Swiber Holdings Limited, a world class integrated construction and support services provider to the offshore industry, announced that it has secured another sizeable contract through a local collaboration with Dragados Offshore (“Dragados”), totaling approximately US$273 million for offshore construction work in the Gulf of Mexico.
This latest contract win awarded by an oil major from the Gulf of Mexico, entails offshore construction works for the procurement, transportation, and installation of pipeline in the Gulf of Mexico. Work for this project will commence immediately this year and will carry on into 2013.
Commented Mr. Francis Wong, Group Chief Executive Officer and President of Swiber, “Our strategic collaboration with Dragados enables both companies to provide a consolidated source of expertise and offer turnkey solutions to the offshore oil and gas industry. This puts us in a strong position to bank on the vast opportunities in the Gulf of Mexico region.”
With this third consecutive contract announcement in less than three months of 2012, Swiber’s order backlog continues to strengthen with steady growth.
This has come in quick succession to the recent US$36 million worth of vessel charter contract wins in the Gulf of Mexico and Southeast Asia. Prior to that, the Group has secured a US$216 million contract early last month, for offshore construction projects and vessel chartering services in Southeast Asia and South Asia.
Mr. Wong said, “This is indeed a winning season for us as we continue to secure contracts of larger values, which is a strong reflection of the confidence and trust that major oil companies have on Swiber’s ability in handling complex projects.
“Geographical diversification will remain the cornerstone of our growth path as we further strengthen our foothold in the offshore oil and gas industry in the region. This, coupled with our vessel fleet enhancements carried out in the past few years will enable us to concurrently manage our offshore projects while securing more contract wins.
“We have continued to break into new frontiers – new markets, new customers, new records in terms of size of contracts, revenue and order book. We have a strong order book visibility with offshore projects spread out over the next couple of years. This will clearly give us a solid footing to navigate forward in the exciting offshore oil and gas construction industry.”
Infield Systems has forecasted upstream capex in the Gulf of Mexico to increase by as much as 38% year-on-year in 2012 as operators push forward with development plans and execute offshore projects. Offshore capex is forecasted to increase from $9 billion in 2011 to over $12.5 billion per annum by 2015.
Concluded Mr. Wong, “Tendering activities in the offshore oil and gas industry is gaining traction, with vast opportunities appearing in the Gulf of Mexico. As an internationally recognised, world class company, with proven track record of delivering consistent and superior quality of products and services, Swiber is ready to support the region’s growing offshore exploration and field development market.”
With a slew of new contract wins, key strategies in place, strong order book visibility, and robust opportunities in the Southeast Asia, South Asia, Middle East and Gulf of Mexico regions, Swiber has firmly entrenched its position in the big league and is set to take on bigger ventures and capture fresh and exciting opportunities in the offshore oil and gas arena.
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When the Leiv Eiriksson, a rig built to hunt for oil beneath 10,000 feet of water in the world’s roughest seas, finishes drilling a well off Greenland’s west coast next month, it will sail for its next job — a prospect 9,000 miles away, south of the Falkland Islands.
The month long voyage from top to bottom of the Atlantic Ocean, at a cost of about $500,000 a day, exemplifies how the world’s drillers have never spent so much searching for oil and gas in so many places, spurred by crude prices above $100 a barrel and depleting reserves at existing fields.
After holding back in the aftermath of the financial crisis, Exxon Mobil Corp. , Royal Dutch Shell Plc and other producers will increase exploration spending by the most since 2007 this year to a record $70 billion, said Wood Mackenzie Consultants Ltd. That’s bringing rigs to countries with no history of oil and gas production, from French Guiana in South America to Kenya in east Africa.
“The race for exploration has become hotter than ever,” said Michael O’Dwyer, managing director for oil and gas at Morgan Stanley & Co. in London. “The biggest change I’ve seen in the activities of oil companies over the last 24 months is the focus on exploration.”
About three-quarters of exploration money for conventional oil and gas is spent offshore, where 284 wells will be drilled next year, 30 percent more than in 2011, targeting more than 100 billion barrels of potential reserves, according to Morgan Stanley.
BP and Total SA are increasing exploration budgets after the world’s largest oil companies were beaten to the biggest discoveries by smaller competitors in recent years, such as Tullow Oil Plc’s Jubilee field in Ghana, which is now umping 120,000 barrels a day.
“Majors have overlooked a number of the biggest basins in the world,” BP Chief Executive Officer Bob Dudley said at a press conference yesterday.
U.S. independent Anadarko Petroleum Corp. has found fields off Mozambique in east Africa that hold more gas than the U.K.’s total remaining reserves. Rockhopper Exploration Plc’s Sea Lion discovery is the Falkland Islands’ first commercial find and may contain as much as 1.4 billion barrels of oil.
“We’re seeing some courageous exploration activity at the moment, particularly with the medium-sized companies such as in Greenland and east and west Africa,” said John Martin, managing director for global energy at Standard Chartered Plc in London.
The so-called supermajors have responded in two ways. First, by becoming partners with smaller companies and secondly, by drilling more exploration wells themselves.
When Tullow’s Zaedyus well made a potential find of 700 million barrels of oil in deep water off French Guiana last month, its partners were Shell and Total, Europe’s largest and third-largest oil companies. Paris-based Total is looking to replicate Anadarko’s east Africa success in Kenya, where it’s acquired control of five deepwater exploration blocks.
At BP, the experience of drilling a well in the Gulf of Mexico that exploded and caused the U.S.’s worst oil spill hasn’t deterred it from exploration. The company plans to double spending on exploration from $2.7 billion in 2010. The company plans drilling in waters off Australia, China and the U.K., and will increase its exploration wells to as many as 25 a year by 2013 from six wells drilled this year.
“It’s very hard to grow and make a profit with an oil and gas company unless you are good at, and are investing in, exploration,” Helge Lund, chief executive officer of Statoil ASA , Norway’s largest oil company, said in an interview. “It seems that compared to what we saw in the 90s, oil and gas companies are exploring much more now.”
Exxon CEO Rex Tillerson, whose company spent $3 billion on exploration last year, signed an agreement with Russia’s biggest oil company, OAO Rosneft, this year to spend an initial $3.2 billion exploring undrilled areas of Russia’s Arctic Ocean and the Black Sea.
“As long as oil prices stay above $80, no one’s going to slow their exploration programs,” said Jason Gammel, an analyst at Macquarie Capital Europe Ltd. in London. “Exploration is very high risk, but the highest rates of return on capital tend to be from fields you discover yourself. Unlocking new frontiers can bear fruit.”
The 11 percent drop in prices in the past six months isn’t likely to deter exploration, Wood Mackenzie analyst Andrew Latham said. Brent oil, a benchmark price for two-thirds of the world’s crude, is about $110 a barrel, more than 30 percent higher than its five-year average. Futures contracts show prices above $100 for the next two years.
“The recent softening in oil prices doesn’t change exploration planning,” Latham said. “Most of the industry is planning on prices ranging from $70 to $80.”
Wood Mackenzie’s figures for exploration spending don’t include investment in so-called unconventional oil and gas, which is extracted from oil sands or by grinding underground rocks.
Still, many wells will find nothing more than sand or water. Edinburgh-based Cairn Energy Plc’s $1 billion drilling campaign in the Arctic waters off Greenland has yet to make a significant discovery. While the success rate for exploration wells worldwide is about 48 percent this year, typically only one in four exploration wells will find oil or gas, according to Morgan Stanley.
That’s a factor that may also play to the balance sheet strength of the largest oil companies as worsening financial conditions make funding harder to find for smaller explorers. An index of oil and gas companies on London’s junior AIM market — a leading source of equity finance for smaller drillers — has dropped 39 percent this year.
“The big question is whether financial market turmoil will put pressure on spending,” said Lucy Haskins, an equity analyst at Barclays Plc in London. “Most of the big-cap companies are very keen not to get into a stop-go investment cycle that has dogged their production in past, but some of smaller players may be a more cautious short term.”
By Brian Swint (Bloomberg)
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