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TUESDAY 26 AUGUST 2014
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IN THIS ISSUE
Future prospects in ONS 2014 spotlight
Solberg backs bid to meet carbon goals
Conference programme
Aramco to spend despite cost pressures
Elon Musk sees bright future
Communicating key issues
INSIDE
Page 16
Page 17
Page 17
Pages 18&19
Page 19
Page 21
Lundin
hands
Sverdrup
keys to
Statoil
LIEN CALLS FOR MAX
Norwegian Energy Minister
Tord Lien warns players not to
leave resources undeveloped.
Page 4
LUND WARNS OF DELAYS
Statoil chief exeutive says
company’s Russian projects
may suffer because of
Page 5
Western sanctions.
CONTRACT FLIGHT FEAR
ONS told Norwegian
contractors could lose out to
Page 6
Asian rivals.
Come & visit us at
stand J980/7
SWEDEN’S Lundin Petroleum is conceding
operatorship of the Johan Sverdrup field to
Statoil, letting its Norwegian state-owned
partner remain in the driving seat of the
giant Norwegian North Sea field.
Page 2
ENI DRIVES ON AT AREA 4
Italian operator presses
ahead with liquefied natural
gas schemes in Mozambique.
Page 7
WATER TOPS CONCERNS
Supply constraints among
leading concerns for hydraulic
fracturing companies.
Page 8
Get up to speed with the
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oil and gas. Visit us at Hall M,
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2 Show Daily
Tuesday 26 August 2014
NORWAY
Christmas
for Epic
awards
Lundin stepping out of
Sverdrup operator race
Swedish player to
concede control
of major North
Sea project’s
development to
Norway’s Statoil
BEATE SCJOLBERG and
OLE KETIL HELGESEN
Stavanger
SWEDISH player Lundin Petroleum is conceding operatorship of
the Johan Sverdrup field to partner Statoil, letting the Nor wegian
state-owned player remain in the
driving seat of the giant North Sea
field in the years ahead.
Statoil is operator for the planning phase of the field, but was
expected to be challenged by Lundin — which drilled the allimportant Sverdrup discovery
well in 2010 — for the leading role
for the development and operation
stages.
“Statoil has done a good job as
working operator, the relationships are good, and I see no reason
that they don’t continue,” both for
the first and any later development phases, Lundin chief executive Ashley Heppenstall told
Upstream on the sidelines of the
ONS Conference in Stavanger.
“There is an expectation from
the partnership that that is what
is going to happen, “ he added.
“They are the largest percentage owner in Johan Sverdrup, and
this is the biggest project in Norway.
“You have to be pragmatic.”
The first phase of the Johan
Sverdrup development is expected
to cost up to Nkr120 billion ($19.4
billion), with production start-up
in 2019.
Estimated to hold between 1.8
billion and 2.9 billion barrels of
oil, the field is to be developed in
several phases over the next 50
years.
Statoil has been clear all along
that it wants to remain operator
for all phases of the field, which at
its peak will account for 25% of
Norway’s total oil production.
“We have the experience needed. Many of our giant fields in
Norway — like Oseberg, Statfjord
and Gullfaks — are off plateau production, and we therefore have
many experienced people ready to
Field dynamics: an artist’s
impression of the Johan
Sverdrup development
(main image). Below left:
Lundin chief executive
Ashley Heppenstall
Below right: Statoil’s
senior vice president for
the Johan Sverdrup
project, Oivind Reinertsen
Image/Photos: STATOIL/
OLE MORTEN MELGAARD/
OYVIND HAGEN
take on the new challenge,” said
Oivind Reinertsen, senior vice
president for the Sverdrup development at Statoil.
Having Statoil assume the operator’s seat on a permanent basis
does not mean Lundin and the
other partners will be any less involved, Heppenstall emphasised.
“One of the things that is
healthy in Norway is that there is
a strong input from all of the partnership,” said Heppenstall.
“That is certainly the case with
Sverdrup. It is not just Statoil driving the thing forward, there is a
lot of input from ourselves and the
other partners in terms of the final decisions.”
Choosing an operator is one of
several decisions that Statoil and
Lundin, along with partners
Petoro, Det Norske Oljeselskap and
Maersk Oil, have to agree on before a development plan is submitted next February.
With the operatorship seemingly settled, the group can concentrate on other issues, including the percentages each company
should get of the unitised field.
Johan Sverdrup straddles three
licences, the largest two of which
are currently operated by Statoil
and Lundin, respectively.
Because of the field’s size, every
tenth of a percentage point represents large values, boding for
tough negotiations in the months
ahead.
“Everyone will fight for the best
deal they can get,” said Heppenstall.
Having grown significantly in
Norway in the past decade, Lundin is operator of the ongoing
Brynhild and Edvard Grieg developments.
It has also had exploration success with the Luno 2 and Gohta
discoveries in recent years.
STATOIL aims to place awards for
the lucrative engineering, procurement and construction contracts
on the first phase of Norway’s giant
Johan Sverdrup project before
Christmas, writes Ole Ketil Helgesen.
Statoil’s senior vice president
for the Sverdrup development
Oivind Reinertsen told Upstream
that the company has started a
prequalification process for the
giant EPC contracts for the construction of the four platforms
destined for the field centre.
“A number of contracts have already been awarded, and a
number will be awarded by the
end of this year and the beginning
of next year,” Reinertsen told
Upstream on the sidelines of the
ONS conference in Stavanger.
He said Statoil wants to award
contracts on long lead items early
in the process in order to avoid
project delays, with first oil due by
the end of 2019.
“We will include cancellation
clauses in the contracts,” he said.
“This is necessary if, for example, parliament does not initially
approve the plan for development
and operation.”
Reinhardsen said the impact of
the massive project on Norwegian
industry and society “cannot be
exaggerated”, with total investments ranging between Nkr100
billion and Nkr200 billion (between $16 billion and $32 billion) .
“Operational costs will be from
Nkr3 billion to Nkr5 billion each
year,” he added.
“Phase one will be in place by
2019, and we will need more
processing capacity, which will
come in phase two. This must be
in place by 2022,” he said, referring to the Norwegian parliament’s demand for full electrification of the whole Utsira High area
by 2022.
The market is expecting tough
competition for the four platform
construction contracts in the first
phase.
Upstream has previously reported that the three major South
Korean yards — Samsung, Daewoo
and Hyundai — are all preparing
bids, as is SMOE of Singapore.
In Europe, Norway’s Kvaerner
and Aibel will aim to play the local
content card, while sources said
Heerema in the Netherlands and
Dragados in Spain are keen to get
involved.
The processing and utility platform is the biggest structure, with
a topsides expected to tip the
scales at between 23,000 and
24,000 tonnes.
The riser platform deck is pegged
at between 18,000 and 19,000
tonnes and the drilling platform
topsides at 15,000 to 17,000 tonnes.
The official ONS show daily is published by Upstream, an NHST Media Group company, Christian Krohgs gate 16, PO Box 1182, Sentrum, N-0107 Oslo and printed by Stavanger Aftenbladet, Stavanger, Norway.
This edition was printed on 25 August 2014. © All articles appearing in the Upstream ONS show daily are protected by copyright. Any unauthorised reproduction is strictly prohibited. Editor-in-Chief: Erik Means.
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4 Show Daily
Tuesday 26 August 2014
NORWAY
Production demand:
Norwegian Energy Minister
Tord Lien
Photo: TERJE BENDIKSBY/
SCANPIX
Lien calls for maximum output
Norwegian energy minister warns players not to leave viable
resources undeveloped, despite investment cuts
BEATE SCHJOLBERG
Stavanger
NORWEGIAN Energy Minister
Tord Lien has warned that operators active on the country’s continental shelf must not allow ongoing investment cuts to result in
viable oil and gas resources being
left in the ground.
The obligation to achieve maximum recovery of the resources in
Norway’s offshore sector is a fundamental part of a system that
has brought profits and riches
both to the industry and the Norwegian state over 45 years, Lien
told Upstream on the sidelines of
the ONS conference in Stavanger.
“We see a bright future for the
shelf,” Lien said. “But at this very
moment I also see that a lot of the
operators off Norway are postponing a lot of the investments we
expected them to make, and that,
in the short term, is giving the
activity some challenges.”
While some fluctuations in activity are unavoidable, it is part of
the operators’ social contract with
Norwegian society to ensure
downturns do not become stronger than necessary, Lien said.
In return, the government will
continue to offer favourable terms
and continued access to new exploration acreage.
“One of the most important fundamentals of the success for the
Norwegian continental shelf has
Concern: IEA executive director Maria van der Hoeven at ONS
Comments : Labour leader Jonas Gahr Store
Photo: KAIA MEANS
been a good and stable long-term
framework for activity in the sector, making sure that operators do
realise all the potential of the fields
that are developed, and always
making sure that operators do
have access to new, promising
acreage,” Lien said.
Lien’s comments follow some
controversy in recent weeks after
Jonas Gahr Store, leader of the
opposition Labour party, gave a
speech last month that was interpreted by many to mean that Norway should consider leaving some
of its hydrocarbon resources in
the ground in order to help limit
global carbon dioxide emissions.
Store has since said his comments
mainly concerned global coal production rather than Norwegian oil
or gas, but that has not stopped oil
industry officials from using the
opportunity to argue against any
deliberate slowdown in Norwegian oil and gas activity on environmental grounds.
Statoil chief executive Helge
Lund offered full support for Lien’s
stance. “To me it seems pointless
to leave Norwegian oil and gas in
the ground,” Lund said at the ONS
conference in Stavanger. “I believe
the opposite, that the Norwegian
Photo: OYVIND ELVSBORG
continental shelf is an example
that we can combine oil and gas
production with good environment policies.”
Lund and Lien were supported
by Maria van der Hoeven, executive director of the International
Energy Agency.
Continued high Norwegian oil
and gas production is “desirable”
to maintain sufficient global energy supply, she said at ONS on
Monday.
Van der Hoeven also expressed
concern about a possible energy
crunch if investments fall. “With
insufficient investments in oil
production, we will not be able to
meet the demand for energy in
2020,” she said.
While Statoil agrees that all
viable oil and gas resources should
be produced, rising engineering
and development costs might
force operators to leave resources
behind, according to Lund, and
getting expenses down is easier
said than done.
“We are not talking about simple
cost cuts here — we need to tackle
the underlying complexity” that
pushes up development costs, Lund
said. “We not only need to halt this
trend, we have to reverse it.”
Tuesday 26 August 2014
Show Daily 5
NORWAY
Lund warns of Russia delays
Norwegian
operator’s chief
executive says
sanctions over
Ukraine may hit
partnership with
Rosneft
BEATE SCHJOLBERG
Stavanger
STATOIL’S activities in Russia may
be delayed because of the international sanctions imposed by the
European Union and other nations
in response to Russia’s alleged intervention in Ukraine, according
to the Norwegian company’s chief
executive Helge Lund.
The Norwegian company signed
an agreement in 2012 with Russia’s Rosneft for exploration of
four blocks in Russia’s Barents Sea
waters and the Sea of Okhotsk, as
well as two onshore assets.
“Some of our activities will be
affected by this,” Lund said at the
ONS conference in Stavanger on
Monday.
“We and our suppliers have to
apply for permits before we can do
the job. This will at least lead to
delays in some areas, things may
take more time.”
The US and EU have imposed
tough sanctions on Russia’s oil,
banking, defence and technology
industries, as well as travel bans
and asset freezes on key individuals linked to the Kremlin.
The sanctions were imposed in
response to Russia’s annexation of
Crimea and alleged backing for
separatist rebels in eastern
Ukraine.
Russia has retaliated by banning Western food imports.
Statoil is working with Norwegian authorities, suppliers and
Rosneft to find ways of continuing
the co-operation within the
framework of the sanctions, Lund
said, adding that many of the possible consequences remain uncertain.
“Our aim is for the co-operation
to continue,” Lund said.
“Europe and Russia will be
energy partners for many decades
ahead, so from an energy point of
view it is important that one finds
diplomatic solutions.” The 2012
Co-operation: Statoil chief executive Helge Lund speaks at ONS
agreement with Rosneft also
covered co-operation off Norway,
aiming to bring in the Russian
player as a partner in licences
on the Norwegian continental
shelf.
As a first step, Rosneft has taken a 20% interest in production
licence 713 in Norway’s Barents
Sea waters, where operator Statoil
last week spudded a wildcat at the
Pingvin prospect.
The licence lies north of the
Johan Castberg discovery.
Search the archive:
Barents Sea
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for the Alpha platform are also currently under construction at Heerema
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6 Show Daily
Tuesday 26 August 2014
NORWAY
Gobal arena: Aibel chief
executive Jan Skogseth
Photo: STEVE MARSHALL
Norway fears contract flight
Country could lose key fabrication contracts to
cheaper Asian rivals as Norwegian companies price
themselves out of competition, ONS told
STEVE MARSHALL
Stavanger
NORWAY’S high-cost contracting
industry risks seeing a flight of
key competence in fabrication of
complex offshore facilities to
cheaper Asian rivals that are
building up their technological
muscle to compete for such lucrative contracts, an ONS seminar
was told on Monday.
South Korean and other Asian
players have secured contracts
worth around Nkr40 billion ($6.5
billion) for topsides and other
units on five North Sea projects
after Norwegian contractors earlier priced themselves out of the
game in tenders, enabling them to
gain valuable expertise on more
advanced facilities.
Notably, Statoil recently took
delivery of the Nkr2.3 billion Valemon topsides from South Korea’s
Samsung Heavy Industries, marking the first time the state-owned
operator had built an entire topsides at an Asian yard.
While Norwegian players such
as Kvaerner have initiated costreduction initiatives to boost competitiveness, ONS delegates were
warned it may be only a question
of time before Asian rivals steal a
greater share of the high-tech facility market.
“The Norwegian industry has
historically been too expensive
due to high salaries and low efficiency,” said Linn Cecilie Moholt,
chief executive of electromechanical player Karsten Moholt.
“Such high-competence projects
have therefore been lost to lowercost countries — and competence
will follow projects.
“As a result, many see this key
competence flowing out of the
country.
“It may take five or up to 15
years, but there is a real risk that
Norway will no longer see this
work as other countries will then
be sitting on this expertise.”
Western sanctions on Russia,
which are now backed by Norway,
also pose the risk that local engineering players such as Kvaerner
and Aker Solutions could lose out
on future contracts as the South
Koreans — and possibly the Chinese— seize the opportunity to
grab a share of the Russian offshore market, a Kvaerner spokesman told Upstream.
The seminar heard that Norway’s cost level has also been
fuelled by a lack of standardisation and a dramatic 70% increase
in the number of engineering
man hours, as well as safety and
documentation requirements.
“The problem we have is
self-regulating and will result in
lower future activity on the Norwegian continental shelf,” Moholt
said.
Local contractor Aibel has
sought to balance out the domestic cost level by farming out a
large part of its engineering
and fabrication work to a subsidiary yard in Thailand — which recently delivered the Gudrun topsides to Statoil — while carrying
out detailed engineering in Norway.
Aibel chief executive Jan
Skogseth told Upstream this has
resulted in a cost reduction of
between 15% and 20%, making
Aibel a more competitive player in
the global arena, and he sees such
a fabrication model as key to preventing domestic expertise disappearing overseas.
The need to cut costs in Norway
has been given greater urgency
due to capital expenditure cutbacks by oil companies such as
Statoil and Shell as they face
shrinking returns on investments
amid soaring expenses.
The seminar heard the industry’s annual capital expenditure
more than doubled between
2005 and 2012 from $59 billion to
$132 billion, fuelled by cost overruns due to project complexity,
supply chain costs and a skills
shortage.
However, DNB Markets’ senior
oil analyst Torbjorn Kjus said
there had recently been signs of a
reversal of the rising costs
trend, with deflationary pressure
from reduced rig dayrates due to
lower drilling demand and incentives being offered to oil companies by countries such as Mexico
and Argentina to exploit their
resources.
Tuesday 26 August 2014
Show Daily 7
AFRICA
Scene: Maputo,
Mozambique
Photo: IAIN ESAU
Eni pushes on with Area 4 drive
Italian operator aiming to take final
investment decision on acreage’s
LNG schemes in next 18 months
MARK HILLIER
Stavanger
ITALY’S Eni is pressing ahead
with its development effort on
prolific Area 4 off Mozambique,
where it is looking to exploit natural gas reserves that total more
than 85 trillion cubic feet.
Over the next year and a half,
the Italian operator is aiming to
take final investment decisions on
both its share of the giant onshore
liquefied natural gas development
that will be fed by gas from the
Mamba-Prosperidade field as well
as a separate floating liquefaction
project at the Coral field that is located solely in Area 4.
Stefano Maione, Eni senior vice
president in charge of the Area 4
development, told an ONS 2014
conference session that the aim
with the company’s share of the
Mamba-Prosperdidade onshore
LNG development is to start production in 2020.
He highlighted the sheer scale
of productivity at Mamba’s prolific gas wells, which have been
calculated to have open hole flow
potential of as much as 1800 million cubic feet per day.
In the deep-water subsea gas
development that will be used to
feed Mamba’s onshore liquefaction trains, each production well
will flow at 200 MMcfd, helping to
boost project economics.
For Mamba-Prosperidade, the
Area 4 partners are working towards construction of an initial
two liquefaction trains, each with
capacity of 5 million tonnes per
annum.
Maione said that Eni launched
the engineering, procurement
and construction tender covering
the two liquefaction trains for its
share of the project last month as
it works to put all the pieces in
place for a final investment decision to be made during 2015.
US operator Anadarko is separately working on the develop-
Role: Stefano Maione, Eni
senior vice president in
charge of the MambaProsperidade project
Photo: ONS
ment of its equally large share of
gas reserves in the portion of the
field that lies within neighbouring Area 1.
Anadarko will also feed gas to
two 5-million-tpa liquefaction
trains in the phase one development of Mamba-Prosperidade,
meaning that output will reach
20 million tpa in all.
There is also space at the Afungi
onshore location for another six
liquefaction trains that could be
used in later stages of development.
Eni’s floating LNG focus, meantime, is centred on a smaller 2.5
million-tpa unit, which it plans to
locate over the Coral field.
Maione said that if all goes well,
a final investment decision on the
Coral FLNG unit could come as
soon as the end of this year, which
would put it on target to start production as soon as in 2019.
Mozambique has emphasised
that its overall policy favours onshore liquefaction because of the
potential benefits such plants will
bring in terms of both direct jobs
and the encouragement of associated industry.
However, sources said that the
East African nation is prepared to
consider the use of floating liquefaction as part of overall LNG sector development as long as there
is also onshore LNG.
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8 Show Daily
Tuesday 26 August 2014
HYDRAULIC FRACTURING
Looking ahead: NOV
chief technology officer
Hege Kverneland
Photo: EOIN O’CINNEIDE
Water tops fracking concerns
DONG ENERGY ONS 2014
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Supply constraints and extensive
use of heavy equipment are
challenges for shale industry, which
is urged to work more efficiently
EOIN O’CINNEIDE
Stavanger
WATER supply constraints and
the large-scale use of heavy equipment in rural and remote locations are among the most pressing
challenges the fracturing industry has to solve in order to maintain or win its licence to operate,
according to an executive at
National Oilwell Varco (NOV).
Hege Kverneland, chief technology officer at the US drilling services giant, said at the ONS conference in Stavanger on Monday that
the availability of water should
bode well for the industry in some
nascent European shale gas
exploration regions.
However, the problems of sourcing and effectively using such resources in many other areas could
hold back the industry elsewhere,
she added.
She conceded that there are
many unsavoury aspects to shale
gas drilling, even in such a mature region as the US.
“One drilling rig, for example, is
around 20 truckloads of equipment,” she said.
“In addition, we have to come in
with all the fracking equipment,
the pumping units, sand, chemicals, things like that,” Kverneland
said.
“If I had a house in the countryside and I suddenly have 11,000
truckloads passing by my house
and I didn’t have that before, I
would be relatively upset too. And
that is a challenge that we as
an industry need to solve,” she
added.
“But the worst part is that in
many areas we have to get water
into many of these areas — water
is probably the biggest challenge
that we have in the shale industry.
“It is not sustainable to use so
much water... We need to be able
to clean the water to be able to reuse it.”
Kverneland said the relative
availability of water in places
such as the UK and Norway should
bode well for the emergence of
shale markets there, but places
like Saudi Arabia — which has
large shale gas reserves — will
prove more problematic.
“Can we use salt water, for example?” she asked.
There is, however, much the oil
and gas industry can do to reduce
its footprint in shale gas drilling,
Kverneland said.
“I think that we can do a lot in
making it more efficient — we can
do it smarter, we can remotely
control a lot of what we are currently sitting on the rigs controlling,” she added.
Search the archive:
Hydraulic fracturing
Tuesday 26 August 2014
Show Daily 9
NORWAY
KS&T gas sales deal for Statoil
Norwegian state-controlled company to
supply 2 million cubic metres per annum
to offshoot of Koch Industries
EOIN O’CINNEIDE
Stavanger
STATOIL has signed a mediumterm agreement for the sale of
natural gas to an offshoot of US
conglomerate Koch Industries.
The Norwegian state player will
supply 2 billion cubic metres per
annum of gas for a total of two gas
years to Koch Supply & Trading
(KS&T).
The gas will be delivered to a
number of different locations in
Europe, KS&T said on Monday.
“In a changing European gas
market, Statoil is continuously
seeking new partners,” said William Brendeford, head of the company’s gas sales to Germany.
Stephen Cornish, director of
KS&T’s global gas and liquefied
natural gas business, added: “This
agreement demonstrates KS&T’s
continuous diversification of its
sourcing portfolio to meet the
needs of the European gas market.”
KS&T launched a Europe, Middle East and Africa natural gas
business and liquefied natural gas
trading division in 2012.
One of the largest companies in
the world, Koch industries is controlled by US industrialist billionaire brothers David and Charles
Koch.
The staunch US Republican
party backers were earlier this
year named on Time magazine’s
list of the 100 most influential
people in the world, along with
Russian President Vladimir Putin,
Venezuelan counterpart Nicolas
Maduro and Iranian President
Hassan Rouhani.
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French joy for
Petromanas
CANADIAN junior Petromanas Energy said an independent audit has
suggested significant gas in place
could lie at its Saucede prospect
onshore France’s Aquitaine basin.
The audit by GLJ Petroleum
Consultants said the Saucede
prospect holds about 550 billion
cubic feet of best-estimate unrisked gas initially in place, based
on reprocessed 2D seismic data
and the results of historic well
data from the 1980s.
Chief executive Glenn McNamara said the Leduix permit in
south-west France is situated in “a
historically-productive region of a
country with a marked supply/
demand imbalance, favourable fiscal terms, and extensive infrastructure”.
“Next steps include initiating a
marketing process to assess the
joint venture potential for this asset and the finalization and permitting of a well location that will
allow us to test the identified
deep, naturally-fractured carbonate structures,” he said.
The company gained the permit
last year when it acquired fellow
Calgary minnow Gallic Energy.
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ONS 2014 AUGUST 25-28 • STANDS D434 & D436
10 Show Daily
Tuesday 26 August 2014
NORWAY
Statoil pushing for a Snorre 20
Norwegian
operator and
field partners
battle to make
progress despite
soaring costs
OLE KETIL HELGESEN
Stavanger
“Our competitiveness is under
pressure. Not long ago, $100 per
barrel oil would have called for
champagne. Now it calls for con-
LEADERS IN
CORROSION
RESISTANT
FLOWLINES
cern,” Lund said. According to
Lund, structural changes are necessary for the industry.
“We need a proactive approach
to deal with the underlying causes
of the high cost level,” he said.
Statoil has initiated a wideranging cost-cutting programme
in an effort to deal with increasingly high costs. Lund said the
industry’s technical requirements
are a cost driver. Lund used the
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STATOIL and its partners are still
working hard to get the planned
Snorre 2040 project off the ground
despite soaring costs that threaten to scupper the increased recovery scheme off Norway, according
to chief executive Helge Lund.
Upstream reported last week
that the proposed $6.7 billion
scheme to extract more resources
from the giant field using a new
tension-leg platform is at risk
amid apparent dissension among
the partners over its economic viability, with no alternative plan
on the table.
However, operator Statoil is
under pressure to deliver a workable solution from partner Petoro
— which holds the state’s stake in
the project — as well as the Norwegian Petroleum Directorate, in
line with government policy to
maximise exploitation of resources from existing fields.
Petoro believes the field’s resource potential is higher than
the original estimate of 240 million barrels and there are fears
that hundreds of millions of barrels in untapped reserves could be
lost if the project is ultimately
scrapped.
However, Lund reaffirmed the
field partners’ intention to bring
the increased recovery project to
fruition at a briefing at the ONS
conference in Stavanger on Monday.
“The partners must work together to find the best possible
concept for Snorre 2040,” he said.
Industry body Norwegian Oil &
Gas Association is calling for improved fiscal terms for such
projects in next year’s government Budget after a punitive tax
increase last year that has eroded
their economic viability.
However, Lund would not be
drawn on whether he expected
tax breaks to be unveiled in the
next Budget to make the Snorre
2040 scheme viable, although he
led an industry chorus of protest
last year on the tax increase.
“This is up to the government.
We focus on improving the economics in the project,” he said.
Commenting on the issue of
spiralling costs for oil and gas
companies, Lund said it would not
be enough for the industry to simply adapt to the high cost level.
Tuesday 26 August 2014
Show Daily 11
040 solution
Norway’s mature fields in need of
greater tax incentives, says report
PROJECTS to boost recovery from
existing mature fields off Norway
are set to account for as much as
half of its anticipated field development investments over the
next decade of $200 billion, but
could be kyboshed unless fiscal
incentives are introduced to make
them more profitable, according
to Wood Mackenzie.
The UK-based research company
said in a new analysis that incremental projects — those aimed at
tapping more resources from producing fields — “stack up favourably” in terms of economics when
compared with greenfield schemes.
It comes amid tighter project
screening and more stringent
capital allocation by the likes of
state-controlled Statoil and other
players working off the country as
they face intense investor pressure to boost returns on investments that have been slashed by
spiralling costs for rigs as well as
oilfield equipment and services.
The cost increase, which has
seen expenses for oil companies
more than double over the past
STEVE MARSHALL
Stavanger
decade, has been compounded by
a tax increase last year by the previous government that reduced
uplift on field investments, hitting new field projects with marginal economics and increased
recovery schemes.
This has resulted in a number of
greenfield schemes being shelved,
including the $15 billion Johan
Castberg project in the Barents
Sea, where the concept is being reevaluated as projected costs have
overrun original budgets.
Brownfield and incremental
projects such as gas compression,
infill drilling work and field redevelopments are therefore becoming
increasingly important as the Norwegian industry seeks to boost average field recovery rates from 50%
to 60%, in line with government
policy, according to WoodMac’s
North-West Europe upstream research analyst Lennert Koch.
WoodMac has compared the
per-barrel cost and investment
risk of Norwegian greenfield
schemes with five incremental
projects — Aasgard subsea compression, Heidrun North Flank,
the Hod redevelopment, Ormen
Lange subsea compression and
Valhall West Flank.
The schemes, which are being
developed for a total investment of
$11 billion, are set to add estimated
reserves of 1 billion barrels of oil
equivalent, boosting the recovery
rate for the fields by an initial 9%.
The analysis showed the average capital expenditure per barrel
is 30% lower compared with
greenfield schemes, while a higher average rate of return of 18%
“means a reduced economic risk
to the companies involved, in addition to the lower perceived subsurface risk”, the firm stated.
However, Koch pointed out that
incremental projects are also at risk
of being axed by oil companies, despite ostensibly more favourable
economics, as has been shown by
Shell’s decision earlier this year to
shelve Ormen Lange compression.
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example of the cost of a 100 megawatt gas turbine to exemplify his
concerns about overall industry
cost pressures.
“For land-based industry, it requires 5000 manhours to deliver
such a turbine,” he said.
“Because of the technical demands in the offshore industry
(however), 37,000 man hours are
required for the same turbine delivered to an oil company.”
Lund said this illustrates there
is an underlying complexity in
the industry that must be addressed.
Centre stage: Statoil chief
executive Helge Lund at the
opening of ONS 2014 in
Stavanger
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Photo: RUSSELL MCCULLEY
12 Show Daily
US major
deal for
Ziebel
NORWEGIAN well
intervention services player
Ziebel has landed a contract
from ConocoPhillips that will
see it work primarily at the
US giant’s unconventional
plays.
Stavanger-based Ziebel will
provide distributed fiber
optic intervention services
for the oil company at some
continental US wells
beginning in the first
quarter.
Ziebel — headed by chief
executive Stig Hognestad —
will use its trailer-mounted
Z-System to access and
visualise wellbores in
real-time, focusing on
ConocoPhillips’ horizontal
wells on shale plays.
The US company will then
compare the information
gathered with other data
previously collated from
North Sea wells.
“The ability to access and
visualise the entire wellbore
in real-time in challenging
well environments has the
potential to increase
production from our existing
assets through enhanced
understanding of our
reservoirs,” said Ram Shenoy,
chief technology officer of
ConocoPhillips.
The Z-System can travel
safely through restrictions to
reach zones of interest in
horizontal sections of the
wellbore to assess well flow
optimisation, integrity risk
control, reservoir modeling,
and enhanced oil recovery.
“This is achieved with
minimal production
interruption compared with
other traditional
intervention and data
acquisition techniques,
which can struggle with
reach or speed, making it a
cost-effective solution,”
Ziebel said.
Contract: Ziebel chief
executive Stig Hognestad
Photo: TROND SORAAS
Tuesday 26 August 2014
UNCONVENTIONALS
Priorities: Statoil’s senior vice president of US onshore Torstein Hole
Photo: KAIA MEANS
Statoil putting Mexican
opportunities on radar
Norwegian operator in talks with Mexico delegation as
Latin American country’s energy reforms step up
RUSSELL MCCULLEY
Stavanger
STATOIL is discussing possible offshore exploration and production
agreements with Mexico as reforms of the country’s oil laws gain
traction, a senior Statoil official
said Monday at ONS in Stavanger.
However, lingering security
concerns will likely delay expansion of the Norwegian player’s activities in the Eagle Ford onshore
shale play beyond the Texas border into Mexico, said Torstein
Hole, Statoil’s senior vice president of onshore US.
“I’m promoting the onshore
business within Statoil, but when
we are now talking with the Mexico delegation, who are here, it’s
mainly focused on offshore,” Hole
said.
Statoil is “looking with big interest” at changes in Mexico’s
laws, which since the late 1930s
have prevented state oil company
Pemex from entering profit sharing agreements with foreign oil
companies.
Proposed changes to the Mexican constitution would open the
energy sector to private investment.
While pointing out that his authority was limited to the Statoil’s
onshore activities in the US alone,
Hole said the company is laying
the groundwork for a more active
role in Mexico should President
Enrique Pena Nieto succeed in his
quest to reform the regulations.
“I think that Statoil’s priorities
in the first move will be offshore,”
he said.
“In the beginning of our dialogue about possible activity with
Mexico we will prioritise offshore,
but we will also closely follow the
development of what happens onshore.”
Statoil holds about 59,000 net
acres in the Eagle Ford play and
produces about 37,700 barrels of oil
equivalent per day there.
The 2011 acquisition of Brigham
Exploration increased Statoil’s acreage in the Bakken play to 290,000
acres, with a net 50,200 barrels of
equivalent per day production.
The company also holds about
605,000 acres in the Marcellus formation, which produces about
122,000 barrels per day for Statoil.
Hole said Statoil’s considerable
holdings in the US shale plays allow the company to increase or
decrease activity in response to
market conditions, unlike large
offshore projects, which incur
steep spending and, once started,
cannot be easily scaled down.
Statoil has managed to cut onshore drilling costs by as much as
50% over the past two years, and
the company aims to reduce total
well costs by another 15% by 2016.
“We have a large resource. When
you look at Marcellus, Bakken and
Eagle Ford, we don’t drill any dry
wells. We know the resource is
there. Our challenge is to get it out
in a profitable way,” he said.
Hole added that the company is
satisfied with its onshore US
assets, but is open to further acquisition or divestment.
“We are happy with the position we have, but this is a competitive play, and we will have to
evaluate continuously,” he said.
“As we produce, we learn more
about the granularity of the acreage as well — where are the best
parts in the acreage, and where
are the parts that are not as good.
“We can sell on the fringes, or
what we feel is not part of the core
of our acreage,” and look at acquiring new acreage that fits the company’s business strategy, he said.
“You will probably not see any
big moves from us going into other areas in the US in the short
term, but there will definitely be
development of the fields that we
have.”
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14 Show Daily
Brazilian
boost for
Alvopetro
Tuesday 26 August 2014
NORWAY
SOUTH
AMERICA
Encouraging flow
results from well
LUKE JOHNSON
Houston
TORONTO-listed Alvopetro
Energy took another step
towards commerciality with
encouraging flow results
from the first interval of a
multi-zone well in northeastern Brazil.
Alvopetro said last week
that its 197-1 well was drilled
to a total depth of 3275 metres
and hit 43 metres of potential
net pay over several separate
intervals.
On Monday, the company
said the well flowed gas on
an unstimulated basis from
an interval between 3175 and
3184 metres.
The well flowed at an
average rate of 40,000 cubic
feet per day over 67 hours
with no water on an 8/64inch choke from the Gomo
member of the Candeias
formation.
The well will now be shut
in to measure reservoir
pressure and obtain pressure
build-up data.
“The strong demand for
natural gas and high energy
prices in north-eastern Brazil
place us in an excellent
position to commercialise
our discovery,” said chief
executive Corey Ruttan.
Alvopetro will now
continue completions
up-hole to test the primary
target, consisting of a
continuous, thick, tight sand
within the middle Gomo
member.
The third interval to be
tested is a “more
conventional sandstone”
with 20 metres of potential
net pay, the company said.
Charge: the semisub Songa Venus
Photo: ROBERT GARVEY
Songa sinks into red in
wake of rig charges
Impairment on semisubs Songa Mercur and Songa Venus hits
Olso-listed contractor’s second quarter results
STEVE MARSHALL
Stavanger
Demand: Alvopetro chief
executive Corey Ruttan
Photo: PETROMINERALES
SONGA Offshore sank to a net loss
of $8.9 million in the second-quarter as it suffered from an impairment on a pair of rigs that have
just been sold.
The charge of $31.2 million related to the recently closed sale of
semi-submersibles Songa Mercur
and Songa Venus to Opus Offshore
and dragged down the bottom line
of the Oslo-listed rig contractor,
which had reported a net profit of
$5 million a year earlier.
The company said the impairment derived from a $16.2 million
reduction in the $200 million selling price of the pair due to earnings from the rigs during the latest quarter as well as $15 million
related to a revised valuation.
Songa was left with a negative
result despite increased quarterly
revenue of $151 million, versus
$143.2 million a year ago, as its remaining three-rig fleet posted
stronger earnings due to higher utilisation.
Its earnings before interest, tax,
depreciation and amortisation
rose to $60.5 million from $51.9
million in the same period of 2013,
with rig operating expenses down
at $64.8 million from $76.1 million
a year ago.
The contractor is meanwhile
facing costs of $90 million, plus
rig operating expenses, for upgrade and modification work on
its semisub Songa Dee, which arrived at the yard in Invergordon,
Scotland at the weekend, with the
unit set to be out of action for an
estimated 60 days.
The workscope of the special
periodic survey includes drilling
and well control equipment maintenance, and re-certification,
anchor winch upgrades, inspections and modifications, as well as
steel and pipe replacement.
Songa has now secured bank
and export credit agency financing for the final pair of newbuild
Category D rigs — Songa Encourage and Songa Enabler — under
construction at South Korean yard
Daewoo Shipbuilding & Marine
Engineering.
It has lined up pre-delivery
financing of $90 million and postdelivery funding of $550 million
for each of the units, with the earlier revised delivery schedule for
the total four-rig programme for
Statoil still on track, according to
the company. The first of the rigs,
Songa Equinox, is due for delivery
in the first quarter of next year
with the remaining three set to be
delivered back to back in the subsequent quarters of 2015.
The company said the slowdown in rig contracting activity
off Norway was continuing, with
a number of units set to exit the
region, but it expects an improved
market from the second half of
2015 and into 2016.
However, its rig fleet is well insulated from the downturn as the
units are all fixed on long-term
contracts with Statoil.
Search the archive:
Songa Offshore
TUESDAY 26 AUGUST 2014
TODAY
INSIDE
Future prospects in ONS
2014 spotlight
Page 16
Solberg backs bid to
meet carbon goals
Page 17
Conference programme
Page 17
Centre Court
programme
Page 17
Saudi Aramco to spend
despite cost pressures
Pages 18&19
Europe remains
dependent on Russia
Pages 18&19
Bright future for Tesla
boss
Page 19
Communicating key
issues
Page 21
In the picture at ONS
Page 22
ONS 2014
gets
under way
ONS TODAY is published for
free distribution by ONS. PO
BOx 175, N-4001, Stavanger,
Norway.
Crown Prince Haakon and
ONS president Leif Johan
Sevland tour the show
Photo: KAIA MEANS
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WAY AHEAD IN CORROSION CONTROL
Statements made and
opinions expressed do not
necessarily represent the
views of the Foundation.
16
Tuesday, 26 August 2014
The theme for ONS 2014 is Changes
Photo: KAIA MEANS
Future prospects in
ONS 2014 spotlight
T
HE first day of ONS 2014 was a
great success. I was really pleased
to see so many of you at
yesterday’s official opening.
ONS always strives to develop further,
renewing itself, in line with the industry.
We always want to provide you with the
latest in what the industry has to offer.
This year’s conference programme is
larger than before.
We have a broad focus on content and
with dual sessions in the afternoons, we
are able to cover more topics.
The main theme for ONS 2014 is
Changes, and the conference will address
the theme through several topics — and
speakers with different points of view.
Today’s main topic for the conference is
the future prospects of the Northern
Continental Shelf.
I am also very excited about the
Innovation Luncheon, where the Minister
of Petroleum & Energy, Tord Lien, will
present our three prestigious Innovation
Awards.
Two of these will go to innovative
companies or technologies, and one to
an individual or organisation that has
played a significant role in the wider
energy sector.
At the afternoon dual sessions the
ONS President
Leif Johan
Sevland
Photo: TOMAS
ALF LARSEN
speakers will address how the industry
can get more out of mature fields as well
as addressing the challenges and
opportunities facing the energy industry
in the Middle East.
Besides the main conference you can
also attend the ONS Centre Court, which
is placed in the middle of the ONS
Exhibition.
At Centre Court, the presentations are
shorter and the pace faster than in the
main conference arena, but the topics
are just as relevant and exciting — and
free for all visitors at the Exhibition!
The intimacy of Centre Court gives the
presentations a special atmosphere and
edge.
The audience sits much closer to the
speakers than what is usual at a
conference venue.
This inspires a more personal dialogue
between the speakers and the audience,
and encourages the listeners to ask
questions.
During ONS 2014, more than 70
presentations, debates and discussions
will take place in Centre Court — so come
and be inspired!
Leif Johan Sevland
President of the ONS Foundation
17
Tuesday, 26 August 2014
Solberg backs bid to
meet carbon goals
N
ORWEGIAN Prime
Minister Erna Solberg,
touting the country’s
current and future role
as a major exporter of natural
gas to Europe, voiced support
for a shift from coal-fired energy
to gas to help meet ambitious
goals to cut global carbon
emissions.
Speaking at the opening
ceremony at ONS 2014 in
Stavanger, the Conservative
party leader called for a uniform
set of emissions targets from
European Commission policy
makers based on a carbon price.
“Norway has the resources
and the infrastructure to be a
significant supplier of natural
gas for the foreseeable future,”
Solberg told an audience of
about 900 attendees.
“If you have a neutral system
based on pricing of emissions,
we will have a big role for gas,”
she said.
“If we get policy decisions in
the EU now, over the new system
and the framework that they are
developing, that are just caused
by the national interest of
different countries, then it will
be more difficult.”
Solberg praised the domestic
industry for its successful
efforts to find new resources
Norwegian
Prime Minister
Erna Solberg
speaks at ONS
Photo: KAIA
MEANS
and extend the life of existing
fields, and said market forces,
rather than government policy,
should shape Norway’s oil and
gas future.
“Our job is to make sure that
the policies around how the
market is functioning are
functioning good enough,” she
said.
“People will always say ‘the
government should do more in
my area’. So I think we’ll stick to
the fact that you have to make
good production, lower
emissions of CO2, and I’ll try to
make you the best framework
that you can have.”
CONFERENCE
TUESDAY
26 AUGUST
AUGUST
Tuesday 26
The NCS – limitless possibilies,
but is the price too high?
09:45
10:00
TUESDAY
AUGUST
Monday
25 26
AUGUST
2014
10:05 - 10:25
Smart use of energy downstream
10:35 - 10:40
10:40 - 10:55
10:55 - 11:10
11:10 - 11:25
11:25 - 11:40
12:05 - 12:25
12:25 - 12:40
12:40 - 13:00
13:00 - 13:15
Challenges
g
Philip Lambert - CEO, Lambert Energy
13:15 - 13:35
Future prospects of the NCS
Arne Sigve Nylund - Executive VP,
P D&P Norway,
y Statoil
Opportunities for cost reductions
T re Halvorsen - Senior VP,
To
P Subsea Te
T chnologies, FMC
The enhanced oil recovery opportunity
p
y is now
Trevor Garlick - Regional President, BP North Sea
12:00
Leading through changes
13:40 - 14:10
Leading through changes
Dr. Homa Bahrami - Senior lecturer, University of Berkeley
14:15 - 14:30
IEA Norwegian launch of Energy Technology Perspectives 2014 –
scenarioes and perspectives to 2050
Maria van der Hoeven - Executive Director, IEA
Norwegian perspective – remarks from MPE
Kåre Fostervold - State Secretary, Ministry of Petroleum and Energy
The NPD Award
Bente Nyland - Director General, NPD
Global energy changes
14:30 - 14:40
Innovaon luncheon
Panel debate
14:00
How to get more out of
mature fields
Moderator: Liv Monica Stubholt
The Middle East
The global center of aenon
14:40 - 15:20
Moderator: Nisha Pillai
UKCS Maximising Recovery Review
Stephen Speed - DECC
New technology - the key to solve energy challenges?
Auke Lont – President and CEO, Statnett
Eimund Nygaard – President and CEO, Lyse
Unni Steinsmo – CEO, SINTEF
Eirik Wærness – Chief Economist, Statoil
Joining forces to recover more
What does it take?
Grethe Moen - Petoro
Arild Selvig - FMC Te
T chnologies
Contributing to sustainable
development
p
Salem Rashed AlMatrooshi ADNOC
Imagine
g
seismic 4D
Jon Erik Reinhardsen - PGS
The Middle East today: what is
exceptional and what isn´t?
rence Eid - Arabia Monitor
15:35 - 15:50
The challenge of Middle East oil,
an inside view from Norway
Bijan
j Mossavar-Rahmani DNO & RAK Petroleum PCL
15:50 - 16:05
Drilling
g faster and cheaper
TTorjer Halle - Schlumberger
16:00
Welcome and introduction
Moderator: Anders Bjartnes - Director, Norwegian Climate Foundation
Electrification, from vision to reality. The transmission system
operator’s perspective
Auke Lont - President and CEO, Statnett
Offshore electrification – viewed from the Parliament
Ola Elvestuen - Chairman, Energi og miljøkomiteen
Power from shore – Energy efficient solutions with proven technology
Svein Knudsen - Vice President, ABB
Power from shore: The future is electric
Hans Erik Horn - Director, Energi Norway
Operator’s view on electrification – how to do it?
Olav Fjellså - Director Comm., BP Norge and Øistein Johannessen VP Comm. DPN, Statoil
How are changes affecting company leadership and what kind of future
leaders are we looking for?
12:30
14:15
Welcome and introduction
Moderator: Konrad Putz - Senior engineer, Transnova
Fuel cells - Enabling technology for a low carbon society
Steffen Møller-Holst - Vice President Marketing, SINTEF
A new type of large-scale thermal energy storage
Jon E.Bergan - Market Analyst & Strategy, NEST
LNG fueling ships – how to retain a strong Norwegian position?
Erik Dyrkoren - Programme Manager, Maritime21
Challenges when being first in the world to equip LNG-fuelled engines
on two international cruise-ferries
Ingvald Fardal - CEO, Fjordline
Electrificaon of offshore installaons
12:00 - 12:05
Moderator: Liv Monica Stubholt
Perspectives on the future of the NCS
T rd Lien - Minister of Petroleum and Energy
To
Banking and energy in times of change
Rune Bjerke - President and CEO, DNB
Youth energy, the driving force
for change
g in the Middle East
Sara Akbar - Kuwait Energy
How can we succeed in recovering leftover oil?
15:30 - 15:35
16:05 - 16:20
16:20 - 16:35
Welcome and introduction
Moderator: Chloe Potter
From core to pore to field. Extracting the unextractable
Merete Vadla Madland - Centre Director the National IOR Centre of
Norway, University of Stavanger
Increased recovery – every single day
Thom van der Heijden - IOR Coordinator, Statoil
Cost effective drilling and wells for improved recovery
Sigmund Stokka - Centre Director Drillwell, IRIS
Enhanced recovery at Ekofisk
Hroar Hermansen, ConocoPhillips
18
Tuesday, 26 August 2014
Saudi Aramco to
despite cost pres
Chief executive
Khalid Al-Falih talks
up industry positives
at ONS session
S
audi Aramco has been affected
by rocketing industry costs and
other challenges just like the
rest of the oil industry, but is
sticking with plans to invest $40 billion
per year over the next decade.
Aramco chief executive Khalid Al-Falih
said the Saudi Arabian state oil company
will keep up its massive investment as it
looks to maintain oil production capacity
of 12 million barrels per day while also
doubling its natural gas output.
He said that the bulk of Aramco’s
investment over the next decade will be
focused on upstream, with offshore
coming increasingly to the fore.
Falih acknowledged at Monday’s
opening ONS 2014 conference session
that the oil industry outlook is seen by
many observers as cloudy and that
many predict “even more stormy
weather ahead”.
He highlighted the challenges of rising
industry costs, manpower shortages,
environmental concerns - notably
around climate change - and ongoing
global economic weakness that is
hindering short-term oil demand growth.
However, Falih said there are also
bullish factors to consider, noting that
primary energy demand is expected to
grow by more than a third over the next
two decades and that petroleum-based
liquids are still expected to be meeting
80% to 90% of transport market demand
by 2050.
On the supply side he spoke of the
increasing maturity of many developed
fields and said that “offsetting their
observed decline is not a trivial
challenge.”
“To meet forecast demand growth and
offset this decline, our industry will need
to add close to 40 million barrels per day
of new capacity in the next two decades.
To put that figure into perspective, that’s
equivalent to approximately 30 Norways
or 15 times America’s current
unconventional oil production,” he said.
Falih said that while in-place resources
may be plentiful, their production cost
will not be low and “long-term prices will
be underpinned by more expensive
marginal barrels”.
With that backdrop, the Aramco boss
said his company will continue to invest
in technology as it looks to push its oil
recovery towards 70%, allowing it to add
more than 100 million barrels of oil
resources to its portfolio.
Saudi Aramco chief executive Khalid Al-Falih
‘US shale not a
The chief executive of Saudi
Aramco has insisted that US oil
shale production poses no
threat to Saudi Arabia’s oil
industry and has instead been
crucial in helping to ensure
stable markets during a time of
supply volatility.
Asked at Monday’s opening
session of the ONS 2014
conference if he regarded the
US shale sector as a threat,
Aramco chief executive
Khalid Al-Falih said: “Absolutely
not.”
He first highlighted Saudi
Arabia’s own shale and tight
gas potential, saying that
Aramco is transferring across
shale experience from the US in
“a very accelerated way” and
expects to deliver its first
increment of shale production
in a couple of years.
More broadly, he emphasised
that the shale production
explosion has helped the oil
Europe remains dependent on Russia
MARIA van der Hoeven, the executive director
of the International Energy Agency, has
cautioned that North American liquefied
natural gas exports will be no panacea for
Europe’s natural gas supply concerns after
they start to flow in 2015.
Speaking to the ONS 2014 conference, Van
der Hoeven said that “a few tens of bcm
(billion cubic metres) of LNG will not make
much difference, given that OECD-Europe
(gas) production continues to fall by similar
quantities.” Instead, she argued that a
broader range of measures are needed in
Europe to ensure natural gas supplies long
term, especially in the light of recent conflict
between Russia and Ukraine.
Speaking after her presentation, Van der
Hoeven added that at this point Europe has
no realistic way of ending its dependence on
Russian gas supplies.
Looking at Europe’s plight, she suggested
that “while internal infrastructure is
improving and the single market is on track,
continued strong gas demand in Asia and
competition for LNG mean that new volumes
will be hard to come by in the case of supply
disruption”.
With that backdrop, Europe should
encourage domestic output to offset declining
production and also have “a strategic
engagement with producers.”
All this should be seen as complementary
to rather than a substitute for efforts to
improve energy efficiency and maintain
diversification of the primary energy mix, she
said.
19
Tuesday, 26 August 2014
o spend
ssures
Tesla chief executive Elon Musk
Bright future
for Tesla boss
Photos: KAIA MEANS
a threat’
sector to avoid shortages that
might otherwise have
occurred.
“I also think globally that
shale oil and gas is the best
thing that has happened,”Falih
said.
“It has kept prices in a band
that allows producers and
consumers to plan
appropriately for investment,
and to meet rising energy
demand and without that share,
I think the world would have
been in a tight spot given the
interruptions (in production)
that have taken place in some
other producing areas.”
IEA executive
director Maria
van der
Hoeven
ELON Musk is the chief executive
of electric car maker Tesla, who
has a future vision of a space
colony on Mars and wants to
see huge expansion of solar
power.
On paper, then, he was walking
into the proverbial lion’s den
when he rose to address the ONS
2014 conference opening
session and some 900 oil and
gas industry delegates.
Well, he didn’t actually rise as
such, instead he proceeded to sit
down with conference moderator
Nisha Pillai and, in line with his
image of taking an unorthodox
approach to business and
technology, invited the audience
to throw questions at him.
Of course, given his reputation
for being at the forefront of
technology, the questions weren’t
actually thrown forward but were
zapped in, albeit through the
slightly rusty technology of SMS
messaging.
Anyway, Musk spoke about the
need to reduce dependence on
hydrocarbons and the potential
for solar energy to provide huge
amounts of energy.
He suggested that devoting a
couple of hundred square
kilometres of Utah to solar power
could provide enough energy to
power the whole of the US.
He said that flying people to
Mars might be possible for
around $500,000 in 25 years or
so and even threw in the promise
of a return flight, too, if
passengers didn’t like it as much
as they expected when they got
there.
When asked about how to push
forward technological advances,
Musk said that not only should
innovation be incentivised, but a
culture should be created where
staff are allowed to fail, pointing
out that not all ideas will work but
they have to be tested to see if
they will or not.
Musk also made no bones
about his view that, as a nonrenewable resource,
hydrocarbons by their nature will
eventually run out and the world
needs to prepare for that future,
starting now.
Industry participants will
probably be consoled by the
knowledge that the prospect of
hydrocarbons running out is
some way off in the future yet.
And Musk did provide some
further consolation for the
industry by acknowledging
that the rockets he expects to
use to send people to Mars
will be powered by hydrocarbons,
as there is no alternative fuel yet
available for that task.
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Tuesday, 26 August 2014
Communicating key issues
G
OOD communication
was highlighted on the
first day of ONS 2014 as
among the factors that
will help oil companies to keep
control of costs on their
developments.
The Mega Projects — Mega
Opportunities session on Monday
afternoon had the theme of
controlling costs at its heart as
the challenges of huge projects
— such as the Prelude floating
liquefaction development,
Hebron, Sakhalin and Mamba in
Mozambique, as well as the
unconventional sector — were
highlighted.
As the debate unfolded, much
of the discussion centered on
issues such as supply chain
challenges, the use of new
technology and the need for
designs to be simple and as easy
as possible to build.
In addition to these, good
communication within project teams
was also seen as a crucial factor.
Geoff Parker, ExxonMobil’s
senior project manager for the
Hebron oil development in
eastern Canada, said that a lot of
what mega projects are about is
getting people to communicate
across interfaces.
“You need to make sure that
different parts of the project are
talking to other parts of the
project,” he said, arguing that it
does not matter if one part of a
development is done well if that
does not translate to the whole
project. Parker acknowledged
that not all aspects of a project
can be done in the same place
and said that communication via
new technology was critical.
However, on top of that, he said,
at the beginning of a project he
would “fly people together so that
they see the other person as
another person that they can talk
to as an equal” and that then
when they talk later they are
much better off.
The largest module for the
turret for Shell’s Prelude
FLNG vessel starts its move
to South Korea from the
Middle East
Photo: DUBAI DRYDOCKS WORLD
20
Tuesday, 26 August 2014
The Lyse stand
In the picture at ONS...
Queen Sonja
Erna Solberg
C
Crown
Prince
Haakon
Opening
ceremony
The Lundin stand
Photos: KAIA MEANS
Tuesday 26 August 2014
Show Daily 23
NORWAY
Lundin keeps the heat on
Swedish operator approaching new
milestones at Edvard Grieg and
Brynhild developments
BEATE SCHJOLBERG
Stavanger
SWEDISH independent Lundin
Petroleum is busier than it has
ever been as its Edvard Grieg and
Brynhild developments off Norway approach new milestones.
While other operators off Norway are looking to trim investments, Lundin is spending more
than ever with an expected $1.7
billion in Norwegian investments
this year, managing director
Torstein Sanness of the company’s
Norwegian division said at the
ONS Conference in Stavanger.
The topsides for the Edvard
Grieg platform, the company’s
first manned operated installation, is now 75% finished.
It is expected to be completed
towards the end of the year and
shipped out to the field in April
next year, Sanness said.
More than 2000 people on Norway’s west coast are currently
engaged in getting the platform
ready for first oil to be produced in
the fourth quarter of 2015, accord-
ing to Sanness. The topsides is
being built by Norwegian contractor Kvaerner, which has also delivered the already installed steel
jacket.
However, the subsea Brynhild
development is delayed, with production now expected to start in
the fourth quarter, Lundin said
earlier this month.
Lundin is also busy on the exploration side, with discoveries
including Luno 2 and Gohta.
The primary aim is to find oil,
said Sanness.
“We are black-oil boys and girls.
We know what to do with gas, but
we are not particularly looking for
it,” he said.
The company recently completed an appraisal well of its Gohta
oil discovery in the Barents Sea,
and is currently drilling the Alta
prospect.
Both licences lie in the same
general area as the Statoil-operated Johan Castberg discovery.
Statoil and its partners are considering ways to develop Castberg,
with one of the options being a
pipeline to shore that could be
shared with other discoveries.
“Statoil has offered us and oth-
ers to participate in a pipeline,
and we are evaluating that proposal,” Sanness said. The outcome
will depend on drilling results
from a number of wells, including
the ongoing Alta wildcat, he said.
Project plans: Lundin
managing director Torstein
Sanness
Photo: IDA VON HANNO BAST
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24 Show Daily
Tuesday 26 August 2014
OIL PRICE
Talks: Ukraine’s President Petro Poroshenko
Photo: REUTERS/SCANPIX
INTEGRATED SERVICES
Aftermath: a damaged aircraft after shelling at Tripoli International Airport on Sunday
Photo: REUTERS/SCANPIX
Oil stays neutral
despite tension in
Libya and Ukraine
Ample supplies help negate political
tensions, as weak demand and healthy
output create glut in Atlantic basin
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OIL WAS neutral at $102 per barrel
on Monday as support from geopolitical tensions in Ukraine and
Libya was negated by ample supply preventing a rebound from
last week’s 14-month low.
Brent crude fell $0.07 to trade at
$102.22 at 1500 GMT on Monday,
compared to a 14-month low of
$101.07 it struck on 19 August. US
crude was down $0.42 at $93.23.
Libyan exports have risen in
the past few weeks, although a
further recovery looks uncertain,
analysts say, and the revival stood
in sharp contrast to rising violence in Libyan urban centres.
Rockets hit eastern Libya’s Labraq airport on Monday, a day after fire destroyed the terminal at
Tripoli’s main airport.
The escalating violence between
armed factions has prompted Libya’s ambassador to Egypt to seek
the international community’s
help to protect its oilfields, airports
and other key state assets.
At the same time, Libya’s
National Oil Corporation said the
key Waha oilfield had resumed
operations and that the 160,000
barrels per day field could resume
supplying crude to the Es Sider
terminal as soon as Tuesday.
Libyan oil output has recovered
to 655,000 barrels per day, the official said, up from a low of
OIL PRICE
COMMENTARY
200,000 bpd struck earlier this
year before new deals with rebels
in recent months but still way
off its pre-war rate of 1.7 million
bpd.
“Oil prices are likely to stabilise,
so we no longer expect prices to
slide any further,” said Carsten
Fritsch, analyst at Commerzbank.
“Risks to the oil supply are still
considerable.”
Underlining the extent of the
recent selling pressure, exchange
data for the week to 19 August released on Monday showed hedge
funds and other big speculators
had cut their bets on rising Brent
prices to the lowest in more than
two years.
Weak demand and healthy production have helped create a supply glut in the Atlantic basin,
pushing Brent into its longest
contango since early 2011, US bank
Morgan Stanley said.
In a contango market, immedi-
ate supply is cheaper than oil for
delivery later.
“We expect Brent to trade in a
slightly lower range for much of
the third quarter, barring any
geopolitical escalation,” the
bank’s analysts, led by Adam
Longson, said in a note.
“Libyan supplies could trickle
back, but maintenance and security issues should keep exports
subdued.”
In Europe, Russian President
Vladimir Putin will meet his
Ukrainian counterpart Petro
Poroshenko for the first time in
months on Tuesday to try to reach
a compromise on Ukraine.
Russia wants to send a second
humanitarian aid convoy to eastern Ukraine in the near future,
Foreign Minister Sergei Lavrov
said on Monday after Kiev and the
West criticised Moscow for sending the first without official permission.
The dollar index increased as
the US Federal Reserve prepared
to lay the groundwork for the central bank’s first interest rate increase in nearly a decade.
A stronger dollar makes dollardenominated commodities such
as oil more expensive for holders
of other currencies, and tends to
weigh on prices.
• Reuters and Dow Jones
Tuesday 26 August 2014
Show Daily 25
ARGENTINA
YPF hails deep
gas discovery at
Santa Cruz
Argentinian state-owned company uncovers
find at 2770 meters — deeper than
traditional producing horizons in region
Results: YPF chief executive Miguel Galuccio
Photo: YPF
GARETH CHETWYND
Rio de Janeiro
ARGENTINA’S YPF has discovered
wet gas in Santa Cruz province at
deeper than traditionally productive horizons in a find that the
explorer believes could be a playopener.
The state company said the
discovery in the Los Perales-Las
Mesetas find has the potential
to produce 200,000 cubic metres
per day plus a moderate flow of
crude.
It was uncovered at 2770 metres,
deeper than traditional producing
horizons in the region.
“This discovery is the result of
innovation because we went after
a deeper concept, below mature
formations,” said YPF chief executive Miguel Galuccio.
A key factor on the find was the
use of integrated 3D seismic techniques to the supposedly mature
Gulf of San Jorge conventional
play, YPF said.
YPF recently registered a 15.2%
increase in gas output in the Santa Cruz province, compared with
the second quarter of 2013.
Crude production was also up
3.7% in the province, compared
with the same period in 2013.
Talk to us.
We are listening, and
we are committed
to your success.
Come see us at ONS. Booth B280.
Search the archive:
YPF
Waha restart
for Libyans
LIBYA’S key Waha field has restarted oil production, according
to reports.
The resumption of flows at the
160,000 barrels per day field has
boosted Libyan output to 655,000
bpd, a National Oil Corporation official was quoted by Dow Jones
Newswires as saying.
The official said that crude from
the field could resume supply to
the Es Sider terminal as soon as
Tuesday following Monday’s production restart.
Libya used to produce almost 1.6
million bpd before the downfall of
former leader Muammar Gadhafi,
but has slumped as low as 200,000
bpd this year in the country’s continuing political turmoil.
Agreements with militia forces
and striking workers at various
export facilities in recent weeks
have allowed several facilities to
reopen, reviving output rates.
nov.com
© 2014 National Oilwell Varco | All rights reserved | D392005982-MKT-001 Rev 01
Upstream Technology
magazine 2014
Upstream Technology is the new bimonthly oil and gas
magazine covering the global development and application
of critical technologies, both in an offshore and onshore
context.
With a content mix that appeals to both specialists and
general management alike, Upstream Technology upholds
the high editorial standards expected from an Upstream
publication.
Large-format, high-quality print
designed for long shelf life
Experienced and specialist editorial team working
solely on Upstream Technology
Wide distribution – it’s delivered shrink-wrapped with
Upstream in the post, separately at key exhibitions and
conferences, and through bespoke promotions
With only six issues each year, shelf life and opportunities
to see your advertising are increased
Online version increases readership
Each issue delivers technology sector reviews,
analysis, comment and key project and
technology updates
Tech Talk consists of in-depth interviews with
respected technology experts
Geophysical coverage and ‘technology
demystified’ articles are part of the mix
Publishing dates and spotlight features 2014
Issue
Distribution
Feature one
Feature two
5
October / November
Unconventional oil & gas
Pipelines
Booking deadline
19 September
6
December / January
Reservoir monitoring
Asset integrity
21 November
To book or get more information on distribution or other details,
please contact [email protected]
Tuesday 26 August 2014
Show Daily 27
CERTIFICATION
DNV aims to standardise
subsea certifications
Oslo-based group views increase in
standardisation as essential to
reducing costs for industry
BEATE SCHJOLBERG
Stavanger
CLASSIFICATION and certification
group DNV GL has launched a new
certification scheme for subsea
equipment and components, aiming to help operators and suppliers
cut costs and delivery times.
The Oslo-based group has
worked with both operators and
suppliers to establish a system for
certification that covers several
product groups such as subsea
trees, wellheads, tie-in systems,
control systems and manifolds, as
well as related work processes and
documentation standards.
Introducing more standardisation is seen as essential to bring
down costs, which have surged in
recent years, Bjorn Sogaard, segment director for subsea and floaters at DNV GL, said at the ONS
conference in Stavanger.
However, many suppliers have
pointed to operators as part of the
problem, as all the major players
have their own additional requirements and documentation demands that push lead times and
costs higher.
“Standards are like toothbrushes — everyone wants one, but they
want one of their own,” said
Anders Husby, head of the department for wells, subsea and risers
at DNV GL.
“But operators do see that
the extra requirements are part
of the cost picture, so there is
room for things to happen,” Husby
added.
Search the archive:
DNV GL
Standards: Bjorn Sogaard, segment director for subsea and
floaters at DNV GL
Photo: DNV
The oil adventure
is just getting started
When we started Lundin Norway in 2004, there were many who thought that the
oil adventure was already over. Not us. We had a handful of experienced pioneers
on our team, who were convinced that there was plenty of oil left on the Norwegian
Shelf – oil that no one was looking for. Since then, we have made several major
discoveries, including the Johan Sverdrup field which, at plateau production, will
account for 25% of Norwegian oil production.
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Hallin
ends job
at COOEC
SUBSEA contractor Hallin
Marine has completed the
replacement of nine mooring
lines for a wholly-owned subsidiary of China Offshore Oil
Engineering.
The company was contracted
to provide support for the
replacement of nine lines
beneath the Hai Yang Shi You
111 floating production, storage
and offloading vessel, while the
company can continue operations.
According to the company,
this is the first time in the history of the industry that all
FPSO mooring lines have been
replaces as one continuous activity.
Previously, only one damaged mooring line would be
replaced at any one time.
The work was carried out
ahead of schedule without
shutting down the production
on the facility.
Hallin service delivery director Phil Chamberlain said Hallin was involved in subsea services and removing old mooring
lines, before it laid and hooked
up new mooring wires.
The company provided the
DSV Windermere and a dive
team as well as subsea operational solutions for the mooring.
28 Show Daily
Tuesday 26 August 2014
GAS SEEPAGES
Surprise:
methane is rising
to the surface
between Cape
Hatteras
(pictured) in
North Carolina
to
Massachusetts
Photo: AP/SCANPIX
Methane find sparks interest
Discovery of gas bubbling up off the US East Coast poses
questions for explorers and climate scientists alike
STEVE MARSHALL
Stavanger
THE reported discovery by scientists of methane seepages from
the seabed off the East Coast of the
US is set to cause a mild ripple of
excitement among explorers over
the possible presence of subterranean gas in the untapped play.
The methane is emanating from
at least 570 locations on the seafloor in an area stretching from
near Cape Hatteras, North Carolina to Georges Bank, south-east
of Nantucket, Massachusetts, according to an online paper published in the Natural Geoscience
journal at the weekend. Scientists
who co-authored the report believe the seepages, which create
bubbles rising to the surface, may
have been going on for the past
1000 years.
Co-author Carolyn Ruppel said
about 40 of the seeps, located in
water depths exceeding 3300 feet,
may be migrating up through
sediment layers from deeper reservoirs of the gas.
If the gas is found to be originating from reservoirs, then oil
companies could potentially be
interested in determining whether the reservoirs can be tapped.
Beyond the horizon
Ruppel said that most of the seeps
are occurring in water depths of
about 800 to 2000 feet where the
methane, which is produced by
microbes, is most likely trapped in
sediments near the seafloor within hydrates.
She explained that hydrates in
such relatively shallow depths are
very sensitive to small temperature changes that enable methane
to easily seep out.
However, the surprise discovery of the seepages where the US
continental shelf meets the Atlantic Ocean may assist the study of
an issue of concern to climate scientists — the potential for the release of huge stores of methane on
land and under the seas as warming of the atmosphere and oceans
continues.
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Research: Carolyn Ruppel
Photo: USGS
Tuesday 26 August 2014
Show Daily 29
SCOTLAND
Norsea adds to its UK stable
Norwegian
services player
signs deal for
Smith Quay and
Embankment at
Peterhead
EOIN O’CINNEIDE
Stavanger
NORWEGIAN services player NorSea Group is adding to its UK stable by signing a long-term agreement for operatorship of Smith
Quay and Embankment at the
Scottish port of Peterhead.
The 10-year agreement for the
facility at the north-east Scotland
port, which is heavily used by the
North Sea oil and gas industry,
will begin on 1 September.
John Wallace, chief executive of
Peterhead Port Authority, said of
the deal: “We built up a strong
portfolio of clients at the Smith
Quay base, but it became apparent
that we needed a professionallyfocused and integrated company
such as NorSea Group to continue
the success and provide the level
of service expected at Peterhead,
to grow this business further.”
NorSea has also signed a 15-year
lease at South Quay in Montrose
and a long-term agreement with
Scrabster Harbour Trust.
Kim Christensen, UK managing
director for NorSea, said: “The past
12 months has seen considerable
company growth within the UK
and we now have a major presence
in four key Scottish ports — Aberdeen, Montrose, Peterhead, Scrabster with additional service provision at Lerwick and Invergordon.”
The latest deals follow on from
the purchase earlier this year of
Danish base and logistics supplier
Danbor from local conglomerate
Contract: Norsea has signed a deal for operatorship of Smith Quay and Embankment at Peterhead, Scotland
Photo: PETERHEAD PORT AUTHORITY
AP Moller-Maersk for around
$42.48 million.
Danbor is based in Esbjerg but
also has a presence in Aberdeen
and, though a joint venture, in
Greenland.
It mainly offers services to companies such as Maersk Oil and
Dansk Undergrund Consortium
on the Danish continental shelf.
NorSea director of international
and project operations, Knut
Magne Johannessen, said on Monday: “We have made a long-term
commitment to the energy sector
in the UK and we will continue
our plans for future growth.
“Traditionally known as a service provider for the oil and gas
industry, our purchase of Danbor
has given us the additional resources and facilities we needed
to support our intention to provide a full range of services to the
renewables and decommissioning markets, both on and
offshore.”
Bureau
Veritas deal:
the FPSOs will
be converted
at
Sembawang
shipyard in
Singapore
Saipem taps Bureau Veritas
to class Kaombo floaters
ITALIAN player Saipem has
awarded a contract to Bureau Veritas to provide classification and
certification for two floating production, storage and offloading
vessels off Angola.
The $4 billion project has been
awarded to Saipem by Total for the
engineering, procurement, installation and commissioning of two
converted turret-moored FPSOs.
The vessels will be stationed at
the Kaombo field development
project in Block 32 off Angola.
Bureau Veritas will oversee the
conversion of the vessels and class
the floaters, while certifying the
topsides and turret assemblies.
The vessels will be converted at
Sembawang Shipyard in Singapore.
Each vessel will have an oil production capacity of 115,000 barrels
per day, a water injection capacity
of 200,000 barrels per day, a 100
million cubic feet per day gas compression capacity, and a storage
capacity of 1.7 million barrels of oil.
Work will include engineering
and fabrication, as well as commissioning onshore and offshore
work, which will be carried out in
Angola.
The first FPSO will be working
by the first quarter of 2017, with
the second unit expected to be operational by the second quarter of
the same year.
U P S T R E A M M E D I A PA C K 2 0 1 4
le
l
ia te ab
tr ra ail
ee po av
Fr cor ns
d io
an opt
ss
ce
ac
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Tuesday 26 August 2014
Show Daily 31
GULF OF MEXICO
OSV in collision in US Gulf
No injuries reported as offshore supply vessel collides
with shrimping boat off Pascagoula, Mississippi, with
US Coast Guard still to determine cause of incident
EOIN O’CINNEIDE
Stavanger
A COLLISION between an offshore
supply vessel and a shrimping
boat in the Gulf of Mexico has left
the latter severely damaged, but
no injuries were reported.
The US Coast Guard (USCG) in
Mobile, Alabama received a call at
10:40pm local time on Sunday from
the fishing vessel after it collided
with the platform supply vessel
Gloria May 18 miles (29 kilometres)
off Pascagoula, Mississippi.
The three crew on board the
fishing vessel were able to scramble into their life raft and were
later picked up by the US-flagged
Gloria May.
A USCG response vessel was also
dispatched from Pascagoula.
The offshore support vessel,
owned and operated by Cheramie
Holdings of Louisiana, suffered only
minimal damage, but the shrimping vessel suffered “significant
damage”, according to the USCG.
There were no injuries on either
unit.
There were 10,000 gallons
(45,460 litres) of diesel on board
the shrimping vessel, as well as
200 gallons of oil.
Lieutenant Bradley Parker of
the USCG said: “The cause of the
collision has yet to be determined,
however, the Coast Guard will begin an immediate investigation.”
Four options
for Otto
SINGAPORE’S Otto Marine has
options for four more platform
supply vessels at a Chinese yard
following a firm order for a quartet earlier this year.
The company’s offshoot Otto
Offshore holds the options at
Wuchuan Shipbuilding Industry,
vessel designer Ulstein Design &
Solutions said on Monday.
Otto signed on for four PX121
units at Wuchuan for delivery in
2016. It is not known when option
declarations need to be made.
Each unit will be 83.4 metres
long, have a cargo deck of 840
square metres and 4000 deadweight tonne load capacity. They
will be able to carry 30 crew.
Power plant turbines are built to run.
But what if they could fly?
Tanker refused
A TANKER carrying 300,000 barrels of Kurdish crude has changed
its destination to Limassol,
Cyprus, after returning from the
US without delivering its disputed
cargo to a New Jersey refiner.
The tanker Minerva Joy had previously listed its destination as
“Gibraltar orders”, but changed its
destination on Saturday afternoon,
Reuters reported.
Refiner Axeon Specialty Products
turned the vessel away earlier
this month, saying it would not accept delivery of disputed Kurdish
oil.
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All trademarks used herein are trademarks or registered trademarks of Exxon Mobil Corporation or one of its subsidiaries unless otherwise noted.
32 Show Daily
Otto eyes
subsea
expansion
Tuesday 26 August 2014
AUSTRALIA
STRATEGIC
REVIEW
Company sees sector
opportunities
SINGAPORE’S Otto Marine has
revealed it is looking at strategic options to further grow its
subsea services division, writes
Josh Lewis.
The company has appointed
investment holding company
UOB Kay Hian Holdings to advise it on strategic options to
develop the international profile and competitive position of
its subsea services unit.
“We believe there are avenues that could afford Otto
Marine more versatility to
make strategic investment decisions to take full advantage of
the compelling prospects of
the subsea segment and to
better position the business for
its customers, partners and
employees,” Otto executive
director Michael See said.
Otto said one of the options
it was considering was a potential listing of one of its whollyowned subsidiaries, Surf Subsea, on the Singapore Stock
Exchange.
It added the process of exploring new strategic options
were still in the preliminary
stages, stating there was currently no specific time frame
for the expansion of the subsea
services business or the potential listing.
The company said it would
assess the feasibility of the
strategic options, prevailing
market conditions and the
company’s circumstances before moving ahead with any
potential expansion of its subsea services arm.
Otto owns and operates a
fleet of offshore support vessels
and also has a shipyard in
Batam, Indonesia.
Confidential: Metgasco, based in
Sydney, is in discussions with the
New South Wales government
Photo: REUTERS/SCANPIX
Metgasco in talks to net
compensation for well
Operator seeks settlement from New South Wales government
after its approval for an exploration well was suspended
JOSH LEWIS
Perth
SYDNEY-based Metgasco has
confirmed it is in discussions
with the New South Wales government in Australia to seek an
out-of-court settlement in the dispute over the suspension of its approval for an exploration well.
Australian media reported on
Monday that the government
could be forced to pay up to A$15
million (US$14 million) in com-
pensation after it suspended its
approval for Metgasco’s drilling
operations in May.
The state government ordered
Metgasco to suspend all work on
the Rosella-1 well, in PEL 16, until
it could demonstrate it had complied with certain conditions of
the licence regarding community
consultation.
Metgasco has argued against the
decision, stating previously that it
believed it had fulfilled its community consultation obligations and
was looking into the potential for a
claim for damages to compensate
for losses resulting from the suspension.
On Monday, Metgasco confirmed it had held discussions
with the government to seek an
out-of-court settlement, adding
the discussions were confidential.
“Metgasco continues to argue
that the government’s suspension
decision was unlawful and unjustified and has severely damaged
its interests,” the company said in
a statement to the Australian Securities Exchange.
“Court action is currently under
way to have the suspension decision lifted. Metgasco will not
comment or speculate on the
status or possible outcome of discussions with government.”
The primary objective of the
Rosella-1 well was to test the conventional gas potential in the
Greater Mackellar structure in
PEL 16 and also had secondary
tight gas exploration targets.
The suspension of drilling the
conventional well was the latest setback for Metgasco, which had already been forced to suspend its
operations targeting coalbed methane in the state following new regulations imposed by the government.
Metgasco claims it has invested
about A$120 million over the past
decade exploring for gas in the
Clarence Moreton basin and saw its
share price nearly halved following
the suspension of its latest activities.
Triangle gains time at Pase
AUSTRALIA’S Triangle Energy has
been given more time to gain a
production sharing contract for its
Pase block in Aceh, Indonesia.
Triangle revealed on Monday
that Indonesian regulator SKK
Migas had extended its appointment as the operator of the Pase
block for a further six months,
from 24 August.
The company said it was continuing to work with the Aceh
government to facilitate the
award of the Pase PSC.
Triangle has formed a joint venture company with governmentrun Perusahaan Daerah Pemban-
gunan Aceh, named Aceh Pase
Global Energy (APGE).
Triangle has been operating the
Pase field since 2009 and is currently applying for a new 30-year
PSC over the block, which will be
operated by the APGE joint venture.
Triangle purchased the Pase
PSC from ExxonMobil in 2009. The
tract covers 922 square kilometres
in North Sumatra.
The field was discovered in 1983
by Mobil and output started in
1998. In 2003, ExxonMobil estimated Pase to contain 498 billion
cubic feet of gas in place.
Tuesday 26 August 2014
Show Daily 33
CHINA
Sinopec says shale costs to fall
Chairman predicts drop in expenses by more
than a third for drilling wells in five years
BILL LEHANE
London
SINOPEC chairman Fu Chengyu
has said he expects shale drilling
costs to fall by more than a third
in the next three to five years.
The head of the Chinese state oil
giant told reporters in Beijing that
he predicted a shale well would
cost around $50 million to drill in
five years’ time, compared with
$80 million at present, Reuters reported.
The cost of shale drilling was
one of the factors thought to have
led China to shelve its previous
ambitious expectations for the
country’s shale output ramp-up.
Earlier this month, China
halved its shale gas production
target to 30 billion cubic metres
per annum by 2020.
Other hurdles faced by shale
explorers include complex geology, mountainous terrain and low
recovery rates.
Sinopec itself said trial development and appraisal of its Fuling
shale gas project had resulted in a
“significant breakthrough”, leading it to set a new target of 10 Bcm
for the south-westChina project.
The Chongqing province field is
producing 3.2 Bcm as of the end of
June, with aims to add a further
1.8 Bcm this year to achieve 5 Bcm
output in 2015.
Sinopec said it would drill 91
wells altogether at the field, which
is currently producing from 29
wells, and install gas gathering
and processing facilities.
China’s Ministry of Land & Resources said last month that the
field held 106.75 Bcm of verified
Factor: Sinopec chairman
Fu Chengyu this week
Photo: BLOOMBERG
proven reserves. The regulators
said based on a site visit and data
review that the mountainous play
held high quality thick marine
shale with high formation pressure and good gas composition.
Sinopec increased its net profit
by 7.5% year-on-year in the first
half of 2014 as higher oil and gas
production and improved refining
and marketing margins boosted
operating income.
The company said that completing the integration of the overseas
assets acquired from its parent
China Petrochemical Corporation
had significantly boosted crude
output compared with the first
half of 2013.
Overall oil and gas output rose
8% to 237 million barrels of oil
equivalent per day.
Amsterdam. Central. International.
Hibiscus in Kitan step
MALAYSIA’S Hibiscus Petroleum
is a step closer to gaining a stake
in the producing Kitan oilfield in
the Australia-Timor-Leste joint
petroleum development area,
writes Josh Lewis.
The Australian Foreign Investment Review Board (FIRB) said it
had no objections to the deal, which
will see Hibiscus take Talisman Energy’s 25% stake in the field.
Hibiscus executed a share sale
agreement in June to acquire 100%
of the shares in Talisman’s whollyowned subsidiary Talisman Resources, which holds the Kitan
stake, in exchange for US$18 million.
While Australia’s FIRB has given approval for the deal to go
ahead, it is still subject to the
approval from the relevant authorities of Timor-Leste.
The Kitan field lies in the
Bonaparte basin, roughly 550 kilometres north-west of Darwin,
Australia, and, as of 1 January,
was estimated to hold 17 million
barrels of oil.
Wood Mackenzie has also estimated the field will produce an average of about 10,000 barrels per day
from three subsea wells in 2014.
The field was discovered in 2008
and started production in 2011,
with output tied back to the Glas
Dowr floating production, storage
and offloading vessel.
Italian giant Eni operates the
field with a 40% stake, Talisman
has 25% and Japan’s Inpex holds
the remaining 35% equity.
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Beach sees tide turn on profit
AUSTRALIA’S Beach Energy reported a 34% drop in full-year net
profit, despite a growth in revenue
and production.
The company posted an A$101
million (US$93 million) profit
for the 2014 financial year, a
drop on the previous year’s
A$153 million, due to an A$162
million impairment. Expenses
rose from A$181 million to A$222
million due to an impairment on
Egyptian assets and a geothermal
project.
Total revenue for the year was a
record A$1.05 billion, a 51% increase on the year before, and was
underpinned by record production
of 9.6 million barrels of oil equivalent, a rise of 20%.
28 & 29 OCTOBER 2014
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34 Show Daily
Tuesday 26 August 2014
ONS FEATURE
Europe has substantial resources of
lignite coal and gas, and if those are
to be made compatible with climate
aspirations, CCS links them together.
ZEP chairman Graeme Sweeney
CARBON CAPTURE
Progress: Draz Power Station in North Yorkshire, England, the site of the White Rose CCS project
White Rose move a change in
European Commission decision to award €300 million to project
gives boost to technology after years of thwarted ambtions
TERRY SLAVIN
London
C
ARBON capture and storage proponents in Europe
have finally had something to cheer about in
recent months.
Last month, the European Commission awarded €300 million
($397 million) to the White Rose
carbon capture and storage project
— the first CCS project to win funding under the European Union’s
NER300 funding programme.
The UK government earlier this
year awarded White Rose and
Shell’s gas CCS project in Scotland
£100 million ($166 million) to begin
detailed engineering and design.
Elsewhere in Europe, Norway in
June said it would help plug a €130
million hole in the finances of the
ROAD project, the CCS scheme that
has been awaiting a final investment decision for the past two
years. However, any optimism that
Europe is about to enter the global
race is muted at best. In June, Canada’s Boundary Dam became the
first fully integrated large scale
CCS project in the world to begin
operations, while the US and China
are close behind.
News earlier this summer that
Sweden’s Vattenfall, which built
the world’s first carbon capture
project at the Schwarze Pumpe
coal power plant in Germany in
2009, had pulled out of CCS research and development set the
seal on what has been a frustrating six years of high ambitions
brought low in Europe.
Observers say it is now clear
that the UK and the Netherlands
are the only European countries
with any chance of making a running on the technology, and they
face significant challenges getting
projects off the ground.
EU Energy Commissioner
Gunther Oettinger has twice
called crisis meetings in Brussels
to try to broker a solution to the
€130 million funding gap that has
prevented joint venture partners
E.ON, GDF Suez and Belgium’s
Electrabel from taking a final investment decision on ROAD.
Early days The announcement
by Norwegian Petroleum Minister
Tord Lien in June that Norway
would commit Nkr100 million
($16.2 million) to a new CCS research programme targeted at
ROAD under the EU’s €80 billion
Horizon 2020 initiative was the
first indication that his efforts
have started to bear fruit.
ROAD, which will capture 1.1
million tonnes per annum of carbon dioxide from a new coal power plant and pump it through a 26
kilometre pipeline for storage in
Taqa’s P18 gas field, could be operating as early as 2017, and would
be Europe’s first full scale CCS
project if the gambit succeeds.
But it is far from a done deal. At
least three countries must participate, contributing a total of €40
million, in order to trigger maximum support from the EU of €20
million. And this would only raise
€60 million in total for ROAD, less
than half the required amount.
Keith Whiriskey, policy manager for climate technologies at
Norwegian environment group
Bellona, says he understands that
Germany and France are the two
other potential funders, but they
have yet to come forward. In the
UK, White Rose and Shell’s Peterhead project are both strong contenders as potential recipients of
£1 billion through the UK’s CCS
commercialisation programme.
The UK’s Department of Energy
& Climate Change will make a final decision about whether to
fund one or both projects after
front-end engineering and design
studies have been completed at
the end of 2015 or 2016.
In many ways, Peterhead has
the advantage — its amine-based
capture technology, by Shellowned Cansolv, is already being
used in the Boundary Dam coal
power plant in Saskatchewan,
Canada, which began operating in
June, and will be tested on gas at
Test Centre Mongstad in Norway
from September.
Shell plans to store 1 million
Tuesday 26 August 2014
Show Daily 35
2 million
THE AMOUNT in tonnes
per annum of CO2 that the
White Rose project is
planning to store.
Capture Power and
Shell lead way in UK
YORKSHIRE AND
SCOTLAND
Challenges ahead in first
steps to CSS industry
Photo: BLOOMBERG
in fortune for CCS
tpa of CO2 in the depleted Goldeneye field, while White Rose is
pushing into uncharted territory
with plans to store 2 million tpa
of CO2 in the 542 saline aquifer, 95
kilometres offshore in the southern North Sea.
Support But White Rose has a
financial advantage given its €300
million in funding through the
EU Commission’s NER300 project.
Taylor said it would have been
disastrous had the Commission
failed to support a CCS project after the first tranche of the NER300
went exclusively to renewables.
The scheme, which auctioned
off 300 million European Emissions Allowances (EUA), was conceived at a time when EUAs were
trading at €30 and there were
hopes it would fund up to 12 CCS
demonstration projects. However,
economic recession decimated
prices and today EUAs hover at
about €5. With that backdrop
there has been a change of tactics
from ZEP, the zero emissions platform, which heads the business
lobby for CCS in Brussels.
Graeme Sweeney, the former
Shell official who chairs ZEP, says
it is now pressing for CCS to be
treated like other low carbon technologies, with support mechanisms such as feed-in tariffs by
member states, or an EU-wide certificate scheme, which would require utilities to obtain tradable
certificates for the CO2 they emit.
Given appropriate support,
Sweeney said, CCS could deliver
four percentage points of the 40%
cut in overall greenhouse gas
emissions proposed by the Com-
mission for 2030, amounting to 220
million tonnes of CO2. It seems a
tall order — observers say Europe
will be lucky to have one or two
projects, sequestering 2 million or
3 million tonnes of CO2, by 2020.
But Sweeney says there is a
more positive attitude towards
CCS in Brussels, driven not just by
climate considerations, but by energy security concerns.
“Energy security means maximising indigenous resources as well
as decreasing [energy] demand,”
Sweeney says. “Renewables represent one of those resources, but
Europe also has substantial resources of lignite coal and gas, and
if those are to be made compatible
with climate aspirations, clearly
CCS links the two together. And using CO2 for EOR would give even
greater security of supply.”
THE UK has two challengers
looking to help save Europe’s
blushes on carbon capture and
storage.
Capture Power’s White Rose
has both European Union and
UK funding, while Peterhead in
Scotland has a share of the same
UK cash and the muscle of
Anglo-Dutch supermajor Shell
on its side.
However, both face
significant challenges before
any final investment decisions.
They will be subjected to the
UK’s new Development Consent
Order (DCO) planning process.
DCOs are intended to speed up
major new infrastructure
projects, but David Few, director
of major energy projects at
design, engineering and
management consultancy
Atkins, which is advising the
government on CCS, describes
the untested new planning
regime as a “significant hurdle”.
Other challenges include the
technical complexity of
designing and building capture,
transport and storage systems
so they work together in a single
chain, the negotiation of a
feed-in tariff at a viable level
with the government, and the
need to raise finance to help
fund projects.
Raising substantial project
finance is a complex process but
in the current UK competition
for funds, Peterhead has the
advantage of simplicity, says
one industry official.
“It is Shell’s project, so if Shell
decides to fund the project,
that’s it,” he says.
The unknowns relate to the
level of contract for differences
feed-in tariff funding that Shell
will be able to secure from the
government to help with
operating costs, and whether
Peterhead will get a slice of the
£1 billion ($1.7 billion) in capital
funding on offer through the
CCS competition.
White Rose is in line to get at
least £250 million through the
UK’s CCS competition as the
government pledged to match
the €300 million ($407 million) it
is getting from the EU. It will
also get contracts for differences
funding.
However, for White Rose, the
difficulty of tying together
capture, transport and storage in
a full chain, something that has
not been done in Europe before,
is exacerbated by the number of
diverse companies involved.
White Rose is being built by
Capture Power, which groups
together capture technology
company Alstom, industrial
gases outfit BOC and power
plant operator Drax.
National Grid Carbon is
handling transport and storage,
and it in turn is seeking a
long-term partner to handle
storage of 2 million tonnes per
annum of CO2. “Legally, it’s a
more complex chain,” Phillips
observes.
However, the project took
another step forward at the end
of last month when National
Grid Carbon awarded a front end
engineering and design contract
to Genesis, the Aberdeen oil and
gas contractor.
Graeme Dunn, engineering
manager for Capture Power, says
he is confident White Rose,
which will capture 90% of its CO2
emissions, will be able to
demonstrate to potential lenders
its ability to produce electricity
as cheaply as other low-carbon
competitors by 2020, at less than
£100 per megawatt hour.
He says White Rose will also
seek to demonstrate that coal
power stations, equipped with
CCS technology, will be an
important contributor to the
future energy market by
providing a flexible source of
energy to offset the large amount
of intermittent renewables that
will be in the grid by 2030.
However, observers say the
government has to do more
than get one or two of these
projects under way if it is to
develop a viable CCS industry.
“You need a serial building
programme to bring costs
down,” says Stuart Haszeldine,
professor of CCS at the
University of Edinburgh. “And
two initial projects doesn’t
make a serial build
programme.”
The UK’s Department of
Energy & Climate Change has
said it will begin negotiations
with two more projects to
qualify for the contract for
differences feed-in tariff —
Summit Energy’s Captain
project in Scotland and 2Co
Energy’s Hatfield project,
although sources have said they
are still awaiting ministerial
consent to begin that process.
You need a
serial building
programme
to bring costs
down. And
two initial
projects
doesn’t make
a serial build
programme.
Stuart Haszeldine,
CCS professor at
Edinburgh
University
36 Show Daily
Tuesday 26 August 2014
FLNG
Supply chains a challenge
Project chief at
Prelude cites
need to keep up
quality
EOIN O’CINNEIDE
Stavanger
QUALITY in the supply chain is
the biggest concern for Shell when
it comes to its giant Prelude floating liquefied natural gas project
off Australia, according to the
project’s director.
The sheer volume of individual
contracts involved in the LNG
project off the north-east coast of
Western Australia also causes
problems for those in the supply
chain, leading to delays, delegates
at ONS in Stavanger heard on
Monday.
Anglo-Dutch supermajor Shell
made its final investment decision on the Prelude FLNG unit,
which will produce 1.3 million
tonnes per annum of LNG, in 2011.
When pressed during a conference session on megaprojects
what was his major concern with
Prelude, project director Didrik
Reymert identified a lack of
the requisite quality in some parts
of the supply chain when Shell
started making enquiries for contracts.
“We found a lot. It’s probably
not more than most projects do...
but sometimes I’m a bit surprised,” Reymert replied.
He insisted that it was quality
rather than the speed of delivery
that was the driving force behind
Quality control: Prelude FLNG project director Didrik Reymert at ONS
getting Prelude up and running.
“That comes down to the robustness of the design and the
quality of the manufacturing and
fabrication, and the quality check
that we are going to do during
start-up,” he said.
However, a delegate representing an Austrian contractor currently working on the piping
package for the unit’s swivel function put it to Reymert that suppliers are facing constraints when
trying to complete assignments,
not least due to a lack of communication.
“Sometimes what we have seen
is that it was difficult to find people at Shell with whom we could
talk on a high technical level to
get some questions answered,” he
argued.
“Sometimes you are talking
about minor issues, which can delay projects by weeks or even
months.
“It would be great if we had a
more direct approach to Shell to
discuss, for instance, coating issues.”
Reymert conceded that there
are blockages in the supply chain
that do not suit parties on either
side of the project.
“The way we contract, sometimes we get too many links between us and suppliers, but we
also have to respect the contractual relationships.
“I can see at times that the
contractual chains are a bit of a
challenge, but we have to have
Photo: EOIN O’CINNEIDE
that because of the size of the
facility.”
Prelude, which at 488 metres
long was described by Reymert as
a “decent par five” hole on a golf
course, weighs more than 600,000
tonnes and will be positioned 475
kilometres north-west of Broome.
The largest of six modules for
the turret recently left Dubai Drydocks World to join the other modules and eventually the hull at
Samsung Heavy Industries in
South Korea.
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