PETROL & ENERGY IN THE WORLD



Far from an existential crisis, some oil majors are viewing the collapse in oil prices as an opportunity to become stronger. By reining in spending and focusing on only the best projects, the oil bust could push the oil industry to become more lean and healthy.

The Financial Times reported on the growing sense from oil executives that they are right-sizing their operations for the long haul. Speaking at IHS CeraWeek, several CEOs of major oil companies talked about having been forced to rethink their operations, cut costs, trim fat, and focus on value. In that sense, they could be beneficiaries of low oil prices. Once oil prices rise again, they could be making more money than ever before.

That would require an adjustment, but what if oil production companies can put the cost of adjustment onto someone else? Falling oil prices have allowed oil companies to cut the cost of drilling, finding savings in rig rates, the cost of equipment, well completions and other oil services. Those savings are great for ExxonMobil, BP, or Total – three companies who spoke at CeraWeek with a degree of optimism – but the savings amount to huge losses for oil field services companies.

Halliburton, Schlumberger, Transocean have been forced to slash the rates that they charge oil producers for their services. The U.S. rig count has declined by more than 50 percent since last year, and idle rigs are becoming the norm given the amount of drilling taking place. BP and Total just reported their earnings for the first quarter, and they beat analysts’ estimates. Their refining units benefitted from lower oil prices, partially offsetting a decline in revenue.

But for oil field services companies, which earn their money on drilling activity and not the price of oil, they are feeling the pinch the hardest. All sorts of kit is being auctioned off at cut rate prices, as pipes, machines, and heavy equipment pile up in scrap yards.
 

 

Africa

Angola: Eni commenced production from the Cinguvu oilfield, part of the West Hub Development project on Block 15/06 off Angola. The field is located approximately 350 km north-west of Luanda and 130 km west of Soyo. The West Hub Development Project encompasses the development of Sangos, Cinguvu, Mpungi, Mpungi North and Vandumbu fields in a water depth ranging from 1,000m to 1,500m. The two fields, Sangos and Cinguvu, are currently producing about 60 Mbbl/d through the N’Goma FPSO. Eni has discovered over 3 Bbbl in Block 15/06. Ownership of Block 15/06: Eni (35%, operator), Sonangol (35%), SSI Fifteen (25%) and Falcon Oil Holding (5%).

Ghana: McDermott International has formed a new JV company in Ghana with the Accra-based Hydra Offshore Group. The new JV company will be called McDermott Marine Construction Ghana Ltd. (MMCGL) and focus on opportunities offshore Ghana. McDermott said the MMCGL JV will optimize both local and international expertise to support Ghana’s offshore oil and gas industry. The company will operate out of Accra and any initial support to develop and operate the JV will come from Houston and London. 

Libya: Libya's western El Feel oilfield is still closed due to a strike by security guards, a spokesman for state oil firm NOC said on Wednesday. El Feel, which analysts say produced about 100,000 barrels per day (bpd), is operated by a joint venture owned by NOC and Italy's Eni. Libya this year had managed to restart El Feel after it had to shut late last year when a group in the Zintan region, which opposes a self-declared government in Tripoli, closed a pipeline. 

Namibia: Global Petroleum says a new evaluation of the deeper petroleum potential across Blocks 1910B and 2010A in Namibia is nearing completion. Global says the results are encouraging in that the primary risk which is associated with source rock development has been reduced. The report says: "Regarding the Juan de Nova permit, the 15 month period within which the French Authorities must respond to the renewal application expired within the Reporting Period. Silence by the French Authorities is deemed to be a refusal of the application under French law, and consequently the Company has launched a (non-litigious) appeal to which the French Authorities have two months to respond. "The Company continues to progress the process for award of its four exploration applications  offshore Italy. "Consistent with its previously announced strategy, the Company will continue to evaluate asset acquisitions, but will also consider appropriate corporate opportunities which are likely to increase significantly in number, given the current environment in the E&P sector of low oil prices linked with serious constraints in capital  availability." 

Nigeria: Solo today announces that it has exchanged its shareholding in Pan Minerals Oil and Gas AG for a direct holding of 15.9% in Burj Petroleum Africa Limited, a private UK registered company created with the purpose of participating in the current marginal field licensing round in Nigeria. Burj Africa, together with its partners, Global Oil and Gas and Truvent Consulting, has made application for two marginal fields in the current marginal field licensing round in Nigeria. These two adjacent fields contain a total of 10 wells that were drilled by an international major. These fields are believed by Burj Africa based on internal estimates to contain proven and possible recoverable oil reserves of 59.3 million barrels (13.5 million barrels net to Burj Africa after royalty). Solo has also entered into an agreement to increase its investment in Burj Africa. Solo will acquire an additional 5% holding in Burj Africa at closing through a payment of US$200,000 in cash and, in due course, the equivalent of US$300,000 in 39,750,000 new Ordinary Shares at an issue price of 0.51 p per share. Upon completion, Solo will hold a total interest of 20% in Burj Africa. 


Nigeria: One year after its listing on the Nigerian Stock Exchange (NSE), the worth of Seplat Petroleum Development Company Plc on the bourse has depreciated by N110 billion. Seplat, the only indigenous oil exploration and production firm on the NSE, got listed in April both on the Nigerian bourse and London Stock Exchange (LSE) after a successful $500 million initial public offering (IPO). The stock  was listed  at N576 per share with a market capitalisation of N319 billion. However, THISDAY checks  showed that one year after the listing, the market capitalisation of Seplat has dipped to N209 billion as at  Monday. This shows a decline of N110 billion or 34 per cent. This implies that investors, who subscribed to the IPO have suffered a capital depreciation of 34 per cent. Market analysts said apart from the weak demand generally affecting the market, the decline in oil prices  further worsened  demand for Seplat shares since the company operates in the oil and gas sector. In order to boost its capital structure and position for future opportunities, Seplat last week secured a $1.4 billion facility.


Nigeria: Seplat Petroleum Development Co, in its latest Interim Statement, reported that the commissioning work has been completed for the new 150 Mmscf/d Oben gas plant. The company revealed that gas has been introduced to the system and final pre-start up audits and checks are underway. This expansion of the processing capacity at Oben is a major step forward for Seplat’s gas business and increases gas supply available to the domestic market in Nigeria. Seplat also said that the construction of two 50,000 barrel storage tanks at the Amukpe field is progressing, with one at 90% complete and the other 74% complete. The company expects to commission the tanks and ancillary plant in Q2

South Africa / Namibia: In a first for the region, Spectrum’s latest 2D Multi-Client survey offshore western Africa has provided a full grid of coverage across the border between Namibia and South Africa in the central Orange Basin. The 3,500 km survey completes the second phase of a 6,000 km seismic programme linking key wells and discoveries on either side of the border. According to a release by Spectrum, many experts opine that the oil and gas potential offshore Namibia and South Africa is yet to be fully realised, while new exploration technologies and new seismic are rejuvenating this margin. Results from wells drilled by HRT provide a proven, working source in the area, which supports evidence from abundant oil seeps, basin model studies and high resolution 2012–2015 seismic.
 

Middle East

Iran: Iran's crude oil exports have risen in April following softer sales last month, helped by a framework nuclear agreement between Tehran and world powers and the possibility that Western sanctions could be lifted soon. Iran, once OPEC's second-largest producer after Saudi Arabia, hopes to boost crude exports by as much as 1 million barrels per day (bpd) if Tehran and six major powers finalise a nuclear agreement by a June 30 deadline. The sides reached a framework accord on March 31. One source, who tracks tanker movements, said Iran's crude oil exports have risen by around 500,000 bpd in April to 1.18 million bpd, helped by firmer sales to India, which bought no Iranian crude last month. Last month, India halted oil imports from Iran for the first time in at least a decade as New Delhi responded to U.S. pressure to keep its shipments from Tehran within sanction limits ahead of the negotiations on a preliminary nuclear deal. A second tanker-tracking source said Iran's exports in April rose by 450,000 bpd from March's unusually low level, towards 1.3 million bpd. 

Iraq: Technip, in partnership with UNICO, a Japanese engineering consultant, has been awarded a Project Management Consultancy (PMC) contract on a reimbursable basis, for the upgrading of the Basra refinery. This contract, awarded by South Refineries Company (SRC) – Ministry of Oil, covers the engineering, procurement, construction, commissioning, start-up and warranty management phase of the refinery upgrading project, located in Basra, Iraq. The project will aim at increasing the gasoline production capacity through the installation of a new fluid catalytic cracking unit and associated units such as visbreaker, hydrotreating, and hydrogen plant. This development is part of the Iraqi Government’s long-term plan to meet increasing future demand for hydrocarbon products. This award follows the PMC contract attributed to Technip in June 2013 for the Karbala refinery. It will be executed by Technip’s engineering centre in Milton Keynes, United Kingdom, and supported by Technip PMC teams. 

Oman: Petroleum Development Oman ( PDO ) says it is making headway in maturing its showcase Khulud tight gas development, the success of which could open the way for the potential commercialisation of other unconventional and tight gas plays in its Block 6 concession. Khulud is the majority government-owned oil and gas producer's first tight gas project located in the Yibal-Fahud area of its sprawling concession. It is also one of the deepest tight gas accumulations in the world, requiring capital intensive innovative and complex drilling, completion and hydraulic fracturing practices. Around a dozen wells have so far been drilled into the tight gas formation, of all which are in various stages of fraccing and completion, according to PDO . Since January 2014, six of the wells have been producing through an Early Production System (EPS) that was commissioned during the previous year. The facility, which has a capacity to process one million cubic metres per day of natural gas, is key to the long-term testing of the field, as well as to understand decline rates and overall output per well. 

Oman: Oman Tank Terminal Company (OTTCO) plans to start operating a floating storage unit later this year to boost trade of crude oil futures on the Dubai Mercantile Exchange (DME), trade sources told Reuters on Tuesday. The storage unit will increase monthly trade volumes on the DME would by 2mn barrels and help curb price volatility, they said. OTTCO, which is majority owned by the Oman Oil Company, will lease storage space onboard a Very Large Crude Carrier, via a tender process to four companies for a year, the sources added. The tender could be issued in June or July so that the storage space would be allocated before September when trade in November-loading cargoes starts. Each company will have space to store one cargo, or 500,000 barrels, they added. OTTCO, a joint venture between OOC and Takamul Investment Company, declined to comment. 

Oman: Indonesia's PT Medco Energi Internasional Tbk said its unit has signed an amended agreement which allows it to operate the Karim oil fields in Oman for an additional 25 years. The agreement was originally signed by Medco and its partners with Petroleum Development of Oman in 2006 for a period of 10 years, Medco said in an emailed statement on Wednesday. Medco holds a 51 percent effective participating interest in the fields, with the remainder held by Kuwait Energy Company, two local partners and Oman Oil Company Exploration & Production. 

Turkey: Turkey could more than triple natural gas imports from Azerbaijan once the planned $10 billion TANAP pipeline reaches full capacity in 2026, the general manager of the project told Reuterson Wednesday. As per the plan TANAP would initially carry 16 billion cubic meters (bcm) of gas a year by mid-2018 of which 6 bcm will be supplied to Turkey, the rest going to Europe. "Once the flow in the pipeline reaches 31 bcm, Turkey will be able to buy 21 bcm of this if it wants to. Both BOTAS or Turkish private companies can buy this," Saltuk Düzyol said in an interview to Reuters. The gas will come from Azerbaijan's Shah Deniz II field in the Caspian Sea. TANAP will deliver 10 bcm to Europe once it is connected to the Trans Adriatic Pipeline (TAP) by 2020. By 2023, TANAP's capacity will rise to 23 bcm per year and then to 31 bcm by 2026, according to project executives. 
 

Rest of the World

Australia: Falcon Oil & Gas Ltd. indicated Wednesday that the joint venture for Exploration Permits 98, 76 and 117 in the Beetaloo Basin in Northern Territory, Australia is making preparations to drill three wells soon, the company said in its release of full year 2014 results. Work to prepare for the 2015 Australian three well drilling program in the Beetaloo Basin with partners Origin Energy Ltd. and Sasol Ltd. are at an advanced stage and drilling operations are expected to commence in the middle of this year. Falcon Oil & Gas said the principal objectives of the 2015 drilling program will enable the joint venture to carry out formation evaluation and reservoir characterization from these initial three wells through petrophysical interpretation, core analysis, geomechanical studies and stimulation design. Tendering and contracting for the rig and key well services, and recruiting additional project resources are ongoing. 

Australia: Chevron Australia Pty Ltd said Thursday it has made another gas discovery in the Greater Gorgon area located in the Carnarvon Basin offshore northwest Australia. “The Isosceles-1 exploration discovery well encountered approximately 134 metres (440 feet) of net gas pay in the Triassic Mungaroo Sands in 968 metres of water (3,175 feet). The well fulfilled the second year work commitment in the exploration program. It is located in the WA-392-P permit area approximately 95 kilometres (60 miles) northwest of Barrow Island, off the coast of Western Australia,” Chevron said. Melody Meyer, president, Chevron Asia Pacific Exploration and Production Company said “the discovery is a continuation of our exploration success and further positions our company as a key supplier for future liquefied natural gas (LNG) demand in the Asia-Pacific region.” Chevron Australia is the operator of WA-392-P with a 50 percent interest while Shell Australiaand Mobil Australia Resources each hold a 25 percent interest. 

Australia: The Directors of Armour Energy Limited (ASX: AJQ; Armour) are pleased to provide an update on recent analysis of the emerging Tawallah Group source rock play in the MacArthur Basin of the Northern Territory. The Tawallah group source rock play is newly recognised, and could potentially add very significant oil and gas resources to Armour’s portfolio, beyond those previously identified by the Company. The Tawallah Group source rocks are believed to underlie the McArthur Group (which includes the prospective Barney Creek Shale) throughout EP176, extending east to the Queensland border and south across EP191 (see Figure 1). The extent of this newly recognised exploration play within Armour’s permits is currently estimated to be 52,000 km2. 

Canada: Canada’s resource minister is privately urging oil and gas executives to get outside the board room and pitch projects to the public, boost spending on environmental research and work more closely with aboriginal groups to win the public relations battle over energy. Greg Rickford spoke to a closed-door meeting of about 40 to 50 oil and gas executives in October -- a speech that went through several drafts as bureaucrats worked to make it more “pointed on what is needed from industry,” prepared remarks and e-mail documents obtained by Bloomberg through an Access to Information request show. In the private address, Rickford congratulated industry on its achievements and touted his government’s record, as he regularly does in public speeches, according to the prepared remarks. He then called for industry to do more. 
Georgia: Range provides the market with the following update in respect of its interest in
the Georgian project. The Ministry of Energy of Georgia has formally notified the Operator of the Georgian project, Strait Oil & Gas (“SOG”: in which Range holds a 45% interest) that the Production Sharing Contract (“PSC”) over Block VIb has been terminated. The Ministry cites the non-performance of obligations, specifically the requirement to drill a well in accordance with the stipulated procedure. The penalty to be imposed on SOG by the Ministry is US$1 million, payable immediately. Range has been a supportive investor in SOG and the Georgia project since 2009 and has invested approximately US$40 million into the project, which is significantly in excess of the original expectation of cost to this point. 

China: Praxair has signed a long-term contract to provide industrial gases to the China National Offshore Oil Company (CNOOC). The project, expected to start up in 2017, will enable the reliable and efficient supply of industrial gases for CNOOC’s refinery and downstream chemical production. Praxair will build, own and operate two 2,400 tons per day air separation plants in the Huizhou Daya Bay Chemical Industrial Park, located in Huizhou, Guangdong, China. Praxair’s product line plants will provide oxygen and nitrogen to CNOOC to support the company’s refinery expansion from 250,000 to 460,000 barrels of oil per day. Praxair currently serves other customers in the Park including the existing CNOOC refinery and the CNOOC and Shell petrochemical complex. This investment will further position the company to supply new customers in the Park via pipeline.

Indonesia: New Zealand Oil & Gas Ltd., an independent exploration and production company, reported that the field operator of onshore Kisaran Production Sharing Contract (PSC) in Sumatra, Indonesia has submitted a plan of development for the block to the country's upstream regulator. "Approval by the regulator is targeted for mid-2015, with the final investment decision following," New Zealand Oil & Gas said in its quarterly activities report released Wednesday. The development program is likely to include the completion of up to three suspended exploration and appraisal wells, while as many as four new wells will be drilled. Based on the current plan, new well drilling and workover of existing wells are expected to be carried out in the second half of this year, with initial production expected late 2015/early 2016. The Kisaran Joint Venture partners are PSC operator Pacific Oil & Gas (Kisaran) Ltd., with a 55 percent stake. The remaining 45 percent interest are divided evenly between Pacific Oil & Gas (Sumatera) Inc., a subsidiary of Bukit Energy Inc., and New Zealand Oil & Gas. 

Indonesia: Indonesia-focused oil and gas exploration and production company Lion Energy Limited reported Wednesday that CITIC Resources Holdings Limited (CITIC), the Operator of the Seram (Non-Bula) Production Sharing Contract (PSC) in eastern Indonesia, of which Lion has a 2.5 percent interest, has made an announcement on the Hong Kong Stock Exchange regarding the Lofin-2 appraisal well. In October 2014, CITIC Seram commenced drilling Lofin-2 to appraise the Lofin-1 discovery and evaluate the potential oil/gas condensate and gas deposits within the Manusela Formation. Lofin-2 had a planned depth of 17,798 feet (5,425 meters). CITIC Seram had drilled Lofin-2 to a current depth of 18,379 feet (5,602 meters) and is conducting tests. Results from testing of Lofin-2 so far are promising with results showing Lofin-2 continues to encounter oil/condensate and gas at its current depth. CITIC Seram, therefore, proposed to deepen Lofin-2 in order to continue its appraisal of the oil/condensate and gas potential within the Manusela Formation. 


Norway: Norwegian oil major Statoil swung to a surprise net loss of around $4.7 billion in the first quarter as it wrote down the value of its U.S. shale business and suffered from lower oil prices. State-controlled Statoil, which operates in dozens of countries from Canada to Africa, said it had cut its price outlook for its U.S. business, took about $6 billion in impairments, suffered from plunging crude and gas prices and only enjoyed a modest benefit from higher refining margins. "The impairments were a result of a revision of Statoil's long term economic planning assumptions," the company said in a statement on Thursday. The firm made a net loss of 35.4 billion crowns ($4.7 billion) for the quarter, below analyst expectations for a profit of 3.8 billion crowns in a Reuters poll and well down from a profit of 23.7 billion crowns a year earlier. Offering some relief, it reported an adjusted operating profit of 22.9 billion crowns, ahead of forecasts for 16.4 billion crowns and kept its quarterly dividend at 1.80 crowns, in line with its promise to maintain the dividend at this level for the first three quarters of 2015. 

Russia: Russia's top natural gas producer Gazprom expects Russian gas price for Europe at $242 per 1,000 cubic metres in 2015 after an average of $289 in the first quarter, Alexander Medvedev, the company's deputy CEO said on Wednesday. Medvedev said the forecast is based on the average price of Brent oil of $55 per barrel. 


Russia: Arktikgaz, a JV between Gazprom Neft and Novatek, has commenced production from the Yaro-Yahinskoye field in the Yamalo-Nenets Autonomous Okrug, Russia. Annual production at the field is expected to reach around 7.7 Bcm of natural gas and 1.3 MMT of de-ethanized gas condensate. The field comprise thirty seven gas condensate wells drilled at the field, with a gas collection system, a gas treatment facility, and a condensate de-ethanization unit. Gazprom Neft First Deputy CEO Vadim Yakovlev commented: “The Arktikgaz fields constitute a significant contribution to Gazprom Neft’s plans for the establishment of a new production cluster in the north of the Yamalo-Nenets Autonomous Okrug. By 2020 the three projects in this cluster — those of the Messoyakha and Novoportovskoye fields, together with the Arktikgaz assets — will account for approximately one quarter of all production at Gazprom Neft — with total production expected to reach 100 million tonnes of oil equivalent (mtoe).” 

Russia: OAO Gazprom, Russia’s natural-gas exporter, said profit fell 86 percent on soaring foreign exchange losses, while the ruble collapse helped it generate record free cash flow. Net income shrank to 159 billion rubles ($3 billion) in 2014 from 1.14 trillion rubles the previous year, the Moscow-based company said Wednesday in a statement. That compares with an average estimate of 665 billion rubles from five analysts surveyed by Bloomberg. The results reflect lower demand in Europe, Gazprom’s largest export market, as a mild start to the winter and increased supplies of liquefied natural gas weighed on prices. European buyers also tapped gas from storage before increasing purchases from Gazprom as they waited for a drop in crude prices to filter through to oil-linked gas-supply contracts. The ruble’s almost 50 percent collapse helped to both lower capital expenditures and buoy revenue. The company generated 654 billion rubles of free cash flow, 90 percent more than the previous year, according to calculations based on numbers in the report. Net operating cash flows rose 10 percent. Shares rose 1 percent to 154.33 rubles by 11:03 a.m. in Moscow. 

United Kingdom: BP, on behalf of the Schiehallion co-venturers Shell and OMV, is pleased to announce the start of drilling on the Loyal field by the new-build, semi-submersible Deepsea Aberdeen, marking the start of a seven year drilling campaign west of Shetland. Deepsea Aberdeen is contracted to drill wells across the Schiehallion and Loyal fields, as part of the Quad204 development. The sixth-generation, dual derrick rig is the newest addition in Odfjell Drilling’s fleet of mobile offshore drilling units. It has been designed to the highest international safety standards to operate in harsh environments, carrying out ultra-deepwater drilling in depths up to 3,000m. The Deepsea Aberdeen will initially drill two producer wells and one injector well on Loyal, before moving onto Schiehallion to continue drilling activities. Five wells are planned to be drilled prior to first oil from the new Glen Lyon floating, production, storage and offload (FPSO) vessel at the end of 2016.

United Kingdom: Mediterranean oil and gas firm Sound Oil (LON:SOU) is currently working on various transformational transactions, it stated in its 2014 results. The firm is in advanced discussions on a strategic partnership with a major oil and gas company to fund and technically de-risk a selection of Sound Oil's assets. It is also negotiating to farm in to a Southern Mediterranean onshore gas discovery with very significant estimated reserves and exploration upside. Meanwhile, the company continues to explore various onshore exploration, development and production asset opportunities in Italy. Sound said production volumes at its Rapagnano asset were ahead of expectations last year; the first full calendar year of production at Rapagnano saw volumes rise to 2.83mln standard cubic metres (MMscm, or 135mln standard cubic feet (MMScf). 
 
Energy Prices

Crude Oil ($/BBL)
Brent: $ 65.46 +1.47%

WTI: $ 58.47 +2.71%
OPEC Basket: $ 60.41 -1.06
%
 
Natural Gas ($/MMBTU)
Henry Hub: $ 2.59 +2.78%

Steel ($/MT)
Steel Billet: $ 305.00
(LME Official – 3 months Buyer)

Euro/USD
€ 1 = $ 1.01095 +1.16%
Sponsored Oil & Gas Events

Second Quarter 2015

12th Africa Independents Forum 2015 - 26 to 27 May, in London, UK -
Oil council's Canada Oil & Gas Assembly - 28 May, in Calgary, Canada 

Madrid LNG & Shipping Forum 2015 - 28 to 29 May, in Madrid, Spain -

Oil council's 
Africa Assembly - 23 June, in Paris, France -

Third Quarter 2015

Tanzania Oil & Gas Expo 2015 - 27 to 29 August, in Dar-es-Salaam, Tanzania - 

 
Fourth Quarter 2015

Oil council's West Africa Assembly - 13 to 14 October, in Lagos, Nigeria 
World Oil & Gas Week & Awards of Excellence 2015 - 16 to 18 November, in London, UK - 

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