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.”

Maritime Today Story

Australia: THE federal government has released the biggest area in more than a decade for offshore petroleum exploration, underscoring the country’s commitment to exploiting its rich endowment of natural resources to cash in on Asia’s surging demand for energy.

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

LONDON—Royal Dutch Shell PLC said it is postponing for a year a controversial plan to drill for oil in the Arctic waters off Alaska after U.S. regulators withdrew a key permit.

The move reflects the growing public and regulatory scrutiny oil companies face in the wake of the Deepwater Horizon disaster, especially when they try to move into environmentally sensitive frontier regions.

The Anglo-Dutch oil giant said it would forgo its 2011 drilling program for the Beaufort Sea following a decision by the Environmental Appeals Board to invalidate its air-quality permit for drilling in Alaskan waters. Shell says of the …>more

Synergen Consulting – Construction Claims Assistance

For decades, oil and gas companies have faced the same problem: Where to drill?

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

Oil prices rose more than 3% Wednesday to close at their highest level since Nov. 11, driven by unexpectedly strong private sector job gains in the U.S. and a seven-month high in Chinese factory activity.

Crude oil futures for January delivery ended the trading day up $2.64 to $86.75 a barrel on the New York Mercantile Exchange. But while positive economic news here and abroad was the catalyst for the day’s rise in oil, U.S. consumers aren’t likely to appreciate the potential long-term effect on commodities prices, particularly if several long-term forecasts turn out to be accurate.

Goldman Sachs, for example, has reiterated its view that U.S. crude prices are likely to average $110 a barrel by 2012, rising from $100 next year. That would lead to sharply higher retail gasoline prices.

It won’t necessarily matter if energy demand continues to lag in the U.S., experts said, because the impetus for higher oil prices is likely to come from China. The world’s fastest-growing oil consumer will use 9.6 million barrels a day in 2011, up by more than 4% this year, according to the recent report by the International Energy Agency in Paris.

Fatih Birol, the IEA’s chief economist, said at a recent conference in Budapest, Hungary, that higher oil prices are inevitable. “The age of cheap oil is over,” Birol said.

The IEA’s most recent energy outlook presentation, by Executive Director Nobuo Tanaka, can be found here.

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Oil rose to a two-year high as the dollar weakened against other major currencies and equities advanced to a two-year high in Europe.

Futures increased for a seventh day, the longest stretch of gains since January, as the Dollar Index, which tracks the greenback against six other currencies, retreated for the first time in three days. A weaker dollar boosts the appeal of commodities as an alternative investment. The Stoxx Europe 600 Index increased to its highest level since September 2008.

“We’re going to keep inching along because of the dollar weakness that’s not going to go away anytime soon,” said Matt Smith, a commodities analyst for Summit Energy in Louisville, Kentucky. “We’re seeing a flip-flop again with a weaker dollar and equity markets higher, so risk appetite is back on.” >>more

The Department of the Interior in the US has announced two new rules that will help improve drilling safety by strengthening requirements for safety equipment, well control systems, and blowout prevention practices on offshore oil and gas operations, and improve workplace safety by reducing the risk of human error.

“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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Statoil ASA, Norway’s largest oil and natural gas company, agreed to sell a 40 percent stake in the Brazilian offshore Peregrino field to China’s Sinochem Group for $3.07 billion in cash.

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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Astronauts just had to get to the moon. They didn’t have to figure out how to extract oil from it.

With the new $3 billion Perdido oil and natural gas platform, in a remote deep-water area of the Gulf of Mexico, Shell and its partners have effectively done both.

After more than a decade of work, they began last month pumping oil at the massive floating facility, which sits in nearly 8,000 feet of water and draws from wells that far below the sea floor, setting several records along the way.

A recent visit to Perdido, roughly 200 miles south of Houston, brings the scope of the achievement into focus.

It also offers a g

limpse of what could be ahead for the oil and gas industry as it presses farther into one of the last remaining U.S. regions where big quantities of crude oil are still being discovered.

“What we’re seeing here is the start of a new frontier in the Gulf of Mexico,” Bill Townsley, Shell’s Perdido venture leader, said as he stood aboard the hulking steel structure, staffed with 150 people, that he has dedicated the last three years of his life to building.

Indeed, Perdido could offer a template for rivals to follow in coming years as they develop fields of their own in an emerging deep-water area known as the Lower Tertiary trend. In recent years, more than a dozen big oil discoveries have been in made Lower Tertiary formations — deposited from 65 million to 35 million to 23 million years ago — in a 300-mile band on the outer edge of the U.S. Gulf between Texas and Louisiana.

Shell’s Perdido — which in Spanish means “lost” — is the first to achieve commercial production there, but Lower Tertiary fields are also being developed by BP, Chevron Corp. and others and are expected to help reverse years of oil and gas output declines in the well-plowed offshore region.

Perdido alone is capable of producing 100,000 barrels of oil and 200 million cubic feet of natural gas per day — enough to meet the energy needs for over 2 million households for a year.

Though not at that level of production yet, getting to this point hasn’t been easy. Shell, with partners Chevron Corp. and BP, has done the equivalent of moving mountains to bring the project online.

To make the project feasible, Shell, the lead operator, and partners devised an elaborate plan for tying in three distinct fields — called Great White, Silver Tip and Tobago — and handling their production through a single platform. Doing it, however, would require drilling at least 35 wells, some as far as seven miles from the platform and all extremely costly.

“When we came at them with 35 wells, people’s heads exploded,” Townsley said.  >more

LONDON (AP) — BP PLC said Wednesday that it had made a “giant” oil discovery in the Gulf of Mexico but had not yet determined the size and commercial potential of the find.

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.