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.”

Maritime Today Story

Finding new energy reserves is a priority for Australia, which forecasts a trade deficit in crude oil, refined products and liquefied petroleum gas of more than $30 billion by 2015.

Some of the world’s biggest energy projects are under construction off the Pacific nation’s vast coastline, which has proven a fertile hunting ground for exploration in recent decades.

A total of 29 areas in nine basins in Australian waters covering around 200,000 square kilometres have been released, stretching from the West Coast through the Northern waters to Victoria in the south.

Acreage release gives companies the right to bid for exclusivity in searching for oil and gas, but not the right to drill exploration wells or run seismic surveys without further approval.

“The release of acreage is a critical step in maintaining Australia’s energy security,” Martin Ferguson, the government’s minister for resources, energy and tourism, said in Perth.

“The large areas are mostly located in frontier regions. The ‘super-sizing’ of frontier opportunities acknowledges the challenges of exploring in these areas.”

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Construction Claims – Oil and Gas Offshort Experts

Now, Microsoft co-founder Bill Gates is tossing his financial support behind a Houston company which hopes to utilize detailed analytics and measurement technologies to take some of the guesswork out of onshore oil and gas exploration. NEOS GeoSolutions — whose investors include the legendary venture capital firm Kleiner Perkins Caufield & Byers and investment bank Goldman Sachs — today announced a $60 million investment from Gates and others.

The company touts itself as a “geosciences company where Silicon Valley meets the oil patch,” and Gates’ involvement certainly adds some big-name technology credentials to the mix.

According to the company’s Web site, NEOS can can help oil, gas and mining companies more efficiently explore the Earth’s subsurface.

We do this by integrating a broad range of geological and geophysical (G&G) data – including data available in the public domain, owned by our clients, or acquired using proprietary NEOS platforms – to produce a highly constrained 3D model of the subsurface. By applying the latest geostatistical techniques, we help our clients determine which portions of a basin might be the most prospective and, at the lease level, what areas are most likely to contain commercial quantities of hydrocarbons or minerals.

This is not Gates only investment in the energy field. The billionaire also is a backer of TerraPower, the Bellevue-based nuclear energy startup that raised $35 million last year.

In addition to Gates, Goldman Sachs and KPCB, NEOS raised the money from Passport Capital and Energy Capital Group, an investment vehicle controlled by the Saudi-based firm Rawabi Holdings.

W. Michael Long, Executive Chairman of NEOS, said in a press release that the investor group believes that a new era of natural resource exploration is just beginning.

“They believe that NEOS has the ability to drive the development and commercialization of a new generation of geophysical sensors capable of recording more measurements with greater accuracy from the Earth’s surface and subsurface. When these measurements are processed with advanced software algorithms that include state-of-the-art geostatistical and intelligent search features, our customers obtain more accurate 3D images of the subsurface at less cost and in shorter periods of time compared to conventional subsurface imaging techniques.”

NEOS has raised about $100 million since 2006.

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Oil and Gas Construction Claims Expert Support

“These new rules and the aggressive reform agenda we have undertaken are raising the bar for the oil and gas industry’s safety and environmental practices on the Outer Continental Shelf,” said Secretary of the Interior Ken Salazar, who announced the rules in a speech at the Woodrow Wilson International Center.

“Under these new rules, operators will need to comply with tougher requirements for everything from well design and cementing practices to blowout preventers and employee training. They will also need to develop comprehensive plans to manage risks and hazards at every step of the drilling process, so as to reduce the risk of human error.”

The Drilling Safety Rule and the Workplace Safety Rule join a host of reforms that the Department of the Interior has undertaken in the five months since the Deepwater Horizon oil spill that touch every stage of the offshore planning, review, permitting, drilling, and development processes.

“These two rules are part of a broader series of reforms we are undertaking to reduce the risks of offshore energy operations,” said Michael R Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM).

“We are substantially raising the standards for all offshore operators, and are doing it in an orderly and responsible way. We will continue to move forward with other changes and reforms in what will remain a dynamic regulatory environment. We owe the public nothing less.”

The Drilling Safety Rule, effective immediately upon publication, makes mandatory several requirements for the drilling process that were laid out in Secretary Salazar’s May 27th Safety Report to President Obama.

The regulation prescribes proper cementing and casing practices and the appropriate use of drilling fluids in order to maintain well bore integrity, the first line of defense against a blowout.

The regulation also strengthens oversight of mechanisms designed to shut off the flow of oil and gas, primarily the Blowout Preventer (BOP) and its components, including Remotely Operated Vehicles (ROVs), shear rams and pipe rams. Operators must also secure independent and expert reviews of their well design, construction and flow intervention mechanisms.

The Drilling Safety Rule is being issued under an emergency rule-making process. Director Bromwich said that BOEM will soon move forward with a standard rulemaking process that includes greater opportunity for public comment and that considers implementing additional recommendations of the Secretary’s May 27th Safety Report, such as the requirement that BOP’s have two sets of blind shear rams.

The second regulation, known as the Workplace Safety Rule, requires offshore operators to have clear programs in place to identify potential hazards when they drill, clear protocol for addressing those hazards, and strong procedures and risk-reduction strategies for all phases of activity, from well design and construction to operation, maintenance, and decommissioning.

The Workplace Safety Rule requires operators to have a Safety and Environmental Management System (SEMS), which is a comprehensive safety and environmental impact program designed to reduce human and organizational errors as the root cause of work-related accidents and offshore oil spills.

The Workplace Safety Rule makes mandatory American Petroleum Institute (API) Recommended Practice 75, which was previously a voluntary program to identify, address and manage safety hazards and environmental impacts in their operations.

BOEM will undertake additional workplace safety reforms, such as requirements for independent third-party verification of operators’ SEMS programmes, through an additional rulemaking process that BOEM will be launching soon.

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The companies also agreed to jointly seek more opportunities in Brazil and elsewhere, Statoil Chief Executive Officer Helge Lund said today. “Both companies see many opportunities for value creation through increased recovery and exploration for additional resources in the decades to come.”

The Norwegian company said last year it was considering cutting its stake in Peregrino to reduce risk and raise funds to develop other projects. Chinese state-owned companies, including PetroChina Co., last year spent a record $32 billion on energy and mining acquisitions to meet rising resources demand in the world’s fastest-growing major economy.

Cnooc Ltd., China’s biggest offshore energy explorer, was also in the bidding process for the stake estimated to cost as much as $3 billion, people with knowledge of the process said on April 15. Sinochem, China’s biggest chemicals trader, last year agreed to buy Emerald Energy Plc to boost revenue from oil and gas operations by tapping wells in Syria and Colombia.

“This transaction will significantly increase Sinochem’s interests in the exploration and production business and consolidate our position as one of the leading global players in the oil and chemicals business,” Han Gensheng, president of Sinochem Corp., said in a statement. The company made its first oil and gas investment in 2003 and operates 12 such projects in the Middle East, Latin American and Asia, according to the statement.

‘Profited Well’

“Statoil has profited well,” said Trond Omdal, an analyst at Arctic Securities with a “buy” rating on the shares. The price works out to about $15.4 a barrel, compared with the $7.2 a barrel Statoil paid when it took full control in 2008, he said.

Statoil’s shares gained 0.9 kroner, or 0.7 percent, to close at 127.3 kroner on the Oslo exchange after earlier falling as much as3.5 percent.

The Stavanger-based company, which has operations in 40 countries, took control of the field in March 2008 after buying the remaining 50 percent from Anadarko Petroleum Corp. The field, 85 kilometers (53 miles) offshore Rio de Janeiro, has an estimated 460 million barrels of recoverable oil, spokeswoman Mari Dotterud said on Oct. 20.

‘Better Than Fair’

“The price looks very strong actually, it’s better than fair,” Oswald Clint, an analyst at Sanford C. Bernstein who has a “market perform” rating on Statoil shares, said by phone from London. “This was signaled for some time.”

Statoil will keep 60 percent ownership and remain the operator of the field, which is set to start production in early 2011. Brazil will continue to form a “key part” of the company’s international strategy, and Statoil will explore further opportunities in the region, it said.

This stake sale will reduce Statoil’s equity production guiding for 2012 by 40,000 barrels of oil equivalent a day to 2.06 million to 2.16 million, the company said. Equity output was 1.962 million barrels of oil equivalent a day in 2009, while booked reserves of oil and gas totaled 5.4 billion barrels.

The transaction is subject to government approvals in Brazil and China.

–With assistance by William Bi in Beijing, Editors: Jonas Bergman, Raj Rajendran

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The well, in Keathley Canyon block 102 about 250 miles (400 kms) southeast of Houston, is in 4,132 feet (1,259 meters) of water, the company said.

The Tiber well was drilled to a total depth of 35,055 feet (10,685 meters), making it one of the deepest wells ever drilled by the oil and gas industry, BP said.

BP has a 62 percent interest in Tiber, while Petrobras holds 20 percent and ConocoPhillips has 18 percent.

BP shares were up 1.9 percent at 529.5 pence on the London Stock Exchange.

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