui
discovery

Photo: SHELL

Umuroa
extension
for Tui
THE AWE-led joint venture in New
Zealand has conrmed exercising a
one-year extension to retain the
oating production, storage and ofoading vessel at its Tui oil project.
AWE said the Tui owners had
taken up the rst of seven oneyear extensions, with the lease of
the Umuroa FPSO extended to the
end of 2016.
The remaining options, if all
exercised, would keep the FPSO
until the end of 2022.
The FPSO began producing at
Tui in July 2007, and is owned by
BW Offshore.
The eld produced an average of
3010 barrels per day of oil in the
fourth quarter of 2014.
A new satellite eld called
Pateke-4 is planned to start producing into the FPSO in April this
year.
The Tui owners are operator
AWE with 57.5%, New Zealand Oil
& Gas with 27.5% and Pan Pacic
Petroleum with 15%.

Analysis of well data under way, with

Ruru-2 well likely to be developed as
subsea tie-back if commercial
RUSSELL SEARANCKE
Wellington

SHELL is set to get to grips with

trying to prove up the commerciality of a new exploration discovery it has now conrmed making
at the agship Maui eld in the
offshore Taranaki basin in New
Zealand.
Upstream reported on 30 January that the Shell-led joint venture
had made a new nd with the
Ruru exploration well that would
prolong the elds productive life
even further.
Shell New Zealand then conrmed to Upstream that hydrocarbons have been encountered in the
Ruru exploration well offshore
South Taranaki in close proximity
to the Maui eld which has been
safely operating for nearly 35 years.
The company added that the
challenge for the Maui joint venture was to determine if this discovery can be developed economically.
A team of subsurface experts is
analysing the well data and, seeing
as the focus is on the Ruru opportunity, Shell and partners had decided against drilling the Maui-8
exploration well, which was part
of the original two-well campaign.
This discovery is pleasing for
New Zealand but needs to be tempered by the uncertainty of not
knowing if the nd is commercially viable, said Rob Jager, Shell
New Zealand chairman and of the
Maui joint venture.
Upstream last week quoted
well-placed sources as saying
there were good results in the secondary reservoir target at Ruru-2,
and also hydrocarbon shows in
the primary sands.
Shell had not provided any predrill estimates of prospective reserves, and sources said it was too
early to speculate on resource volume.
The well was drilled by the
Frigstad-operated semi-submersible drilling rig Kan Tan IV, which

has now completed a campaign in

New Zealand that included three
wells for OMV and two for AWE.
Sources said the Kan Tan IV will
be demobilised from New Zealand
in the second half of February for
drydocking and various maintenance works.
If Ruru-2 is of a commercial
size, it is likely to be developed as
a subsea tie-back to the existing
production platforms at Maui.
Ruru-2 lies 12 kilometres from
the existing MauiA and Maui-B
platforms in 108 metres of water.
The structure had been dened
as straddling both the Maui production licence and the adjacent
exploration permit PEP 381203.
Ruru-2 and Maui-8 were viewed
as the nal throw of the dice in
terms of nding additional reserves to extend the elds life.
First gas was achieved at Maui
in 1979 and the eld is now very
much in its twilight years having
come off plateau production.
The Maui joint operating company, which is called Shell Todd
Oil Services, said recently its focus
has shifted from running and
maintaining the asset for maximum reliable production to nding new and innovative ways to
economically unlock more difficult remaining volumes from the
existing reservoirs by applying
evolving technology solutions.
The New Zealand government
last year revealed a boost in reserves at Maui to 416 billion cubic
feet of gas on a proven and probable basis plus 13 million barrels of
condensate.
The increase was due to a sustained drilling programme that had
enabled a better understanding of
the eld, said the government.
The Maui co-owners are operator Shell on 83.75%, OMV with 10%
and Todd Energy on 6.25%.
The same trio own exploration
permit PEP 381203.

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WORLD

20

This is a
time to be
ambitious

6 February 2015

GE OIL & GAS ANNUAL MEETING

BATTLE TO CUT
COSTS
Call for collaboration
between companies
OIL companies and contractors
are being urged to collaborate
more closely in order to slash
costs, cut out inefficiency and
increase design standardisation
in an age of oil price weakness.
As an industry we really have
no choice: either we change our
model of value creation to
become substantially more cost
efficient, or we will as an
industry gradually become
uncompetitive in the global race
for capital, Statoil chief
executive Eldar Saetre said at
the GE Annual Meeting
conference in Italy this week.
We cannot decide on the oil
and gas prices the market
does that. So that means that
cost has to come down that is
the only way to improve the
protability and our
competiveness, Saetre
continued at the Florence event.
Michael Utsler, chief
operating officer of Woodside
Petroleum, said: It is
staggering the number of
self-induced examples of
incrementalisation of needs and
requirements, arguing that the
lure of technology is one thing
standing in the way of
standardisation.
Utsler said operators and
suppliers have lost condence
in each other and lled the gap
with third-parties.
We should not need the
plethora of third, fourth, fth
and seventh layers of assurance,
because those are where real
costs are coming into the
system that add no real value at
the end of the day, he said.
ExxonMobil development
president Neil Duffin said the US
supermajor takes a minimal
kit approach to projects at the
very initial design phase to try
to reduce waste. Duffin said oil
companies need to simplify
their project specications, do
proper up-front engineering and
make sure the concept structure
suits the project at hand.
BP chief operating officer for
production, Bernard Looney,
spoke of previous collaboration
between the UK supermajor and
GE as having cut downtime on
its global eet of deep-water
drilling units from 600 days to
200 days by addressing issues
with the blowout preventers,
estimating the lost-time saving
at $500 million.
The one challenge that we
have ahead of us right now is to
be sufficiently ambitious,
Looney argued. This is not a
time to be incremental, this is a
time to be ambitious... to explore
different ways of doing things
and really push ourselves (to
make savings longer term)
instead of getting a marginal
dollar here or there that, quite
frankly, will be eroded as soon as
the price (of oil) goes back up.

The Monday afternoon panel at the GE Oil & Gas Annual Meeting, Florence. From left: GE subsea chief executive Rod
Christie, Samsung Engineering chief executive CH Park, BP chief operating officer production Bernard Looney, Tecnicas
Reunidas chief operating officer Felipe Revenga Lopez and Woodside Petroleum chief operating officer Michael Utsler
Photo: EOIN OCINNEIDE

Crude price decline has

sharpened the focus
Leading subsea executive tells Florence gathering that oil price
drop has pushed operators and contractors into working together
to reduce costs and improve efficiency
EOIN OCINNEIDE
Florence

THE sudden drop in the price of

crude has sharpened the focus
of oil companies in terms of how
to approach eld developments,
better preparing them for tough
market conditions in the future,
according to a leading subsea executive.
Although a number of projects
have bitten the dust as a result of
the sharp decline in commodity
prices that picked up pace in the
fourth quarter, most affected

Fundamental issues: GE Oil

& Gas chief executive of
subsea systems Rod Christie
Photo: EOIN OCINNEIDE

projects have simply been pushed

to the right, said GE Oil & Gas
chief executive of subsea systems,
Rod Christie.
Globally there are a few
projects that have been delayed.
There are very few that I can
think of that have been cancelled
once they have been sanctioned.
There is a couple I can think of
but luckily nothing for us.
Christie said the only project
that the US engineering giant is
involved in that has been suspended is Chevrons $12 billion
Indonesia Deepwater Development (IDD) gas project off eastern
Borneo, which may see full operation delayed by up to two years.
It is associated with the government and regulatory environment out there and getting sanctioned for further progress,
Christie said, explaining the rationale behind the delay. It hasnt
gone into suspension as a result of
the economic climate it would
have carried on.
Commercially the market has
come down from 2013 to 2014
fewer projects have closed and
more projects are moving to the
right. But bidding activity (was)
up, through last year, Christie

said. So people were really looking at how they could sanction

and move forward the next set or
wave of projects. So there was still
a lot of activity.
That bidding activity was seen
all across the spectrum, from subSaharan Africa to Latin America,
from the Mediterranean to Asia,
Australia and Norway, the GE executive said.
If you go back 12 to 18 months,
by then it was very clear that the
large oil companies were getting
a lot of attention from their investors around free cash ow, capital
efficiency and the like. Project
cost escalation was happening,
and then delays. So they were
starting to look more and more at
how they could drive some of that.
What has happened with the
oil price changing is that it has
sharpened the focus even further
and probably started to drive it
even faster looking for results.
Christie said this has forced operators and contractors to the table
to actually talk about the fundamental issues of the way the industry works and how we x it, make
it better, make it more efficient,
more effective and less costly.
He added: We have had a lot of

views about what they should

look like for quite some time. Now
I think there is probably a better
engagement from the customers
side, because the impetus to actually nd a substantial saving out
of project costs is now very clearly
on the doorstep.
There are still hot spots of subsea project bidding activity, such
as the Gulf of Mexico, Australia,
Malaysia and Vietnam.
But others, such as the UK
North Sea, are quiet, something
which Christie said may change
through the countrys next budget cycle.
There is still activity in Norway, although Statoil is trying to
realise a 20% cost saving so
those are slowing as they work
through that process, Christie
remarked.
Although ongoing projects in
sub-Saharan Africa are still being pushed along, behind this
there is a lot of work to try to
work out how to take cost out of
developments in the region, with
Christie identifying Angola as an
example.
New projects in Angola right
now would be challenged from an
economics point of view.

WORLD

6 February 2015

21

ASIA

Myanmar considering
sweetened PSC terms
Government
review after only
four PSCs
signed for 20
offshore blocks
won in its 2013
licensing round
AMANDA BATTERSBY
Yangon

MYANMAR is considering sweetening the terms of its production

sharing contracts for the offshore
blocks from the 2013 licensing
round for which negotiations are
ongoing between the earlier announced winners and the Ministry of Energy.
A senior government official
said operators are reviewing the
proposed commitment work programmes on which their winning
bids were based in light of the low
oil price and are now wanting improved terms.
We will revisit our 2013 PSC
model... the nal PSC can be refreshed, Aung Kyaw Htoo, deputy
director of the Ministry of Energys Energy Planning Department, told delegates at the 5th
Myanmar oil and gas conference,
organised by Oliver Kinross.
In March 2014, the Ministry of
Energy announced the winners of
20 blocks 10 shallow-water and
10 deep-water tracts but to date
just four PSCs have been signed.
Those already formalised are
blocks M-4 and YEB for Oil India,
Block AD-3 for Ophir Energy and
Block M-8 for Berlanga. Four other
blocks AD-9, AD-11 and MD-5 for
Shell and partner Moeco and YWB
for Total are close to being
signed.
Taxation structure issues that

Market forces: street stalls in Yangon

relate to these four blocks are

very nearly solved, according to
Aung Kyaw Htoo.
He reckoned that these four
PSCs would be signed by the end
of March.
Once the offshore PSCs have
been signed, operators will have
an 18-month environmental impact assessment and study period,

after which they have the option

to enter into a three-year exploration work programme.
Contracts have already been
signed for all but two of the 16
onshore blocks offered in a separate 2013 bid round for which
winners were announced later
that year.
Petroleum Exploration Private

Photo: BLOOMBERG

Limited has yet to sign contracts

for PSC J in Mawlamyine and PSC
O in Pathein, for which its local
partners respectively are Parami
Energy and Precious Stone Mining
Company.
Aung Kyaw Htoo would not be
drawn on when, or indeed if,
these two PSCs would be signed
off.

Pipeline
to China
in limbo
Renery construction
delays full start-up
THE Myanmar to China oil
pipeline and related deep-water
port at Maday Island in
Myanmar have been inaugurated
but China is not yet ready to
receive any crude, writes Amanda
Battersby.
The rst tanker was due to
arrive and offload 300,000
tonnes of oil as Upstream went
to press.
However, this shipment is
expected to either sit in storage
tanks or be used in Myanmar,
as China has not yet completed
construction of a renery in
Yunnan province part of its
multi-billion dollar
investment.
China views the 440,000
barrels per day pipeline as
promoting its energy security as
oil from the Middle East and
Africa can now be imported
without having to be
transported by tanker via the
Malacca Strait.
The pipeline covers 771
kilometres in Myanmar and
more than double that distance
on Chinese soil.
Myanmar Vice President Nyan
Tun said the pipeline would
generate revenues for his
country and supply crude for
domestic consumption,
although he did not specify any
amount.
The oil pipeline was installed
parallel to the Myanmar-China
gas pipeline that started
operations in 2013. This 12
billion cubic metres per annum
trunkline is running way below
its design capacity, carrying
just 1.87 Bcm of gas in its rst
year.
The pipelines are joint
ventures between state-owned
counterparts China National
Petroleum Corporation and
Myanma Oil & Gas Enterprise,
with the Chinese company
acting as consortium operator.

WORLD

22

6 February 2015

Gas eld
gets back
on track

CANADA

Probe: the semisub West Hercules spudded a Bay de Verde sidetrack for Statoil

Photo: OLE JORGEN BRATLAND/STATOIL

Flemish Pass blocks to

be demarcated for round
Interest said to be high in licensing exercise, with bids due to be
submitted in November and results announced in December
IAIN ESAU
London

CANADAS authorities are due

within weeks to demarcate blocks
to be offered in a highly anticipated licensing round in the
deep-water Flemish Pass basin off
Newfoundland, where Statoil has
made three signicant oil discoveries.
Called the Eastern Newfoundland round, the offered acreage
will cover an area of about 23,000
square kilometres surrounding

the Bay du Nord, Mizzen and Harpoon discoveries.

A well-placed source said, based
on industry interest, this area will
likely be divided into as many as
12 blocks in the rst quarter or
early in the second quarter.
Once the blocks available have
been publicised, bids must be
submitted in November this
year with results unveiled either
that month or in December. We

STATOIL IN THE FLEMISH PASS BASIN

Discoveries
Bay du Nord: 300 million to 600 million barrels recoverable
resources, 34 degrees API crude. Jurassic reservoir with high
porosity and high permeability.
Mizzen: 100 million to 200 million barrels recoverable
resources, 22 degrees API crude.
Harpoon: Statoil has not published a resource gure but
Upstream was told the prospect carried a pre-drill prospect
size of 224 million barrels of light oil.

Identied prospects
Bay de Verde (east of Bay du Nord)
Bay dEspoir (west of Bay du Nord)
Mesquite (west of Mizzen)
Gooseberry

Likely development
Floating hub facility at Bay du Nord.

are seeing some good interest

there, said the source, who
highlighted the record $558 million bid submitted by ExxonMobil, Suncor and ConocoPhillips
for a block just south of Statoils
discoveries.
The round will attract companies with deep pockets who are
able to nance exploration in
these waters and are looking for
scale when it comes to prospectivity.
It is understood that Statoil will
participate in this licensing round
but is fearful that if too much information is made public on Bay
du Nord, Mizzen, Harpoon and its
ongoing wildcat-appraisal campaign in the basin, then bid offers
will rise exponentially.
Statoil is currently drilling
ahead on its Bay de Verde wildcat,
the rst probe in a six-to-eight
well campaign, said a source.
Semi-submersible West Hercules spudded the Bay de Verde
F-67z sidetrack on 14 December
after the initial vertical well was
abandoned following about one
month of drilling.
Statoil is maintaining a tight
hole status on this probe, but this
has not stopped industry speculation about the possibility that it
has drilled another successful
well.
They could have got a problem
downhole or maybe it was always

their idea to go updip, said one

well watcher, noting that while
sidetracking can be seen as a
signal of interest it could not be
taken as a guarantee of exploration success.
He said the Flemish Pass is an
interesting area for Statoil and
they are likely to sit on the twoyear condentiality period for a
well.
They are eager to see that they
are positioned well (to bid) on any
of these exploration areas, he
added.
Bay de Verde is located in a fault
block adjacent to the Bay du Nord
discovery so was an obvious initial target in Statoils campaign.
Statoil has not identied its
other drilling targets but appraisal wells on both Harpoon and
Mizzen or step-out exploration
wells from these two nds are
likely.
Newfoundland & Labradors authorities unexpectedly identied
a prospect next to Mizzen in a
Statoil-operated licence based
on long offset 3D seismic and electro-magnetic data.
An informed source said after
interpreting electromagnetic
data, the authorities were confounded by the presence of a
stronger anomaly (than Mizzen)
downdip in the next fault block,
which was later conrmed by
long-offset data.

PRODUCTION from Encanas

Deep Panuke gas eld off Nova
Scotia, Canada was approaching near-normal levels in December 2014, the latest month
for which gures are available,
although water cuts were at
their highest ever levels, writes
Iain Esau.
According to data from the
Canada-Nova Scotia Offshore
Petroleum Board, gas output in
December totalled 16.201 billion cubic metres, equivalent to
about 185 million cubic feet per
day. This is signicantly short
of the 300 MMcfd the eld is
designed to produce.
However, water production
in the same month totalled
more than 35,000 cubic metres,
which equates to about 7120
barrels per day.
This is much higher than in
September 2014 where water
production was closer to 25,000
cubic metres.
The eld was shut down in
October last year as Encana
grappled with the water-related issues.
Deep Panuke produces from
four wells with the MarCoh
D-41 wells performance being
the best when it comes to high
gas and low water volumes.
In comparison, water cuts in
Margaree F-70, Panuke H-08
and Panuke M79-A were signicantly higher in December.
Encanas chief executive,
Doug Suttles, said in November
that: We always expected the
reservoir to produce water (but)
recent levels were higher than
we anticipated at this point in
the production life.

Shell hunts
for vessels
ANGLO-Dutch
supermajor
Shell is in the market for four
vessels to support its wildcatting campaign off Nova
Scotia, Canada this year.
Shell plans to drill two deepwater probes in exploration
licenses 2423, 2424, 2425, 2426,
2429 and 2430 with drillship
Stena Icemax and is due to
spud the rst probe in mid2015.
Two or three supply vessels
and one standby vessel are
needed and Shell said they
should be available for duty
tentatively starting 1 June.
The estimated duration for
each well is 130 days without
testing. Expressions of interest
from vessel owners or brokers
are due to be submitted on or
before 11 February.
Contract award is due to take
place around the middle of
next month.
Shells operations will be
conducted from Halifax although a tubulars storage yard
will be based in Dartmouth
and is the responsibility of HNS
Tubulars.
The supermajor has a 505
stakes in the exploration licences and is partnered by
ConocoPhillips on 30% and
Suncor on 20%.

WORLD

6 February 2015

23

US
Opposition: US
President Barack
Obama speaks about
the scal year 2016
budget request
released this week
Photo: AFP/
NTB SCANPIX

Obama plan to repeal

tax breaks is criticised
Operators and industry bodies outraged by US presidents
proposal, saying it would derail countrys current energy boom

Teapot
Dome is
sold off
THE US government has sold
its petroleum reserve at the infamous Teapot Dome oileld in
Wyoming to a unit of industrial conglomerate Alleghany
Corporation for $45.2 million.
Alleghany subsidiary Stranded Oil Resources will operate
the eld, which lies 35 miles (56
kilometres) north of Casper in
Natrona County and is officially known as the Naval Petroleum Reserve 3 (NPR-3).
The Teapot Dome eld was
central to events that tarnished the reputation of the
administration of president
Warren Harding.
The incident erupted in 1922
when Albert Fall, Hardings
secretary of the interior, leased
out Teapot Dome to a subsidiary of Sinclair Oil and the Naval Petroleum Reserves at the
Elk Hills and Buena Vista elds
in California to Pan American
Petroleum without a competitive bidding process.
A two-year congressional investigation followed.
It was discovered that Fall
had accepted around $500,000
(the equivalent of more than
$6.5 million today) in interestfree loans and other compensation from the two companies.
By 1927, the Supreme Court
had invalidated the leases.

LUKE JOHNSON
Houston

US OPERATORS are up in arms

over yet another attempt by the
Obama administration to repeal a
set of tax breaks for drilling operations that have been in place
for decades.
President Barack Obamas budget for scal year 2016 proposes
more funding for oil and gas oversight and attempts to remove the
intangible drilling costs and depletion tax credits, which are seen
as sacrosanct by US producers.
By administration estimates,
the change would add about $560
million to US coffers each year.
The Independent Petroleum Association of America (IPAA) said
lifting those tax credits would
derail the current energy boom
in the US.
These historic provisions enable independent producers to take
on the high capital risk of exploring for and producing Americas
oil and natural gas, the IPAA said.
Without these deductions... the
US energy revolution the president continues to tout would not
exist as it currently does.
Obama has tried to lift the tax
breaks many times before with
very little success. Even when his
Democratic party controlled the
Senate the tax breaks remained
intact, so now that Republicans
control both houses there is little
chance of his efforts succeeding.
Still, that did not stop the
American Petroleum Institute
(API) from voicing its strong opposition to the proposal, which it
said would result in a $95 billion
energy tax hike.
The presidents annual call to
raise taxes on US oil and natural
gas development would hurt job
creation, infrastructure invest-

ment, the federal decit, seniors

on xed incomes and domestic
manufacturing, API said.
Overall, energy gured heavily
in Obamas $4 trillion budget proposal, with both offshore and onshore oil and gas regulators receiving increased funding levels.
Among the beneciaries would
be the Department of Interiors
Bureau of Land Management,
which got a 20% increase in funding from 2015 enacted levels in
order to more quickly process permitting requests and to beef up
well-inspection efforts.
The $48 million funding boost
would be partially offset by a proposed set of inspection fees
charged to oil and gas operators requiring the onshore industry
to share in the cost of managing
the programme from which it
benets, just as the offshore industry currently does, the Department of Interior said.
The budget also focuses on risk
management in the oil and gas
industry and awards $170.9 million for the Bureau of Ocean Energy Management and $204.7 million for the Bureau of Safety
& Environmental Enforcement
(BSEE), the duo that oversees offshore energy development.
BSEE said the additional funds
will be used to recruit expert engineers, scientists, inspectors and
oil-spill prevention specialists.
The budget proposal includes
$1.7 million to establish the Engineering Technology Assessment
Centre to support the evaluation
of new technologies and develop
appropriate safety protocols.
It also proposes $14.9 million for
oil spill research, the same as last
year.

EMPOWERING MANAGERS TO RECHARGE THE ENERGY INDUSTRY

The World of Energy a Global Challenge

Start up
March 2015
bi.edu/emme

Executive Master of Management in Energy is a programme

designed to give you a comprehensive understanding of key energy
issues and improve your analytical and managerial skills. A cooperation
between BI Norwegian Business School and IFP School in Paris.

FITTING OUT
One month after arriving at Huisman yard in the Netherlands,
the Ceona Amazon has been equipped with her inclined
multi-lay vertical lay system.

IN THE PICTURE

24

6 February 2015

ROUND TRIP

Goliat
sets sail

The Goliat FPSO, destined for Enis

oileld of the same name off northern
Norway, was loaded onto the Dockwise
Vanguard this week at the Hyundai yard
in South Korea. The journey to the
Barents Sea will take about 60 days.

BENGHAZI IN THE SPOTLIGHT

Libya Prime Minister Abdullah al-Thinni attends a meeting with ministers and leaders
of the Libyan army in Benghazi this week in a show of support for his troops battling
Islamists groups.

FIRE ON THE HORIZON

WORLDS NEW RECORD
Drydocks World sets a record as it accommodates nine rigs in its
Dubai yard from diffrent parts of the globe. The companys ship
repair and rig repair revenue exceeded its target for 2014.

A member of the Iraqi security forces stands

on a road as smoke billows from the
Khubbaz oileld, about 25 kilometres west
of Kirkuk, this week.
Photos: CEONA/DRYDOCKS WORLD/ENI/REUTERS/AFP/SCANPIX

WORLD

6 February 2015

25

Phased
approach
to eld

MIDDLE EAST

Iran fears Pars gas loss

to Qatars North Dome

EACH standard phase of Irans

South Pars eld has targeted
1 billion cubic feet per day, with
some numbered phases such as
Phase 12, targeting the
equivalent of three standard
phases, writes Vahe Petrossian.
Phase 12 is said to be
producing at more than
two-thirds capacity on the way
to full production sometime
this year.
No new phase since Phase 10,
completed with South Korean
help, has come fully on stream
over the past 10 years.
Earlier phases had been
completed by French giant
Total, Eni of Italy and Statoil of
Norway.
Total and Shell pulled out of
talks on later phases.
The previous administration
of president Mahmoud
Ahmadinejad ordered a crash
development programme
covering phases 11 to 24 all at
the same time, with many of
the contracts going to
companies associated with the
Revolutionary Guards and
military agencies.
However, the programme was
disjointed and badly managed,
resulting in considerable
physical work at almost every
phase, but with many experts
alleging that most of the effort
was unproductive and wasteful.
The Oil Ministry has since
prioritised phases 12, 15&16 and
17&18 for completion in the
middle of this decade, leaving
the rest for subsequent
development, possibly well into
the next decade if US and
European Union-led sanctions
remain in place.

Claim that as
much as half of
Phase 12 gas
has migrated
across maritime
boundary
VAHE PETROSSIAN
London

IRAN claims it is losing critical

quantities of gas from the supergiant South Pars eld to neighbouring Qatar, which started
exploiting the reservoir, called the
North Dome on the Qatari side,
much earlier to become the
worlds leading exporter of liqueed natural gas.
The loss of gas through migration is 50% in the case of Irans
Phase 12 development, which is
about to reach a full production
capacity of 3 billion cubic feet per
day of gas and 120,000 barrels per
day of condensate, according to
Mahmoud Javadian, drilling
manager of Petropars, the state
company in charge of the project.
The issue of migration has been
at the forefront of Iranian policy
and complaints related to the eld
since the 1990s, when Tehran was
forced to shift priority from other
easier-to-develop on and offshore
gas elds such as at North Pars
and Kish.
South Pars gas is very sour and
the reservoir is not as close to the
Iranian shore as North Pars and
Kish, each of which is a medium
giant reservoir.
The Oil Ministry has over the
years tried to convince the Qatari
government and Qatar Petroleum
(QP) to slow down their pace of
development and co-ordinate
overall strategy so as to better
manage the elds resources in
the long run.
However, Qatar has refused to
co-operate, adopting a large-scale
development strategy that has
turned the tiny emirate into a
hydrocarbons and nancial powerhouse.
On occasion, past Iranian
approaches to the Qataris gave the
impression of threats, but Tehran
seemed eventually to give up the
campaign and go all-out with its
own development.
However, nancial problems
and ever-tightening US sanctions
meant that development after the
rst 10 phases of the 24-phase
project proceeded at a very slow
pace.
Javadian said the Phase 12 block
was initially estimated to hold 38
trillion cubic feet, but new data
from appraisal wells put the
gure at 19 Tcf.
Had the development of the
South Pars gas eld been prioritised before the toughening of
international sanctions, we would
not have faced the current conditions, said Javadian.
Iran did not pay enough atten-

tion to the project and it lost time,

he said, apparently in part reference to the Ahmadinejad government that ran the country from
2005 to 2013.
Javadian did not provide details
on the overall reservoir, but the
average loss of reserves through
migration is very unlikely to be at
the same 50% rate as at Phase 12.
Iranian phase blocks, such as
Phase 12, on or close to the shared
border are liable to lose gas to
migration to Qatar at a higher rate
than blocks further north.
The overall rate of migration
loss is unlikely to exceed 10% to
20%.
South Pars was at one time
believed to contain at least onethird of the total reserves of the
shared reservoir, which has an
overall recoverable volume of
about 1300 Tcf.
Irans share of about 400 Tcf
raises its overall reserves to well
above 1000 Tcf, reinforcing its
status as the worlds second biggest gas power after Russia.
Qatar has in the past not officially responded to Irans complaints that it is over-exploiting
the reservoir and stealing Iranian reserves.
However, at the turn of the decade, QP said it did not plan to expand its development programme.
Iran and Qatar are also at loggerheads over an oil layer under the
South Pars gas eld, known as the
South Pars Oil layer in Iran and AlShaheen in Qatar. However, the
differences over the oileld have
not been publicised.
The South Pars Oil layer development has been going on for
more than a decade, with output

of perhaps up to 30,000 bpd at one

time. In turn, Al-Shaheen, run by
Maersk Oil, now produces about
300,000 bpd.

Under development: South

Pars Gas Phase 12
Photo: PASARGAD PETRO SAZEH

ONSHORE. OFFSHORE. EVERY SHORE.

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WORLD

26

Shelf rig
wins
contract

6 February 2015

AFRICA

DUBAI-based Shelf Drillings

jack-up Baltic has scored a oneyear contract with Total Nigeria, commencing around
mid-2015, writes Ruth Chen.
The rig will be earning in the
range of $150,000 to $160,000
per day.
The Marathon Le Tourneau
MLT Super 300 jack-up is currently undergoing refurbishment in Singapores Global Offshore & Marine shipyard for
about 120 days.
The major overhaul work includes the renewal of steel
piping systems, refurbishments to the accommodation
quarters and the repainting of
the jack-up exterior hull structure.
Sources said the refurbishment is expected to cost up to
$40million.
Baltic will set sail for Nigeria
around April 2015.
Total Nigerias production in
2013 was 261,000 barrels of oil
equivalent per day.

Pipe tests
completed
VICTORIA Oil & Gas has completed pressure-testing the gas
pipeline from the Logbaba natural gas eld in Cameroon to the
Bassa and Logbaba power stations in the port city of Douala.
Once Gaz de Cameroon (GdC)
installs the pressure reduction
and metering units and the Altaaqa generator sets arrive and
are commissioned, the national power utility ENEO hopes to
receive 50 megawatts of power
before the end of the rst quarter.
Minimum take-or-pay levels
are pegged at 9 million cubic
feet per day between January
and June, dropping to 3 MMcfd
in the July to December wet
season, with protability xed
at $9 per million British Thermal Units over the extendable
two-year contract term.

Bowleven
Etinde move
EDINBURGH-based Bowleven
has one more legislative process to go through before its
farm-out of a 40% stake in its
Etinde licence off Cameroon
can be nalised.
The company said it is now
in receipt of the signed presidential decree approving the
transfer of interests to NewAge, which will become the
operator, and Lukoil.
We now await gazetting of
the decree, the nal condition
to completion of the Etinde
farm-out and receipt of transaction proceeds, said the London-listed junior.
Bowleven will receive $250
million once the deal is gazetted, with its stake in the asset
scaled back to 25%, leaving
NewAge and Lukoil each with
37.5% interests.

Fresh efforts: Benins President Thomas Yayi Boni

Photo: REUTERS/SCANPIX

Benin aims for onshore

exploration campaign
Two companies signed up for coastal licences following
Embayment discoveries in neighbouring Nigeria
BARRY MORGAN
London

BENIN aims to renew onshore exploration efforts after several

years of neglect, following last
years high-prole Benin Embayment discoveries in neighbouring
Nigeria, such as Ogo, and has
signed up two new companies for
the countrys contiguous coastal
licences.
An explorer understood to have
origins in Nova Scotia, NS Oil, has
acquired Block A, according to the
Cotonou-based Ministry of Mines,
Energy & Waters Office of Hydrocarbons (OBH) while Block B,
located to the west bordering
Togo, has been awarded to UKbased start-up Elephant Oil.
Elephants chosen exploration
debut in the Dahomey Embayment of Benin specically reects
a strategy to target acreage where

the prolic West African Transform Margin comes onshore (following) precedents set by analogous offshore elds.
Elephant has already identied
the Allada structure and aims to
explore a large depocentre with
fresh 2D seismic acquisition after
preliminary eld studies revealed
live seeps, reservoir and source
rock outcrops.
Meanwhile, offshore exploration continues with Hunt Oil and
Canadian partner Century Energy
International currently evaluating data from last years Block 2
wildcat.
It failed to hit the targeted objective but they may drill again
soon, said a senior OBH official.
British
Virgin
Islandsregistered Signet Petroleum has

been ousted from Block 3, with the

OBH reallocating the licence in
late December to Nigerian independent FrazOil one of a stable
of oil service companies owned by
Emeka Okwuosa.
Frazoil may drill towards the
end of 2016 before the initial
three-year exploration period expires, after reprocessing existing
3D seismic and shooting more 3D
this year, according to the OBH.
Okwuosa aims to follow in the
footsteps of fellow Nigerian independent South Atlantic Petroleum
(Sapetro) which is currently completing the second of a three-well
production drilling programme
on the shallow-water Seme oileld
in Block 1.
Two of the deviated Seme wells
are each expected to ow up to

3000 barrels per day of liquids and

yield 6000 bpd of crude into the
next decade.
Block 4, in deeper waters, is
jointly held by Shell and Petrobras and reaches across from
the Togo to Nigerian maritime
boundaries.
This will likely see seismic acquired this year, although the
drillbit will not go down till 2016.
To the south, Oranto Petroleum
is still looking for a partner to offset drilling costs on blocks 5 and
6, having nally relinquished
Block 8 after failing to secure an
extension.
Outlying ultra-deep Block 7 has
nally been cancelled with the licence taken from US explorer Moncrieff Oil, leaving blocks 7 to 15 vacant and open for negotiation.

Svenska takes fresh look at trio of Guinea-Bissau blocks

PRIVATELY-owned Svenska Petroleum is taking a fresh look at the
geology of its three blocks off
Guinea-Bissau in the light of Cairn
Energys recent oil discoveries off
nearby Senegal.
Australian junior Far Ltd
which is a partner in blocks 2, 4A
and 5A in Guinea-Bissau as well as
Cairns Fan-1 and SNE-1 oil discov-

eries off Senegal said a re-interpretation of the Guinea-Bissau 3D

seismic data is ongoing to assess
the potential for this (Senegal) oil
play in the blocks.
Nevertheless, Svenska and Far
still aim to drill an appraisal well
at the end of this year on the Sinapa West eld, discovered by
Premier Oil in 2004. If this well is

a commercial success a further

exploration well will be drilled.
Meanwhile, Far Ltd reported
that detailed drilling plans on the
highly promising Senegalese acreage are not expected to be nalised until late April.
However, the discovery partners have discussed tentative
plans, with drilling possibly start-

ing late this year. Cairn has estimated that, on the back of falling
rig rates, wells could be drilled at
a cost of $30 million to $40 million
each.
The Australian company said
the programme is likely to include
two appraisal wells on SNE-1 and
one exploration well on the shelf,
with options for further drilling.

WORLD

6 February 2015

27

MEXICO

Budget cuts
set to sting
Pemex for
$4 billion
Oil price collapse prompts
government to introduce
spending reductions
GARETH CHETWYND
Mexico City

Photo: REUTERS/SCANPIX

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First bid round nears:

Page 31

Cutbacks: Mexican Finance Minister Luis Videgaray

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daily average of 2.4 million barrels

per day. Pemex ended 2014 with an
average production rate of 2.42 million bpd, down 3.7% on the year
and its lowest rate for 28 years.
Exports averaged 1.14 million
bpd, the lowest rate for 33 years.
The Cantarell eld is declining
into its mature phase and output
at Ku Maloob Zaap has peaked at
about 865,000 bpd.
The spending cuts raise concerns about Pemexs ability to prevent domestic oil output from declining further.
A hoped-for inux of private
sector investment is still some
years away from bearing fruit,
even if the planned licensing
round and Pemexs farm-out
process both run smoothly.
Upstream understands that
Pemexs revamped south-west
marine shallow-water division
will try to compensate for Cantarells decline by prioritising
projects with potential for additional output, notably the TsiminXux and Abkatun Pol Chuc oileld
developments.
However, the Ayatsil-Tekel
heavy oil eld development is
moving slowly and is unlikely to
move to project sanctioning before Pemexs future farm-out partners are in place, a process that is
unlikely to reach fruition before
the second half of the year.
Pemex had already been reacting to the decline in prices by cutting back on current expenditure,
especially outsourced services,
even though the companys own
workforce remains, by most measures, bloated with more than
140,00 employees.
Pemex chief executive Emilio
Lozoya Austin recently ruled out
the possibility of compulsory redundancies, but talks have begun
with the oil workers union about
an early pension scheme which
may include a lowering of the basic
age for retirement to 55 from 65.
The oil giant has not specied
where it intends to make spending
cuts but, with savings of $4 billion
called for, they will most probably
have to include capital expenditures, said Alonso Cervera, chief
Latin America economist with
Credit Suisse bank.

LOWER oil prices have forced the

Mexican government to introduce
$8.3 billion in budget cuts, with
state-run Pemex expected to
account for about half of these
savings.
Sales revenues and taxes from
oil account for about a third of
Mexicos federal spending, but
export-grade Maya crude has been
fetching barely half of the budgeted $79 per barrel.
In 2014, Mexicos federal government hedged 228 million barrels of oil exports at $76.40 per
barrel for the current year and
can ll any budget gap by tapping a rainy-day fund accumulated during the recent years of
strong prices, according to Finance Ministry data.
But these options do not generate cash for the government until
late in the year because payout is
based on the average oil price between December 2014 and November 2015.
Finance Minister Luis Videgaray responded last Friday by announcing a 124 billion peso ($8.3
billion) reduction in spending
that is equivalent to 0.7% of Mexicos gross domestic product.
Pemexs budget was cut by a
total of 62 billion pesos, while 52
billion pesos was cut from the
federal governments own budget
including a agship high-speed
train project with another 10
billion trimmed from the spending plans of CFE, Mexicos stateowned power utility.
Some analysts have warned that
deeper cuts may be needed next
year if oil prices do not rebound.
The hedge does not cover oil
prices for 2016, so the federal government may have to make more
aggressive cuts next year if prices
stay low, said Luis Miguel Labardini Deveaux, a partner with Marcos y Asociados, a Mexico City
consultancy.
Pemex has been given more
control over its own budget in recent energy reforms, but the oil
company has also become more
exposed to downside factors and,
unlike the government, has not
hedged against the decline in revenue.
Pemex is also struggling to halt
an accelerating decline in its output, and may struggle to meet the
Finance Ministrys forecast 2015

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28

6 February 2015

WORLD FEATURE

For most people in the UK, these

platforms are out of sight, out of
mind... it is difficult to understand the
full scale of what we are dealing with.
Shell business opportunity manager Duncan Manning

UK NORTH SEA

Brent Delta operation set to pu

The operation to
decommission
the Brent Delta
platform is
nearing a vital
stage for Shell
and the industry
ROB WATTS
Aboard Brent Delta

RELATIVE silence has

now fallen over the
processing module high
above the east leg of
Shells Brent Delta platform in the
UK North Sea as workers prepare
to dismantle a network of pipes
and manifolds.
It would have been much noisier in here when the oil and gas
was rushing through, says offshore installation manager (OIM)
Paul Morgan, pointing to large
conductor pipes rising through
holes in gratings.
The next big job we have is to
remove those.
Brent Delta and its three sister
platforms Alpha, Bravo and
Charlie were the cornerstone of
the UK oil and gas industry for almost 40 years.
With most of the elds exploitable oil and gas now gone, no hydrocarbons have been produced
on Delta since 2011.
Morgan was the OIM on duty on
the day production stopped, when
he gathered the crew together and
said a few words about Brent Deltas history and achievements.
Only Charlie remains in production and, after Alpha and Bravo ceased last November, Shell is
now headlong into a major programme to decommission the
other three.
This week, Shells ambitious
plans to decommission part of
Brent Delta went under the spotlight.
The company said it will start
asking the public on 16 February
to comment on its plans to remove
and dismantle the platforms
23,500-tonne topsides. Shell is pro-

Learning lessons: Brent decommissioning project manager Alistair Hope aboard Brent Delta

posing using Allseas monster

twin-hulled heavy-lift vessel Pieter Schelte, recently arrived in
Rotterdam from South Korea, to
lift the topsides off Deltas 170-metre tall, 18-metre diameter, reinforced concrete legs in one go. It is
expected to be the heaviest offshore lift ever.
If all goes to plan, Pieter Schelte
will take the structure the 380
nautical miles (704 kilometres) to

decommissioning company Able

UKs facility in Teesside, where a
new super-strong quay is being
purpose-built for the dismantling
operation.
Game changing Alistair Hope,

Shells Brent decommissioning

project director, says he hopes
many people will play an active
part in the consultation.
It is a key stage before Shell

Six-year campaign to plug 40 wells

SHELL began plugging and abandoning Brent
Deltas 40 wells in 2008, three years before
production ended, and work only stopped last
year.
Shell calculates the operation has used 1.7
million litres of cement and retrieved about 170
kilometres of steel tubulars.
Project director Alistair Hope says the plug and
abandon (P&A) work has been a challenge across
all the platforms.
Shell officials said previously one Brent well
took 120 days to P&A, although some have taken
as little as 15 days. Without going into detail
about average times per well, Hope says: These

are very prolic wells that have produced an

awful lot of hydrocarbons.
Hope points out that some wells have produced
more than 30 million barrels each, more than
most elds being developed today in the North
Sea.
The depressurisation project in the mid-1990s
meant some of the wells are very difficult to get in
to and then make sure you have got plugs that
work, he says.
Wells have not only been plugged, they have
also been monitored. We track the data a lot.
Because of the unique factors with this eld it has
taken more time than we expected.

hands its plan to the UK Department of Energy & Climate Change

(DECC), which has the nal say
on signing it off. It is hoped that
could happen before the UK general election in May, and while no
decision has yet been taken, the
lift could take place next year.
Hope calls Pieter Schelte a
game changing technology for
the nascent decommissioning industry.
Being able to remove the topsides in one lift and dismantling
it onshore, instead of chopping it
into smaller parts offshore, will
substantially reduce the risk,
cost and environmental impact
of the operation.
Although a massive engineering task in itself, the removal of
Deltas topsides is just one element of the overall Brent decommissioning programme.
A second set of proposals is being
drawn up to decommission the remaining Brent infrastructure.
That will include Brent Deltas
massive concrete legs, the topsides
and concrete legs of Brent Bravo

and the topsides and steel jacket of

Alpha, as well as 140 wells and 28
pipelines. It will also involve Charlie, once it ceases production.
It is no wonder, as Hope says,
that some in Shell have described
this overall project as the most
difficult job in the company today.
In part, that is due to the technical challenges involved in decommissioning four enormous
platforms of three different designs, each at a slightly different
stage in their later life, in harsh
waters 170 kilometres north-east
of the Shetland Islands.
Heavy scrutiny Shell is also

aware the project poses environmental concerns and that it will

almost certainly face heavy scrutiny.
The company is under pressure
to avoid a repeat of the Brent Spar
asco in 1995, when it was forced
to abandon plans for the deep sea
disposal of that facility after a
public outcry led by environmental campaigners Greenpeace.
Given that experience, it is tak-

6 February 2015

29

23,500

THE WEIGHT in tonnes of the

Brent Delta topsides, which will
lifted off the platform by the
heavy-lift vessel Pieter Schelte.

ush the boundaries

Concrete bases pose

particular challenge
EACH WEIGHS
300,000 TONNES
Storage cells and toxic
sludge add to work
ONE major conundrum Shell has
yet to solve is what to do with the
Brent platforms vast concrete
bases, each about 300,000 tonnes,
the weight of the Empire State
Building.
Removing them would be an
incredible task. But by leaving
them in place, Shell will have to
decide whether to cut them 50 metres below the sea surface and remove sections the size of Big Ben,
or leave them jutting above the
water with navigation lights.
The puzzle is complicated further by the presence of 60-metre
tall concrete storage cells at the
base of each structure that were
once used to store crude before
export.
There are 64 of these across the
eld and 16 on Delta alone.
Each the size of four swimming
pools, they are lled with sea water and a small amount of hydrocarbon oating at the top called

attic oil. Over the years, however, a potentially toxic sediment

has accumulated at the bottom of
these cells.
Working out exactly what it
consists of and how much is
present, even before working out
what to do with it, is presenting a
particular challenge.
Shells decommissioning plans
have to comply with the requirements of the Oslo and Paris Conventions for the Protection of the
Marine Environment of the
North-East Atlantic, known as Ospar 1998, which is designed to
maintain clean seas.
Ospar assumes that offshore installations will be removed entirely but recognises that large
concrete gravity base structures
may be difficult to reoat.
Shell officials told Upstream
two years ago the company is likely to seek an exemption, known as
derogation, to leave them.
However, the company this
week appeared keen to emphasise
that no decision has yet been taken.
Officials say a decision will be
made only when there is condence that the proposals are safe,
technically achievable, environmentally sound and nancially
responsible.
Stay or go?:
A decision
on whether
to remove
the
concrete
bases or
leave them
in place has
yet to be
made

Photos: ROB WATTS

ing particular care to consult and

inform people openly and honestly.
Shell has spoken to more than
180 groups, including non-governmental organisations like WWF
and Greenpeace, academic institutions and independent scientic
experts, to develop its plans.
Duncan Manning, Shells business opportunity manager, who is
also responsible for delivery of the
project, says: We have learnt lessons from Brent Spar.
Lang Banks, director of WWF
Scotland, agrees with that, although he warns that Shells proposals will face close scrutiny.
Manning says Shell is condent
it will deliver very clear recommendations about what we are
doing and why we plan to do it.
He
says
decomissioning
projects are now covered by a far
clearer regulatory framework
than in the days of Brent Spar.
For some aspects of the project,
such as the topsides removal, that
means Shell knows what it has to
do and it is simply a case of us get-

ting on and doing it. However,

other elements are more subjective
and here Shell has to recommend
solutions to the regulator balancing what is technically achievable
regarding safety, environmental
impact, impact on society particularly other users of the sea,
such as sherman and cost.
For those, Manning admits:

There is no silver bullet. There is

no simple conclusion.
Assessing the decommissioning programme, Manning says:
For most people in the UK, these
platforms are out of sight, out of
mind, over the horizon. It is difcult to understand the full size
and scale of what we are dealing
with.

BRENT: THE LIFE OF A FIELD

Owners: Shell (50% and operator) and ExxonMobil.
Location: 186 kilometres east of Lerwick in the northern UK
North Sea.
Discovery and development: 1971, began producing in 1976.
One of several large elds to come on stream amidst two
global oil crises, in 1973 and 1979.
Production: about 4 billion barrels of oil equivalent almost
10% of UK production since 1976. Peak output was more than
500,000 barrels per day in 1982.
Rejuvenation: in the 1990s, the life of the eld was extended
through a 1.2 billion ($1.8 billion) redevelopment and
depressurisation programme so gas could be produced.

Topsides operation
puts technology to the
THE Brent Delta topsides
decommissioning project may
have reached an important
milestone but Shell has not
arrived here all of a sudden.
Work has been going on for
several years to prepare the
facility for the day when the
structure will eventually be
lifted off its concrete legs.
On the upper decks, skips and
containers lled with debris
and waste material are stacked
in readiness for being shipped
back to shore for disposal.
Until recently, the underside
of the lower deck was cocooned
in scaffolding as workers cut
away anything that would
obstruct the vessel Pieter
Schelte.
Eventually, the scaffolding
will return so eight cruciforms,
each weighing about 15 tonnes,
can be engineered into place to
strengthen the topsides where
the vessels loading arms will
make contact. In the modules

immediately above, about 80

tonnes of steel plate will be
inserted to strengthen the walls.
Preparing for the lift is a
signicant amount of work but,
project director Alistair Hope
points out, relatively little
compared to dismantling the
facility bit-by-bit offshore.
Hope says that would have
been hugely challenging,
requiring about three solid
years of work.
Hope says: These old
platforms are hugely integrated
with pipes, wires and cables,
and have been modied over the
years. [Single-lift] is very
attractive to us because it
means we dont have to do all
that dangerous work offshore.
We can move it onshore where
we can dismantle and recycle
the topsides in a much more
controlled way.
Pieter Schelte gears up for
the crucial moment: Page 30

30

WORLD FEATURE

6 February 2015

UK NORTH SEA

Pieter Schelte gears up

for the crucial moment
Much is hanging
on Allseas
970,000 tonne
behemoth
performing its
topsides lift
without a hitch

GUEST WRITER
Lang Banks
Director WWF Scotland

ROB WATTS
Aboard Brent Delta

LLSEAS agship vessel

Pieter Schelte can lay
claim to being the
worlds largest ship, but
it will be able to lift large structures with extreme precision.
The vessel displaces 970,000
tonnes. In comparison, Shells
vast Prelude FLNG vessel displaces
600,000 tonnes, while a US navy
aircraft carrier displaces 100,000
tonnes.
Explaining details of the lifting
operation, Brent decommissioning project director Alistair Hope
says that once the vessel is within
500 metres of Brent Delta, it will
start to ll its ballast tanks so it
sits lower in the water.
Then, using its advanced dynamic positioning system, the
twin hulls will slot around Deltas
legs and under the topsides, which
will have been cut away from the
metre-thick concrete legs using
diamond wire cutters.
With progress monitored and
guided by CCTV and sensors attached to the underside of the
platform, loading arms will slide
out from each side of the vessel
and position themselves at precise
points.
An active motion compensation
system, effectively neutralising
wave motion, will then kick into
gear to keep the ship stable relative to the platform.
Ballast will then be expelled,
leaving the vessel slightly higher
in the water, before a crucial moment in the operation begins.
Hope says a so-called fast-lifting system will raise the topsides
up three metres in under 10 seconds.
Using a weight-lifting analogy,
Hope calls that part of the operation the jerk.
Pieter Schelte will then let out
more ballast, lifting the topsides
even further clear of the legs.
If all goes to plan, it is an operation that could take less than a
day, Hope says.
Once close to shore, the topsides
will be transferred to a barge, also
being built by Allseas, called the
Iron Lady, which will take it to
Able UKs facility, where hydraulic
jacks will pull it ashore.
To accommodate a structure as
large as the Brent Delta topsides,
a super-strong quay is being built,
funded by Shell.
Shell has been able to invest in
the facility in the expectation it
will be used to dismantle all four

Shell is
on track
so far

Game changer: the Pieter Schelte

Brent topsides. It is also likely to

leave the yard well-placed to compete for future work in the global
decommissioning industry.
Able will be in a good position to
compete for the emerging decommissioning market, Hope says.
Hopefully this will lead to further work coming to this area.
With 470 facilities due to be de-

commissioned off the UK by about

2040, Shell also sees the project as
an opportunity for companies and
the UK as a whole to develop skills
and capabilities to take advantage
of the market globally.
Shell is condent that more
than 97% of the topsides material
will be reused or recycled, with
much of the steel nding its way

Photo: ALLSEAS

into the international scrap market.

Lower grade metal could eventually be used to manufacture
washing machines or line piping,
with the higher grade stainless
steel that is in, for example, Deltas production manifolds perhaps
nding its way back into equipment for the energy industry.

I HAVE been at several meetings

over the last few years where
Shell has been setting out the
different challenges it faces.
Theres no doubt in my mind
that Shell has learnt the lessons
of Brent Spar. To give Shell its
due, it has attempted to reach
out to as many stakeholders as
possible, including WWF. From
that point of view they have
done a good job.
However, I will wait to see
what Shell puts in its
decommissioning consultation
for the overall eld, which looks
likely to present some big
challenges.
For example, there are still
many unknowns about the cell
contents, and I will be very
interested to see what Shells
independent analysis reveals.
The other area of concern is
the piles of drill cuttings, some
of which are quite solid and
thick. Shell will have a choice to
either disturb those and remove
them or leave them in place.
Each option presents problems
and is another challenge.
My general view of the
process has been that this
industry has for decades pushed
the limits of engineering and
science to extract this resource
and they have proted
handsomely from that.
Therefore, for me, they should
be expected to push the limits
of engineering and science once
again to remove their
potentially hazardous legacy
and protect the marine
environment.
The platforms were put in
quickly at the height of an
energy crisis without much
thought about how they were
going to come out.
So I absolutely understand the
scale of the challenge but it is
crucial they carry out the
process properly, even more so
given the situation the industry
nds itself in currently.
One of the biggest challenges
will certainly be how much is
this going to cost. The reality is
that the cost will be an
important factor but it should
be at the top of Shells mind.
The question should be what
is possible without taking any
shortcuts?.
There is also an opportunity
for Shell and others in the oil
and gas industry to use Brent as
the foundation for building a UK
decommissioning industry.
Some help from politicians to
this end would be useful.
Search the archive:
Brent Delta

WORLD

6 February 2015

31

Bellatrix
slashes
spending

MEXICO

OIL PRICE
FORCES CUTS
Capital down by C$250
million since November

Permission to proceed: National Hydrocarbon Commission head Juan Carlos Zepeda

Photo: REUTERS/SCANPIX

Interest grows as rst

licensing round looms
Access to data rooms given to 16 players so far with more to be
approved ahead of July bidding for shallow-water blocks
GARETH CHETWYND
Mexico City

MORE companies have requested

access to data rooms ahead of
Mexicos rst licensing round,
with 16 already granted permission to proceed, according to the
countrys hydrocarbons regulator.
The latest group of companies to
be authorised by the National Hydrocarbon Commission (CNH) to
access its brand new data rooms
includes Eni, Cobalt International
Energy, Pacic Rubiales, Inpex,
Tecpetrol, ONGC Videsh, plus
Mexican companies NBL Mexico,
Sierra Oil & Gas and Diavaz.
The seven companies that had
already been authorised are Ecopetrol, Shell, BG Group, Hunt Oil,
Chevron, BHP Billiton and ExxonMobil.
Others in the pipeline to receive
authorisation include Pluspetrol,
Total, Maersk Oil, Petronas, Lukoil,
Korea National Oil Company, Hess,
Galp Energia, China National Offshore Oil Corporation, Sinopec and
Statoil.
The number of companies willing to pay the $360,000 fee to access the data is seen as a gauge of
investor interest as Mexico prepares for its inaugural round in a

bearish world price environment.

Despite the drop in oil prices, we
are seeing great interest in the
round, said CNH head Juan Carlos
Zepeda.
The rst licensing round, scheduled for bidding on 15 July, consists of 14 shallow-water blocks.
They are mostly areas described as
light oil plays, although some are
prospective for heavy or extra
heavy crude.
The CNH has forecast production costs in these shallow-water
areas at less than $20 per barrel
per day, and estimates of geological prospectivity show expected
success averaging 40%.
Pemex sought to retain these 14
areas during the transition from a
monopoly, but efforts to regain
them will be limited by a rule restricting companies to participation in a maximum of ve permits.
Pemex is also facing budget
cuts, announced last week and is
likely to bid with consortium
partners to share costs.
The CNH expects the soon-to-be
licensed areas to produce rst oil
by 2019, and forecasts that the entire area should be able to yield out-

put of between 80,000 to 100,000

barrels of oil equivalent per day.
Visits to the CNH data rooms in
Mexico City were due to begin this
week, and access will be allowed
until 16 March, after which interested parties can move to a prequalication phase.
CNH is running an interactive
online feedback process through
which the terms of the offering
will be rened and nalised by 15
June.
Zepeda said the CNH will be
sticking to its plans for several
more licensing events in 2015, including shallow-water production
licences and exploration permits
in extra-heavy crude and deepwater plays, but he acknowledged
that plans for licensing unconventional plays would have to be reviewed.
The drop in prices has a special
impact on unconventionals, and
we have to look again at what we
can do and what we can keep on
our schedule for this year, he said.
Mexicos unconventionals offerings are expected to include shale
gas in the northern regions and
shale oil and tight oil, mainly in

the Veracruz region and including

the Chinontepec paleochannel.
The licensing process for the
second offering of shallow water
permits is expected to begin later
this month, this time offering areas for development.
State-run Pemex is also working on plans to farm out interests
in 10 blocks carved out of the acreage that the company retained
during the transition away from
the state monopoly.
Mexicos new petroleum laws
allow Pemex to nominate areas
and suggest the timing of farmout projects, and to submit technical specications for qualication of suitable potential partners.
However, the contractual model
for the farm-outs is to be decided
by Mexicos energy ministry, and
the selection process must involve
a competitive bidding process
managed by the CNH.
Upstream understands that
Pemex has now opened CNHmanaged data rooms for the 10
farm-outs, and is expected to submit qualication criteria to regulatory authorities before the end
of the current quarter.

CANADIAN junior Bellatrix Exploration is cutting its 2015

capital budget by C$100 million
(US$79 million), making its
third reduction since November, writes Tonya Zelinsky.
The junior said continued
volatile oil and gas pricing has
forced it to decrease expenditures to C$200 million from
C$300 million.
Its original budget announced in November was
C$450 million.
However, the company will
have access to an additional
C$85 million in third-party
funding from its joint venture
partners, raising its gross 2015
capital to C$285 million.
It could access an additional
C$250 million of joint venture
capital in 2016 and beyond.
Spending will be focused on
completing construction of
phase one of its deep-cut gas
plant at Alder Flats and the
drilling of liquids-rich wells in
the Notikewin and Falher area
to supply the plant. The facility
is expected on-steam no later
than 1 July.
The C$100 million reduction
in spending relative to previous guidance reects a reduced
drilling budget and an acute
focus on wells that delivery superior rates of return at current
commodity prices, it said in a
statement.
The spending cuts also mean
the company has reduced 2015
average production guidance
by 8% to between 43,000 and
44,000 barrels of oil equivalent
per day. Average output in 2014
was 38,100 boepd.

Inter Pipeline
nishes jobs
INTER Pipeline has nished
construction on two expansions worth C$3 billion (US$2.4
billion) serving the Cenovus
Energy-operated Christina
Lake and Foster Creek thermal
oil sands projects in northern
Alberta.
The Cold Lake and Polaris
pipeline systems will carry
850,000 barrels per day of crude
from both projects, jointly
owned by Cenovus and ConocoPhillips under the guise of the
FCCL Partnership.
The expansion added 840
kilometres of new pipeline and
seven pump stations.
In 2016 and 2017 Inter Pipeline plans to invest an additional C$290 million on further
expanding the system to accommodate crude from the
partnerships Narrows Lake
thermal project.
FCCL has committed to a 20year take-or-pay agreement.

32

WORLD FEATURE

6 February 2015

CHINA

Project: a cylindrical oating production, storage and offloading vessel under construction at Cosco shipyard in Qidong, China

Yards in China are walking a

Rig-building boom in country comes with risks for fabricators
as payment terms give foreign companies plenty of leverage
XU YIHE
Beijing

HINESE yards face huge

nancial risks on their
rig-building contracts.
About ve years ago,
when Chinese yard managers
were hungry for orders as the
shipbuilding industry hit the doldrums, they were led to believe
that shifting to offshore rig fabrication could save their yards from
going bankrupt.
Since then, Chinas rig-building
sector has grown in leaps and
bounds, so much so that few foreign rig players will place their
orders without turning their eyes
to China.
Yards in China may have yet to
build a reputation for delivering
on target and on schedule, but
clients have been drawn to the
attractive nancial terms and low
prices Chinese yards offer.
The irresistible payment terms
have also given foreign rig players
considerable leverage in their
talks with more sophisticated

yards in Singapore and South

Korea.
Chinese yards are allegedly
sometimes invited to participate
in rig tenders just to enable clients
to beat down the bid price offered
by yards in Singapore and South
Korea.
In such accompanying bids,
we are doomed to lose even
though we offer competitive prices, says a yard official in northern
China.
New landscape Mergers and

acquisitions in recent years have

signicantly reshaped the landscape of the rig industry, giving
rise to many new players that
tend to place newbuild orders on a
speculative basis.
Most of them have limited
access to the funds needed for
fabrication, not to mention any
possible charter agreements they
have in mind.
The players usually sign initial

agreements with Chinese yards,

which, in their hunger to secure
the order, offer a very low price
and agree on a minimal rst
tranche downpayment.
With initial agreements in
place, foreign rig players, sometimes made up of a few individual
investors without any experience
in rig-building or operation, will
seek the down payment needed to
nalise the commercial agreements to allow fabrication to
start.
For standard jack-up drilling
rigs, Chinese yards often agree to
receive about 10% in the rst payment though in most cases the
payment is less than 10%, with
the lowest hitting 1%.
In such a nancial arrangement, the yards would apply credit lines from Chinese banks to
fund the fabrication and they
would not get full payment from
the rig owners until the unit is
delivered. The attractive payment

terms have fanned the enthusiasm of contractors to order rigs on

spec. Should they then fail to
secure work for their newbuild
rigs, they can abandon the order,
having paid a nominal sum.
Chinese yards have faced huge
nancial challenges to pay back
bank loans when the rig owners
have refused to take delivery due
to lack of charter agreements.
Concern The level of worry has

intensied in recent months

against the backdrop of a signicant decrease in oil prices, which
has prompted oil and gas companies to slash their budgets and cut
back on drilling activities.
The weak crude price denitely
has an adverse impact on drilling
activities, making it more and
more difficult to secure charter
agreements for rigs being built in
China, says a marketing manager
of a yard in eastern China.
Sources say that Chinese banks

are now cautious when providing

credit lines and will carry out
serious due diligence before offering credit to yards.
The yards have also learned
lesions from recent cases where
rig owners went bankrupt, leaving Chinese fabricators high and
dry.
We normally wont consider
any order without a rm charter
agreement, says a yard manager
in Shanghai.
Cosco Shipyard in Nantong in
Jiangsu province has borne the
brunt of such cancellations.
Rig owner ATP Oil & Gas UK recently cancelled an order for the
semi-submersible rig Octabuoy being built at Cosco, after Houstonbased parent ATP Corporation
went bankrupt.
Cosco had almost completed the
hull and was half-way through
the topsides.
In a recent survey, Upstream
found that up to 10 Chinese yards

6 February 2015

WORLD FEATURE

33

Key role to be played

by domestic outts
ORDERS
PLACED
New players help fuel
newbuild boom
XU YIHE
Beijing

Photo: DANA PETROLEUM

nancial tightrope
received orders to build up to 59
jack-up rigs for delivery from now
till 2017, which accounts for about
40% of the jack-ups on order worldwide.
However, 49 of these units are
without rm charter agreements.
The largest jack-up fabricator,
China Merchants Heavy Industry
in Shenzhen in Guangdong province, is fabricating up to 18 jackups, of which only one is understood to have been chartered.
Orders Other yards with thick or-

der books include Dalian Shipbuilding Industry Offshore with 11,

including eight for Seadrill, Shanghai Waigaoqiao Shipbuilding (SWS)
with 11, including three for delivery this year, and CIMC Raffles
with seven, including three selfsponsored Super M2 rigs.
Zhenhua Heavy Industry also
has seven such units on order and
Shanhaiguan Shipbuilding Industry has four. Some Chinese yards

or rig owners are betting on a recovery of the North Sea drilling

market in 2017.
This expected upturn is
prompting them to change the
specications of their previous
orders to boost their marketing
prospects in the UK North Sea and
other areas.
Singapore-based FTS Derrick
has decided to upgrade at least
two units of the four it ordered in
2013 from Shanhaiguan from the
original CJ50 design to CJ54 in order to cater to the drilling requirements of the UK North Sea.
CJ54 drilling rigs are intended
for operations in water depths of
up to 350 feet in harsh environment conditions and 450 feet in a
moderate environment. These
will be the worlds rst rigs to be
built to the CJ54 design.
However, sources say Shanhaiguan may not accept the upgrading proposal put forward by FTS
Derrick.

THE recent rise of domestic rig

players has helped fuel the
rig-building boom in China.
At least four players,
including East Sunrise, Petrolor
and Cayman Islands company
Blue Ocean Drilling, have
entered the business.
Blue Ocean, which comprises
investors in Shandong
province, has placed orders
with Shanghai Waigaoqiao
Shipbuilding (SWS) to build four
high-specication GustoMSC
CJ-50 design jack-up rigs.
These newbuilds will be
designed to comply with the
regulatory requirements in the
UK sector of the North Sea, as
well as for other highspecication operations around
the world.
Orders have waned since the
second half of last year, as rig
owners over-booked.
This forced some Chinese
yards to sponsor the fabrication
of rigs for which they see good
marketing prospects in harsh
environments after 2017.
CIMC has planned to
speculatively build up to six
semi-submersible rigs as it eyes
future demand in the UK North
Sea market.
The ABS-classed units are
designed to operate in the
harsh conditions of the UK
continental shelf, as CIMC
anticipates future growth in
the North Sea replacement
market.
The rigs are to meet HSE
reference standards in
temperatures of minus 10
degrees Celsius, be able to work

in water depths of up to 500

metres upgradable to 1500
metres when necessary and
be able to drill to 9144 metres.
While some yards are trying
to upgrade the specications of
their rigs, others are
considering downgrading specs
so as to sell them cheaply, say
sources.
Investors in Singapore and
some funds in China are
considering establishing a
company to take advantage of
the numerous jack-ups ready
for delivery this year but
without rm charters.
They plan to launch new
tenders to buy some of these
jack-ups that are being built.
The Chinese government has
acted to rein in the expansion
spree among Chinese yards
keen to diversify into rigbuilding.
Early this year, the Ministry
of Industry & Information
Technology (MIIT) set a higher
benchmark to qualify yards
before they are able to take
orders to build offshore rigs.
The MIIT now requires yards
to own licences and
infrastructure for rig building
and should allocate a minimum
2% of their annual revenues for
research and development.
Qualied yards must also
have references as well as
patents for rig building.
Other parameters for
qualication include a
comprehensive commissioning
system and abilities in subsea
installation.
The new policy took effect
from 1 February.
Yards will initially submit
their application for
qualication to the local
provincial authorities in charge
of offshore engineering.
Following the initial
assessment, the local
authorities will send their
comments along with the
application to the MIIT, which
will carry out a nal review
before making its qualication
or rejection decision.

The weak
crude price
denitely has
an adverse
impact on
drilling
activities,
making it
more and
more difficult
to secure
charter
agreements
for rigs being
built in China.
Future demand: the CIMC yard in China
Photo: COSL DRILLING EUROPE

WORLD

34

6 February 2015

AFRICA

Savannah steps up Niger drive

UK-listed
company eyes
Eocene and
Cretaceous
targets with new
seismic survey
IAIN ESAU
London

LONDON-listed junior Savannah

Petroleum is set to complete the
rst full tensor gravity gradiometry survey in Niger next
month over two promising
Agadem basin blocks.
These blocks host the same oil
plays that have been so successful
for China National Petroleum
Corporation (CNPC) in adjacent
acreage, so much so that the
Chinese state-owned player aims
to begin crude exports in 2017 via
a new pipeline tied into the ChadCameroon pipeline.
Savannah chief executive
Andrew Knott said Arkex is
currently carrying out the FTG
survey over blocks R1 and R2.
This data, when analysed and
interpreted, will help identify
prospects and where to shoot further seismic or drill exploration
wells.
Knott told Upstream a decision
on whether to drill or acquire
fresh seismic will be made in
about ve or six months time.
Whichever option is chosen,
Savannah will have to drill wells
off 3D seismic because, as CNPC
found out, this enhanced data
allows better imagery of seals
and where faults lie, said Knott.
Drilling on 3D data resulted in
CNPC exploration success rates
hitting 78%, whereas before the
company entered Niger in 2008
operators were drilling on 2D data
that generated a success rate of
just 25%.
About 800 square kilometres of
legacy 3D seismic already exists in
the southern part of R1, but the
remaining areas of both permits
are partly covered by 2D seismic
and even that is quite sparse in R2.
We dont expect to be in a position to update our prospect inventory until mid-2015, said Knott,
while suggesting Eocene and Cretaceous targets, similar to those
discovered by CNPC, would likely
emerge.
Knott said Savannah will embark on competitive tender processes for both seismic and drilling
work with operations to start in
the second half of this year.
While Nigers large and sophisticated service industry is dominated by Great Wall Drilling and

Round the table: Savannah Petroleum chief executive Andrew Knott (left), with Savannah country manager Yacine Wafy
(second from left) and Niger Energy & Petroleum Minister Foumakoye Gado (right)
Photo: SAVANNAH PETROLEUM

SAVANNAH AND ITS R1 AND R2 PERMITS

NIGERS UPSTREAM SECTOR

Nationality

Company

Licence

Algeria

Sonatrach

Kafra

Australia

Akata Resources
International Petroleum

Achegour
Aborak,
Manga 1 and 2
Tenere Ouest

CNPC

Agadem
Bilma
Tenere

China

Nigeria

Labana

UK

Sirius Group
Suntrust Oil
Savannah Petroleum

R1 and R2

BGP, Knott said Savannah is looking into the idea of buying its own
rig, adding that the market downturn has freed up seismic crews
elsewhere in Africa.
Knott is quietly condent that
Savannah, which has 100% stakes
in its permits, will eventually secure a farm-in partner even in the
current oil price environment due
to the characteristics of the
Agadem basin.
It looks very attractive relative
to other basins globally. An exploration well costs $4.25 million including drilling, completion, civil
works and security with a nding

Acreage relinquished by CNPC in mid-2013 was awarded to

Savannah in June 2014.
R1 and R2 are surrounded by CNPC-operated blocks in sparsely
populated southeast Niger
Potential resource of 573 million barrels in Eocene play.
Source rocks are Upper Cretaceous, Eocene and Palaeocene

Dallol
Dibella 1
Djado 3 and 4
Tamesna
Grein
Tounfalis

Shenshui Oil & Gas

Savannah chief executive Andrew Knott is an economist who

previously worked for Bank of America-Merrill Lynch and GLG
Man hedge fund.

cost of comfortably less than $1

per barrel, he said.
If we decide to attract a farmin party I am very relaxed that
will be doable.
Compared to the cost of a $150
million offshore well, we can drill
20 wells and costs have come
down signicantly.
Savannah has pencilled in the
second quarter of this year to conclude a farm-in deal, though it insists it is in no desperate rush to
secure a partner because it has
funds to acquire more seismic or
drill wells.
We raised $75 million of equity

Eocene sandstones are proven play type with 77 discoveries.

CNPC made recent Cretaceous nds.
No discoveries in R1 and R2 but CNPC nds typically hold waxy,
31 degrees API crude and produce at 1000 to 3000 bpd.
Equipment can be trucked and/or barged from Benin or
Cameroon.

which is enough to acquire FTG

data and for drilling or seismic,
said Knott.
He added that, if a deal is agreed,
I would expect to retain operatorship in the exploration phase and
a very material equity stake.
Nevertheless, he stressed the
company wants to move at our
pace because we have invested a
lot in Niger.
Savannah has fast-tracked everything to date, said Knott, who
trained as an economist and previously worked in the City of London.
Its quite a signicant achievement for Savannah to have an ini-

Agadem basin takes centre stage for exploration plans

NIGERS Agadem basin is one of the interior
basins in West Africa that has been
historically neglected by the major oil
companies, according to Savannah
Petroleum chief executive Andrew Knott.
We looked at a variety of countries and
the geology was either highly prospective
for deep tight gas or we felt the best acreage
was licensed, he said.
But when we went into Niger, it was a

completely different situation. The Agadem

is a relatively unexplored basin but with a
very, very high success rate and companies
were paying no attention to it.
Savannah jumped at the opportunity to
secure the permits and signed up in
mid-2014.
Since then it has listed, established a
board chaired by Steve Jenkins, former
chief executive of Nautical Petroleum, and

secured major shareholders including

Standard Life, Fidelity and Henderson.
There is a strong institutional buy-in,
which makes me very relaxed in terms of the
execution of our business plan, said Knott.
Savannahs board and management also
have sizeable personal investments in the
company and keep a tight control on
overheads, which run to about $3 million
annually, said Knott.

tial public offering and within

three months kick off an FTG survey, he said.
The prospects in R1 and R2 are
not expected to be huge because
the size of CNPCs discoveries to
date have averaged 11 million barrels in Eocene structures with the
largest being 60 million barrels.
However, CNPCs prospects are
clustered, which allows them to
be developed cost effectively via
single well pads.
Knott expects this development
model to materialise on Savannahs blocks.
CNPC currently sends crude to
a 20,000 barrels per day renery at
Zinder, but once a new pipeline is
built to hook up to the Chad-Cameroon line which has excess
capacity available output could
hit 60,000 to 80,000 bpd.
There is still a lot of spare capacity even after new Chadian
elds are tied into it, said Knott,
adding that that Savannahs production sharing contracts for R1
and R2 give it access to export infrastructure.

WORLD

6 February 2015

35

NORTH AMERICA

Shell readies for return

to US Arctic exploration
Chief executive Ben van Buerden
says supermajor well prepared to
mitigate risks to environment

Expansion: Kearl oil sands

Photo: IMPERIAL

BILL LEHANE
London

Kearl 2
ahead of
schedule
IMPERIAL Oil plans to bring an
expansion of its Kearl oil sands
project in Canada on line three
months ahead of schedule as it
maintains its oil sands investments despite low commodity
prices, writes Noah Brenner.
The Kearl 2 project was not
due online until the end of 2015
but Imperial now believes it
could go into production as
early as the third quarter and
said the facility is essentially
complete.
Once online, Kearl 2 will
have a capacity of 110,000 barrels per day of bitumen, doubling the nameplate capacity of
the Kearl facility, said Imperial, which is majority owned by
US supermajor ExxonMobil.
For the fourth quarter, the
existing Kearl facility averaged
66,000 bpd of bitumen, despite
a shutdown of the facilitys ore
crusher in November due to excess vibration.
If the ore crusher had not
been temporarily taken out of
service, the facility would have
averaged 87,000 bpd of bitumen.
As well as its work at Kearl,
Imperial also began steaming
operations at its Cold Lake
Nabiye project in January, after
starting operations there in December.
Imperial plans to produce
rst bitumen from the facility,
which has a nameplate capacity of 40,000 bpd, within the
next couple of months.
Imperial chief executive
Rich Kruger said the companys investment plans remain
largely unchanged despite the
recent plunge in oil prices.
For the fourth quarter, Imperials net income fell by more
than one-third to C$671 million
(US$533.6 million) or about 79
Canadian cents per share compared to C$1.06 billion (C$1.24
per share) over the same period
a year ago.
However, net income for all
of 2014 surged 34% to C$3.79 billion (C$4.45 per share) from
C$2.83 billion (C$3.32 per share)
in 2013.
Imperial produced an average of 315,000 gross barrels of
oil equivalent per day in the
fourth quarter of 2014, down
14,000 boepd compared to the
same period in 2013 but up 4000
boepd excluding asset divestments.

On the spot: Shell chief executive Ben van Beurden speaks

as the supermajor releases its fourth quarter results
Photo: AFP/SCNPIX

ANGLO-Dutch supermajor Shell is

preparing to face off environmental opponents and resume oil exploration drilling in US Arctic waters as soon as this summer.
Shell suspended its Alaskan
drilling programme in 2014 after
an unsuccessful foray in 2012 that
was dogged by operational problems for both rigs involved in the
campaign, including the grounding in poor weather of the barge
drilling unit Kulluk.
Last year, Shell puts it efforts on
hold amid high costs , erce environmental opposition and legal
challenges.
Now though, despite unveiling
plans to cut spending by as much
as $15 billion over the next three
years because of low oil prices,
Shell is looking to get back to the
Arctic.
Shell chief executive Ben van
Beurden said that operational assurance issues, permitting and
legal challenges were all outstanding but assuming they can
be dealt with, the company is
aiming to resume drilling in
Alaskan waters this year.
Speaking in London following
the publication of the companys
2014 results, the Van Beurden admitted that Shellss Alaskan plans
this year seemed to be the story
of the day, even though the company never retired its full eet
and always intended to return to
exploration there.
Environmental groups were vociferouos in their complaints
about the Shell plans.
Despite announcing cuts Shell
hasnt taken the opportunity to
cut its most high-cost, high-risk
project. Shell is taking a massive
risk doggedly chasing oil in the
Arctic, not just with shareholder
value, but with the pristine Arctic
environment. A spill there will be
environmentally and nancially
catastrophic, said Greenpeace
campaigner Charlie Kronick.

Running aground: the drilling

unit Kulluk off Alaska in 2012
Photo: US COAST GUARD

These expensive, long-term oil

projects make no sense as governments around the world become
increasingly serious about climate
change. Its time for Shell to scrap
this hapless project for good, he
argued.
Van Beurden said Shell will only
proceed with drilling if it believes
it can do so responsibly.
I think that we are as well prepared as any company can be to
mitigate the risks, he claimed.
He added that the structures
Shell is looking at off Alaska are
very promising, but any discovery
would have to be very large in order to be economic for development.
He also admitted that any such
development would take many
years.
Shell has already led a revised
exploration plan with the US Bureau of Ocean Energy Management (BOEM) focused on spudding
new wells on prospects in the
Chukchi Sea beginning in mid2015.
The Burger prospect, where a
well was started in 2012 but not
completed before the end of the
weather window, is thought to be
one of several prospects Shell is
planning to target.
Shells plans involve dispatching two rigs to the Arctic play, the
drillship Noble Discoverer and the
Transocean semi-submersible Polar Pioneer.

BLM dispute leads ConocoPhillips to delay GMT1 project

CONOCOPHILLIPS Alaska is deferring
sanctioning of its proposed Greater Mooses
Tooth Unit 1 (GMT1) project on the North
Slope in light of low oil prices and an
uncertain regulatory future, writes Tonya
Zelinsky.
A dispute over the preferred plan for
GMT1 with the US Bureau of Land
Management has taken a toll on the project
and prompted the US major to slow the
pace of investment for the time being.
The project is challenged by permitting
delays and requirements, as well as the
current oil price environment, said
ConocoPhillips Alaska president Trond-Erik
Johansen.
Despite the delay to a nal investment

decision, the company will continue to

shoot seismic and progress engineering.
The GMT1 unit is in the north-east corner
of the National Petroleum Reserve-Alaska. If
developed, the eld would be estimated to
produce about 30,000 barrels per day at peak.
A regulatory application for GMT1 was
submitted to the BLM in 2013, which later
chose a development alternative to
ConocoPhillips preferred plan in October.
ConocoPhillips has said the alternative
would be more expensive.
The US Army Corps of Engineers awarded
a wetlands permit in favour of
ConocoPhillips preferred plan.
It also has support from the Kuukpik
village corporation, Arctic Slope Regional

Corporation, City of Nuiqsut, the North

Slope Borough, Alaskas congressional
delegation, and Governor Bill Walker.
We designed a very robust project that
minimises impacts, complies with all
applicable regulatory requirements and
includes voluntary mitigation measures,
said Johansen.
The company said it will forge ahead on
other plans including construction of the
CD-5 and drillsite 2S projects, both expected
to achieve production by the end of 2015.
It will also sanction phase one of the
North East West Sak (NEWS) development
and the NEWS 1H project and execute
drilling programmes across the Alpine and
Kuparuk elds.

WORLD

36

6 February 2015

AUSTRALIA

All eyes on Murphy Oils

trio of Perth basin wells

RUSSELL SEARANCKE
Wellington

Pertamina
after liftboat

it without incredible non-tax expense for us, added Jenkins.

Meanwhile, on the other side of
the country in the deep-water
Ceduna basin, Murphy is more

than 50% through a major seismic

acquisition in Block EPP43.
Murphy said the 8000 squarekilometre sweep is expected to
nish up in the near term.

Promise: Murphy Oil chief

executive Roger Jenkins says
the Perth basin is a nice
opportunity
Photo: MURPHY OIL

Timor-Leste sets up council for maritime boundary talks

THE government of Timor-Leste
has set up a new council led by
Prime Minister Xanana Gusmao
for the purpose of negotiating
with Australia on a permanent
maritime boundary, writes Russell
Searancke.
The government has been agitating for a maritime boundary
for several years, and launched
legal proceedings last year against
the Australian government alleging espionage during negotiations
for the Certain Maritime Arrange-

10% stakes from Inpex

and JX Nippon
AUSTRALIAS Santos has
farmed in to deep-water Block R
off Sabah, East Malaysia, with
the acquisition of stakes from
Japanese operator JX Nippon
and compatriot Inpex ahead of
wildcatting in 2015, writes
Amanda Battersby.
Santos is taking 10% equity
apiece from JX and Inpex in
the 672-square kilometre Block
R production sharing contract,
where water depths range from
100 to 1400 metres.
A 3D seismic survey and geological and geophysical studies
have been carried out on Block
R since it was awarded in January 2012 and three wildcats targeting oil and natural gas are
planned, starting this year.
The PSC is located in the vicinity of the producing Gumusut-Kakap and Kikeh oilelds
and also near Inpexs deepwater Block S into which Santos last year farmed in.
On completion of the Block R
farm-in, which is subject to
due procedures, partners interests will be operator JX on
27.5%, Inpex with 27.5%, Malaysian national upstream company Petronas Carigali on 25%
and Santos on 20%.
The 574-square kilometre
Block S, where water depths
are between 200 and 1500 metres, was also awarded in January 2012.
Co-venturers here are operator Inpex on 50% and Petronas
Carigali and Santos both on
25%.

Industry keen to
see results as US
independent
drills rst of three
shallow-water
wells off Western
Australia

US INDEPENDENT Murphy Oil is

drilling the rst of three back-toback oil exploration wells in Western Australias Perth basin.
The shallow-water wells are being watched eagerly by the Australian industry which, notwithstanding the current low oil price,
wants to know if there are any
new oil provinces to be developed
in Australia.
Murphy chief executive Roger
Jenkins said the rst well was
spudded on 22 January in Block
WA-481-P, adding that we are
testing a total of 280 million barrels of gross mean resource across
three wells.
Drilling is being carried out by
the semi-submersible rig Atwood
Falcon at a dayrate of US$499,500.
Farstad is providing two large
anchor-handling vessels to support Murphys programme the
Far Strait and the Far Scimitar
which have been awarded contracts by Murphy for about 60 days.
The permit was awarded to
Murphy and joint venture partners Kufpec of Kuwait and Samsung Oil & Gas in 2012. The trio
have also made a commitment to
two additional wells in the second
three-year exploration phase.
Jenkins has previously described the Perth basin as a very
nice opportunity.
Theyre not large (prospects),
one wells around a 50 millionbarrel mean, the other two are
near 100 million. They are in only
60 metres of water.
Theres three different types of
faulting features there. Theres
nearby wells with great sand quality. There was recently an onshore
well there that gave some promise
to that area. So Im excited about
the kick at the can and the size of

Santos
farms in
off Sabah

ments in the Timor Sea, which

governs the Sunrise liqueed natural gas project.
Those legal proceedings are currently suspended, but Timor-Leste
wants to begin direct negotiations
with Australia.
A spokesman for the TimorLeste government said the newly-established maritime council
will be led by Gusmao and will
include former presidents and
prime ministers and other eminent and qualied participants.

Oil and gas activities in the

Timor Sea are guided by provisional arrangements in the form
of three treaties the Timor Sea
Treaty, the Certain Maritime Arrangements in the Timor Sea, and
the International Unitisation
Agreement.
The spokesman said the legislation that underpins the new council declares that 12 years have
passed since the restoration of the
independence of the nation, and it
is now necessary to determine,

once and for all, the national maritime boundaries in light of their
enormous social, political and
economic impact.
Gusmao told parliament in December 2014 that Timor-Leste is
determined to impose its collective political will.
This is why our people sacriced so much. We did not ght
and suffer and die just to have
an independent ag, but to be able
to exercise and enjoy what is
rightfully ours.

INDONESIAS state-owned oil

and gas company Pertamina
Hulu Energi West Madura Offshore has received responses
from at least three companies
for the provision of a self-propelled, multi-purpose and selfelevating liftboat including
operations personnel for two
years of work beginning in July
2015, writes Ruth Chen.
The companies include Indonesias Swadaya Sarana Berlian, Singapores Terras Offshore and Dubai-headquartered
Gulf Marine Services.
The lift-boat is required to
have on-board equipment that
can implement well servicing
including the processes of
acidizing, hydraulic fracturing, cementing, perforating,
sand lls clean-out, wire-line
services, snubbing, well controls, water controls and other
platform maintenance activities.
The local content for the tender is a minimum of 35%.
Meanwhile Pertamina Hulu
Energi Offshore Northwest
Java recently also had a similar
tender for a four-legged liftboat for three years work, including an optional two years.

WORLD

6 February 2015

37

Maersk in
corrosion
warning

RUSSIA-UKRAINE

MAERSK Oil has been warned

after badly corroded hydraulic
pipework was discovered on
the Global Producer 3 oating
production, storage and offloading vessel off the UK, writes
Rob Watts.
Inspectors from the Health &
Safety Executive (HSE) said the
pipes were in poor repair and
an advanced state of corrosion.
The pipework found during an inspection in November
was located in the turret
turning and locking systems.
The company said: Maersk
Oil UK has received an HSE improvement notice in relation to
the Global Producer 3 FPSO. Activity to comply with the notice is well under way, with a
hydraulic pipework replacement programme in place and
scheduled to be completed in
May 2015, in line with the
HSEs requirement.
Maersk has been given until
28 May to comply.

Pressure point: a gauge measures the pressure of gas in pipes headed for the European Union market at a gas compressor
facility operated by Gazprom in Sudzha, Russia, near the Ukrainian border
Photo: BLOOMBERG

Gazprom and Naftohaz

face wait for arbitration
Companies le petitions against each other with chamber in
Sweden, but hearings are not expected to take place until next year
VLADIMIR AFANASIEV
Moscow

RUSSIAN state-controlled gas

monopoly Gazprom has acknowledged a deep rift with Ukraines
gas importer and distributor
Naftohaz Ukrainy in its latest
nancial report, covering the
period between January and
September of 2014.
Both companies have led petitions against each other with an
international arbitration chamber
in Stockholm, Sweden.
However, the rst hearings in
these cases are not expected to
happen earlier than February or
March 2016, according to
Gazprom.
Gazprom said that it is asking
the chamber to conrm its claim
that Naftohaz owes about $4.5 billion to the gas giant for earlier gas
deliveries.
However, in its lings with the
chamber, Naftohaz claims that it
overpaid more than $6 billion to
Gazprom because of the unfair gas
market pricing mechanism, stipulated in their January 2009 supply agreement, since May 2011.
Additionally, Naftohaz seeks a
payment of $6.2 billion from
Gazprom under its 2009 long-term
gas transit transport contract.
The Ukrainiain company claims

that Gazprom failed to pay for the

guaranteed volume of transit gas
across Ukraine and enjoyed unfair
low transport tariffs for sending
its gas across the country to Europe since 2009.
The rift between Gazprom and
Naftohaz may affect the companies ability to reach an agreement
on Russian gas supplies to Ukraine
after the end of March when their
temporary winter gas supply contract expires, according to industry observers.
Ukraine is expected to exit the
winter season with its vast underground storage reservoirs almost
empty, and may not be able to ll
them with new gas during the
summer period because of the
disagreement with Gazprom,
observers warn.
However, with Gazprom traditionally pumping the excess of
produced gas into Ukraines underground storage during the second and third quarters, the unavailability of that outlet
threatens to lead to irreversible
production cuts at Gazproms ageing core gas assets in West Siberia.
The gas giant has already reported gas output for 2014 that
was the lowest in the companys

history, and may not be able to

satisfy any spikes in demand during this coming winter in Europe,
observers predicted.
The fall in international energy
prices is also expected to further
undermine Gazproms bottom line
this year, as its long term contracts with European buyers are
linked to the oil and products pric-

es. At the end of last week,

Gazprom said that its net income
fell by 37% to 556 billion rubles
($14.1 billion) for the period between January and September
2014.
That decline came though the
company reported 6% growth in
total revenues to more than 4 trillion rubles.

GAZPROM VS NAFTOHAZ UKRAINY

Gazproms stance:
$4.5 billion still owed by Naftohaz for earlier gas supplies.
Wants Naftohaz to stick to terms of the 10-year gas supply
agreement signed in January 2009.
Avoided attempts from European Commission to broker a new
gas supply agreement between Gazprom and Naftohaz.
Naftohaz stance:
Overpaid $6 billion for Russian gas supplies since May 2011.
Has not received $6.2 billion from Gazprom under the transit
gas transportation contract.
Wants Gazprom to provide additional technical gas to burn in
compression stations in Ukraine to enable Russian gas transit
to Europe this year.
Wants to revise terms of its 2009 gas purchase and gas
transportation agreements with Gazprom or cancel them.

Helicopter
safety call
GOOD progress has been made
improving North Sea offshore
helicopter safety but there is
still more to do, the UKs air
safety regulator has said.
The assessment from the UK
Civil Aviation Authority (CAA)
came in a progress report on
action to implement changes it
called for in a comprehensive
review of offshore helicopter
operations in February 2014.
CAA director of safety and
airspace Mark Swan said: The
safety of those who rely on offshore helicopter ights is our
absolute priority. Some encouraging progress has been made
over the last year to improve
helicopter safety but there is
still more that can and will be
achieved.
We will continue to report
regularly on progress, so that
people can have condence
that these important changes
are being implemented as
quickly as possible.

Outt ned
over death
LOWESTOFT-based services
company Bilnger Salamis has
been ned 100,000 ($150,000)
after a worker died by falling
23 metres from Shells Brent
Charlie platform off the UK
into the sea.
Lee Bertram, 37, from Newcastle, died on 16 June 2011
when the main and safety
ropes he was using sheared as
he was pulling himself back up
to the platform. He had been
checking under the platform
for dangerous objects.
After an investigation by the
Health & Safety Executive,
Bilnger Salamis admitted
breaching safety regulations at
Aberdeen Sheriff Court on 2
February.

38

6 February 2015

SHALE

AND UNCONVENTIONAL OIL & GAS

Scandrill
forced to
cut jobs
PRIVATELY held US land driller
Scandrill has slashed its
dayrates and trimmed salaries
across the board but will still
be forced to stack rigs and lay
off workers as the market
downturn hits hard, writes Luke
Johnson.
Chief operating officer Paul
Mosvold told Upstream that
Scandrill will be laying off 50
people within the next month,
with more jobs likely cut later
in the year.
It is a last resort for the East
Texas driller, which has already dropped its dayrates by
about 15% and cut salaries by
8% for every employee.
Obviously we need a little
bit more than break-even, but
we are willing to do that,
Mosvold said.
Our key is to keep the
crews operating so we are
ready to ght another day
Without our people we cant do
anything.
Tyler-based Scandrill has
been contracting rigs and drilling services in East Texas and
surrounding areas for more
than 40 years, and its ability to
weather previous downturns
lies in its decades-old relationship with its suppliers and its
customers, Mosvold said.
It has demanded and
received a 15% to 20%
price break from its welders
and other suppliers, and
voluntarily passed on the
savings to operators such as
Anadarko Petroleum, XTO Energy and Devon Energy, among
others.
Scandrill just delivered to
Anadarko a high-specication
newbuild rig, the Scan Vision,
which the Texas-based independent will use to drill wells
in the Haynesville shale in
Panola County.
It may be Scandrills last new
rig for a while, Mosvold said.
We had another rig we were
going to build. We cancelled
it I think everybodys just
stopped, for at least a year, he
said at a christening ceremony
for the Scan Vision.
Scandrill currently has three
of its 17 rigs stacked and could
see another laid down in the
coming weeks.
While it pains Mosvold to lay
off his workers, he is dubious of
some of his larger rivals who
are less forthcoming about imminent layoffs.
If you say youre going to
keep your people while laying
down rigs, you might as well
say Im going to go get my
sword and jump on it, he
said.

Search the archive:

Scandrill

There is solid reason to believe the

statewide (Texas) rig count will ultimately
decline by over 60% from its November
peak level of just over 900.
Petroleum economist Karr Ingham

US

Clouds gather
as Texas braces
for rig-count
cuts of 60%
Oil price collapse could see states
overall count drop below 300
NOAH BRENNER
Houston

THE US state of Texas could see its

rig count cut by up to two-thirds
from its 2014 highs and see its
overall tally dip below 300 as part
of the ongoing bloodbath in the US
onshore drilling sector due to low
oil prices.
Texas is currently home to almost half of all the land rigs in the
US, hosting 695 of the estimated
1543 total US rigs, according to the
latest gures from Houston-based
services giant Baker Hughes.
According to an economist with
the Texas Alliance of Energy Producers, the state is less than halfway through the declines he expects as a result of the latest
downturn.
Future events will dictate the
depth of the decline, but there is
solid reason to believe the

statewide rig count will ultimately decline by over 60% from its
November peak level of just over
900, petroleum economist Karr
Ingham said.
While Texas is the bellwether
state to judge the health of US onshore drilling activity, it is far
from the only state seeing its rigs
get laid down.
The overall number of rigs drilling in the US took one of the biggest weekly dives in recent memory, falling by 90 to a total of 1543,
according to the latest weeks
data.
The drop this week was the biggest since 1987, when Baker Hughes started issuing its rig count.
That was also during a period of
downturn for the oil industry.
Oklahoma was the second-biggest

loser among states, shedding 10

rigs for a total of 183, and North
Dakota lost four rigs for 143, while
the larger Williston basin shed
ve rigs for 148.
In total, the Baker Hughes
count has declined by about 20%
from its 2014 high and some private rig counts are showing even
greater declines.
In Texas, over the course of the
ve-year drilling boom that began
at the end of the nancial crisis,
production has grown by 118% to
its highest level since 1977 to almost 3.4 million barrels of oil per
day, based largely on ows from
the Eagle Ford Shale and Permian
two of the three largest tight oil
plays in the country.
Had commodity prices stayed
high, production could have

eclipsed the state record set in

1972, Ingham said, but now such a
rate is probably years into the future as production is set to decline
as investment dries up.
How fast that decline happens
is perhaps the biggest key to predicting when oil prices will bottom and where they will stabilise.
Weekly data and earnings reports thus far continue to support
the theme of cuts being greater
and quicker than initially expected, analysts at investment bank
Tudor Pickering Holt said in a
note.
The pace of reductions in the
rst quarter could push production to decline sequentially by the
third quarter.
Supply declines could be further

6 February 2015

39

2000

APPROXIMATE NUMBER of
leases in East Texas that EOG has taken
over from Graem.

EOG takes over leases

from Graem Resources
ACREAGE
CHANGES HANDS
US giant expands
exploration programme
EOG RESOURCES has taken control of a large number of leases in
East Texas from Graem Resources,
which has been helping the US
tight oil giant amass acreage in a
stacked exploration play around
Anderson and Cherokee counties,
writes Noah Brenner.
Houston-based EOG took assignment of more than 1500 leases
in Anderson County and more
than 400 leases in Cherokee County from Graem in late December,
according to local land records.
While the lease list does not include the amount of acreage in
each lease, the rural nature of the
area probably means that the almost 2000 individual leases could
total tens of thousands of acres.
The leases are part of an extensive exploration progamme EOG
has undertaken across much of
East Texas, where the shale giant
has locked up hundreds of thousands of acres and drilled a handful of exploration wells.
The area extending from Anderson County in the south-west
through its borders with Henderson, Smith and Cherokee counties

to the north-east seems to make

up one distinct exploration play.
The company began leasing in
the area in spring 2012 using a few
different shell companies, and is
believed to control over 250,000
acres in the area.
Land prices in the area started
out low as there has been little
recent drilling activity, and it is
believed EOG locked up a signicant portion of its position with
lease bonuses of about $150 per
acre and low royalty rates.
Recently, competition from
speculators has pushed prices up
to $500 per acre and royalties as
high as 25%, according to landowners there.
At least initially, EOG was most
interested in testing the Goodland
Lime interval, according to local
sources and Texas drilling
records, but the company is believed to have studied other possible tight oil plays such as the
Buda, Glen Rose and Rodessa.
The company drilled an initial
pair of vertical wells in Anderson
County the Autry and Mathis
wildcats both of which the
company has fractured at least
once but continues to work on, according to state records.
EOG also drilled a pair of wildcats in neighbouring Smith County, including the Cowan 1H horizontal well into the Goodland
Lime, which owed at a rate of 262
barrels per day of oil during an
initial 24-hour test.

Lucas seeks nancial help

Counting the cost: Texas could

see its overall rig count drop
below 300
Photo: AP/SCANPIX

accelerated by what appears to be

a growing phenomenon of operators choosing not to complete
wells that they have already
drilled to save money and avoid
owing peak production into a
low-price market.
A growing number of data
points show E&Ps looking at
plans to delay completions into
the second half of 2015 and beyond, Tudor Pickering Holt
analysts said.
To date, delays have primarily been small cap and private
operators but with continued
low oil prices, a reasonably steep
forward curve ($10 per barrel
over 12 months), 15% to 20% cost
savings over the coming quarters and multi-year paybacks on
just the cost of completions, de-

ferring completions makes

sense.
The overall decline in activity
has already resulted in the termination of thousands of jobs at
both operators and service companies and, like the rig count,
Ingham believes the worst is yet
to come.
In total, he believes more than
50,000 people working in the upstream sector in Texas will lose
their jobs by the end of the current
contraction about one in every
six of the roughly 311,000 total
workers in the sector.
I hope the number is that low,
he said, adding that he sees further downside risk to that estimate.
On the services side, GE announced that it was laying off 330

workers from pump maker Lufkin,

which the conglomerate bought
for $3.3 billion in 2013.
Smaller players also announced
lay-offs, with driller Lariat Services dropping 26 employees and
pressure pumper Trican Well
Services laying off 125 people.
On the operators side, SandRidge Energy cut 25 people from
its Texas operations and ConocoPhillips announced that it too
was considering additional layoffs after letting go more than
200 people from its European operations.
We are likely to see more headcount reductions in other parts of
the business as we re-assess the
implications of lower prices on a
future plans, chief nancial ofcer Jeff Sheets told investors.

US JUNIOR Lucas Energy has

failed to make two required payments on its debt and is shopping
for a nancial lifeline that could
include a sale of the company.
Houston-based Lucas had
missed a principal payment on
13 December and another interest payment in January on a $7.7
million loan, the company said.
While the lender waived the
interest payment, the loan now
carries a default interest rate of
18% and the companys lender
has reserved all rights under
the loan agreement that were
triggered by the default. Lucas

chief executive Anthony Schnur

said the company has made
progress in reducing its operating costs by as much as $2 million per year and hopes to begin
drilling on its acreage in the Eagle Ford shale play in Karnes
County as soon as it can secure
enough cash.
The plunge in crude oil prices
has required us to reconsider all
alternatives, Schnur said.
We are actively and aggressively pursuing options to secure
funding through a corporate combination or project nancing arrangement.

State lands drill ban re-instated

PENNSYLVANIAS newly-elected
Democratic governor has
re-instated a moratorium on
leasing state-controlled lands
for natural gas drilling.
Tom Wolf signed an order
halting leasing in state parks
and forest land, reversing an
order from his predecessor, Tom
Corbett, that opened up parcels
to leases with operators seeking
to tap the Marcellus Shale.
Wolf made the move after the
state Department of
Conservation & Natural
Resources warned that further
leasing could jeopardise its
ability to maintain its gold
standard forest certication.

Moratorium: Pennsylvania
Governor Tom Wolf
Photo: AP/SCANPIX

SHALE

40

Bazhenov
wells
success

6 February 2015

CHINA

RUSSIAS Gazpromneft said last

week that its regional subsidiary
Gazpromneft-Khantos
owed hydrocarbons from two
appraisal wells drilled into the
Bazhenov shale layers of the
South Priobskoye eld.
Gazpromneft did not reveal
ow rates but said that its subsidiary is on course to carry out
testing of two more appraisal
wells after employing downhole fracturing.
According to the company,
the Bazhenov and Abalak layers are located at depths between 3000 metres and 3200
metres, almost two times
deeper than the traditional
sandstone reservoirs at South
Priobskoye, which are already
producing oil.
The appraisal programme for
these two layers at the eld
calls for a total of four appraisal wells, after which Gazpromneft is set to re-assess the potential of the reservoir and
decide upon the number of
horizontal development holes
to be drilled.

Chevron out
of Poland...
CHEVRON is pulling out of its
shale operations in Poland after disappointing exploration
results and continued uncertainty over the regulatory climate in the country.
The US supermajor was drilling in partnership with Polands state-controlled PGNiG
on four licenses covering more
than 1 million acres in the
eastern portion of the country
near the border with Ukraine.
Chevron Polska Energy Resources can conrm that it has
completed the exploration programme in collaboration with
PGNiG in the Tomaszw Lubelski concession area, Chevron
said.
Chevron Polska Energy Resources has decided to discontinue shale gas operations in
Poland as the opportunities
here no longer compete favorably with other opportunities in
Chevrons global portfolio.

... as PGNiG
plans to drill
POLISH Oil and Gas Company
(PGNiG) is planning a multiwell shale gas drilling programme at the Pomeranian
basin in north-west Poland
this year.
PGNiG said three to four horizontals will be drilled and hydraulically fractured at the
basin, which it now sees as Polands most prospective for unconventionals.
Completion and analysis of
the wells will take a further
three to nine months after
drilling, and that by mid-2016
it should be possible to tell
from the results if the Pomeranian basins unconventional
resources are producible.

Rongchangbei deal: Hess chief executive John Hess

Photo; BLAKE WRIGHT

Hess and CNPC strike a

deal for Sichuan study
Joint exploration agreement at
Rongchangbei shale gas block
XU YIHE
Singapore

HESS of the US has entered into an

agreement with China National
Petroleum Corporation (CNPC) to
carry out a joint study at the
Rongchangbei shale gas block in
south-western Chinas Sichuan
province.
Sources said that the agreement
requires Hess and CNPC to complete their study at the
Rongchangbei block by around
June this year.
Based on the results of the
study, Hess will decide whether or
not to enter into a production
sharing contract with CNPC to explore the block, which was abandoned by Italys Eni last year.
Little is known about why Eni
decided against going forward
with exploration on the acreage in
partnership with CNPC.
The Chinese state operator
awarded the earlier study agreement to Eni in 2013 as part of the
deal in which Eni sold a 20% stake
in Area 4 in the Rovuma basin off
Mozambique to CNPC for $4.21 billion.
Sources said that Hess is hoping
for decent prospectivity at the
2000-square kilometre Rongchangbei block as it lies just north
of the Fushun Yongchuan block,
where Anglo-Dutch operator Shell

FOREIGN COMPANIES INVOLVED IN CHINAS SHALE GAS SECTOR

Company

Partner

Block

Province

Status

Shell
ConocoPhillips
Eni
ConocoPhillips
ExxonMobil
Chevron
BP
BP
Total

PetroChina
PetroChina
PetroChina
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec

Fushun Yongchuan
Neijiang Dazhu
Rongchangbei
Qijiang
Wuzhishan Meigu
Longli
Kaili
Huangqiao
Xuancheng

Sichuan
Sichuan
Chongqing
Chongqing
Sichuan
Guizhou
Guizhou
Jiangsu
Anhui

PSC
Joint study
Exit joint study
Joint study
Joint study
Exit joint study
Joint study
Joint study
Joint study

is working hard to meet a target of

producing 100 million cubic metres of shale gas by the end of this
year.
Shell and CNPC signed a production sharing contract to develop
the Fushun Yongchuan block in
2012.
Shell is working towards completing 15 appraisal wells at Fushun Yongchuan.
Shell sources said results have
been mixed of 10 completed
wells, only six were tested to
show shale gas presence.
Wells Yang 101 and Yang 201-H2
have respectively owed 58,000
and 430,000 cubic metres of shale
gas upon test.
Hess has a sizeable position in

Chinas unconventional sector. In

addition to Sichuan, the company
has also carried out studies with
CNPC and Sinopec on the geology
of shale oil and tight oil at the
Yongletoutai blocks Daqing oileld in the north-east and the
Shengli oileld in the east, respectively.
In Xinjiang region, Hess has
signed a production sharing contract with PetroChina to jointly
develop shale oil at the Malang
block in the Santanghu basin.
The latest agreements to study
and explore Chinas unconventional resources are said to reect
the eagerness of the New Yorkbased company to take advantage
of its experience in developing the

Bakken shale in North Dakota in

the US.
However, Eni is not the rst
large player to have exited a shale
gas study in China.
Late last year, ConocoPhillips
pulled out from the study of the
Qijiang shale gas block in Sichuan
because of potential clashes with
military use on the acreage.
ConocoPhillips, which had an
agreement with Chinas secondlargest company, Sinopec, to
study the geology at the block,
prefers not to get involved in work
in the militarily sensitive area.
Earlier, Chevron quit exploration at the Qianan basin in
Sichuan province after drilling
two unsuccessful wells.

SHALE

6 February 2015

41

US

Consol test taps eastern

promise of Utica play
Exploration programme aims to
prove up formation under existing
Marcellus operations in Pennsylvania
NOAH BRENNER
Houston

US PLAYER Consol Energy is drilling the rst test of the Utica shale
in Westmoreland County, Pennsylvania as part of an exploration
programme that could push the
prolic dry gas window of the play
even farther to the east.
The Gaut 4IHSU well in Washington township was spudded in
mid-December as part of a
two-well campaign to prove up
the Utica underneath Consols
existing Marcellus shale operations.
Westmoreland County lies east
of Washington County, where
Appalachian
giant
Range
Resources drilled the Claysville
Sportsman well last year, which
owed at an average rate of 59 million cubic feet per day of natural
gas during production testing a
record for the Utica play.
Consols second Utica exploration well will be drilled in Greene
County, Pennsylvania in the
south-west corner of the state,
where the company joins operators such as EQT and Rice Energy
in exploring the Utica formation.
That exploration is part of an
expanded emphasis on the Utica
at Consol, which has joint venture

operations with Hess in the wet

gas portion of the play in Ohio.
In addition to the joint venture
operations, Consol controls a 100%
stake in about 470,000 acres in
Pennsylvania and West Virginia
that chief executive Nick Deluliis
believes are prospective for the
dry-gas Utica.
These dry Utica wells are going
to be drilled off of existing Marcellus pads and as different areas and
formations such as the dry Utica
continue to be delineated and developed across Pennsylvania and
West Virginia, thats going to
open up entirely new frontiers for
Consol, DeIuliis said.
Many of the same areas have
potential to tap the shallower
Upper Devonian shale, DeIuliis
said, making the development
much more cost effective.
So these stacked pay opportunities, especially when you start
to consider dry Utica, theyre expected to meaningfully improve
our options for production
growth, he said.
While natural gas prices in the
Appalachian basin remain depressed below those at the benchmark Henry Hub in Louisiana,

New frontiers: Consol Energy chief executive Nick DeIuliis

Photo: CONSOL ENERGY

DeIuliis said the company has

been able to push down Utica
costs to $2.24 per million British
thermal units, which is below the
companys Marcellus development costs of about $2.83 per million Btu.
Consols push in the Utica is
part of a growing interest on the
part of Appalachian operators in
the dry gas window of the Utica
that is believed to extend from

south-east Ohio, through West

Virginia and into Pennsylvania.
While the Appalachian natural
gas market remains depressed,
exploration wells from operators
such as Range, Rice and Magnum
Hunter Resources have produced
very high production rates that
have led some to argue the play
could offer returns as good, or better, than the overlying Marcellus
shale.

Oxy takes
a hit in
results
US INDEPENDENT Occidental
Petroleum has taken a massive
$5.1 billion write-down on its
holdings, much of which relates to its US onshore business, due to low commodity
prices, writes Noah Brenner.
The largest single item comprised a $1.7 billion charge for
its acreage in the Bakken tight
oil play in the Williston basin,
where chief executive Steve
Chazen said the US independent had virtually eliminated
all capital spending because it
could not compete with opportunities in the Permian basin
in west Texas.
The company took charges
totalling $600 million on gas
assets in the Piceance basin in
Colorado and South Texas, $550
million for interests it retained
in the spinoff of its California
operations into publicly listed
California Resources and $350
million for miscellaneous US
assets.
Oxy also wrote down $700
million on the value of is
Joslyn oil sands project in
Canada and $1.1 billion from
the value of its operations in
Bahrain.
For the coming year, Oxy cut
its planned capital budget by
33% to about $5.8 billion, to be
focused primarily on the Permian basin.
In the fourth quarter, Oxy
picked up about 120,000 acres
focused on the Midland side of
the Permian for about $1.3 billion in a private transaction.
For the year, Oxy reported
net prot of $616 million down
from $5.9 billion in 2013, largely due to the writedown.

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42

6 February 2015

LNG
Israel in
warning
to Noble
ISRAELS Energy Minister
Silvan Shalom this week
warned US independent Noble
Energy and its local partner
Delek Group that they need to
sell off more assets if they want
to move ahead with developing
the huge 22 trillion cubic foot
Leviathan gas eld, writes Iain
Esau.
Late last year, David Gilo, Israels Anti-Trust Commissioner, stunned the market by failing to approve a deal meant to
address the Leviathan partners dominance of Israels
upstream sector.
The deal would have seen Noble and Delek sell their stakes
in the Karish and Tanin discoveries in return for keeping
their holdings in Leviathan
and the 10-Tcf Tamar eld.
Gilos decision, however,
meant a project sanction decision could not be made on Leviathan this quarter as planned.
Since then, Noble, Delek and
the other Leviathan and Tamar
partners Isramco and Ratio
Oil have been locked in highlevel discussions with government officials to break this impasse.
Shaloms statement is the
rst public utterance on what
the government is pushing for.
Part of the decision will be
that the gas companies will
have to give up some of the reserves they have... it will happen, he was reported as saying
by Reuters.
The government wants
Noble and Delek to sell more
upstream stakes because it
wants greater competition in
the upstream business.
Local reports suggested the
companies may be asked to reduce their holdings in Tamar.
However, Shalom acknowledged the geopolitical difficulties of attracting other companies to Israels offshore arena.
Israel is a small market and
the interests (oil and gas companies) have in Saudi Arabia
and the Persian Gulf states are
much bigger. To bring them
here as competitors to other
groups is not simple, he said.
However, it is not just Noble
and Deleks market dominance
that is being discussed with oil
companies understood to be
pushing for all upstream issues
to be addressed once and for
all.
Its also about gas export licences, about the tax regime
its everything. The oil companies dont want to face the
same problems in future, said
a market source.
What makes achieving a
compromise more challenging,
said a project watcher, is that a
general election will take place
in Israel next month amid
widespread anti-business sentiments among voters.

We are in the process of working through

pricing... We would anticipate, as we see
commodity prices fall and steel prices fall,
some further discounting in pricing. James Kleckner,
Anadarkos head of international and deep-water operations

MOZAMBIQUE

Maintenance: a Mozambican sherman works on his boat during a low tide at Costa do Sol in Maputo, Mozambique

Anadarko nears selection o

Player said to be nearing choice between JGC-Fluor, CB&I-Chiyoda
and Bechtel, but talks are now focused on driving down pricing
IAIN ESAU
London

US INDEPENDENT Anadarko
Petroleum is closing in on the selection of its preferred contractor
group to build two liquefaction
trains at its Afungi liqueed natural gas plant in northern Mozambique.
Sources said the operator is
readying to select one of three

groups JGC-Fluor, CB&I-Chiyoda and Bechtel this quarter, but

believed further delays are likely.
It is possibly in this quarter but
it will not be easy. We need to see,
indicated a source close to the
project.
Anadarkos chief executive Al
Walker told analysts this week:

We are in the nal stages of naming our contractor.

James Kleckner, Anadarkos
head of international and deepwater operations, said contractor
talks are currently focused on
driving down prices.
We are in the process of working through pricing given the

market status right now and we

havent completed that. We would
anticipate, as we see commodity
prices fall and steel prices fall,
some further discounting in pricing, Kleckner said.
Walker added: We do anticipate
given where we are and given the
lack of (industry) activity that

Lake Charles nal investment decision delayed by partners

UK EXPLORER BG Group and midstream player Energy Transfer are
delaying the nal investment decision for the Lake Charles liqueed export project on the US Gulf
Coast due to low commodity
prices.
The project had been due for a
nal investment decision this

year, but now that decision has

been put off for at least a year, BG
chairman Andrew Gould said.
At one time, rst gas was seen
coming on as early as late 2018 or
early 2019.
Gould said uncertainty over
both oil-linked LNG prices and the
ultimate cost of the facility have

caused the company to take a

more cautious approach.
Lake Charles, obviously in the
current market, which is extremely volatile, its not appropriate for us to be looking at any form
of investment decision, Gould
said, adding that discussion of the
project would be pushed way

back into 2016. Technip is working on the front-end engineering

and design for the three train facility, which could export as much
as 15 million tonnes of LNG per
annum from the Louisiana coast.
Despite the delay, analysts said
they still expected the project to
eventually move ahead.

6 February 2015

43

90%

THE AMOUNT of work completed so

far on Chevrons US$54 billion Gorgon LNG
project in Australia. The companys
Wheatstone project is 55% complete.

Push at Gorgon and

Wheatstone projects
CHEVRON
SCHEMES
Staff levels higher
than anticipated
RUSSELL SEARANCKE
Wellington

Photo: AFP/NTB SCANPIX

of Afungi contractor
costs that would have been in the
system a year ago are going to be
much less as we go forward.
The three LNG contracting
groups were involved in a competitive front-end engineering
and design contest before submitting their price offers in April last
year.
Contract awards and a nal investment decision on the project
were originally due to be made by
the end of 2014.
However, last year most sources
told Upstream that this schedule
was unrealistic given this greeneld developments multiple challenges, related to politics, legislation, nances, LNG marketing and
the collapse in oil prices.
The political situation in Mozambique has settled down after
Octobers elections brought Presi-

dent Felipe Nyusi to power. On the

legislative side, a Decree Law covering the LNG project was gazetted late last year which established a much-needed contractual
and legal framework.
Walker said Anadarko is making progress on LNG sales and also
on funding.
He said the company has nonbinding LNG off-take agreements
totaling more than 8 million
tonnes per annum.
In addition, Anadarko has received letters of intent for
nancial support from potential
lenders.
Anadarkos initial development
phase at Afungi calls for two
5 million tpa trains, although the
site can handle up to 12 trains in
total.
Feedstock gas will likely come

from the Prosperidade-Mamba

complex which straddles Anadarko-operated Area 1 Offshore and
Enis Area 4 Offshore.
However, the US player is
known to be keen to also develop
its Golnho-Atum discoveries,
wholly located in Area 1, as LNG
feedstock.
Both assets will be exploited as
long distance subsea tiebacks to
shore.
Elsewhere in Area 1, Anadarko
has completed the Orca-4 appraisal well, hitting gas pay in two
reservoirs.
Further analysis is under way to
dene future appraisal needs at
Orca as well as an optimum development scenario.
In addition, Anadarko continues to drill ahead on its Tubarao
Tigre-2 appraisal well in the block.

CHEVRON has more workers than

originally planned working on the
nal hook-up and commissioning
phase of the US$54 billion Gorgon
liqueed natural gas project in
Australia, while its Wheatstone
LNG development is progressing
as planned.
Chevron chief executive John
Watson said Gorgon is 90% complete, and Wheatstone is 55%
through construction.
At Gorgon, rst gas is planned
to ow into the LNG facility on
Barrow Island in the middle of
this year with LNG cargoes to follow later in the year. Wheatstone
is on track for a late 2016 start-up.
Weve got 8000 people on the
site right now, said Watson.
Thats a little more than we
might have thought in the past.
Weve brought in a bigger combination vessel and so we have put
more people on site.
Chevron has contracted a newbuild accommodation semi-submersible called Floatel Endurance,
which Keppel Fels said it will soon
deliver to the units owner Floatel
International.
The oatel will work for Chevron Australia in 2015 before proceeding to Norway in 2016 to work
for Statoil.
The semisub has accommodation capacity of 440 persons, and
will be used in addition to
thecruise ship Silja Europa, which
houses 1200 people.
Weve made terric progress
on the upstream side, basically all
18 wells have been drilled, all upstream subsea infrastructure is in
place, pipeline installation is complete, said Watson.
Weve got mechanical electri-

cal instrumentation work thats

in high gear right now and were
basically milestone driven and
commissioning and starting up
systems right now.
Were monitoring very closely
contractor performance and productivity on the island (Barrow),
were working with the unions on
contracts and industrial relations.
Were planning for a awless
commissioning and start-up process. Weve got risks of adverse
weather...but were shooting to get
gas into the system in the middle
of the year timeframe and get
some cargos out this year, he
added.
The three Gorgon trains will
have combined capacity of 15 million tonnes per annum of LNG.
Gorgon is owned by Chevron
with 47.33%, ExxonMobil on 25%,
Shell with 25%, Osaka Gas on
1.25%, Tokyo Gas with 1% and Chubu Electric Power on 0.42%.
Meanwhile, Chevrons second
Australian greeneld LNG project
is progressing as planned on
budget and on schedule, said the
US company.
The US$29 billion Wheatstone
scheme will consist of two LNG
trains with a combined capacity
of 8.9 million tonnes per annum.
The Wheatstone project is
owned by Chevron with 64.1%,
Woodside on 13%, Kufpec with
13.4%, Tokyo Electric Power Company on 8% and Kyushu Electric
Power Company with 1.5%.

Contracted: the
accommodation semisub
Floatel Endurance
Photo: KEPPEL FELS

Wood Group Kenny takes job

WOOD Group Kenny said it has
secured a contract for front-end
engineering and design on the
Woodside-led Greater Western
Flank phase two project in
Australia.
No value was attached to the
contract, which covers the ow-

line system and associated procurement support.

The project will develop
the Keast, Dockrell, Sculptor,
Rankin, Lady Nora and Pemberton
elds via a subsea tie-back
to the existing Goodwyn A
platform.

Ichthys development drill start

JAPANESE independent Inpex has
started the big development drilling campaign at the Ichthys eld
in Australia.
Two rigs will be used for the
campaign, which consists of the
drilling and suspension of up to 20

wells grouped in ve drill centres.

The rigs are the 7500-foot water
depth semi-subersible Ensco 5006,
which has spudded the rst well,
and the 5400-foot water depth
semisub Jack Bates, which begins
working soon.

LNG

44

Yamal in
push for
bonds

6 February 2015

CANADA

RUSSIAN
PROJECT
Aim to raise $4.6 bn
for LNG scheme
YAMAL LNG shareholders have
approved the issue of new corporate bonds planned to be sold
to the Russian government,
writes Vladimir Afanasiev.
The company said its shareholders rubberstamped the
plan to have two tranches of
the bonds, with the aim of raising $4.6 billion for the South
Tambey eld development and
construction of the South Tambey LNG plant at Sabetta on the
Yamal Peninsula.
The Russian government has
provisionally agreed to invest
150 billion rubles ($2.3 billion)
from the countrys National
Welfare Fund into the LNG
project, with repayment due by
2029.
The transaction is understood to involve major statecontrolled bank VTB, which
will disburse the state funds.
This is apparently to permit
Yamal LNG to obtain nancing
in US dollars, rather than rubles, as the operator needs hard
currency to pay its foreign contractors.
Deputy Economic Development Minister Nikolay Podguzov said in January that Novateks interest payments on
the state loan will be denominated in dollars and converted
into rubles, based on the exchange rate at the date of the
interest payment.
The loan will also carry the
London Interbank offered rate
(Libor) of interest plus 3%,
which according to industry
analysts is signicantly below
the current rates on ruble-denominated debt.
According to Podguzov,
Yamal LNG shareholders
Russias Novatek, Frances Total
and China National Petroleum
Corporation will also have to
provide guarantees of the implementation of the South
Tambey project to the Russian
government, to be able to obtain nancing.
Speaking in Davos in Switzerland, Novatek chief executive Leonid Mikhelson said his
company will have no need to
nd a [third] partner to buy a
9% stake in Yamal LNG once
the operator receives nancing from the Russian government.
Novatek has a 60% stake in
Yamal LNG, with Total and
CNPC each holding 20%.
Yamal LNG hopes to start-up
the plants rst train in Sabetta
in 2017, with the ultimate capacity of the three trains set at
16.5 million tonnes per annum
of LNG.

Search the archive:

Yamal LNG

New view:
British Columbias
Douglas Channel
Photo: AP/SCANPIX

New owners looking to

revive Douglas Channel
Consortium of AltaGas, Idemitsu Kosan gas, Exmar
and EDF Trading take over scheme with plans for
barge-based facility near Kitimat, British Columbia
TONYA ZELINSKY
Calgary

A CONSORTIUM of new partners

has taken ownership of the oncebankrupt Douglas Channel liqueed natural gas export project
proposed on Canadas west coast.
The Douglas Channel LNG Consortium comprised of AltaGas,
Idemitsu Kosan Gas, Belgiums
Exmar, and the UK-based EDF
Trading took full ownership
and control of the nanciallystrapped project after it was abandoned by Texas-based LNG Partners last year.
With creditor claims settled and
all assets transferred to the new
owners, the consortium said it will
continue to pursue plans for the
C$600 million (US$476 million) LNG
project and is working towards

making a nal investment decision

by the end of 2015. The consortium
is proposing a barge-based, 550,000
tonnes per annum LNG facility near
Kitimat, British Columbia sourcing
gas from western Canadian basins
such as the Montney and Duvernay
formations.
It has signed a 20-year transportation agreement with the Pacic
Northern Gas pipeline, and a longterm lease agreement with the
Haisla First Nation for land and
water tenure.
AltaGas director of nance and
communications Jess Nieukerk
said the consortium is essentially picking up where previous proponents left off.
According to Nieukerk, EDF

Trading a subsidiary of Frances

EdF will be the primary off-taker
and Exmar will be responsible for
development and operations.
Supply will likely come from
Painted Pony Petroleum as per an
agreement the Canadian junior
signed with AltaGas last year,
added Nieukerk.
Painted Ponys operations are
focused in north-east British Columbias section of the Montney.
Theres an abundance of natural
gas (in western Canada) so supply
is not really an issue per se but
were looking to offer producers
that full suite of an energy value
chain. We would hope to sign other strategic alliances but were not
concerned about supply, he said.

Our whole concept or value chain

is from wellhead to burner tip and
to export markets to the extent
we can process (producers) gas
and offer them the opportunity to
get to Asian markets to achieve
higher netbacks.
This is the second LNG export
project on British Columbias west
coast AltaGas and Japans Idemitsu are proposing as partners.
The duo formed the AltaGas Idemitsu Joint Venture Limited Partnership for Triton LNG, a proposed
320 million cubic feet per day
project that was granted a 25-year
export licence by federal regulators last year. Nieukerk said an
export licence for Douglas Channel LNG has yet to be led.

NEB backs Woodside plan for Grassy Point export scheme

AUSTRALIAS Woodside Petroleum has been granted approval by
Canadas National Energy Board
(NEB) to export liqueed natural
gas from western Canada, writes
Josh Lewis.
The NEB licence will allow
Woodside to export up to a total of
807 billion cubic metres of LNG
from its proposed Grassy Point
LNG project, near Prince Rupert in
British Columbia.
We have determined that the
quantity of gas proposed to be ex-

ported by Woodside Energy is surplus to Canadian needs, the NEB

said.
The board is satised that the
gas resource base in Canada, as
well as North America overall, is
large and can accommodate reasonably forseeable Canadian demand, the natural gas exports
proposed in this application, and
a plausible potential increase in
demand.
The NEB said that the export
licence remains subject to the ap-

proval of Canadas Governor in

Council.
Woodside plans an LNG project
in western Canada that will be fed
by a third party pipeline and be
capable of processing up to 20 million tonnes per annum of LNG.
If the project goes ahead, the
company plans to develop it in
two phases, with the rst involving the construction of LNG trains
with an initial combined capacity
of between 6 million and 15 million tpa. The proposed second

phase would see the construction

of more LNG trains to boost the
processing capacity up to the 20
million tpa total.
If Woodside moves ahead with
the project, it has said it could
start construction in 2017 with
rst production currently scheduled for 2021.
Woodside has previously stated
that any decision to proceed with
an LNG development at Grassy
Point is subject to a variety of internal and external approvals.

QUOTE OF THE WEEK

The Saudis are not the chief offender here - we are. There has only been one area of dramatic
production growth around the world, and that is the US and North America. So this is our problem, we
created it, and we will ultimately solve it because we will decrease production.
Karr Ingham, economist for the Texas Alliance of Energy Producers

6 February 2015

CUTTINGS

45

Going with
the ow...

MASK OF SORROW

Statoil has conrmed Eldar

Saetre as president and chief
executive

Simon Toole has been named

licensing and legal director of the
UKs OIl & Gas Authority, with Ian
McKenzie named chief
implementation officer and
Stuart Payne director of change
and organisational development

Technips Philippe Barril is

joining SBM Offshore as chief
operating officer

Rex Energy has appointed

Thomas Rajan chief nancial
officer
William Rogers is succeeding
Gary Whitlock as chief nancial
officer of CentrePoint Energy
Mark Colebrook has been
named chief executive of
Alderley

Ben Monaghan is succeeding

Julian Metherell as chief
nancial officer at Genel Energy

APIS SUPER BOWL PLAY

Oil and gas fans perhaps
deated from
controversies
ranging from oill
pipelines to
well
completion
techniques
got pumped
up during the
Super Bowl in
ets
some US markets
ican
when the American
Petroleum Institute (API) aired
a 30-second advert
cheerleading the industrys
achievements.
During the halftime break,
the oil and gas advocacy
group paid for commercials in
several select markets,
though it declined to specify
which ones and how many.
In Washington, DC, API
reportedly paid $100,000 for
the air time a pittance
compared to the multiple
millions paid for
advertisements during the
actual game, but still a lot to
get a message out.
The specic message
differed based on the region.
Viewers in Washington were
regaled with tales of America
as an energy superpower.
Others saw a geologist or a
small business owner in various
hot shale regions talk about the
importance of fracking.
The Super Bowl ad slate
featured pretty grim subject
matter ranging from dead
children to lost puppies, so
even if APIs offerings were
fairly mundane, at least they
were upbeat.

Foster faces
the music
DOHA! ROYALS RUMBLED IN LONDON
D
Lo
Londons
property market may already be
aw
awash with petrodollars, as wealthy Russian
and M
Middle Eastern oiligarchs vie for the UK
capital most desirable abodes.
capitals
Qatars royal family, however, has recently
found city officials rather less accommodating,
ruefully discovering that there just some luxuries
that stacks of oil and gas cash just cannot buy.
Westminster City Council has knocked back an application made on
behalf of one Raafat Amin that two adjacent Grade I-listed properties in
the expensive Regents Park area be knocked together to create a single
mansion estimated to be worth 200 million ($302 million).
Numbers 1 and 2 Cornwall Terrace were snapped up by members of the
Qatari royal family in 2013 for an estimated 120 million. But the owners
wanted to redesign them into a single property, including 17 bedrooms, a
swimming pool and obligatory cigar lounge.
However, one city planning officer has cited a shortage of housing in the
area as reason for knocking back the proposal.
Negotiation could not overcome the reasons for refusal, the officer
told the applicants estate agent.
The applicant had offered 850,000 in cash to go towards the
boroughs affordable housing fund but anyone who lives in London
knows that will get you very little on the West End.
MAMMOET MAKES DAKAR DASH
Dutch contractor Mammoet recently saw its
two sponsored trucks cross the nishing line in
the Dakar Rally, held in South America.
Drivers Martin van den Brink and Pascal de
Baar nished 17th and 31st, respectively, in the
gruelling 9000-kilometre, two-week-long rally
that nished late last month in Buenos Aires,
Argentina.
Both drivers commandeered new Renault vehicles featuring state-ofthe-art, 13-litre engines that featured emissions-reducing capabilities.
The annual Dakar Rally used to begin in Paris and end in the Senegalese
capital. However, due to security fears in Mauritania that saw the 2008
event cancelled, it was moved to South America.

Photo: ELL BROWN

Jeanette Ourada is
succeeding Matthew Foehr as
comptroller at Chevron, with
Inge Thulin also elected to the
board

Petrobras ex-boss
visage set for Carnival
caper in Rio amid graft
probe into oil giant
Maria das Gracas Foster is not known
for possessing a twinkly-eyed sense of
humour, but the now-resigned
Petrobras chief executive must learn to
laugh at herself if she wants to brave
Brazils Carnival parade this year.
One of the liveliest aspects of Rio de
Janeiros famous parades is the satirical
masks and fancy dress parodies that
adorn the streets, with revelers taking a
no-holds-barred approach to
politicians and world leaders.
Past years have seen al-Qaidas
Osama Bin Laden shaking his stuff with
US President Barack Obama, while
Brazil President Dilma Rousseff and her
predecessor Luiz Inacio de Silva have
been fair game for imitation and
satirical songs and slogans.
This year, Graca will be the most
popular public gure with the
wisecrackers, and downtown street
stalls are already stocking up their
shelves with masks.
The reason, of course, is the wave of
scandals about corruption involving the
state-controlled oil company, which led
to intense pressure from some quarters
for Graca to stand down.
Graca had worked hard to distance
herself from the shady shenanigans
that took place at the oil company
before her move to the top, and she is
also no stranger to Carnival in a past
interview with Upstream she spoke at
length of her enduring love of parading
with a carnival group from her native
neighbourhood, close to Rios
international airport.
Graca is unlikely to take the plunge of
joining the televised parade this year,
but if she does take to the streets, at
least she should be able to blend in
with the crowd.

46

JOB OPPORTUNITIES

6 February 2015

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Inclusive: Engaging,
and respectful

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6 February 2015

JOB OPPORTUNITIES

47

project management, recruitment and consultancy

a world of difference
Brunel is a global business provider specialising in project management, recruitment and
consultancy by offering solutions for all flexible and long term knowledge and capacity
demands. Brunel works for every major operator in the international Oil & Gas, as well as
operators in the petrochemical, power generation and construction industries through its
offices worldwide. With over 10,000 specialists working worldwide, Brunel offers access
to many leading projects in the Oil & Gas industry which enables specialists to develop and
fully maximise their skills and expertise.
Piping Designer/Stress Engineer
VC117024 Denmark

Completions Supervisor
VC107679 United States of America

Engineering & Modications Manager

VC116933 Ghana

Petrophysicist Expert
VC116212 United Arab Emirates

Project IM Lead
VC115046 Norway

E&l Commissioning Engineer

VC115231 United Arab Emirates

Contract Manager
VC102755 Singapore

Onshore Substation Module Group Owner

VC116388 Denmark

Procurement Supervisor
VC112840 The Netherlands

Planning Engineer
VC77447 Saudi Arabia

Discipline Engineer Architect

VC116044 Norway

Construction Engineer
VC117748 Australia

Site Manager
VC114999 United Kingdom

HSE Manager
VC116323 Algeria

Senior Drilling Engineer

VC115341 United States of America

Piping Inspector
VC116378 The Netherlands

Algeria
Angola
Australia
Azerbaijan
Belgium
Brazil
Cameroon
Canada
Chad
China
Denmark
France
Germany
India
lndonesia
lraq
ltaly
Japan
Kazakhstan
Kuwait
Libya
Malaysia
New Zealand
Nigeria
Norway
Oman
Papua New Guinea
Philippines
Poland
Qatar
Russia
Saudi Arabia
Singapore
South Korea
Spain
The Netherlands
Thailand
UAE (Abu Dhabi & Dubai)
United Kingdom
United States

brunel.net

JOB OPPORTUNITIES & CONFERENCES

48

6 February 2015

The company is currently looking for highly-motivated, competent candidates, who display exemplary safety
behaviour and the highest standards of work ethics, to ll the following vacancies in new projects:

QHSE Director

Electrical Maintenance Manager

QHSE Director plans and directs all aspects of the policies,

practices, and procedures that affect QHSE systems within
SOCAR-AQS.

Electrical Maintenance Manager is responsible for organizational

and technical support of maintenance function and personnel
to ensure continued reliable operability of electrical equipment
throughout SOCAR-AQS operations.

Operations Director
Operations Director is responsible for establishing and maintaining
high standards of drilling practice and the highest level of
operational efciency and technical safety in drilling operations.

SOCAR-AQS LLC is a fast growing

integrated drilling and well services
provider. The company is expanding
its activities in onshore and offshore
drilling in the Caspian region and
internationally.

Drilling Manager
Drilling Manager manages the planning and execution of drilling
projects. Plans and develops solutions or enhancements to troubleshoot drilling problems. HPHT and ERD drilling management
background is required.

SOCARAQS LLC is committed to developing a world-class modern drilling

entity adhering to the highest HSE
and technological standards of international oil industry.

Drilling Superintendent
Responsible for the safe and efcient management and co-ordination
of all activities at rig site. HPHT and ERD drilling management
background is required.

Senior Drilling Engineer

Mechanical Maintenance Manager

Mechanical Maintenance Manager is responsible for organizational
and technical support of maintenance function and personnel to
ensure continued reliable operability of mechanical equipment
throughout SOCAR-AQS operations.

Business Development Director

Contribute to strategic planning and decision-making to develop
and implement a business development strategy that aligns with
SOCAR-AQS` overall vision, mission and its current and long-term
business objectives.

Commercial Director
Commercial Director is responsible for commercial support of
SOCAR-AQS drilling activities world-wide.

Senior Drilling Engineer is responsible for the engineering, planning,

co-ordination and optimization of well operations activity. HPHT
and ERD operations background is required.

Finance Director

Drilling Engineer

Learning and Development Manager

Drilling Engineer is responsible for designing, preparing, and

planning well drilling programs according to client requirements
and in compliance with contractual requirements and SOCAR-AQS
standards and policies. Strong well engineering, HPHT and ERD
operations background is required.

To create learning, training and development strategy and put it

into practice to support organizational success.

Driller
Driller is responsible for supervising and carrying out the drilling
and well control and other work in connection with the drilling
operations. HPHT and ERD experience is required.

Contracts and Tenders Manager

To organize preparation and submit bids; organize strategic and
efcient contract management culture in the company.

&DWDO\]LQJLPSURYHGSHUIRUPDQFH
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2015 IADC/SPE

Managed Pressure Drilling &

Underbalanced Operations
CONFERENCE & EXHIBITION

SOCAR-AQS LLC offers safe and stimulating work environment

highly competitive compensation package, training and professional development opportunities, rapid career progression in a
fast growing company.
Interested applicants should submit their CV by 28 February,
2015 via e-mail: recruitment@socar-aqs.com, clearly indicating
in subject line the position applied for. Only shortlisted candidates
will be contacted.
SOCAR-AQS LLC is an equal opportunity employer.

6HFRQG&LUFXODU

($3&(

www.iadc.org
Registration, sponsorship, and exhibition opportunities are
available. For more information, contact IADC The Netherlands,
phone: +31 24 675 2252, email: europe@iadc.org

Finance Director is responsible for organizing efcient and effective

management of SOCAR-AQS nances.

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CONFERENCES

6 February 2015

49

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50

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6 February 2015

CONFERENCES

6 February 2015

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52

6 February 2015

FINANCIAL
Operators
post up
losses
US GIANTS ConocoPhillips and
Anadarko Petroleum both
booked losses for the fourth
quarter as they saw their net
income tumble due to low oil
prices and one-time write
downs.
For the fourth quarter,
Anadarko reported a net loss of
$395 million in the three
months to December, compared
to a $770 million loss in the
same quarter a year ago, as it
took a $639 million charge for
exploration expenses.
Anadarko said that $235
million was due to dry holes,
$267 million to impairments of
unproved properties, $75
million to geological and
geophysical expenses and $62
million on exploration
overhead.
The result was impacted not
only by the write-offs but also
by lower commodity prices,
which crunched revenue to
$3.17 billion compared to $3.33
billion in the same period a
year earlier.
For the year, Anadarko
reported a loss of $1.75 billion
compared to earnings of $801
million in 2013, which
incorporated the impacts of its
$4.045 billion deal to settle the
legacy Tronox case.
ConocoPhillips recorded a
loss of $39 million in the fourth
quarter compared to a net prot
of $2.5 billion during the same
period a year earlier.
The company said that when
special items are taken out, its
earnings were $700 million in
the fourth quarter, down from
$1.7 billion a year earlier, and
$6.6 billion for the full year,
down from $7.1 billion in 2013.
The company said the largest
special item affecting the
fourth quarter was a charge it
took on the termination
agreement it made in 2013 with
Freeport LNG export
development on the Texas
coast.
The Houston-based operator
earned $6.9 billion in 2014 as a
whole, down from $9.2 billion
in 2013.
ConocoPhillips said it has
slashed another $2 billion off its
capital expenditure plans for
2015 on top of an initial
reduction announced in
December in the face of falling
oil prices.
The oil giant now plans
capital expenditure of $11.5
billion this year, with
additional cuts to come from
the deferral of onshore drilling
and exploration programmes in
the US Lower 48 states, and
deferral of major project
spending.
Search the archive:
ConocoPhillips

Weve had some terric performance in the

Permian, and part of the reason were able
to do that is weve been able to
dramatically reduce cost.
Chevron chief executive John Watson

FOURTH QUARTER RESULTS

Permian
performance:
Chevron chief
executive John
Watson
Photo: REUTERS/
SCANPIX

ExxonMobil and Chevron

bullish on investment
Supermajors plan US onshore growth despite
falling commodity prices hitting prots
NOAH BRENNER
Houston

EXXONMOBIL and Chevron plan to

maintain or even increase their
investments in the US onshore sector despite tumbling commodity
prices that hit fourth quarter profits at both US supermajors.
While other operators began cutting rigs from their eets late last
year, ExxonMobil actually added
rigs into the fourth quarter, vice
president Jeff Woodbury told investors.
The Arlington-based giant is
now running about 60 rigs onshore
US, primarily in the Bakken,
Woodford and Permian tight oil
plays.
One reason the company has
maintained its growing rig count
is that it did not ramp up its activity as quickly as some US independents who embarked on aggressive growth initiatives,
Woodbury explained.
We wanted to makes sure that
we had a good understanding of
the resource performance and importantly, we wanted to make sure
that we are fully integrating all the

earnings back into our advanced

programme, he said.
So, weve been very measured.
Going forward, well consider all
the factors, including the business
condition, infrastructure capability as well as our demand projections.
Like ExxonMobil, Chevron chief
executive John Watson said the
company planned to increase its
global shale investment to about
$3.5 billion, much of which is centered in the Permian basin in West
Texas, where Chevron is running
about 30 rigs.
Weve had some terric performance in the Permian, and part
of the reason were able to do that
is weve been able to dramatically
reduce cost, Watson told investors.
Chevron also benets from its
ownership of the mineral rights
across much of its Permian postion.
Remember, (for) a lot of our volume in that area, we benet from
no royalty and thats a big com-

petitive advantage, as you get

down where others might be at the
margin more than we are, he said.
Despite that optimism, Chevron
has not been entirely immune
from the macroeconomic malaise
affecting the industry.
In late January, Chevron laid off
more than 150 people in its Appalachian division based outside
Pittsburgh, Pennsylvania, where it
co-ordinates work in the Marcellus
and Utica shale plays.
For the fourth quarter, both
Chevron and ExxonMobil reported
lower net earnings due to falling
oil prices.
At Chevron, fourth-quarter net
earnings were $3.5 billion ($1.85
per share), compared to $4.9 billion
a year ago as its average realised
price for oil dropped from $90 to
$66 over the period.
The earnings beat average Wall
Street estimates of $1.63 per share.
While shale spending appears
stable for now, Chevron projects its
overall capital budget to decline
from $40.3 billion in 2014 to $35 bil-

lion in 2015, over 90% of which will

go to upstream projects.
At ExxonMobil, net prot fell
21% to $6.6 billion in the fourth
quarter, compared with $8.4 billion
a year ago.
That gure included the benets
of a $1 billion non-cash effect including deferred US tax items and
recognition of a favourable arbitration ruling on the expropriation of
Venezuelan assets.
ExxonMobil executives declined
to give specic capital expenditure
guidance, but Woodbury indicated
that the company would not exceed the $37 billion in spending
that had been stated in previous
calls and promised to give a more
concrete gure at their analyst day
next month.
We have been reducing our
capital spend since 2013 due to several reasons, including the completion of several major projects, our
ongoing intense focus on capital
efficiency and of course our disciplined investment planning given
the economic parameters, he said.

6 February 2015

53

CHEVRONS

$3.5 billion

PLANNED budget
for global shale
investment.

Oil prices slip back after

gains offer a ray of hope
US inventory data
puts pressure on
crude market
after four days
of increases
VAHE PETROSSIAN
London

OIL prices slipped back midweek

after rapid gains in the previous
four trading days that sent prices
soaring by about one-fth and
fuelled speculation that markets
had bottomed out after seven
months of losses.
The main price driver was the
perception that future output capacity was being damaged by cuts
in drilling plans in the US and
elsewhere.
The main pressure on prices on
Wednesday came from US inventory data emphasising the reality
of a global crude surfeit.
The price increases started on
Friday and continued into Tuesday, when Brent was at one point
fetching about $59 per barrel.
Brent prices of about $115 per
barrel last summer had at one
point in January sunk to about $45
per barrel.
Late afternoon trading on
Wednesday saw Brent lose $2.10 to
$55.81 per barrel. This represented
a gain of about $16 per barrel on
mid-January and a still large gain
of about $7 per barrel on prices at
the same time last week.
In New York, US light prices fell
by $2.81 to $50.24 per barrel in
midday trading. One week earlier,

Modec
is hit by
sinking
MODEC has incurred a 1 billion
yen ($8.5 million) extraordinary loss in the year ended 31
December 2014 due to the recent sinking of a oating wind
and current hybrid power generation system during installation off the Japanese coast.
Modec said the system,
which it built, sank in midDecember off the coast of Kabe
island in Saga prefecture.
Despite that provision, Modec made net income of 5 billion yen in 2014 on the back of
370 billion yen in revenue.

MEO rejects
Mosman bid

Count: the number of oil rigs in the US is dropping sharply

Photo: AFP/NTB SCANPIX

the previous week. Crude stocks

rose by 6.3 million barrels to an
all-time high of 413.1 million barrels, the agency said.
Distillate stocks also rose by 1.8
million barrels to 134.5 million
barrels, while gasoline soared by
2.3 million barrels to 240.7 million
barrels.
While traders were wondering
what price level would dent the
fast growth of US shale output,
news of a sharp drop in the
number of US oil rigs and a series
of big capital expenditure cuts by
major oil companies encouraged
speculation that production

OIL PRICE
COMMENTARY

prices had been about $45 per barrel, having fallen well below $45
per barrel earlier in the month.
The US Energy Information Administration issued data midmorning showing very healthy
crude and product inventories in

would fall faster than expected.

However, worries about a sluggish
Chinese economy due to a very
slow growth pace in the services
sector provided a reminder of continuing poor demand for energy
among consumer nations.
Nevertheless, the big and unexpected price increases of the past
fortnight are prompting some
analysts to look at the possibility
of Brent fetching about $60 per
barrel within days and, once that
psychological barrier has been
breached, nding a fresh plateau
of $60 to $65 per barrel in subsequent months.

AUSTRALIAN explorer MEO

has rejected an all-share takeover offer by UK-based Mosman
Oil & Gas.
Mosmans unsolicited offmarket takeover offer is one
Mosman share for every 10
MEO shares on issue.
MEO said its board rejected
the offer because Mosman has
limited capital, there will be
share dilution following Mosmans planned equity raising,
and the Mosman offer is at a
heavy discount to MEOs shares
last traded on 28 January.

Atwood drop
US DRILLER Atwood Oceanics
saw its net income fall to $46.2
million in the fourth quarter of
2014, versus $83.3 million in
the same period a year ago.
The decline came despite revenue growing to $351.7 million in
the quarter compared to $284.7
in the same period in 2013.

OIL AND GAS MARKET AT A GLANCE

WTI SPOT PRICES

BRENT SPOT PRICES

56

HENRY HUB NATURAL GAS SPOT PRICES

3.4

54

54.79
US$/bbl

53

49

52
50.93
US$/bbl

UK DAY AHEAD NATURAL GAS PRICES

48

3.2

48.35
GBp/therm

50

47

50

3.0
48

46
47
46

2.8

45
44

44

15 Jan

22 Jan

One Week Ago: 46.81

28 Jan

One Month Ago: 49.80

4 Feb
One Year Ago: 105.80

22 Jan

One Week Ago: 45.15

4 Feb

28 Jan

One Month Ago: 48.32

US$/bbl

68

70

2.67
US$/MMBtu

2.6

One Year Ago: 97.89

WTI FORWARD PRICES

BRENT FORWARD PRICES

73

14 Jan

14 Jan

21 Jan

27 Jan

3 Feb

HENRY HUB NATURAL GAS FORWARD PRICES

US$/bbl

3.7

65

3.5

62

3.3

59

3.1

56

2.9

Inputs ('000 bbls/day)

Input to dist.
Renery runs
US Production ('000 bbls)
Total Motor Gasoline
Reformulated Gasoline
Conventional Gasoline

61

1M

3M

9M

15M

21M

27M

33M

53

1M

3M

9M

15M

21M

27M

33M

2.7

22 Jan

US Stocks ('000 bbls)

Crude Oil
Total Motor Gasoline
Reformulated Gasoline

64

55

15 Jan

1M

3M

9M

15M

21M

27M

33M

28 Jan

4 Feb

US DEPARTMENT OF ENERGY OIL STOCK DATA

US$/MMBtu

67

58

44

Imports ('000 bbls)

Crude Oil (excl. SPR)

30 Jan

23 Jan

Net
change

413,060
240,670
42

406,727
238,335
36

6333
2335
6

16,025
15,544

15,690
15,256

355
288

9087
2980
6422

9177
3036
6268

-90
-56
154

7422

-35

7387

Source: Bloomberg

FINANCIAL

54

Charge
sees BG
post loss
LOW commodity prices forced
UK-based BG Group to swallow
a $5.9 billion net non-cash impairment charge in the fourth
quarter, largely related to its
costly liqueed natural gas
projects in Australia, writes Iain
Esau.
This charge taken just
weeks before Helge Lund becomes chief executive saw BG
record a net loss for the quarter
of just over US$5 billion, compared with $1 billion a year earlier, on revenues of $4.2 billion
against $5.4 billion a year earlier.
BGs Queensland Curtis LNG
(QCLNG) assets were written
down by $1.8 billion, although
this will be offset by a pre-tax
prot of $3.3 billion later this
year on the sale of the QCLNG
Pipeline.
A further $2.7 billion net impairment charge in Australia
was mainly due to a reduction
in BGs assumptions of future
commodity prices.
Other charges were taken on
assets in Egypt including
Egyptian LNG the North Sea,
the US and Tunisia.
BGs 2015 capital spending
will be between $6 billion and
$7 billion focused on Brazil
and QCLNG while its production target is 650,000 to 690,000
barrels of oil equivalent per
day.
An analyst at BMO Capital
said: We forecast BG increasing its production rate 14%
year-on-year for the coming
few years driven by Brazil and
QCLNG volumes.
He added: Despite poor-tomiserable returns on capital,
QCLNG maintains high Ebitda
and operating cash ow per
barrel of oil equivalent.

OMV reins
in budget
AUSTRIAS OMV has decided to
scale back spending due to low
oil prices and the unpredictability of our Libyan production.
The Vienna-based player said
average annual capital spending in the 2015-2017 period is
expected to be 2.5 billion to
3 billion ($2.8 billion to $3.4
billion), with about 80% dedicated to the upstream sector.
That is down from the
3.9 billion OMV previously
planned to spend annually between 2014 and 2016.

6 February 2015

FOURTH-QUARTER RESULTS

Challenges: BP chief executive Bob Dudley (left) and Shell chief executive Ben van Beurden (right)

Photos: BLOOMBERG

BP and Shell slashing

spending as price bites
Supermajors cut expenditure plans by billions of dollars,
with no turnaround in crude fortunes in sight anytime soon
NASSIR SHIRKHANI
London

SUPERMAJORS Shell and BP are

slashing capital spending to preserve cash in response to falling
oil prices that ate deep into their
fourth-quarter earnings.
Shell will be cutting spending
by $15 billion over the next three
years, although it did warn
against overreaction to the oil
market rout.
BP is cutting its 2015 spending
by between $4 billion and $6 billion compared with original expectations.
BP warned that it sees no sharp
turnaround in prices anytime
soon.
We have now entered a new
and challenging phase of low oil
prices through the near and medium term, BP chief executive
Bob Dudley said.
Our focus must now be on resetting BP managing and rebalancing our capital programme
and cost base for the new reality
of lower prices while always
maintaining safe, reliable and efcient operations.
Shell took a bigger hit than its

AMEX OIL INDEX*

1800
Net change from last week: 79.64

rival, as its upstream operations

were severely buffeted by the low
price environment and writedowns.
We are taking a prudent approach here and we must be careful not to over-react to the recent
fall in oil prices, chief executive
Ben van Beurden said.
Shells fourth-quarter adjusted
net income of $3.3 billion was hit
by weaker than expected earnings from its upstream arm.
Upstream earnings of $1.7 billion were well below our and consensus expectations of $2.8 billion, Morgan Stanley analysts
said in a note.
Integrated gas accounted for
$1.6 billion of this prots, implying that Shells remaining upstream activities were generating
almost no earnings with Brent
still averaging $75 per barrel in
the fourth quarter.
Shells chief nancial officer Simon Henry blamed the poor
showing on a number of one-off
items, including foreign exchange
losses, exploration write-offs in

North America and increased estimates of future decommissioning liabilities worldwide.

The $15 billion spending cut,
which will involve abandoning
and deferring projects through
2017, represents a 14% cut per year
from 2014 capital investment of
$35 billion.
It is a change of course after
Shell, which has one of the largest
capital investment programmes
in the industry, said in October it
would keep its 2015 spending unchanged.
Shell is considering further
reductions to capital spending
should the evolving market outlook
warrant that step, but is aiming
to retain growth potential for
the medium term, the company
said.
Shell maintained its fourthquarter dividend unchanged from
the previous quarter at $0.47 per
share.
BP pleased investors by reporting underlying replacement cost
prot at $2.2 billion versus expectations of $1.5 billion. The surprise

PHILADELPHIA OIL SERVICE INDEX**

INDICES

330

Company

Net change from last week: 13.56

Dow Jones
S&P 500

300
1650

Nasdaq

270
1500
240

result was explained in large part

by a prot of $470 million from
Rosneft.
BPs prot from its 19.75% Rosneft stake was aided by a change
in the Russian outts foreign exchange accounting system.
BP announced a quarterly dividend of $0.10 per share.
Throughout the work to reset
BP, the dividend remains the rst
priority within our nancial
framework, Dudley said.
The oil market slide has prompted BP to cut its capital expenditure in 2015 to around $20 billion,
signicantly lower than previous
guidance of between $24 billion
and $26 billion.
Total organic capital expenditure in 2014 was $22.9 billion,
lower than initial guidance of $24
billion to $25 billion.
BP also indicated it would push
back work on some projects, including its oft-delayed Mad Dog II
development in the US Gulf of
Mexico, to try to take advantage of
anticipated service cost reductions.

Last price Ch net 5 d Ch net 5 d% Vol Avg 5 d Ch 1 yr %

17,675.94

484.57

2.82

123,459,336

14.44

2042.41

40.25

2.01

692,519,898

16.36
16.78

4708.11

70.12

1.51

561,163,898

FTSE 100

6820.35

-5.59

-0.08

813,303,539

5.75

Oslo OBX

551.97

6.40

1.17

80,302,385

12.87

Amex Oil

1368.11

80.06

6.22

46,837,197

-1.18

Philadelphia Oil Service

200.10

13.52

7.24

23,143,991

-23.84

*The Amex Oil Index is a price-weighted index composed of the common stocks of: Anadarko,
BP, Chevron, ConocoPhillips, ExxonMobil, Hess, Marathon Oil, Occidental Petroleum, Repsol,
Royal Dutch Shell, Sunoco, Total and Valero Energy.

1350
1367.69

210

200.15
1200
4 March 2014

4 February 2015

180
4 March 2014

4 February 2015

**The Philadelphia Oil Service Index is a price-weighted index composed of the common
stocks of: Baker Hughes, Cameron International, Global Industries, Halliburton, Lufkin,
National Oilwell Varco, Noble, Oceaneering, Rowan, Schlumberger, Smith, Tidewater,
Transocean, and Weatherford.
The index was set to an initial value of 75 on 31 December 1996; options commenced
trading on 24 February 1997.
Source: Bloomberg

FINANCIAL

6 February 2015

55

CHINA

CNOOC Ltd tightening its belt

Chinese player to
cut expenses
this year by up to
35% from 2014
as effects of oil
prices are felt

Returns:
CNOOC Ltd
chief
executive Li
Fanrong

XU YIHE
Singapore

CHINAS top offshore operator

CNOOC Ltd will cut capital expense by between 26% and 35%
this year from 2014 levels to
between 70 billion yuan and
80 billion yuan ($11.5 billion to
$13.11 billion) as it looks to
tighten its belt amid weaker oil
prices.
Of the companys total 2015 expenditure, exploration will account for 21%, development will
account for 67% and production
will take 10%. About 52% of the expenses this year will be for
projects in China and rest for
those elsewhere.
CNOOC Ltds expenditure last
year was estimated at 108.3 billion
yuan, down from the 120 billion
yuan budgeted at the beginning of
the year.
Of last years expenses, 69.7%
went to development, 23.8% to ex-

Photo:
REUTERS/NTB
SCANPIX

ploration and 13.5% to production.

CNOOC Ltd said its exploration
budget will be down by between
29% and 38% and it will give priority to drilling in mature areas.
Meanwhile, it will make adjustment on deep-water wells and
those with high temperature and
high pressure.
In 2015, the company expects to
drill 162 exploration wells, down

from last years 185. Although

CNOOC Ltd will not stop the development of unconventional resources in Canada and the US, it
will suspend or slow some
projects with low economic returns, company chief executive Li
Fanrong said.
The company will cut development expenditure by 23% to 33%
from last year, aiming to rene

engineering and will be more cautious in evaluating projects before

sanction.
Production expense will be reduced by 41% to 48%, which will
lead the company to strictly
screen and assess inll drilling
wells.
The company aims to produce
between 475 million and 495 million barrels of oil equivalent in

CNOOC LTDS NEW PROJECTS IN 2015

Project

Location

Startup

Peak production (bpd)

Interest

Jinzhou 9-3 adjustment

Bohai Bay

Operational

12,000

100%

Bozhong 28/34 adjustment

Bohai Bay

First half

30,000

100%

Kenli 10-1

Bohai Bay

First half

36,000

100%

Dongfang 1-1 phase one adjustment

West South China Sea

Second half

9000

100%

Weizhou 12-2

West South China Sea

Second half

16,000

100%

Weizhou 11-4N phase two

West South China Sea

Second half

8000

100%

Luda 10-1 adjustment

Bohai Bay

Second half

6000

100%

2015, up from last years 432 million boe.

Of the total production this
year, 67% will come from domestic
elds.
This year, the company will
bring seven offshore projects on
stream, including four in the
Bohai Bay and three in the
South China Sea, adding production by 117,000 barrels per day
at peak.
CNOOC Ltd has set net production targets set for 2016 and 2017 at
509 million and 513 million boe
respectively.
Facing the complicated and
highly volatile macro environment in 2015, the company will
continue to strengthen the management of internal operations
and make efforts to meet annual
operational targets, Li said, adding that CNOOC Ltd will work to
ensure an appropriate balance between short-term return and longterm development

BAKER HUGHES NORTH AMERICAN ROTARY RIG COUNT

Dec 19
6

Dec 26
6

Dec 19
103

Dec 26
102

Alabama-inland water

New York

Alabama-offshore

N Dakota

180

179

172

169

175

162

156

147

143

155

Ohio

Alabama-land

Total Alabama

Dec 5
7

Dec 12
6

Dec Avg
6

Jan 9
4

Jan 16
7

Jan 23
8

Jan 30
7

Jan Avg
6

11

10

11

10

11

11

11

11

10

10

11

10

11

10

11

11

11

11

10

10

Arkansas

12

12

12

11

13

11

12

12

California-land

41

43

43

26

38

21

17

14

43

45

45

28

40

22

18

15

Alaska-land
Alaska-offshore
Total Alaska
Arizona

California-offshore
Total California
Colorado

New Mexico

Oklahoma
Oregon
Pennsylvania

Dec 5
100

Dec 12
101

Dec Avg
102

Jan 9
95

Jan 16
92

Jan 23
89

Jan 30
87

Jan Avg
93

45

47

45

47

46

47

48

44

41

45

211

211

205

209

209

206

201

193

183

198

55

54

55

54

55

51

51

53

54

52

S Dakota

12

Tennessee

14

17

Texas-offshore

Texas-inland water

16

19

District 1

122

122

122

121

122

114

106

101

98

107

70

68

68

69

69

65

64

64

63

64

District 2

85

83

85

86

85

87

83

80

76

82

Florida-land

District 3

67

63

65

63

65

62

53

52

37

53

Florida-inland water

District 4

21

22

21

19

21

20

19

21

23

21

Florida-offshore

District 5

Total Florida

District 6

32

34

34

32

33

34

33

33

30

32

Georgia

District 7b

10

11

Hawaii

District 7c

100

103

96

96

99

89

85

83

75

85

Idaho

District 8

335

316

318

317

322

298

288

285

275

292

Illinois

District 8a

36

31

27

28

31

27

27

28

22

26

Indiana

District 9

16

17

19

16

17

14

15

16

13

15

Kansas

26

28

30

29

28

26

24

23

22

25

District 10

63

61

62

58

61

50

43

38

34

44

Total Texas

896

872

868

852

872

810

766

753

695

773

23

23

23

23

23

18

17

15

14

17

Kentucky

N Louisiana-land

29

28

28

28

28

29

30

30

31

30

Utah

S Louisiana-inland water

14

13

12

12

13

12

12

11

12

12

Virginia

S Louisiana-land

18

17

17

18

18

16

14

16

18

16

Washington

S Louisiana-offshore

53

55

53

53

54

51

51

53

47

51

W Virginia

31

33

31

28

31

28

26

25

23

26

114

113

110

111

112

108

107

110

108

108

Wyoming

59

58

58

57

58

51

47

46

42

48

1920

1893

1875

1840

1882

1750

1676

1633

1543

1683

420

429

389

253

373

363

437

429

391

365

422

431

391

256

375

366

440

432

394

368

2342

2324

2266

2096

2257

2116

2116

2065

1937

2051

Total Louisiana
Maryland

Total United States

Canada-land

15

15

14

14

15

14

12

11

Montana

10

Total Canada

Nebraska

Grand total

Nevada

Note: Monthly averages may not total due to rounding

Michigan
Mississippi

Canada-offshore

HEAD TO HEAD

56

6 February 2015

Sanderson capitalises on
long industry experience
FirstEnergy Capital UK managing
director has come a long way since
has days as a roughneck in Canada
BARRY MORGAN
London

UGH Sanderson has

been managing director of London-based
FirstEnergy Capital
since 2009 a far cry from his
early days on the Canadian rigs
in the mid-1990s, sweating with
the derrickmen in the remote
borderlands of Alberta and British Columbia.
Brinkerhof Drilling gave him
his rst taste of oil and then he
worked summers throwing
chain for Calgarys Ensign
Energy around Fort St John.
They dont do that now as all
the rigs have topdrives. One slip
could result in the loss of a nger
or hand because the machinery
would just keep going, Sanderson says.
He loved the outdoors, relished
the fortnight-on, fortnight-off
lifestyle, but I learned it was a
lot safer to work in an office than
on the drilloor.
Studies Born in Vancouver in

1973, Sanderson and his family

later moved to Toronto, where he
completed secondary school.
He then took a year off in
France before embarking on undergraduate studies in economics and political science at Montreals McGill University, and
remains uent in French.
He studied at Dalhousie University in Halifax for an MBA
before scouting around for that
rst job.
A guy with similar early experience on the rigs recruited me
as a researcher with Torontobased investment broker Midland Walyn, just one month before the 1998 merger with Merrill
Lynch, he says.
He stayed for two years but
didnt get the industry exposure,
so got himself hired into FirstEnergys corporate nance division.
They only did oil and gas, and
I started off in the service sector,
handling mergers and acquisitions for dividend-paying domestic companies, he says.
Sanderson thrived in FirstEnergys collegial atmosphere,
navigating the private equity
needs of E&P ventures with
radically different management
incentives and governance oversight, and helping to speed de-

technology

velopment of companies such as

oil operator Crescent Point
Energy, Albertas unconventional gas eld operator Peyto and oil
waste management specialist
Secure.
Through the 1990s and into
the 2000s, the size of companies
grew while the cost of E&P rose
and the oil price gained,
prompting increased M&A work
with Toronto-listed companies,
farm-outs and initial public offerings.
We moved to London in 2009
during the credit crunch. They
were tough times but the timing
was deliberate because our competition had been much weakened, laying off staff and not
paying top performers, so we
were able to poach, Sanderson
says.
Fellow Canadian outt Tristone Capital merged that year
with the Macquarie Group, and
we were able to convince a
clutch of them to come to us.
Sanderson presided over a
massive expansion of business,
not least in Africa.
In Canada we had little to do
with that continent, but now
more than 50% of our business
has African exposure, acquisition and divestment or raising
cash to unlock assets now every meeting has an African element.
Realising big ideas He handled

the Griffiths Energy namechange to Caracal Energy and the

IPO that enabled the company to
start drilling, move forward its
development campaign and access ExxonMobils Chad-Cameroon pipeline to sell oil into the
Kribi export terminal.
Caracal got so much of their
business plan executed that
Glencore Xtrata jumped in and
wanted to own them since theyd
proved that a deal could be done
in Chad, Sanderson says.
Its exciting for us to identify
great teams, chase down the
equity and then set our clients,
all junior and mid-sized companies, on the road to realising
their big ideas.
He aims to do it again for
South Africas Impact Oil, and
last summer advised Signet Petroleum on the sale to Shell of a

Rollercoaster ride: FirstEnergy Capitals UK executive managing director for corporate

nance, Hugh Sanderson
Photo: BARRY MORGAN

potential 15 billion-barrel Namibian asset, also acting for East

Africa-focused Wentworth and
Cove Energy.
FirstEnergy Capital advised Nigerian independent Oando Energy Resources and has been brokering for Eland Oil & Gas.
We always look out for good
operating teams, and once dispatched a business development
squad to Nigeria, focusing on
M&A, nance and farm-outs, so
far unsuccessfully. It can be a
difficult place to operate, he
says.
Sanderson used to love hiking
and canoeing in Canadas Northwest Territories but is now content with skiing on the slopes
surrounding Lake Louise. This
year hes off to Austrias St Anton
resort.
My wife and I are avid downhill and cross-country skiers, its

Dont miss Upstreams bimonthly

magazine for oil and gas innovators
to be distributed along with next
weeks newspaper. The rst edition
of 2015 includes spotlights on the
seismic sector and HPHT.

I learned it
was a lot
safer to work
in an office
than on the
drilloor.
something we can enjoy together, Sanderson says.
Six years discovering the UK
has been something of a rollercoaster especially the theatre, London is so awesome and
weve not yet scratched the surface, he explains.
I prefer social documentaries
Im not a Shakespeare fan,
though I do visit the Globe Theatre because there I can feel
sophisticated. Philanthropic

work is taken seriously and he

chairs the UK branch of community-oriented Canadian charity
United Way, which FirstEnergy
supports.
We give 2.5% of annual operating prot to charity. Our committee chooses the causes including the favourite charities of
employees weve never yet
turned down a staffer, says
Sanderson.
He knows that when the
oil price recovers into the $60
per barrel range, the call for
massive volumes of capital will
spike, alongside demand for
fresh acquisition and divestment.
The majors are constantly recycling assets while always
keeping about 20% of their portfolios under review. The potential is huge, its just a question of
how much we can capture.