Maritime Today: Oil & Gas Execs: Market Moving Up , 1/23/2012 9:22:42 AM

While forecasts of financial gloom dominate mainstream news casts, there is an emerging feeling of optimism in fo the near term prospects for the oil and gas business. Oil and gas industry leaders have forecast improved performance and higher levels of capital expenditure this year, despite concerns over global economic instability, according to a new report on the future of the sector.
Increased investment across the industry will focus on exploration activity, with North America emerging as the area with the greatest opportunities in 2012.

Big Spenders: The outlook for the oil and gas industry in 2012, is the Economist Intelligence Unit’s second annual industry barometer, commissioned by GL Noble Denton, an independent technical advisor to the industry with considerable insight into many of the issues faced by those operating in the oil and gas sector.

82% of the 185 board-level directors and industry policy makers surveyed for the report are either highly or somewhat confident about the business outlook for their company, compared with 76% last year. Just 8% of those polled described themselves as pessimistic over performance in 2012.

Findings from the research also show that nearly two thirds (63%) of executives plan to invest either somewhat or substantially more over the next year, in contrast to 49% in 2011. 41% of industry professionals expect to see increased investment in exploration activities over the next year, with only 4.3% anticipating a decline.

There remains a caveat, however; if global economic conditions deteriorate, oil and gas companies will have to scale back their spending commitments where they can do so without creating damage to their wider portfolios, according to the report.
Other key findings from the research, as reported by the Economist Intelligence Unit, include:
- Rising operating costs emerge as the top barrier to growth. More than 50% of respondents say that they expect there to be an increase in wages over the next 12 months. 54% of respondents also expect the cost of contractors to increase, compared to only 11% anticipating a decline.
- Risk remains a key challenge. An overwhelming majority of respondents – 82% – either strongly or somewhat agree that regulatory issues have become more important in the post-Macondo period. Increasing regulation is regarded by more than 30% of respondents as the main challenge for their company over the next 12 months.
- Skills shortages are becoming more acute. According to the Economist Intelligence Unit’s research, this issue comes out of the survey as one of the major obstacles to growth over the next 12 months. Last year, skills issues came fifth on the list of barriers and were only identified as a top three issue by 25% of respondents. This year, the issue has risen to second on the list, and has been identified as a key barrier by 34% of respondents.

Unconventional gas: A global game changer?
The advent of projects like the Marcellus, Barnett, Haynesville and Fayetteville shales have created a supply glut that has affected global prices. Yet there is widespread doubt as to whether the shale gas revolution can be exported outside North America.

Scope for optimism for refiners: After a dismal few years, the downstream sector is showing some signs of life, at least in the US. Refining profitability has improved where robust margins have resulted from a revival of consumption of refined products. But Asia and Europe remain in the doldrums.

Pekka Paasivaara, member of the GL Executive Board, said: “The second annual Economist Intelligence Unit oil and gas industry barometer sends a clear message: Companies are preparing to spend big in 2012, despite a slower growth in demand for oil and gas during the second half of last year, and concerns over the future of the global economy.

“But this doesn’t mean that our clients are sanguine about their prospects for the year ahead. Findings from the report highlight a wealth of barriers to success, from rising operating costs to the worry of an impending shortage of skilled professionals and an uncertain regulatory environment in the post-Macondo era.

“While capital expenditure looks set to take off, industry leaders will need to invest selectively this year, keeping operating risks low during a period of prolonged uncertainty. Their success will be defined by an ability to develop innovative approaches to operating more safely, efficiently and sustainably than ever.”

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Latin America’s oil and gas market has remained relatively strong over the past year, despite the impact of ongoing financial problems worldwide. Demand for drillships and semisubmersibles has led to fleet utilization rates of around 100 percent, and Petrobras has busied itself with a number of offshore field development projects.

However, while the discovery of vast reserves in the pre-salt area of Brazil has helped drive activity for state company Petrobras, the company has had its share of problems, as has Venezuelan state oil company PDVSA.

Troubled Waters

Petrobras recently had to contend with a five-day strike by oil workers union Federação Única dos Petroleiros (FUP). FUP began the strike, which affected refineries and exploration and production units, after becoming unhappy with a profit-sharing scheme proposed by Petrobras, along with grievances that the company had not guaranteed protection against layoffs or adequately addressed concerns over safety issues. The workers previously went on strike in June 2008, demanding payment for time spent commuting to oil platforms.

The latest strike ended March 27 after Petrobras agreed to a substantial increase in the base level for its profit sharing, overtime payment for May Day, new meetings on employee safety and an assertion that job and benefit cuts were not planned. Petrobras also agreed not to harshly penalize workers who participated in the strike.

During the strike, Petrobras’ contingency teams took over operation of its platforms, and the company asserted that there was no interruption in oil and gas production.

Due to low oil prices, Venezuelan state oil company PDVSA has had trouble making payments to drilling contractors and oilfield services companies since pushing out foreign operators and nationalizing its oil and gas industry. PDVSA has ordered gradual payment of all outstanding debts dating back to 2008, and started to renegotiate terms and conditions with rig owners and companies providing well services.

In one of the more dramatic moments related to payment problems, PDVSA subsidiary Petrosucre took over operations of Ensco International jackup ENSCO 69 in January. Ensco had suspended drilling operations due to a lack of payment in the region of US$35 million. Petrosucre employees resumed drilling operations under observation by Ensco supervisory rig personnel, claiming that Ensco had violated contract provisions giving it 30 days to resolve such issues. PDVSA and Ensco are now working on resolving payment issues while drilling continues.

PDVSA President Rafael Ramirez said that the company would be “breaking away from structures that provide goods and services through monopolies, in many sectors of the oil industry” and create new companies, organizations and production units that “contribute effectively to the construction of socialism is the beginning of a new stage in the revolutionary process.”

Discoveries
In September 2008, Anadarko Petroleum made a pre-salt discovery at the Wahoo prospect offshore Brazil in the Campos Basin. The 1-APL-1-ESS well is on Block BM-C-30 in around 4,650 feet (1,417.3 m) of water, southeast from Petrobras’ pre-salt discoveries at the Jubarte field. Results at Wahoo indicate 195 feet (59.3 m) of net pay with similar characteristics to the Jubarte 1-ESS-103A well, Brazil’s first producing pre-salt field, which achieved rates of 18,000 b/d of light oil. Anadarko plans to run a multi-zone drill stem test toward the middle of 2009 at Wahoo and anticipates drilling more wells on the block later in 2009.

In late January of this year, Petrobras found  traces of natural gas in Blocks BM-ES-5 and BCAM-40. BM-ES-5 is in the Espirito Santo Basin in around 196.8 feet (60 m) of water. Scorpion Offshore jackup Offshore Defender is drilling on the block. BCAM-40 is in the Camamu-Almada Basin in around 967.8 feet (295 m) of water.

ExxonMobil has notified Brazilian regulatory agency Agencia Nacional de Petroleo, Gas Natural e Biocombustiveis (ANP) of two hydrocarbon discoveries in block BM-S-22, a pre-salt block known as Azulao. The discoveries were made in 7,293 feet (2,223 m) of water using Seadrill drillship West Polaris.

Rig Demand
South America continues to dominate Latin American drilling activity, with the majority of the rigs in the region working offshore Brazil or Venezuela. There are currently 128 rigs of various types in South America, and at least four rigs that are planned or on order will be headed to the region as well.

Of the existing rigs, 91 are under contract. The majority of the rigs with no contract are cold stacked or out of service drill barges and tender barges in Venezuela.

Other rigs are en route to South America. Noble semisubmersible Noble Dave Beard, Transocean semisubmersible Sedco 706 and Seadrill semisubmersible West Eminence will all begin contracts with Petrobras before the end of the year. Ensco International jackup ENSCO 68 is heading to Venezuelan waters to begin a three-well contract with Chevron.

Demand in both regions is expected to grow, with the majority of the growth coming from the semisubmersible market, according to ODS-Petrodata’s World Rig Forecast Short Term Trends report. In South America, an increase in demand to 52 semisubmersibles is predicted, but some requirements are likely to remain unfilled. At present, 40 semisubmersibles are in South America, all in Brazil, and all mainly operated by Brazilian state energy company Petrobras. Aside from Aban Offshore semisubmersible Aban Pearl, which will begin a contract with Venezuela’s PDVSA towards the end of the month, the rest of the arriving semisubmersibles will be working offshore Brazil for Petrobras or OGX Petroleo.

Of the seven rigs in Central America and the Caribbean Sea, all are in Trinidad and Tobago, with three jackups, one semisubmersible and one platform rig working, one platform rig warm stacked and one jackup cold stacked. One of the working rigs, Maersk-managed semisubmersible Kan Tan IV, has been drilling for Canadian Superior, Challenger Energy and BG Group on the Intrepid block, but will soon be leaving the region for Australia.

Field Development
Petrobras has been busy installing new FPSOs and production platforms offshore Brazil, and on Feb. 25 managed to set a new daily oil production record of 2,012,654 barrels with the help of the new facilities.

In the last quarter of 2008, floating platform P-53 became the first production unit installed in the Marlim Leste field in the Campos Basin. The P-53 is capable of producing up to 180,000 barrels of heavy oil, 20 degrees API, and of compressing up to 211.88 MMcf/d. The platform’s oil production is offloaded by shuttle tankers with the assistance of autonomous repumping platform PRA-1 and floating storage and offloading vessel Cidade de Macaé. The P-53 is in waters of 3,543 feet (1,080 m).

In January 2009, semisubmersible platform P-51 began producing from Well MLS-99 in the Marlim Sul field in the Campos Basin. Installed 93 miles (150 km) offshore in 4,117 feet (1,255 m) of water, the platform is capable of producing up to 180,000 b/d of oil. P-51 is capable of compressing 211.8 MMcf of gas and has a water injection capacity of 282,000 b/d. P-51 is 410 feet (125 m) in length, 360.8 feet (110 m) wide, and weighs 48,000 tons.

Petrobras brought FPSO Cidade de Niterói online in February, also in the Marlim Leste field. Chartered to Modec, the FPSO is 75 miles (120 km) off the coast in 4,495 feet (1,370 m) of water. The FPSO is capable of producing 100,000 b/d of light, 28-degree API oil and 123.6 MMcf/d of gas.

Following these projects, Petrobras expects to bring FPSO Cidade de São Mateus and FPSO BW Peace online within the next six months. Chevron’s Frade FPSO should also begin producing from the Campos Basin by mid-2009.

A number of field development projects have been taking place offshore Trinidad & Tobago. A consortium between Fluor Corp. and J. Ray McDermott recently installed the Poinsettia production platform for BG Trinidad and Tobago. Gas is now flowing from the platform.

The platform, located in 530 feet (161 m) of water off the northwest shore of Trinidad, can produce as much as 350 MMcf/d of gas, which is transported via a 20-inch diameter pipeline to the existing BG Trinidad and Tobago Hibiscus platform before final pipeline transmission to shore.

In March, Trinidad Offshore Fabricators Unlimited (TOFCO) delivered the EOG Toucan Deck to EOG Resources. The deck, a conventional deck module with a structure designed to support a drill rig, gas processing system and manned operations, will be part of the EOG Toucan platform in 433 feet (132 m) of water, 43 miles (69 km) east of Trinidad.

Source: Energy Current