Oil and Gas People first for breaking oil industry news from around the globe. Oil and Gas People is working to create a LIVE snapshot of the entire oil and gas workforce and it's current availability.
CNOOC Limited has announced that CNOOC China Limited, its subsidiary, has signed a Cooperation Framework Agreement with China Petroleum & Chemical Corporation (Sinopec Corp.) regarding the sea areas of Bohai, Beibu Gulf and South Yellow Sea, as well as North Jiangsu basin.
The Cooperation Framework Agreement will be implemented in three years through joint study, joint exploration and facility sharing in multiple sea areas. Under the framework, both parties have signed three joint study agreements, namely, “Joint Study Agreement on Bohai basin,” “Joint Study Agreement on North Jiangsu basin and South Yellow Sea basin” and “Joint Study Agreement on Beibu Gulf basin.” Both parties will share data and carry out innovative joint studies in the Yellow River Mouth Sag, the Qingdong Sag and the eastern part of Bodong Sag in the Bohai basin, as well as southwestern Weizhou and Xuwen areas of Beibu Gulf basin, the North Jiangsu basin and the blocks in eastern South Yellow Sea basin (involving 19 prospecting rights and approximately 26,900 km2 altogether). The expenditures incurred for the joint studies shall not be recovered from the costs of any petroleum contract that may be signed in the
@hotTipLiveSnapshot@ future. During the joint study period, the exploration, development and production operation of both parties in their respective prospecting rights areas will not be affected.
This cooperation will promote the distribution of sedimentary facies belts and enhance the understanding of the regularity of hydrocarbon accumulation in cooperative blocks and potential structures in the basins in order to make the optimization of potential exploration zones and targets more scientific, reduce exploration risks and improve the success rate of exploration wells.
Capricorn Norge AS, operator of PL 758, has completed the drilling of wildcat well 6508/1-3.
The well was drilled about 6 km southeast of Norne field and 200 km northwest of Brønnøysund.
The objective of the well was to prove petroleum in Lower Jurassic reservoir rocks (the Åre formation).
Well 6508/1-3 encountered about 170 m of alternating layers of sandstone, claystone and coal in the Åre formation, of which a total of nearly 50 m of sandstone with very good reservoir quality. There are no traces of petroleum in the well, which is classified as dry.
Data acquisition has been carried out.
This is the first exploration well in PL 758. The license was awarded in APA 2013.
The well was drilled to a vertical depth of 1663 m below the sea surface, and was terminated in the Åre formation in the Lower Jurassic. Water depth at the site is 390 m.
The well will now be permanently plugged and abandoned.
Well 6508/1-3 was drilled by the Transocean Arctic drilling facility, which will now drill wildcat well 6608/11-9 in PL 842 in the Norwegian Sea, where Capricorn Norge AS is the operator.
The surprise departure of Mexico’s finance minister has the state oil company’s watchers biting their nails.
Carlos Urzua resigned Tuesday, citing conflicts of interest and policy disagreements within Andres Manuel Lopez Obrador’s administration. That sent the peso plunging as much as 2.3%, and stocks sliding. Yields on both sovereign and Petroleos Mexicanos bonds surged, reflecting the tight link between the nation and the oil giant.
The first major cabinet loss since Lopez Obrador, known as AMLO, took office in December could spark another junk rating for Pemex after Fitch downgraded its bonds last month, according to TD Securities. The average spread on all Pemex’s bonds rose 13 basis points on Wednesday.
“This opens the door to fiscal slippage in the 2020 budget and, crucially, a lack of strong impetus to address the bubbling Pemex ‘crisis’,” Sacha Tihanyi, deputy head of emerging market strategy at TD, said in a note Wednesday.
Rajan Vig, founder of oil trading company Indimex Marketing and Trading LLC in Mexico City, reckoned that Urzua’s resignation could lead to higher spending on Pemex’s refining business, which would detract from its core business of drilling.
“Urzua was diligent and highly conservative when analyzing opportunities. That’s what I gathered the issue was,” said Vig. “There is only one person that runs economic policy in Mexico and that is AMLO.”
Andres Manuel Lopez Obrador Photographer: Luis Antonio Rojas/Bloomberg
While Urzua’s replacement -- former deputy finance minister Arturo Herrera -- is considered more market-friendly than his predecessor, analysts question how much sway over Lopez Obrador’s nationalist energy agenda he’ll actually have.
In his morning press conference on Wednesday, Lopez Obrador said he had some disagreements with Urzua. He said he replaced Urzua’s draft for the government’s national development plan, and opted for one closer to his transformation goals.
The five-year plan includes goals to enhance Mexico’s self-sufficiency in energy by expanding the role of state companies Pemex and the Federal Electricity Commission.
Pemex’s oil output has declined consecutively for 14 years, while its refineries operate at about 35% of their capacity due to historic under-investment. Its debt is the highest of any oil company in the world, at $106.5 billion.
If that weren’t enough of a challenge, Pemex has also been saddled with managing the construction of a new $8 billion refinery in three years, which investors fear could drain the resources of the already struggling oil producer.
After his nomination Tuesday, Herrera told reporters that Pemex’s high fiscal burden must be reduced slowly, and he said that the focus of Pemex’s business plan due in the coming days will be investment in oil production. He said that refinery investment is minor compared to the total.
Herrera played down an episode where he was quoted by the Financial Times as saying that the government’s refinery project was on hold, only to be contradicted by Lopez Obrador hours later. He now says he wasn’t properly cited by the media.
Herrera is likely to be “trodden on,” said Vig, “unless he can convince AMLO to act based upon economic indicators."
IFP Energies Nouvelles (IFPEN) and Total announce that they signed a strategic R&D partnership yesterday, that includes an agreement to endow a chair at the IFP School, on carbon capture, utilization and storage (CCUS) and technologies to curb CO2 emissions. The roughly €40-million partnership covers a period of five years.
The agreement has two parts:
A strategic R&D partnership on carbon capture, utilization and storage (CCUS) aims to reduce the cost of infrastructure and improve the CCUS chain’s energy efficiency to secure its large-scale deployment. The partnership steps up the longstanding collaboration between Total and IFPEN by marshaling additional resources. The research will focus on fields related to new materials, process scaleup, underground carbon storage in deep saline aquifers, technical and economic feasibility studies and the quantification of environmental benefits for the entire CCUS chain.
The Carbon Management and Negative CO2 Emissions Technologies to Net- Zero Carbon Future Chair will help train a new generation of international researchers and experts who will develop technologies to reduce carbon in the atmosphere. Overseen by a scientific committee comprised of world-renowned, independent experts, the chair will bring together seven doctoral and five postdoctoral researchers for five years.
Following the signature of the agreement, Patrick Pouyanné, Chairman and CEO of Total, stated: “We are delighted to accelerate the R&D partnership between Total and IFPEN. We want to pool our innovation capabilities to reduce the cost of CCUS technologies and improve their efficiency — both of which are necessary for large-scale deployment. Total wants to help make the planet carbon neutral and boost the competitiveness of an industrial-scale CCUS sector.”
Didier Houssin, Chairman and CEO of IFPEN, commented: “IFPEN has been actively researching carbon capture, utilization and storage technologies for nearly 20 years. Our strengthened partnership with Total will allow us to combine our teams’ skills and know-how with Total’s and thus to accelerate the deployment of CCUS technologies, which are a key solution for drastically cutting CO2 emissions.”
According to the International Energy Agency’s (IEA) Sustainable Development Scenario, which corresponds to a less than 2°C rise in the global average temperature, it will be necessary to capture and store 6 billion tons of carbon by 2050. This will require developing viable, cost-competitive CCUS technologies.
Welltec has announced the first deployment of a truly cementless completion in the Republic of Congo during the second quarter of 2019. Building on the experience gained through the continuous deployment of the Welltec Annular Barrier (WAB) in Moho North Albian field, which was awarded the first quarter of 2017, Total E&P Congo has pushed the boundaries of Metal Expandable Annular Sealing technology even further by deploying the world’s first cementless completion using the Welltec Annular Isolation (WAI) in open hole.
The WAI uses multiple metal expandable packers to provide long length open hole zonal isolation to replace the functions of traditional cement, leading to significant gains in efficiency in the overall well construction process. It significantly reduces the free annulus space between the liner/casing and the open hole which can be beneficial in highly layered reservoirs of varying permeability where selective production, stimulation or water shut off is required. In addition to the efficiency gains, the simplified well completions operations enabled by the WAI eliminated multiple operational risks associated with the cementing process in depleted and over-pressured reservoirs.
“Total E&P Congo have utilized innovative technologies and methods to continually improve the drilling curve on the Moho North Albian field development project,” says Ronan Bouget, the Drilling and Completions Manager of Total E&P Congo. “We were early adopters of Welltec’s WAB technology which has assisted in ensuring zonal isolation and annular sealing (liner to formation) during the development of our major oil project in the Republic of Congo. The WAI was deployed as part of the global efficiency drive to reduce drilling expenditure whilst maintaining the beneficial productivity index in this highly heterogenous carbonate field. Our Albian Asset team led by Manfred Bledou and the completion department led by Guillaume Viger worked with Welltec to develop the technology. The simplicity of the WAI enabled us to successfully deploy the technology the first time without operational issues. We delivered a step change improvement in our well construction record and plan to deploy the WAI in subsequent wells - especially those identified as high-risk.”
“The WAI technology will without doubt transform how future wells are constructed in the industry,” explains ‘Gbenga Onadeko, senior V.P., Welltec Africa. “We are proud of this collaboration with Total E&P Congo to demonstrate our ability to deploy game-changing innovation that can simplify, eliminate risks and enhance operational efficiency. This world-first deployment of the WAI technology is very important as we progress our mission - to develop and deliver ground-breaking solutions which enable our client to optimize the management and development of their assets.”
McDermott International, Inc., has announced that it has been awarded a contract in excess of $3 billion for Package 1 of Saudi Aramco's Marjan Increment Development Mega-Project to provide engineering, procurement, construction and installation (EPCI) of the Gas-Oil Separation Plant (GOSP), in a consortium with China Offshore Oil Engineering Company (COOEC).
McDermott will lead the consortium with COOEC in an integrated execution model utilizing McDermott's extensive global assets and facilities. The consortium will leverage McDermott's extensive project management, engineering, global procurement, fabrication, In-Kingdom field-operations and marine knowledge of Marjan field with COOEC's fabrication capability and marine vessels. The Package 1 GOSP separation platform is located offshore in the eastern flank of the Arabian Gulf. This is the operational center of the Marjan increment development mega-project and will draw upon McDermott's extensive interface and logistics management capabilities.
The award represents the single largest EPCI offshore contract awarded by Aramco. The Marjan Increment Project will increase production from 500,000 to 800,000 bopd, with Package 1 GOSP facilities at the core of the development.
"This award signifies Aramco's confidence in McDermott's project management expertise and ability to meet the interface, logistics and coordination challenges that an EPCI project of this vast scale represents," said Linh Austin, Senior Vice President, Middle East and North Africa. "The award is validation of the One McDermott Way, our locally focused and globally-integrated approach to deliver certainty to the most complex projects."
The contract includes the fabrication of over 165,000 tons (150,000 metric tons) consisting of six major topside platforms and jackets, 12 bridges and six bridge support platforms and jackets, as well as over 40 mi (70 km) of 36-in. oil export trunk lines and more than 55 mi (90 km) of 230 kV composite subsea cables.
The project management and engineering teams will be centrally located in McDermott's Asia-Pacific Headquarters in Kuala Lumpur, Malaysia, in close proximity to our Batam Island fabrication facility in Indonesia and the COOEC facility in China. The engineering phase is scheduled to begin in the third quarter of 2019 and fabrication is scheduled to begin in the first quarter of 2020, with overall completion planned for the fourth quarter of 2022. The contract award will be reflected in McDermott's second quarter 2019 backlog.
Oil rode a tide of bullish news to its highest price in almost two months as a potential hurricane roiled the Gulf of Mexico and U.S. crude inventories dropped.
Futures advanced 4.5% to the highest settlement since May 22. The storm brewing in the Gulf could reach hurricane status before slamming ashore this weekend, according to government meteorologists. Chevron Corp., Exxon Mobil Corp. and other major oil producers are evacuating crews from offshore installations and almost one-third of Gulf crude output has been halted.
The Energy Department. meanwhile, reported that U.S. crude stockpiles shrank by 9.5 MMbbl last week, surpassing all 13 estimates in a Bloomberg survey. President Donald Trump vowed to increase sanctions on Iran “substantially,” adding to already simmering tensions in the Persian Gulf.
“The market is reacting to the impact of the storm and the price is getting further support from the crude oil inventory draw,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
In Washington, Federal Reserve Chairman Jerome Powell said the central bank is concerned about the economic implications of global trade disputes, which investors took as a sign the Fed is ready to cut interest rates.
West Texas Intermediate crude for August delivery rose $2.60 to settle at $60.43/bbl on the New York Mercantile Exchange. Brent for September settlement climbed $2.85 to $67.01 on the ICE Futures Europe Exchange.
The global benchmark crude traded at a $6.49 premium to WTI for the same month.
“We started the morning pretty strong and on top of that the tropical depression in the Gulf was already leading us higher,” said Brian Kessens, a portfolio manager and managing director at Tortoise in Leawood, Kansas. “And Powell certainly didn’t hurt any markets with his dovish comments.”
The Gulf storm system was about 155 mi (250 km) from the mouth of the Mississippi River, the U.S. National Hurricane Center said in an advisory at 2 p.m. New York time. It could turn into a tropical storm by Thursday and turn into Hurricane Barry on Friday, according to the agency.
Chevron said Tuesday that it began shutting in five of its platforms and is starting to evacuate all associated personnel. Royal Dutch Shell Plc slightly reduced production on two platforms and is removing non-essential personnel. BP Plc and Exxon also began evacuations.
The European Union may suspend most high-level contact with Turkey and cut the flow of funds in protest at its drilling activities off the coast of Cyprus.
Those measures are among a range of proposals that EU government envoys will discuss Wednesday in Brussels and could limit the European Investment Bank’s sovereign-backed lending in Turkey and confirm a cut of some 146 million euros ($163 million) in aid for next year, according to a person familiar with the matter. The Turkish lira pared gains on the news.
The options proposed by the European Commission also include suspending all ministerial and leaders’ meetings, as well as ongoing talks between the two sides on an aviation agreement. The bloc’s foreign policy service would also advise member states to refrain from high-level contacts with Turkey, according to the official, who asked not to be named as the matter is sensitive.
Turkey and Cyprus are at loggerheads over offshore gas reserves in the eastern Mediterranean that are claimed by the Cypriots and disputed by Ankara. Turkey has sent exploration vessels into the area and Cyprus says that is a violation of its sovereignty.
EU leaders have squarely sided with Cyprus in the dispute, declaring last month that they are ready to consider sanctions if Turkey continues drilling. Such action could target companies, individuals, and Turkey’s deep-sea hydrocarbon exploration and production sectors, though they aren’t currently on the menu of the commission’s proposals, according to the official.
If ambassadors agree on the measures then they could be triggered by EU foreign ministers when they meet in Brussels next week.
Mexico’s moratorium on auctioning off its oil riches to foreign producers is giving a leg up to nearby rivals Brazil and Guyana.
Mexico President Andres Manuel Lopez Obrador has halted new bid rounds, and state-owned Petroleos Mexicanos has disappointed potential partners by eschewing deep-water blocks in favor of cheaper-to-produce oil closer to shore. This means latecomers to Mexico’s opening will have to buy into existing licenses, or move on to other countries.
Royal Dutch Shell Plc, Malaysia’s Petronas, Repsol SA and Total SA were the quickest to pounce before the halt, making it easier for them to find partners hungry for access. However, the moratorium also means fewer wildcatters in Mexico just 20 years away from an expected peak in global oil demand.
“There is an opportunity cost for Mexico keeping its doors closed,” said Pablo Medina, vice president of Welligence Energy Analytics. “Oil and gas companies need to be efficient and they won’t keep a big Mexico team for the sake of it.”
In December, days after assuming the presidency, Lopez Obrador said that no new auctions would be held for at least three years because companies must show results from contracts already awarded. Meanwhile, Pemex has resisted handing back dormant blocks in other regions for re-auction, closing off another expansion path for outsiders.
Brazil, which has a deep-water round planned this year, imposed a similar moratorium to Mexico’s a decade ago after it discovered fields in a deep-water region known as the pre-salt, seeking time to put state-controlled Petroleo Brasileiro SA in charge of the new frontier.
But Brazil was blindsided by the onset of U.S. shale oil, and missed an opportunity to auction the acreage when prices were above $100/bbl. Brazil also failed to meet aggressive production targets after delaying development in the region.
“It’s important for the government to understand that exploration in deep-water must continue” to reverse production declines and meet a goal of 2.65 MMbpd by 2024, said Alberto Casquera, an oil analyst at Wood Mackenzie Ltd.
Mexico’s Perdido Fold Belt holds an estimated 3.3 Bboe in yet-to-find resources, and the country could produce around 1.2 MMbpd from deepwater resources by 2028, Casquera said. It takes years to go from a discovery to commercial production at these remote projects, and none of the 1.66 MMbpd Mexico produces are from this region.
More liberal response
Private companies have about 70% of the deepwater acreage auctioned in Mexico between 2015 and 2018, while Pemex holds the remainder. Positive exploration results could prompt a more liberal policy response even from Lopez Obrador, said Schreiner Parker, Rystad Energy’s vice president for Latin America.
“Those companies may choose to farm down, so I think there’s still a second-hand market for exploration acreage in Mexico. But certainly not an organic rout to that acreage,” said Parker. “The proof will be at the end of the drill bit, and if it turns out that the Mexican Gulf of Mexico has these significant prizes out there, that could change the minds of the government and also the appetite of the international oil companies.”
Mexico’s most advanced deepwater project is Trion, a joint-venture between Pemex and BHP Group, which is the operator. BHP is drilling appraisal wells and is expected to start production in late 2024, Wood Mackenzie estimates. Last month, Mexico’s National Hydrocarbons Commission approved Shell’s plan to explore five deep-water blocks in Mexico, with drilling expected to start before the end of the year.
Oil and politics have been historically intertwined in Mexico. In the aftermath of the Mexican Revolution in the 1920s, Shell and Exxon Mobil Corp. migrated to Venezuela and turned it into the world’s top exporter within a decade. Then full expropriation came in 1939, blocking international oil companies from operating in Mexico until the previous administration approved landmark energy reforms in 2014.
“They haven’t undone the laws, but they have systematically moved to dismantle the system,” said John Padilla, managing director of IPD Latin America LLC. “This is clearly a net positive for Brazil if they can continue to attract companies looking to add more acreage.”
One of the world’s biggest clean energy lenders see a future for European natural gas investments.
Government plans to quit coal and nuclear power may create openings for gas in the region, according to Thomas Brehler, global head of power, renewables and water at KfW IPEX-bank, the international export and project business unit of Germany’s development bank. Natural gas, the least polluting fossil fuel, offers the most practical backup for renewable generation until grid-scale storage arrives, he said.
“In Europe, lots of investments are going to offshore wind, also for onshore, and not so much is going to gas,” Brehler said in an interview in the bank’s headquarters in Frankfurt. “There are more chances for gas-fired power plants expanding further, starting for Germany where we will see a lot of nuclear and coal power plants being shut down.”
The remarks highlight the potential for natural gas to remain a key energy source even as European politicians work toward slashing fossil-fuel emissions. While gas plants burn more cleanly than coal ones, environmental groups are pushing for eliminating all fuels that contribute to greenhouse gases in the atmosphere. For KfW, that transition toward cleaner forms of energy will require gas plants as a way to make up for variable power supply from wind and solar farms.
Several European countries are tilting for an exit from coal and nuclear power, with Germany debating a plan to quit coal by 2038. KfW has provided $16 billion in loans to clean energy, trailing only the European Investment Bank in Europe, according to BloombergNEF.
“As much as we all love renewables, we all know that when there are only intermittent sources, the system can face difficulties,” Brehler said. “If there is no coal and no nuclear, the bridging technology in these times probably has to be gas.”
Some specialists argue that energy security can be maintained through a combination of a limited number of gas-fired stations and cross-border power lines known as interconnectors, as well as by shifting demand from peak periods and using energy storage. But some of these solutions might not be ready on time, according to Brehler.
“One would need some type of affordable large-scale storage for renewable power and I don’t see that technology being there yet in 2030,” he said.
Europe’s gas sector has not attracted much investment in recent years as an expected alliance between renewable energy sources and gas failed to materialize, according to Gergely Molnar, a gas analyst in Europe at the International Energy Agency. That left the fleet of plants using the fuel underutilized.
Europe’s gas power stations offer low margins to investors due to higher costs, such as for increasing carbon emission permits, and lower revenue amid declining power prices in the region, Molnar said. And renewable sources have received much greater incentives from European governments.
“Europe planned a marriage between renewable energy sources and natural gas for its energy transition plans,” he said by telephone. “But at the end, what really happened was a marriage between renewables and coal, due to low coal prices.”
It is “very probable” that gas power plants usage will increase as Europe transitions to low-carbon energy generation, he said. This year, utilization rates have already improved as natural gas prices in the region fell to their lowest in almost 10 years, making them more competitive against coal.
About 40 gigawatts of coal and nuclear capacity will shut down in Northwestern Europe countries by 2025, enough to supply 80 million households, according to announcements by governments and companies. While the KfW’s Brehler expects to see more gas power plants in countries such as Germany, the question is “on what commercial basis they will be built, what type of compensation schemes they will have.”
But even the replacement of dirtier sources of energy is expected to boost gas demand for power generation in Europe by only 0.6% per year in the coming five years, according to the IEA’s Gas 2019 report.
European gas consumption is expected to stagnate or even decrease until 2024 as additional demand from nuclear and coal phase-out plans is constrained by the development of renewables and limited growth for industrial and residential uses.
Gas demand in Europe decreased by 2% in 2018, after three years of consecutive growth, due to mild winter temperatures, while global natural gas demand grew 4.6% in 2018, its fastest annual pace since 2010, IEA’s report shows.
KfW IPEX-Bank is not only interested in the financing of gas-fired power plants and pipelines, but also sees growing opportunities in liquefied natural gas infrastructure, especially in Germany.
“The need of capital for the energy transition to an extent is largely on the way, we already see a lot of new investments happening,” Brehler said. “You see banks and financial institutions providing loans, opportunities in replacing existing power facilities. For investors, there is an abundance of opportunities."