Floating Production, Storage Orders Set Record Pace

by OGJ editors, OGJ, Houston, Aug 3, 2011
A record pace in the number of floating production and storage orders was noted in a recent study by International Maritime Associates [IMA] Inc., Washington DC. [Please see remarks below -- D.R.]

The study found that the industry has placed a record 14 orders for floating units since March. Currently 256 floating systems are in service or available worldwide, according to the study.

Of these, 62% are floating production, storage, offloading (FPSO) vessels; 17% are production semisubmersibles; 9% are tension leg platforms; 7% are production spars; and the remaining 5% are production barges and floating storage and regasification units (FSRUs).

Eleven of the 256 units are not on a field and are available for reuse.

The 14 orders since March include the world’s first floating LNG vessel. The $3 billion Prelude FLNG [please see remarks and image below -- D.R.] is the most expensive floating production unit ordered to date, the study noted.

Among the other orders, 9 are FPSOs (1 purpose-built unit, 6 units converted from trading tanker hulls, and 2 modification redeployments), 2 production spars, and 2 purpose-built FSRUs. The 14 construction contracts for these units exceed $11 billion, the study said.

Current order backlog includes 53 production floaters, a net increase of 6 units since March. This extends the buildup in backlog that began in second-half 2009, the study noted.

Of the 53 units, 28 have purpose built hulls and 25 have converted tanker hulls. Also 20 are orders from leasing operators, while 33 are orders from field operators.

The study identified 196 projects in the bidding, design, or planning stage that potentially will require floating production or storage. These projects are declared discoveries or planned developments where floating production or storage is an option.

Brazil has the most with 50 potential floater projects in the planning cycle. Next in line is Southeast Asia with 37, followed by West Africa with 36, Northern Europe with 22, Gulf of Mexico with 17, and Australia with 11.

Of the 196 planned projects, 53 are in the bidding or final design stage. Major hardware contracts for these 53 projects are likely to be let within the next 12-18 months, the study noted.

Another 143 floater projects are in the planning or study phase, and major hardware contracts for these are likely to be let in 2013-18, according to the study. [Full story]

(IMA has been producing detailed market reports on floating production for the past 15 years. The reports focus on equipment requirements for floating production projects. They are designed for use in business planning by companies servicing this sector. Three reports are issued during the year -- in March, July and November. For the July 2011 Floating Production Systems Report and for previous reports, please see IMA, here. Floating liquefied natural gas/FLNG is a revolutionary technology that will allow Shell to access offshore gas fields that would otherwise be too costly or difficult to develop. Shell took final investment decision on the Prelude FLNG Project on May 20, 2011. It will start building a FLNG facility to produce and export LNG off the coast of Australia at the site of the gas field. Moored far out to sea, some 200 kilometers from the nearest land in Australia, the FLNG facility will produce gas from offshore fields, and liquefy it onboard by cooling for export at sea. The Prelude FLNG facility will be the largest floating offshore facility in the world. It will be built at Samsung Heavy Industries’ Geoje Island shipyards in South Korea---please see "Prelude FLNG - An Overview," and "Shell Decides to Move Forward with Groundbreaking Floating LNG." and "Samsung Says Shell Prelude FLNG Vessel To Cost $3 Billion," as well as my tweets on Twitter dated on May 20 and June 23, 2011, here. Separately, please see my post "BOEMRE Approves First FPSO Use in the U.S. Gulf of Mexico." -- D.R.)
                               Graphic of Shell's Prelude FLNG

                                                                    Source: Shell, here

BOEMRE Approves First FPSO Use in Gulf of Mexico

by Nick Snow, OGJ, Mar 17, 2011
The US Bureau of Ocean Energy Management, Regulation, and Enforcement [the former Minerals Management Service] approved Petrobras America Inc.’s application to use a floating production, storage, and offloading vessel to produce oil and gas from its Cascade-Chinook project in the Gulf of Mexico. This will be the first time that FPSO technology has been used in the [U.S.] gulf, the US Department of the Interior agency said on Mar. 17.

The BW Pioneer FPSO [please see image below -- D.R.] will receive production through dual flow lines, which connect it to two free-standing hybrid risers for each field, also a new technology for the gulf, Petrobras America said.

BOEMRE said it approved the project’s production safety system permit and supplemental deepwater operating plan following extensive consultations with the producer.

The FPSO will have a production capacity of 80,000 b/d of oil and 16 MMcfd of natural gas, with production expected to begin soon, it indicated.

The project is in the gulf’s Walker Ridge area in 8,200 ft of water [2,500 meters] about 165 miles [266 kilometers] off Louisiana. [Full story]

                                                  Source: Petrobras via MARINE LOG.com here

(Also, the FPSO has an oil storage capacity of 500,000 barrels. Natural gas processed by the BW Pioneer will be transported to shore by pipeline, while crude oil will be offloaded to shuttle tankers for transportation. In the event of a hurricane or tropical storm, the facility is designed to disconnect from the turret-buoy and move off location until the storm has passed. FPSOs are widely used in offshore Brazil and West Africa---e.g., please see its use in Ghana, here. The FPSO vessel to be used in the project is owned and operated by Oslo-based BW Offshore. The company already operates another FPSO ship in the Mexican side of the Gulf, among many others around the globe. -- D.R.)

World Watch -- Comment & Interpretation on Today's News [Libyan Crisis -- Saudi Oil: European Refiners May Prefer Swap Arrangements]

by David Knapp, New York, EI
Saudi Arabia is working hard -- in its typically understated fashion -- to soothe market concerns about possible oil shortages. Last week, the Saudis took a group into the control room of the newly refurbished Khurais field northwest of the giant Ghawar deposit to suggest it could provide higher capacity and higher production than was commonly thought [for information on Khurais, please see my post here -- D.R.]. Riyadh has repeatedly said the kingdom will meet any demand for extra barrels from refiners to replace Libyan outages. Interestingly, however, there does not currently seem to be much demand for Saudi barrels from European refiners who are expected to bear the brunt of the Libyan shortfall. Quality is an issue: spare Saudi Arab "Light" is more of a medium, sour crude compared with Libya's predominantly light, sweet menu. Swaps for Libya-similar West African grades have been suggested, with Saudi barrels instead going to Asian customers. In general, however, the current lack of European interest likely reflects ample stock levels.

World Watch [East African Oil & Gas]

by Peter Kemp, EI
East Africa is a hot frontier and a top investment story for 2011. The talk is of big gas finds offshore Mozambique and Tanzania, which is launching a new deepwater licensing round. BG Group is angling for blocks off Kenya, and explorers are excited by the first signs of elusive oil offshore as well. But landlocked Uganda, where the first oil in East Africa was discovered barely five years ago, is rattling investors. With reserve estimates at 2.5 billion barrels [please see below] and counting, the country's potential is huge. Yet exploration has stalled. Disputes have arisen over taxes, seized licenses and conflicting views on the pace and shape of development. ... The government [recently] outlined plans for a domestic refinery that it considers to be a higher priority and more profitable than crude oil exports. Unsurprisingly, incumbent explorers are dismayed that their export plans may not get the green light. As Tullow Oil's sunny optimism fades amid the endless discussions, the patience of the prospective incomers, Total and China's CNOOC, is also being put to the test.

(So far, one billion barrels of oil reserves have been confirmed in a quarter of the Albertine Graben of Uganda, a figure that is projected to reach 2.5 billion. Uganda is included in the OGJ's latest annual survey of world oil & gas reserves---see OGJ, Dec 6, 2010---for the first time with 1 billion bbl of proved oil reserves and 500 bcf of gas reserves. Britain's Tullow Oil PLC reports another 1.5 billion bbl in prospective resources in the East African nation in addition to these totals. Uganda does not yet have any oil or gas production. In contrast, new oil province in West African Ghana, being developed by Tullow and its partners, has already begun to bear fruit. 15 December 2010 celebrated the delivery of First Oil from the offshore Jubilee field---please see my post here. -- D.R.)

Ensco to Acquire Pride in $7.3 Billion Deal

by Paula Dittrick, OGJ, Feb 7, 2011
Ensco PLC agreed to buy Pride International Inc. for $7.3 billion, marking the biggest consolidation in the offshore drilling industry since [Swiss-based] Transocean Ltd. announced plans to acquire GlobalSantaFe Corp. in July 2007 (OGJ Online, July 23, 2007).

The transaction would create the second-largest offshore driller worldwide with 74 rigs. The largest offshore drilling fleet belongs to Transocean, which has 136 [sic] rigs. After closing, Ensco will have 21 ultradeepwater and deepwater rigs.

Analysts predicted consolidation among offshore drilling contractors, citing regulatory and market uncertainties since the April 2010 Macondo well blowout in the Gulf of Mexico. [Please read my related blog posts -- D.R.]. BP PLC operated Macondo. The blowout prompted an explosion and fire on Transocean’s Deepwater Horizon semisubmersible, killing 11 crew members and resulting in a massive oil spill.

Following the Pride acquisition, Ensco plans to maintain its headquarters in London. Pride has been looking for a buyer since last year, analysts have said. Norwegian Seadrill Ltd. owns 9.5% of Pride, which is based in Houston.

Terms of the stock and cash transaction call for Pride shareholders to receive 0.4778 share in Ensco and $15.60 for each Pride share. Closing, subject to shareholder approval and other customary closing conditions, is expected for the second quarter, the companies said.

After closing, current Pride shareholders would own about 38% of Ensco’s equity. Terms of the transaction call for Ensco’s eight directors to be joined by two Pride directors. Ensco expects the combined company to realize pretax expense savings of at least $50 million for full year 2012.

“Our rig types, markets, customers, and expertise complement each other with minimal overlap,” said Dan Rabun, Ensco’s chairman, president, and chief executive officer. “Pride has gained valuable expertise building and operating ultradeepwater semisubmersibles and drillships.”

Pride has customers in Brazil and West Africa, two of the world’s fastest-growing deepwater markets. Ensco provides premium jack ups and ultradeepwater semis with a strong presence in the North Sea, Southeast Asia, North America, and the Middle East. [Full story]

EIA: US Oil Imports Drop 1.5% from Year Ago in November

By David Bird of Dow Jones Newswires, WSJ, Jan 28, 2011
U.S. crude oil imports in November fell 1.5% or 132,000 barrels a day, from a year ago to 8.608 million barrels a day, government data released Friday show.

Figures from the Energy Information Administration show imports were up 119,000 barrels a day, or 1.4%, from October.

Canada maintained its role as the top crude source, a position it has held since March 2006, with imports at 1.975 million barrels a day. [See Table below]. Canada accounted for 22.9% of U.S. crude imports, the highest share since December 2009.

Mexico, the number two supplier, shipped the highest volume since May and its 14.3% share of imports was the highest since November 2007.

Imports from Iraq rebounded, pushing the Middle East supplier up to eighth place from 13th in October.

Crude supplies from ninth-place Angola hit the lowest level since July 2005.

With members of the Organization of Petroleum Exporting Countries, led by number-three supplier Saudi Arabia, holding seven of the top 10 spots, supplies from OPEC rose about 200,000 barrels a day in the month. OPEC [including supplies from Libya and Kuwait -- D.R.] accounted for 48.4% of U.S. crude imports, up from 46.8% in October and unchanged from a year earlier.

Imported crude cost $87.72 a barrel, the highest level since September 2008, and up from $74.40 a barrel a year ago. The average import price in November was the highest ever for the month on EIA data beginning in 1974. [Full story]

EIA Top 10 US Crude Oil Import Sources*

(figures in million barrels per day)

                       Nov      Oct     Nov   Jan-Nov    Jan-Nov

                      2010     2010    2009     2010       2009

Canada               1.975    1.840   2.018    1.963      1.928

Mexico               1.229    1.178   0.951    1.132      1.095

Saudi Arabia         1.119    1.114   0.847    1.081      0.991

Venezuela            0.884    0.887   0.793    0.920      0.968

Nigeria              0.806    0.812   0.948    0.982      0.753

Colombia             0.489    0.400   0.216    0.349      0.258

Algeria              0.379    0.259   0.219    0.331      0.276

Iraq                 0.340    0.143   0.461    0.421      0.461

Angola               0.263    0.311   0.408    0.387      0.465

Ecuador              0.188    0.203   0.150    0.196      0.190

*Prepared by David Bird
(Top 7 OPEC suppliers of crude to the U.S. are Saudi Arabia, Venezuela, Nigeria, Algeria, Iraq, Angola and Ecuador. The U.S. also imports crude from other OPEC members: Kuwait and Libya. See EIA data and November 2010 Import Highlights -- D.R.)

Halliburton's Profits Climb on Liquids-Rich Shale Plays

by Paula Dittrick, OGJ, Jan 25, 2011
Halliburton Co. said higher drilling activity in oil and natural gas shale plays boosted its fourth-quarter earnings, more than offsetting declines in revenue from restrained international markets and suspended deepwater activity in the Gulf of Mexico.

During a Jan. 24 conference call, Halliburton reported fourth-quarter net income of $605 million, or 66¢/share, compared with $243 million, or 27¢/share, for the same period the previous year.

“Our United States land operations experienced continued improved profitability,” said David Lesar, Halliburton chairman, president, and chief executive officer. “The increase in horizontal drilling and activity in liquids-rich plays continued to drive service intensity.”

Meanwhile, Halliburton reported a decline in its Gulf of Mexico revenue and income following the April 2010 blowout of BP PLC’s deepwater Macondo well off Louisiana and the subsequent oil spill in the gulf.

“We continue to believe that prospects for a recovery in the Gulf of Mexico will remain uncertain through the first half of 2011 and perhaps the full year,” Lesar said. “However, I believe it is prudent to maintain all of our infrastructure and most of our headcount in anticipation of a rebound in the gulf.”

Halliburton’s gulf strategy could resulting in continuing losses there until the rig count recovers, Lesar noted. For 2011, he expects US and Canadian operators will continue investing in unconventional oil and gas.

“Development of these resources requires expansive well programs resulting in longer-term contracting arrangements for some services,” he said. “We continue to expect that we can improve prices in select basins where the demand for our integrated services is robust.”

For instance, one customer plans to increase the length of its laterals in the south Texas Eagle Ford play to 10,000 ft compared with 6,000-ft laterals that it is currently drilling, Lesar said.

Halliburton reported improved results in Norway, West Africa, Iraq, and Algeria, Lesar said. He expects activity increases to continue in those markets despite a traditional first-quarter decline for international earnings.

“We continue to win significant additional awards in Iraq,” he said. Halliburton plans to double the number of workers it has in Iraq to 1,200 this year.

“The improving oil consumption demand levels combined with the industry’s declining spare capacity provides a more favorable outlook for oil services and technologies in 2011 and beyond,” he said. Halliburton plans to invest in technology and to expand its manufacturing capacities as a result. [Full story]

(Halliburton, once run by former US vice-president Dick Cheney, is the second largest oil services company following Schlumberger. Earlier this month the US presidential commission investigating the BP disaster slammed Halliburton, along with BP and rig owner Transocean. -- See my post here. Halliburton’s revenue was $18.0 billion for the full year 2010, an increase of 22% from the full year 2009. -- See the company’s website at http://www.halliburton.com/, press release Jan 24, 2011, here. In August 2010, e.g., Halliburton announced it had been awarded a contract by Italian oil company Eni to provide a range of integrated energy services to help redevelop the Zubair field in southern Iraq. For Zubair, please read my blog posts under the category/label "Iraq." -- D.R.)

Happy New Year 2011!

Here's wishing all my readers all the Best and a Happy New Year. See You in the New Year 2011.

An oil rig near Takoradi Port in Ghana, about 40 miles (65 km) from Jubilee field, which has just begun producing oil. [See also my post, here -- D.R.] Like many in Ghana, port officials hope to share in an economic boom from new oil, but challenges are ahead. Photograph by Max Milligan via National Geographic, here

Ghana Oil Begins Pumping for First Time

by BBC News, Africa, December 15, 2010 13:08 GMT

The West African nation of Ghana has begun to pump its first commercial oil after the discovery of the offshore Jubilee Field three years ago.

President John Atta Mills turned on the valve at an offshore platform.

A consortium led by UK-based Tullow Oil [Its partners include U.S.-producer Anadarko Petroleum, U.S.-based Kosmos Energy, Ghana National Petroleum Corp, Sabre Oil and Gas and E.O. Group - D.R.] hopes to produce 55,000 barrels per day, increasing to 120,000 barrels in six months. ...

               Ghana's offshore oil fields are estimated to contain about 3bn barrels

The BBC's David Amanor in the capital, Accra, says there a positive mood about the pumping of the country's first oil - and plenty of advice about how the revenue should be spent. More

(Notice in the picture above, Kwame Nkrumah, the Jubilee Floating Production Storage and Offtake-i.e. FPSO-vessel. The first oil from the field is expected to be exported in January 2011. Ghana has produced oil in the past, but only in very small quantities by industry standards. -- D.R. It is worth stressing that Ghana is already a major producer of cocoa and gold, as pointed out in the article.)