Daily Archives: May 2, 2011
By Katharine Frase May 2, 2011 4:58 PM
With Petrobras planning to invest $224 billion between 2010-2014 in Brazil’s upstream and downstream oil and gas sector, plenty of US companies want to get a handle on how to get a piece of that. And US officials on hand at the Offshore Technology Conference in Houston want to lend a hand, including two who are visiting the meeting from the US consulate in Rio de Janeiro.
The key for foreign companies in Brazil may be raising your Brazilian profile, according to a panel of Petrobras and US officials at OTC. While Petrobras will buy goods originating elsewhere, it does place a preference on local sources and foreign companies are encouraged to build equipment in Brazil (this is known as the local content policy).
That is not to say Petrobras will not buy foreign-built equipment. Joao Henrique Rittershaussen, general manager of strategic market development in Petrobras’ procurement department, gave a slide show that included an extensive list of equipment that it is in the market for, including pumps, cranes, compressors, structure steel, flares, power generators, tanks, processing towers, reactors, wet Christmas trees, offshore wellheads, manifolds, umbilicals, tubing, flexible pipes, risers and turbines. He also went over the types of representatives that companies can retain in Brazil; the criteria for being selected, such as meeting certain industry standards; and did a quick walk-through of where to find more about the company’s procurement on its website.
Not all of it is for pre-salt oil exploration and production, and a lot is for refineries, the Petrobras official noted, saying that the boost in downstream is “huge.” As for sourcing, Petrobras’ objective is to see more companies hiring and building out in Brazil because the “idea here is to maximize local content,” but it will still buy foreign goods, Rittershaussen said.
After his presentation, he told a reporter that there are “more opportunities for companies” that set up shop in Brazil. Also, companies with a local presence usually provide “faster and friendlier” after-sales service and response than a foreign company; at least that’s what a slide in one of the presentations said. In essence, there is a sliding scale upon which “if the product can be made in Brazil,” the proportion of local content used will be higher, he told the OTC audience.
“We recommend that you find a Brazilian partner,” Alan Long, principal commercial officer with the US Commercial Service at the US Consulate in Rio, said. “We can help you find potential partners,” he added, noting “we can do customized market research and then move forward with company to company introductions.”
Just as Petrobras, a publicly traded company controlled by the Brazilian government, would like to see more Brazilian companies land its investments, the US wants to maximize the amount of Petrobras spending that could flow to American companies, according to Joseph Ringer, the senior export finance manager for the Export-Import Bank of the United States‘ southwest region. The Ex-Im Bank has “open account terms” with Petrobras to speed loan guarantees for US companies wanting to do business with it, he added.
Houston-based Ringer gave an overview of the types of credit programs accessible through his agency and offered to sit down with would-be US exporters to Brazil. “We make house calls. We actually come out to visit you.”
Posted on May 2, 2011 at 1:28 pm by Jennifer Dlouhy
The federal government will expand its oversight of coastal drilling to include new regulation of oil field service firms, rig suppliers and other offshore contractors, a top Obama administration official said today.
Michael Bromwich, the head of the Bureau of Ocean Energy Management, Regulation and Enforcement, said a broad internal review of current laws concluded that the agency has “broad legal authority over all activities relating to offshore leases, whether it is engaged in by lessees, operators or contractors.”
“We can exercise such authority as we deem appropriate,” Bromwich told the Offshore Technology Conference in Houston.
Bromwich has floated the idea of expanding the ocean energy bureau’s reach beyond oil and gas companies before — but he had been unsure whether the move would require Congress to go along with the plan. According to the administration’s internal legal review, congressional action isn’t necessary; the agency already has the authority.
Historically, the federal offshore energy agency — previously known as the Minerals Management Service — has focused on leaseholders and operators. Other federal agencies, such as the Coast Guard, separately regulate entities such as drilling rigs and their owners. The benefit of the traditional system, Bromwich acknowledged, is that “it served to preserve clarity and the singular responsibility of the operator.”
But the drilling chief said that he was “convinced that we can fully preserve the principle of holding operators fully responsible — and in most cases solely responsible — without sacrificing the ability to pursue regulatory actions against contractors for serious violations of agency rules and regulations.”
Bromwich insisted the Obama administration would be “careful and measured in extending our regulatory authority to contractors.”
The presidential commission that investigated last year’s oil spill concluded that poor communication among contractors on the Deepwater Horizon rig contributed to the disaster.
Sean Grimsley, the panel’s deputy chief counsel, said that there was an absence of a sense of real responsibility at the Macondo well.
“One of the problems is that there are upwards of 20 plus contractors out here on one of these rigs,” Grimsley said. “What we saw here was that different contractors were making critical decisions, often times without communicating what they had learned to other decision makers.”
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Posted on May 2, 2011 at 11:33 am by jenniferdlouhy
Governors from Alaska and states bordering the Gulf of Mexico are reaching out to their counterparts along the West and East Coast today in a bid to get them more involved in decisions about energy production offshore.
The push for a new Outer Continental Shelf Governors Coalition is led by four governors who know a little something about oil and gas production offshore: Rick Perry of Texas, Bobby Jindal of Louisiana, Haley Barbour of Mississippi and Sean Parnell of Alaska.
In an invitation to other coastal state governors, the foursome said they hoped the coalition would “foster an appropriate dialogue between the coastal states and the administration” about offshore drilling. The group would give the governors a vehicle to lobby for expanded drilling offshore.
“All federal decisions regarding exploration and production must be made in consultation with affected states,” the four governors said. “In recent months, however, the federal government has taken sweeping actions regarding offshore oil and gas activities with little consultation with the states.”
And too often, they say, those decisions have conflicted with the states’ best interests.
For instance, Gulf Coast governors who signed the letter have protested the administration’s decision to halt deep-water drilling after last year’s oil spill and to postpone some sales of offshore drilling leases. And Virginia state leaders were upset by the Obama administration’s move to cancel a lease sale off their coastline.
Representatives from Louisiana, Texas and other states are set to announce the new group during a session this afternoon at the Offshore Technology Conference in Houston.
David Holt, president of the Consumer Energy Alliance and a FuelFix guest blogger, said the move would allow the governors to better communicate “the need to produce American energy offshore, not only for their individual states, but for the entire nation.”
Visit FuelFix this week for the latest news from OTC. You can also like our page on Facebook or follow @FuelFixBlog on Twitter. Look for updates from reporters @houstonfowler and @jendlouhyhc under the #OTCHouston hashtag.
Public hearing set on use of ‘fracking’ to extract oil
By AMY WOLD Advocate staff writer Published: May 2, 2011
An oil-rich shale beneath parts of the Baton Rouge area could soon be tapped on a large scale through hydraulic fracturing, a technique that has raised environmental concerns elsewhere.
High oil prices have made hydraulic fracturing, or “fracking,” an economically feasible way to extract oil and gas that in the past were too difficult to get at.
Environmentalists and some people living near such drilling contend fracking pollutes the air, contaminates water and overtaxes water resources — claims the industry argues are unfounded.
The state will hold a public hearing as early as June on whether to approve a drilling production unit in the Tuscaloosa Marine Shale near Ethel in East Feliciana Parish. Devon Energy, based in Oklahoma City, wants to use fracking, said James Welsh, commissioner of the Louisiana Office of Conservation.
“This will be Louisiana’s Eagle Ford,” Welsh said referring to a shale area in Texas that has seen a recent boom in production.
Devon Energy spokesman Tony Thornton said it’s too early for the company to talk about the permit application.
Fracking was employed on one of the four wells already drilled in the Tuscaloosa Marine Shale. But Devon Energy’s proposal marks the start of what is expected to be intensive fracking in the shale.
Madhurendu Kumar, director of the state Office of Conservation’s geological oil and gas division, said Devon Energy’s application for a production unit shows the company believes the area around the well contains multiple leases. It’s a first step toward greater development of the shale, he added.
Since 2008, “fracking” has occurred mainly in north Louisiana’s Haynesville Shale for extracting natural gas. In the Tuscaloosa Marine Shale, the target is oil.
The Tuscaloosa Marine Shale stretches about 200 miles east to west and is about 45 miles wide. A 1997 LSU study estimates there is 7 billion barrels of oil in the shale, Kumar said.
Hydraulic fracturing involves drilling down to the shale layer, then horizontally across the shale. The horizontal pipe is punctured so a high-pressure water/chemical mix can crack the shale, allowing oil or gas to be collected.
The liquid forced into the shale contains a propping agent that helps hold the fractures open, Welsh said. It also can include chemicals that kill bacteria in the water or prevent corrosion and deposits in the pipe. The formulas vary depending on what is needed at each well.
The chemicals that producers use are considered proprietary. The U.S. Environmental Protection Agency has started requesting that information as part of an upcoming study. Some companies have released the makeup of their fracking liquid, while others have resisted.
Barry Kohl, an adjunct professor of geology at Tulane University, said reports from across the country suggest that problems exist with hydraulic fracturing, including water contamination.
“The chemicals they use are secret formulas that they won’t release even to EPA,” said Kohl, who said he worked in the oil industry for 26 years.
Another concern is that the large volume of water needed for the fracking process will deplete underground aquifers or draw down lakes and streams, Kohl said.
Welsh said the state conservation office encourages companies to use surface water when possible, and 72 percent of the water used in the Haynesville Shale comes from such sources.
Some wells rely on the Red River alluvial aquifer, which is very mineralized and doesn’t make good drinking water, he added.
“But it makes wonderful ‘frack’ water,” Welsh said.
Other concerns include air pollution from production, management of the water that comes back out of the well, and noise and vibrations caused by the fracking process.
Welsh counters that hydraulic fracturing has been used in the state for decades without a problem. He said it’s impossible fracking would harm ground water in Louisiana because almost two miles of earth separates drinking water aquifers from fracking activities.
Underground water supplies lie about 2,500 feet below the surface, while the Tuscaloosa Marine Shale is 12,000 to 13,000 feet deep, he said.
When a well is drilled, several casings are installed to prevent any fracking liquid, oil or gas from migrating from the well itself, he said.
“So you have a seal of surface casings,” Welsh said. “It’s our job to see that the drilling that is done is safe. That’s our job. That’s what we do.”
Kohl said another concern is the fracturing process itself.
Fracking wells are similar to injection wells used by industry to dispose of hazardous materials deep underground, Kohl said. Those injection wells have leaked in the past, which means the same could happen with hydraulic fracturing wells.
Without careful planning, Kohl said, it’s possible some high-pressure wells could hit Louisiana’s geologic faults.
If that happens, he said, material pumped into the wells could migrate up through the faults and other cracks to the drinking-water level. Natural gas could seep to the surface, possibly contaminating small streams, he said.
“Those are the sorts of things, from a geologic perspective, that I can see that one has to be very cautious about,” Kohl said.
Kohl contends the push to extract natural gas and oil in marine shale deposits has accelerated so quickly — fueled in part by higher prices — that it’s been hard for states to stay ahead of the game by adopting more-stringent safety regulations.
The state’s argument that no water-contamination problems have stemmed from fracking in the past holds little comfort, he said.
A recent review of Louisiana’s hydraulic fracturing procedures contained both praise and recommendations for improvement.
The State Review of Oil and Natural Gas Environmental Regulations — a nonprofit group that helps states examine oil-and-gas environmental regulations — reported the strengths of Louisiana’s oversight include water-use monitoring requirements rule changes that let producers to reuse fracking liquid to reduce water use.
The group suggested that the Office of Conservation review casing and cementing standards with an eye toward protecting drinking water.
Another recommendation is having producers report to the state the amounts of all chemicals used in fracking.
The U.S. Environmental Protection Agency is conducting a study into the impacts of hydraulic fracturing. Preliminary results could be made public by the end of 2012.
ON THE INTERNET:
Louisiana Hydraulic Fracturing State Review, March 2011
May 2, 2011
International Maritime Associates
In its recent analysis of floating production systems, International Maritime Associates, Washington, forecast the petroleum industry will add 120-175 new units during the next 5 years.
The study found that currently there are 250 units in operation or available, more than double the number of units 10 years ago.
Included in the total are 12 units off field and being remarketed. Eleven of these are floating production, storage, and offloading (FPSO) vessels and one is a production semisubmersible. The overall utilization rate for available production floaters is 95.2%.
FPSOs account for 62% of the current production floater inventory. The balance consists of production semis 17%, tension leg platforms 9%, production spars 7%, and production barges and LNG storage-regasification vessels 5%.
Petroleo Brasileiro SA (Petrobras) clearly dominates, with 43 FPSOs in operation or on order, having a combined processing capacity of 5.1 million bo/d. China National Offshore Oil Corp. Ltd. (CNOOC), ExxonMobil Corp., Total SA, Chevron Corp, Eni SPA, BP PLC, Royal Dutch Shell PLC, and Malaysia’s Petronas are next in line. These nine operators account for 61% of FPSOs and 72% of oil processing capacity installed on FPSOs. Fig. 1 breaks out by company the number of FPSOs in service and on order.
Order backlog on Mar. 31, 2011, stood at 47 units, of which there are 35 FPSOs, 6 production semis, 3 tension leg platforms, and 3 floating storage-regas units. Twenty-four of these units will have purpose-built hulls and the remainder will have converted tanker hulls. When delivered, new production floaters will increase operating inventory by 20% over the next several years.
Almost half of the units on order are for use off Brazil. Southeast Asia, West Africa, Northern Europe, and the Gulf of Mexico are other major destinations for units on order. Production floaters currently are being built or converted at 28 facilities worldwide. Asia is the major location for fabrication and conversion. But Brazil is becoming an increasingly larger player and is now the second largest fabrication center for floating production systems.
The study identified 194 projects in planning that likely will require a floating production system for development. Fifty-five of these projects are at bidding or final design, with equipment orders likely during the next 12 to 18 months. Another 139 projects are in planning or study, with orders likely in 2013-19.
Brazil is the most active region for new floater projects. The study identified 47 projects in planning in Brazil. Some of these projects involve multiple floating production systems of up to 6 units in one major project.
West Africa is the second largest region for planned projects, followed by Southeast Asia, Northern Europe, the Gulf of Mexico, and Australia-New Zealand. Fig. 2 shows where these units will be deployed.
Overall, the study expects orders for production floaters to average 24-35 units/year during the next 5 years. About 80% of them will be FPSOs; redeployment of existing units will satisfy 15-20% of new FPSO projects.
The study expects about 30% of the FPSOs to be large units similar to CLOV off Angola, Skarv off Norway, and P-62 off Brazil. Another 30% will be midsize units such as Cidade de Sao Paulo off Brazil, Kwame Nkruma off Ghana, and Pyrenees Venture off Brazil. The balance will be small units such as Gimboa off Angola, Montara Venture off Australia, and Cidade de Santos off Brazil.
The capital expenditures required for these floater orders may total $80-115 billion between 2011 and 2016. The forecast range reflects three potential crude oil pricing scenarios. The base scenario assumes oil stays in the $90-110 range, a price range the futures market sees most likely over the foreseeable future.
Future growth indicators in the floating production sector are positive. Global demand for oil continues to grow, the market is again threatened by Middle East and North Africa supply disruptions, oil prices have pierced $100, and virtually every major field operator has announced plans to increase offshore exploration and development expenditures.
Deepwater fields are among the major sources of hydrocarbons yet to be found or developed. While no one knows the full extent of deepwater potential, the magnitude undoubtedly is huge.
In Brazil alone, estimates place deepwater presalt resources at 70 billion boe, a figure likely to grow as companies confirm more finds. Some estimates see deepwater resources offshore Brazil, West Africa, and elsewhere providing almost 14 million boe/d by 2030, more than double the current contribution to global supply. Importantly, drillships and semisubmersible drilling rigs now being built will add 38% to available deepwater drilling capacity.
A shortage of available rigs has constrained exploration and development. More rigs looking for oil result in greater number of finds and ultimately greater demand for additional floating production systems.
Overall, growth in the floating production sector has lots of room to run. There are no indications of the market slowing. Rather, demand for new systems is accelerating.
James R. McCaul (firstname.lastname@example.org) is president of International Maritime Associates Inc., which he established in 1973. Before forming IMA, he was member of the faculty of Webb Institute of Naval Architecture. McCaul holds a PhD in economics from the University of Maryland, an MS in business administration from Pennsylvania State University, and a BS in marine science from the State University of New York.
Mr Polye has been in Japan for the signing of the investment agreement for the protection and promotion of Japanese investments in PNG. Japanese companies are participating in both the ExxonMobil-led project and the second LNG project operated by InterOil Corporation.
A number of disgruntled landowner groups have already disrupted the construction of the major gas pipeline being constructed for the first LNG project.
In recent months, killings and attacks have been reported in Southern Highlands, raising security concerns about the safety of developers and contractors.
The government has stationed police units in the oil and gas rich region.
Subsea 7 Inc. and Acergy S.A. merged in January this year, bringing together two very strong subsea companies to create a global leader in seabed-to-surface engineering, construction and services. With a 12,000 strong workforce worldwide, the new Subsea 7 has the highest concentration of expertise in its industry sector. It has a global engineering team of around 1,500 professionals addressing the key engineering disciplines within its business. Subsea 7 is well placed to deliver technologies that address its clients’ requirements, for example, in the offshore rigid pipelay market, not only does the company have an industry-leading engineering design capability, but also the full suite of installation techniques of: Reel-lay; S-lay; Steep S-lay; J-lay and Bundlelay.
The new Subsea 7 enables clients to access a fleet comprising 42 vessels and on booth #2824 in the Reliant Centre, Subsea 7 will showcase its technically advanced fleet, in particular, Seven Borealis, a new pipelay/heavy lift vessel due to be delivered to Subsea 7 during the first half of 2012. Seven Borealis will be ideally suited to meeting the exacting requirements of ultra-deep and deepwater projects in the world’s harshest environments. Subsea 7 will demonstrate its project management experience, in executing major engineering, procurement, installation and construction projects, this is endorsed by a newly awarded milestone US $1 billion contract by Petrobras for four decoupled riser systems to be installed in the Guará and Lula fields located offshore Brazil, in water depths of approximately 2,200m. On top of the challenges of scale posed by the project are the ground-breaking design innovations. The project is based on installing four very large submerged buoys, weighing around 1,900 tonnes each, approximately 250 metres below the surface, along with twentyseven steel catenary risers (SCRs) and associated pipeline end terminations.
Subsea 7 will also have an update on the commercialisation of its first new Autonomous Inspection Vehicle (AIV), expected to be available in late 2011. A significant amount of interest was generated during OTC 2010 where Subsea 7 had a scale model of the AIV on its booth to enable visitors to understand the technology.
At OTC 2011, Subsea 7 will deliver 11 technical papers, showcasing examples of its capabilities in deepwater markets, its engineering and technical expertise.
Technical papers include:
• Conger – Technical Challenges and success for Rigid Pipeline
• Deployment lowering operations (2 papers)
• Deepwater Field Developments
• Lateral Buckling Mitigation in Deepwater
• Qualification of Large Diameter Fiber Rope – DNV
• Angola LNG Pipeline bundle
• Design, construction and management of Hybrid Riser Towers (2 papers)
• Reel Clad SCR Weld Fatigue
Recruitment and talent-spotting will also be high on the agenda for Subsea 7 at this year’s event. At present, the company is looking to recruit a substantial number of people globally, in a range of disciplines including engineering, project management, operations management and support functions.
Steve Wisely, Subsea 7’s Executive Vice President – Commercial, commented:
“This year’s OTC is an ideal opportunity for the new Subsea 7 to give visitors a real insight into the extended fleet capabilities, technical expertise and depth of engineering and project management resources that are available to help them meet their deepwater challenges in particular. We will also be actively recruiting and hope to attract a number of new people to join the company, through the variety of opportunities we currently have available.”
The multi-component seismic company Reservoir Exploration Technology ASA (RXT) has entered into a LOI with an international oil company regarding acquisition of 4C seismic data in West Africa. The intention is to conclude the final contract during May and start up of the project will be in Q2.
The work is estimated to take 4-5 months, depending on the final lay out of the acquisition design. The final contract is subject to board and government approvals.
Reservoir Exploration Technology ASA (RXT) is the only marine geophysical company specializing in multi component seismic seafloor acquisition.
Multi-component seismic solves several imaging challenges that cannot be resolved with towed streamer seismic, and targets improved oil recovery from existing fields. The technology also gives better data quality for appraisal and development, and is also the solution where towed streamers are impractical due to high density of platforms and/ or shallow waters. The Company has offices in Oslo, Norway in Rio de Janeiro, Brazil in Abu Dhabi, UAE and Houston, Texas.