Category Archives: GEOGRAPHIC

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Crude Crash Set To Continue After Arab Emirates Hint $40 Oil Coming Next

In space, no one can hear you scream… unless you happen to be Venezuela’s (soon to be former) leader Nicolas Maduro, who has been doing a lot of screaming this morning following news that UAE’s Energy Minister Suhail Al-Mazrouei said OPEC will stand by its decision not to cut crude output “even if oil prices fall as low as $40 a barrel” and will wait at least three months before considering an emergency meeting.

In doing so, OPEC not only confirms that the once mighty cartel is essentially non-existant and has been replaced by the veto vote of the lowest-cost exporters (again, sorry Maduro), but that all those energy hedge funds (and not only) who hoped that by allowing margin calls to go straight to voicemail on Friday afternoon, their troubles would go away because of some magical intervention by OPEC over the weekend, are about to have a very unpleasant Monday, now that the next oil price bogey has been set: $40 per barrell.

Luckily, this will be so “unambiguously good” for the US consumer, it should surely offset the epic capex destruction that is about to be unleashed on America’s shale patch, in junk bond hedge funds around the globe, and as millions of high-paying jobs created as a result of the shale miracle are pink slipped.

According to Bloomberg, OPEC won’t immediately change its Nov. 27 decision to keep the group’s collective output target unchanged at 30 million barrels a day, Suhail Al-Mazrouei said. Venezuela supports an OPEC meeting given the price slide, though the country hasn’t officially requested one, an official at Venezuela’s foreign ministry said Dec. 12. The group is due to meet again on June 5.

“We are not going to change our minds because the prices went to $60 or to $40,” Mazrouei told Bloomberg at a conference in Dubai. “We’re not targeting a price; the market will stabilize itself.” He said current conditions don’t justify an extraordinary OPEC meeting. “We need to wait for at least a quarter” to consider an urgent session, he said.

And with OPEC’s 12 members pumped 30.56 million barrels a day in November, exceeding their collective target for a sixth straight month, according to data compiled by Bloomberg. Saudi Arabia, Iraq and Kuwait this month deepened discounts on shipments to Asia, feeding speculation that they’re fighting for market share amid a glut fed by surging U.S. shale production.

The above only focuses on the (unchanged) supply side of the equation – and since the entire world is rolling over into yet another round of global recession, following not only a Chinese slowdown to a record low growth rate, but also a recession in both Japan and Europe, the just as important issue is where demand will be in the coming year. The answer: much lower.

OPEC’s unchanged production level, a lower demand growth forecast from the International Energy Agency further put the skids under oil on Friday, raising concerns of possible broader negative effects such as debt defaults by companies and countries heavily exposed to crude prices. There was also talk of the price trend adding to deflation pressures in Europe, increasing bets that the European Central Bank will be forced to resort to further stimulus early next year.

And while the bankruptcy advisors and “fondos buitre” as they are known in Buenos Aires, are circling Venezuela whose default is essentially just a matter of day, OPEC is – just in case its plan to crush higher cost production fails – doing a little of the “good cop” routing as a Plan B.

According to Reuters, OPEC secretary general tried to moderate the infighting within the oil exporters, saying “OPEC can ride out a slump in oil prices and keep output unchanged, arguing market weakness did not reflect supply and demand fundamentals and could have been driven by speculators.”

Ah yes, it had been a while since we heard the good old “evil speculators” excuse. Usually it appeared when crude prices soared. Now, it has re-emerged to explain the historic plunge of crude.

Speaking at a conference in Dubai, Abdullah al-Badri defended November’s decision by the Organization of the Petroleum Exporting Countries to not cut its output target of 30 million barrels per day (bdp) in the face of a drop in crude prices to multi-year lows.

“We agreed that it is important to continue with production (at current levels) for the … coming period. This decision was made by consensus by all ministers,” he said. “The decision has been made. Things will be left as is.”

Some say selling may continue as few participants are yet willing to call a bottom for markets.

There is some hope for the falling knife catchers: “Badri suggested the crude price fall had been overdone. “The fundamentals should not lead to this dramatic reduction (in price),” he said in Arabic through an English interpreter. He said only a small increase in supply had lead to a sharp drop in prices, adding: “I believe that speculation has entered strongly in deciding these prices.””

Unfortunately for the crude longs, Badri is lying, as can be gleaned from the following statement:

Badri said OPEC sought a price level that was suitable and satisfactory both for consumers and producers, but did not specify a figure. The OPEC chief also said November’s decision was not aimed at any other oil producer, rebutting suggestions it was intended to either undermine the economics of U.S. shale oil production or weaken rival powers closer to home.

Some people say this decision was directed at the United States and shale oil. All of this is incorrect. Some also say it was directed at Iran and Russia. This also is incorrect,” he said.

Well actually… “Saudi Arabia’s oil minister Ali al-Naimi had told last month’s OPEC meeting the organization must combat the U.S. shale oil boom, arguing for maintaining output to depress prices and undermine the profitability of North American producers, said a source who was briefed by a non-Gulf OPEC minister.”

And as Europe has shown repeatedly, not only is it serious when you have to lie, but it is even worse when you can’t remember what lies you have said in the past. That alone assures that the chaos within OPEC – if only for purely optical reasons – will only get worse and likely lead to least a few sovereign defaults as the petroleum exporting organization mutates to meet the far lower demand levels of the new normal.

In the meantime, the only question is how much longer can stocks ignore the bloodbath in energy (where there has been much interstellar screaming too) because as we showed on Friday, despite the worst week for stocks in 3 years, equities have a long way to go if and when they finally catch up, or rather down, with the crude reality…

Source and chart

How Long Can The Shale Revolution Last?

by Nick Cunningham via OilPrice.com,

A new study has cast serious doubt on whether the much-ballyhooed U.S. shale oil and gas revolution has long-term staying power.

The U.S. produced 8.5 million barrels of oil per day in July of this year — 60 percent more than just three years earlier. That is also the highest rate of production in three decades.

Put another way, since 2011, the U.S. has added 3 million barrels per day in additional capacity to global supplies. Had that volume not come online, oil prices would surely be much higher than they currently are.

That has “revolutionized” the energy industry and geopolitics, as scores of energy analysts have claimed. The Energy Information Administration (EIA) forecasts that U.S. oil production will hit 9.6 million barrels per day (bpd) in 2019, and gradually decline to 7.5 million bpd by 2040.

This would allow the U.S. to be one of the world’s top oil producers for an extended period of time. With such an achievement now at hand, many analysts are predicting an era of American dominance in geopolitics. For example, in an op-ed on Oct. 20, columnist Joe Nocera considered a “world without OPEC,” in which U.S. oil production soon kills off the oil cartel.

Or consider this rather triumphalist piece in Foreign Affairs from earlier this year, where two former National Security Council members who worked under President George W. Bush boasted that the recent surge in oil production “should help put to rest declinist thinking” and “sharpen the instruments of U.S. statecraft.” In the following issue, Ed Morse of Citibank went further. “Despite its doubters and haters, the shale revolution in oil and gas production is here to stay,” he declared.

But a new report throws cold water on the thinking that U.S. shale production will be around for the long haul. The Post Carbon Institute conducted an analysis of the top seven oil and top seven natural gas plays, which together account for 89 percent of current shale oil production and 88 percent of shale gas production.

The report found that both shale oil and shale gas production will peak before 2020. More importantly, the report’s author, David Hughes, says oil production will decline much more quickly than the EIA has predicted.

That’s largely because of high decline rates at shale wells across the country. Unlike conventional wells, which can produce relatively stable rates for a long period of time, shale oil and gas wells experience an initial burst of production in the first few years, followed by a precipitous decline thereafter.

Hughes estimates that the average shale oil well declines at a rate of between 60 and 91 percent over three years. Wells in the Bakken decline by 45 percent per year, which stands in stark contrast to the 5 percent annual decline for an average conventional well.

Or put another way, oil and gas companies will have to keep drilling at a feverish pace just to stand still. This means the industry is on a “drilling treadmill” that will be unsustainable over the long-term.

Predicting what oil production will be in 25 years is difficult, to say the least, but the Post Carbon report projects that oil production from the Bakken and Eagle Ford will be just one-tenth of the level that EIA is forecasting. The EIA predicts that the Bakken and the Eagle Ford will be producing a combined 1 million bpd in 2040. Hughes thinks it will be just a small fraction of that amount – a mere 73,000 bpd.

This is not the first time that David Hughes has taken aim at EIA data. In a December 2013 report, he skewered the high estimates for the potential of the Monterrey Shale in California, calling the EIA’s numbers “simplistic and highly overstated.” Several months later, the EIA was forced to back track on its figures, downgrading the recoverable oil estimates in the Monterrey by 96 percent.

Hughes says the implications of getting it wrong are “profound,” since so many companies are basing very large investments on incorrect projections. He says rosy estimates have cut into investment for renewables, while steering capital towards expensive oil and gas export terminals that should now be called into question.

An article in CleanTechnica points to the possibility of boom towns turning into “ghost towns” if the pace of drilling drops off. If David Hughes and The Post Carbon Institute are correct, there could be quite a few ghost towns popping up in the coming years as the shale revolution begins to fizzle.

Source and Full Report Here

Worldwide Field Development News Oct 18 – Oct 24, 2014

Worldwide Field Development News
Oct 18 – Oct 24, 2014
This week the SubseaIQ team added 9 new projects and updated 38 projects. You can see all the updates made over any time period via the Project Update History search. The latest offshore field develoment news and activities are listed below for your convenience.

MidEast – Persian Gulf
JODCO Announces First Phase Oil Production at Umm Lulu Field
Oct 21, 2014 – Inpex subsidiary Japan Oil Development Company (JODCO) announced that production had started earlier this month at the Umm Lulu field off Abu Dhabi. Production activities are currently associated with the first phase of development at the field and involves using existing facilities at the adjacent Umm Al-Dalkh field with produced oil flowing to shore-based processing facilities on Zirku Island. Phase II will consist of the installation of several fixed platforms and is expected to allow oil production at a rate of 105,000 bopd. The Umm Lulu joint venture consist of Abu Dhabi Oil Company (60%), BP (14.67%), Total (13.33%) and JODCO (12%).
Project Details: Umm Lulu
Australia
IPB Petroleum Preps for Pryderi-1 Probe
Oct 22, 2014 – IPB Petroleum anticipates spudding a wildcat well in the WA-424-P permit in late October or early November. The Stena Clyde (mid-water semisub) has been contracted to drill the well but is currently on location at the Puffin field in permit AC/L6. Pryderi-1 is designed to target a possible 78 million barrels in prospective resources. IPB operates the permit with 75% interest on behalf of its partner CalEnergy (25%).
Project Details: Pryderi
Africa – West
Leopard Wildcat off Gabon Provides Gas Discovery for Shell and CNOOC
Oct 23, 2014 – Shell announced the discovery of oil and gas while drilling the Leopard-1 exploration well in Block BCD10 offshore Gabon. The well was drilled to a total vertical depth of 16,610 feet by the Noble Globetrotter II (UDW semisub) in 6,922 feet of water. A net gas column of 656 was cut through pre-salt reservoir. Shell serves as block operator with 75% and its partner, CNOOC, carries the remaining 25%. The partners are planning to initiate an appraisal drilling program to aid in determining resource volumes.
Project Details: Leopard (Gabon)
Ophir Reports Successful DST at Fortuna Field Appraisal
Oct 22, 2014 – A successful drill stem test (DST) was recently performed at the Fortuna-2 well in Ophir Energy’s Block R offshore Equatorial Guinea. Fortuna-2 was drilled by the Titanium Explorer (UDW drillship) to appraise the 2008 Fortuna discovery. During the DST, a sustained flowrate of 60 MMscf/d was achieved through constrained testing equipment with less than 20 psi of drawdown at the reservoir. Ophir had originally assumed 7 development wells would be needed to exploit the reservoir but the excellent flowrate and minimum drawdown make it likely that less wells will be needed. Fortuna is estimated to contain 1.3 Tcf in recoverable gas resources. Ophir and GEPetrol participate in the block at 80% and 20% interests respectively.
Project Details: Fortuna Complex
N. America – US GOM
Delta House FPU Successfully Installed in MC254
Oct 24, 2014 – Installation of LLOG’s Delta House floating production unit (FPU) has been successfully completed in the U.S. Gulf of Mexico. The semisubmersible is located in 4,500 feet of water in Mississippi Canyon 254. Based on the Exmar OPTI-11000 hull design, the facility has a peak oil and gas production capacity of 100,000 bopd and 240 MMscf/d. Most of the subsea infrastructure associated with Delta House has been installed and production start up is anticipated in 1H 2015.
Project Details: Delta House
Chevron Hits Oil Pay at Guadalupe Prospect in U.S. GOM
Oct 23, 2014 – Chevron, operator of Keathley Canyon Block 10 in the U.S. Gulf of Mexico, discovered oil while drilling a deepwater exploration well at its Guadalupe prospect. Specific details were not provided but the discovery in Lower Tertiary Wilcox sands is described as significant. The well was drilled by the Discoverer India (UDW drillship) to a depth of 30,173 feet. Chevron’s partners in the block include BP (42.5%) and Venari Resources (15%). Additional testing and appraisal will be needed to determine the commerciality of the discovery.
Project Details: Guadalupe (KC10)
Europe – North Sea
GDF and BP Team Up for Vorlich and Marconi Discovery in UK North Sea
Oct 23, 2014 – GDF Suez and BP recently made a new discovery in the UK North Sea while drilling well 30/1f-13A and a sidetrack. The well was drilled to test a structure that spans parts of GDF-operated license P1588 and BP-operated license P363. GDF refers to the discovery as Marconi and BP refers to it as Vorlich. The well was drilled by the Transocean Galaxy II (400′ ILC) under a joint well agreement between the participants of both licenses. Hydrocarbon-bearing Paleocene sands were encountered in license P363 and a sidetrack into license P1588 confirmed the westerly extension of the discovery. Well 30/1f-13A tested at a maximum flowrate of 5,350 boepd.
Project Details: Marconi – Vorlich
Xcite Signs MOU with Baker Hughes for Bentley Field Services
Oct 22, 2014 – Xcite Energy, operator of the Bentley field in UK license P1078, announced a Memorandum of Understanding (MOU) with Baker Hughes that lays down principles for the provision of services related to the development of the field. Xcite Energy has tasked Baker Hughes with maximizing recovery from the field. Baker Hughes will likely supply drilling and completion services, well engineering, reservoir engineering and electric submersible pumps. Bentley was discovered in 1977 and development started in early in 2012. Xcite is the sole interest holder in the project. Production at the field could be initiated next year with an expected rate of 57,000 bopd.
Project Details: Bentley
Statoil Finds Additional Resources near Grane Field in North Sea
Oct 22, 2014 – Additional oil resources have been proven in the vicinity of the Statoil-operated Grane field in the Norwegian North Sea. Statoil tested the D-structure with well 25/8-18S and exposed an oil column of 82 feet in the Heimdal formation. Data indicates a recoverable volume of 30 to 80 million barrels. The discovery is located just over 4 miles north of the Grane field and is part of Statoil’s strategy of near-field exploration in an effort to extend the life of existing infrastructure. The well was drilled by the Transocean Leader (mid-water semisub) and reached a measured depth of 6,125 feet.
Project Details: Grane
Africa – Other
Chariot Elects Not to Renew Namibian Blocks
Oct 23, 2014 – Chariot Oil & Gas has elected not to apply for a new exploration license concerning its 100%-owned Namibian Blocks 1811A and 1811B that are due to laps Oct. 26. The company has thoroughly analyzed proprietary seismic and well data and has integrated information from third party drilling activity in order to determine the possibility of long range hydrocarbon migration to the Zamba prospect. The efforts have not been able to de-risk the prospect to a level that warrants further investment although Chariot still considers the acreage to be prospective. In May 2012 Chariot drilled an unsuccessful well at the Tapir South prospect. Well 1811/5-1 cut 568 net feet of carbonate and sandstone reservoirs but no hydrocarbon indications were observed.
Project Details: Zamba
Oil Shows Suggest Possible Discovery Offshore Morocco
Oct 21, 2014 – Near the end of July, Genel Energy spud the SM-1 exploration well in the Sidi Moussa block offshore Morocco to test the Nour prospect. San Leon Energy, a junior partner in the block, confirmed in a recent report the well has been drilled to 9,268 feet and that oil was encountered during the drilling process. The partners plan to proceed with well testing to determine possible commercial value of the discovery. SM-1 was drilled by the Noble Paul Romano (DW semisub) in 3,215 feet of water. Block interest holders include operator Genel Energy (60%), state-run ONHYM (25%), San Leon Energy (10%) and Serica Energy (5%).
Project Details: Nour
Asia – SouthEast
McDermott Snags Second Bukit Tua Development Contract
Oct 23, 2014 – McDermott International, Inc. was recently awarded its second contract relating to the Petronas-operated Bukit Tua development in the Ketapang Production Sharing Contract (PSC) offshore East Java, Indonesia. In August, the engineering firm was secured to build the jacket for the BTJT-A wellhead platform that will be installed at the field in November 2014. This week, McDermott was awarded a transportation, installation and pre-commissioning contract regarding the jacket and its topsides along with subsea pipeline tie-in spools. Additionally, McDermott will be responsible for pre-commissioning of the related export and infield pipelines. Offshore work should be completed by the end of 1Q 2015.
Project Details: Bukit Tua
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