PETROL & ENERGY 09.10.2015


Cam Hewell runs Premium Oilfield Technologies, a small company that makes equipment and spare parts for drilling rigs from North Dakota to Texas. Like his rivals, he is trying to withstand the worst oilfield downturn in six years, but they face a vexing obstacle: cannibals.

In a bid to save cash, rig owners are cannibalizing parts such as motors and drill pipe from idled rigs to fix 800 active ones in the U.S. when stuff breaks. In good times, they would buy new equipment from companies like Hewell's or industry leader National Oilwell Varco Inc when parts fail. Now, they just pick over any of about 1,100 rigs idled by the price crash.

Cannibalization is so widespread in this downturn that services companies and others say even after oil prices recover it will take six months or more to see a significant rebound in drilling and production - a timeframe that will allay fears of a quick uptick in drilling promptly sinking prices again.In good times, they would buy new equipment from companies like Hewell's or industry leader National Oilwell Varco Inc when parts fail. Now, they just pick over any of about 1,100 rigs idled by the price crash.

NOV has said so many rigs are idled that firms could cannibalize drill pipe for up to a year before placing new orders.

 

Africa

Algeria: Algeria's In Amenas gas plant should be back to full output capacity soon when partners complete work on a third processing train, a senior official at Norwegian oil company Statoil said on Tuesday. Amenas, which once accounted for 11.5 percent of the OPEC state's gas production, has been working less than full capacity since the January 2013 militant attack and siege in the Sahara desert where 40 oil workers were killed. 

Djibouti: Rubis won the invitation to tender for taking over the assets and the Total branded business base in Djibouti. Through this new development Rubis takes control of the leading fuel distributor in the country, present in all market segments: motorgas stations, commercial, aviation, marine and lubricants, representing a yearly volume exceeding 100 000 cbm. Djibouti, strategically positioned at the entry of the Red Sea in the Horn of Africa, has a natural advantage of being the main, if not the only, sea access to strong growing Ethiopia. 

Gabon: The situation is very difficult between the State of Gabon and Serge Toulekima, the Director General of the Gabonese National company of hydrocarbon (SNHG). It is the state company more known as Gabon Oil Company (GOC). He was reported that Toulekima refused to submit a technical and financial audit commissioned every 2 years to companies under contract with the Gabonese State according to a press release from the Minister of Petroleum and Hydrocarbons Etienne Dieudonné Ngoubou who is also in charge of the Board of Directors of the company. Serge Toulekima is suspended for a period of three months, from October 7. 


Gabon: Tullow Oil plc announced Thursday that it has reached an agreement with the Government of Gabon to regain its 7.5 percent stake in the Onal Complex producing fields and the Ezanga block (formerly the Omoueyi exploration block). The deal follows a decision last year by Gabon oil minister Etienne Ngoubou to lock Tullow out of negotiations on the renewal of a license on Onal, which effectively seized the company’s 7.5 percent stake. As part of the new deal, Tullow has been granted license extensions in the Onal Complex fields until 2034 and has gained access to two small oil discoveries made within the Ezanga block in 2014. In return for access to these discoveries, it has been agreed that the effective date of the new license will be August 1. 

Mauritania: Malaysia's Petroliam Nasional Bhd (Petronas) said on Thursday it was still operating in Mauritania after media reports this week said it had started to pull out of the north African nation as low global oil prices cut revenue. "In the event that Petronas intends to close our operations in the country, it will be in strict compliance with our legal commitments and is subject to customary conditions including the necessary approvals from relevant authorities," Wee Yiaw Hin, Petronas' chief executive officer for upstream, said in an emailed statement. 

Nigeria: Plans by Nigeria, Africa’s biggest oil producer, to review offshore production contracts signed with international oil companies two decades ago, have added to uncertainty in an industry already lacking regulatory clarity, said analysts including Philippe de Pontet of Eurasia Group. The objective is to increase Nigeria’s earnings from the fields, according to Emmanuel Kachikwu, group managing director of the Nigerian National Petroleum Corp. Yet, declining crude oil prices take away some of the incentive for investments that would’ve given the government more leverage in negotiations. “With Brent below $50 a barrel, the timing is not ripe for big contract negotiations.,” de Pontet said. “If the administration is not careful its agitation for contract review could prove counterproductive at a time when the oil sector is already stagnant at best.” 

Tunisia: Mahdia 2 project, carried out in Tunisia in 2012, allowed the national hydrocarbon company SONATRACH to make its first offshore discovery and the experience was a "proven success," said Wednesday in Oran an upstream drilling engineer and director of the Algerian-Tunisian projects, Rabah Aissani. The project was launched 90km southeast the port of Sousse, he said, adding that the drilling operations were launched in 2012, after two years of preparation. The exploration lasted 73 days and cost about US$ 30 million, which is a good performance, he said, explaining it by the low equipment rental expenses US$ 78,000/day against US$ 150,000/day, the rate around the world.
 

Middle East

Iraq: Proved and probable oil reserves at Gulf Keystone Petroleum’s Shaikan oilfield have increased from 299mn gross barrels to 639mn gross barrels, based on an updated Competent Person’s Report. The oilfield’s proven reserves have now increased 55 per cent to 306mn barrels from 198mn barrels last March, said the report. Based on the new findings, the Iraqi oil and gas explorer can focus on developing the field at lower costs. The company’s Shaikan oilfield, located in northern Iraq, has the potential to produce 100,000 bopd. 

Iran: Fourty Iranian MPs have signed a proposal for the impeachment of the country’s oil minister Bijan Namdar Zangeneh. Seyed Shokrekhoda Mousavi, a Member of Parliament and a member of Energy Committee of Iran’s Majlis (parliament) told the official Mehr News Agency that the MPs had been eager to introduce the proposal earlier, but waited to see the results of the impeachment proceedings held on October 6. Mousavi said that the status of Iran’s oil refineries and “lack of observing resistant economic macro-policies” were among the main reasons why Zangeneh’s ouster was being sought, although other reasons, if any, remain unknown. 


Middle East: Noble Group Ltd. hired former Trafigura Pte Ltd. executive Wael Amer to expand its Middle East and African oil-trading business as the Asian commodities firm restructures its operations. Based in Dubai, Amer will report to Middle East and Central Asia Chief Operating Officer Raj Kapoor as well as Global Head of Oil Liquids Jeff Frase, the company said Thursday in a statement. At Trafigura he was head of Middle East and African oil trading.


Saudi Arabia: The full extent of the impact of slumping crude prices on Saudi Arabia’s public finances has been highlighted by the International Monetary Fund in a new report telling oil exporters to be braced for a prolonged period of disruption to their budgets. The fund’s half-yearly fiscal monitor report shows that in the past three years a hefty budget surplus in Saudi Arabia has been turned into a deficit of more than 20% of GDP – double the shortfalls seen in the UK and the US during the worst of the global slump of 2008-09. 
 

Rest of the World

Australia: A consortium, led by QIC, has entered into a binding agreement to acquire the Iona Gas Storage Facility from EnergyAustralia, a member of the China Light & Power Group, for a purchase price of A$1.78 billion (US$1.2 billion). The QIC consortium comprises of the QIC Global Infrastructure Fund (QGIF) and existing QIC clients. Iona is an underground natural gas storage facility in west of Melbourne in Victoria, Australia, with a storage capacity of 23.5 PJ. The storage facility and associated processing plant is strategic in the supply of gas and generation of electricity to customers in Victoria, South Australia, and up the east coast of Australia.

Australia: Bass Strait Oil Company Ltd. reported Wednesday that it has sought and received approval from the National Offshore Petroleum Titles Authority (NOPTA) for a 12 month suspension and extension of the work program and permit term for its wholly owned Vic/P68 permit located in the prolific Gippsland basin, offshore Australia. The permit is currently in Year 3 of the 6 year term. The Year 3 program, which entails 87 square miles (225 square kilometers) of 3D seismic, now expires Nov. 3, 2016. Bass had sought the variation of the work program for this permit to allow an aggregation of seismic work with other operators to reduce the cost of the survey and for the survey to occur in the normal summer acquisition window offshore southern Australia. 

Brazil: Oil companies showed scant appetite for extensive acreage offered in Brazil´s 13th licensing round today, highlighting the impact of the country´s deep economic and political troubles combined with the oil price slump and regulatory inertia. Only 37 blocks, or 14pc of 266 onshore and offshore blocks on offer, were awarded, almost all to unchallenged bidders. Signature bonuses for the round totaled around R121mn ($31.2mn), a fraction of the R2bn the government had expected to attract. The awards yielded an accumulated R340mn in minimum exploration commitments. Brazilian independent QGEP was the sole bidder for two of 10 deepwater blocks in the Sergipe-Alagoas basin that had been considered among the most attractive.  The 10 blocks that had been offered there hold an estimated 20bn bl of oil equivalent. 


China: China has nearly tripled the size of proven reserves at its Fuling project, by far the country's largest shale gas find, according to an official from investor Sinopec Corp and an industry report. That would take total proven preserve certified by the Ministry of Land and Resources (MLR) at Fuling to 380.6 bcm, giving it the potential to have an annual production capacity of 10 bcm by the end of 2017, it said.The Jiaoshiba block of the project, in the municipality of Chongqing in southwest China, has 273.8 billion cubic metres (bcm) of newly proven reserves, said the report carried on news.cnpc.com.cn, an industry portal run by top energy group CNPC. 

Georgia: Frontera Resources Corporation has increased the gas resource estimate of its operations in eastern Georgia more than tenfold, compared to previous estimates. In April this year, Frontera revealed that independent consulting firm Netherland, Sewell & Associates confirmed combined prospective natural gas resources of 12.9 trillion cubic feet of gas in place, with as much as 9.4 trillion cubic feet of recoverable prospective natural gas resources, at the Mtsare Khevi Gas Complex and Taribani Field Complex, which were both combined to form the South Kakheti Gas Complex. In addition to gas resources previously identified for subsets of this combined area, Frontera’s ongoing work recently concluded new estimation of as much as 135 trillion cubic feet of gas in place from reservoir targets found between 984 feet and 16,404 feet in depth. Following Frontera’s considerable resource upgrade, an independent assessment of the company’s new internal estimates is now underway.

Netherlands: Gunvor Group Ltd., the Swiss commodity trader seeking to diversify from its Russian roots, confirmed it’s in final talks with Kuwait Petroleum International to purchase the Europoort refinery in Rotterdam. An agreement would see the 88,000-barrel-a-day plant continue to operate, the company said Thursday in a statement, without disclosing financial terms. Rival bidder HES International BV had planned to cut the site’s capacity and convert some to storage. 

Norway: Oil spilled into the North Sea during the loading of a tanker at Norway's Statfjord field on Thursday, operator Statoil said. About 40 cubic metres of oil, or 252 barrels, leaked at 0630 GMT when oil was loaded on the Hilda Knudsen tanker from the Statfjord A platform via a loading buoy, Statoil said. Production at the platform was not halted, but tanker loading has been suspended. A Statoil spokesman later said another buoy could be used to export oil stored on the platform.

Norway: Italian oil company Eni has received permission from Norway's Petroleum Safety Authority to extend the use of a service rig on its troubled Arctic Goliat oil field offshore Norway until Nov. 30, the regulator said on Thursday. The Floatel Superior rig is used to house hundreds of crew members working to finish the installation of Eni's Goliat platform. The permission to extend the use of Superior from Sept. 30 to Nov. 30 was given "on the basis of an updated schedule for the project", the safety authority said.

USA: Encana Corp. agreed to sell oil and natural gas assets in Colorado to an entity 95-percent owned by Canada Pension Plan Investment Board for about $900 million. Encana will use the proceeds to strengthen its balance sheet after oil prices fell about 45 percent in the past year, according to a statement Thursday. The transaction includes Encana’s 51,000-acre DJ Basin, which produced an average of 52 million cubic feet per day of gas and 14,800 barrels a day of crude oil and natural gas liquids in the first half of 2015. The purchasing group is 5-percent owned by The Broe Group, an investment management company. The transaction is expected to close in the fourth quarter of 2015, with an effective date of April 1, 2015. 

 
Energy Prices

Crude Oil ($/BBL)

Brent: $ 53.87 +4.64%
WTI: $ 50.39 +5.15%
OPEC Basket: $ 46.24 +4.69%
 

Natural Gas ($/MMBTU)
Henry Hub: $ 2.49 +0.40%

Steel ($/MT)
Steel Billet: $ 185.00
(LME Official – 3 months Buyer)

Euro/USD
€ 1 = $ 1.1283 +0.29%

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