According to the Seadrill’s Fleet Status Report for May, Total has hired the rig on a three-month contract. The contract, expiring in mid-July, will bring approximately $12 million to Seadrill.
Total operates the Yadana field (31.2%). Located on offshore Blocks M5 and M6, this field produces gas that is delivered mainly to PTT (the Thai state-owned company) to be used in Thai power plants.
The Yadana field also supplies the domestic market via a land pipeline and, since June 2010, via a sub-sea pipeline built and operated by Myanmar’s state-owned company MOGE.
Following the completion of drilling operations in Myanmar, the rig will leave south-east Asia in which it has been operating since 2010. West Callisto will move to Middle East to commence drilling operations offshore Saudi Arabia under a three-year contract with Saudi Aramco. The drilling program is scheduled to start in September 2012
- Seadrill Secures Contract for Jack-Up Rig West Callisto Offshore Saudi Arabia (worldmaritimenews.com)
- Seadrill Expects Stronger Second Quarter after Robust 1Q 2012 (mb50.wordpress.com)
- South Korea: Seadrill Confirms Samsung Drillships Contracts (mb50.wordpress.com)
- Strong Demand for UDW Drillships Spurs Seadrill to Order One More from SHI (South Korea) (mb50.wordpress.com)
- Seadrill Orders Harsh Environment Rig in South Korea (mb50.wordpress.com)
- Ezion to Provide Service Rig for Operations Offshore Myanmar (mb50.wordpress.com)
The purchase price is $40 million in cash. Ocean Columbia is a LeTourneau Class 82 SD-C jack-up drilling rig registered and flagged in the Marshall Islands. Subject to customary closing conditions, the Company expects the acquisition to close in May 2012.
“Hercules approached us with an offer to acquire the Ocean Columbia, and we found the terms to be compelling,” said Larry Dickerson, President and Chief Executive Officer of Diamond Offshore. “We are principally a floater company, and this transaction will further augment our funds for potential investments in deepwater and ultra-deepwater assets.”
Saudi Aramco contract
Hercules Offshore also announced that it has entered into a three-year drilling contract with Saudi Aramco for the use of the Ocean Columbia. Over this three-year period, the Company expects to generate total revenues of $160.0 million, including a lump-sum mobilization fee, assuming a utilization rate of 98% for the rig. Under the drilling contract, Saudi Aramco has the option to extend the term for an additional one-year period. Prior to commencing work under the contract, the Company expects to spend approximately $45.0 million for repairs, upgrades and other contract specific refurbishments to the rig and to mobilize the rig from the Gulf of Mexico to the Middle East. The Company expects the rig to commence work under the contract in November 2012.
- Hercules sees more rigs in GOM (mb50.wordpress.com)
- Fairstar FJELL to Carry Hercules 185 Jack-up Back to West Africa (mb50.wordpress.com)
- How Will Hercules Offshore Do in 2012? (dailyfinance.com)
- The Best Offshore Drilling Stock (dailyfinance.com)
At the Ceraweek 2012 conference in Houston, Amin H. Nasser, Senior vice president, Upstream Operations in Saudi Aramco, unveiled the company’s plans to start the Red Sea deepwater drilling operations by the end of 2012.
“We are optimistic about the potential for significant discoveries. We expect to start drilling in the deepwater by the end of this year,” Dow Jones quotes Nasser as saying.
Nasser, who joined the company in 1982, said that Saudi Aramco was working to increase its oil recovery levels from 50% to 70% in the years to come. He also highlighted the importance of deepwater and shallow water drilling in the company’s long-term plan to unlock “at least 100 million barrels of energy resources within the Saudi Arabian kingdom in the next several decades,” Dow Jones reports.
- Saudi Aramco Announces Deepwater Drilling Ambitions in the Red Sea (gcaptain.com)
- Demand for oil fuels tech investments (mysanantonio.com)
- Baker Hughes Opens Unconventional Resources Research and Technology Center in Dhahran (prnewswire.com)
While the green movement naively harbors hopes it will be able to shut down unconventional oil and gas development, in Saudi Arabia they are already contemplating a time when North American fossil fuel will replace their oil.
Looking past the din of protesters, state-owned oil giant Saudi Aramco is resigned to the fact that its influence will wane because of the massive unconventional fossil-fuel development underway in North America. As such, Saudi Arabia has no plans to raise its production output to 15 million barrels per day from 12 million, said Khalid Al-Falih, the powerful chief executive of Aramco.
“There is a new emphasis in the industry on unconventional liquids, and shale gas technologies are also being applied to shale oil,” Al-Falih, president and CEO of Saudi Aramco, warned a domestic audience in a speech in Riyadh Monday.
“Some are even talking about an era of ‘energy independence’ for the Americas, based on the immense conventional and unconventional hydrocarbon resources located there. While that might be stretching the point, it is clear that the abundance of resources and the more ‘balanced’ geographical distribution of unconventional’s have reduced the much-hyped concerns over ‘energy security’, which once served as the undercurrent driving energy policies and dominated the global energy debate.”
Aramco is the powerful state entity that manages the Kingdom’s nine million barrel-plus oil output. Saudi Arabia has long dominated oil markets by leveraging its spare oil capacity and, as the OPEC kingpin, striking a delicate balance between the interests of oil consumers and the exporter group.
But the oil chief’s remarks reveal Saudi fears that the market dynamics are changing and its dominance over energy markets is under threat by new unconventional finds.
OPEC estimated in a recent report that global reserves of tight oil could be as high as 300 billion barrels, above Saudi Arabia’s conventional reserves of 260 billion barrels, which are currently seen as the second-largest in the world after Venezuela.
Global output of non-conventional oil is set to rise 3.4 million bpd by 2015, still dominated by oil sands, to 5.8 million bpd by 2025 and to 8.4 million bpd by 2035, when tight oil would be playing a much bigger role. By 2035, the United States and Canada will still be dominating unconventional oil production with 6.6 million bpd, the group forecasts.
Last year, even as the world consumed nearly 30 billion barrels of oil, not only was the industry able to replace this production but global petroleum reserves actually increased by nearly seven billion barrels, as companies increasingly turned toward higher risk areas, Al-Falih noted.
Clearly, the Kingdom is preparing for new market realities as the discussion on energy has changed from scarcity to abundance, particularly due to the new finds that can be produced feasibly and economically.
In the past, Saudi Arabia, along with its OPEC allies, could drive prices down by opening the taps to ensure unconventional fossil fuels remained firmly buried in the ground. But most analysts now expect oil prices to remain high, at least over the medium term, thanks to tight supplies and continued demand from emerging markets. That’s great news for Canadian oil sands developers, which need prices around US$60 to US$70 per barrel to make their business models economically feasible.
Saudi Arabia’s own break-even oil price has also risen sharply in the past few years, making it less likely to pursue a strategy of lower prices. The Institute of International Finance estimates that Saudi Arabia’s break-even price has shot up US$20 over the past year to US$88, in part due to a generous spending package of US$130-billion announced this year to keep domestic unrest at bay.
The Saudis now find themselves between a shale rock and a hard place: While high crude prices mean the Saudis can maintain their excessive domestic subsidies for citizens, in the long run that means the world is developing new sources, making it less dependent on Saudi oil.
Although the Saudis have vigorously fought the Ethical Oil ads, which paint them in a negative light, they already know their oil is less welcome in the Americas – Saudi oil made up a mere 9.3% of U.S. oil imports last year, down from 11.2% five years ago, according to the U.S. Department of Energy.
But while Saudis would be cheering on the green groups with ‘No KXL’ signs, they don’t hold out much hope for renewable energies either. Calling them ‘green bubbles,’ Al-Falih says governments should stop focusing on unproven and expensive energy mix, as there is frankly no appetite for massive investments in expensive, ill thought-out energy policies and pet projects.
“The confluence of four new realities – increasing supplies of oil and gas, the failure of alternatives to gain traction, the inability of economies to foot the bill for expensive energy agendas, and shifting environmental priorities – have turned the terms of the global energy dialogue upside down. Therefore, we must recast our discussion in light of actual conditions rather than wishful thinking,” the pragmatic chief said.
Somebody should explain this wishful thinking to the green movement.
- New oil reserves seen reducing Saudi Arabias importance (theglobeandmail.com)
- Saudis worry over North American shale oil surge (business.financialpost.com)
Hercules Offshore, Inc. today reported a loss from continuing operations of $17.0 million, or $0.12 per diluted share, on revenue of $163.0 million for the third quarter 2011, compared with a loss from continuing operations of $16.1 million, or $0.14 per diluted share, on revenue of $157.6 million for the third quarter 2010.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, “Activity levels in the U.S. Gulf of Mexico Shelf are on the rise, as operators increasingly focus on liquids rich drilling opportunities. Concurrently, several jackup rigs have departed for international opportunities, resulting in a tight environment for rig availability in the region. Hercules Offshore has been the primary beneficiary of the improving fundamental trends in the shallow water U.S. Gulf of Mexico, which have accelerated during the third quarter. Average dayrates in our Domestic Offshore segment have increased by nearly $10,000 per day over the past year, with leading edge rates suggesting further upside for our domestic jackup fleet.
“Our International Offshore segment was recently successful at securing several contracts, including attractive, long term extensions for the Hercules 261 and Hercules 262 in the Middle East. These contracts are a testament to our strong performance and relationship with the customer, Saudi Aramco. Tempering our international success was the recently announced damage to the Hercules 185, where we are anticipating approximately six months of downtime for repairs.”
Domestic Offshore revenue increased to $60.2 million in the third quarter 2011 from $25.1 million in the comparable period in 2010. Approximately 70% of the revenue increase is attributable to the acquisition of the Seahawk rigs, while higher utilization and dayrates on the legacy fleet contributed to the remaining revenue growth. Average revenue per rig per day increased by $9,722 per rig per day to $49,060 in the third quarter 2011 compared to $39,338 in the prior year period. Utilization in the third quarter 2011 increased to 74.2% from 62.9% in the third quarter 2010. However, operating days rose by more than 90%, largely as a result of the acquisition of the Seahawk rigs. Domestic Offshore operating expenses increased to $53.2 million in the third quarter 2011 from $38.7 million in the third quarter 2010, due to costs associated with the acquired Seahawk rigs. Domestic Offshore recorded an operating loss of $12.8 million in the third quarter 2011 compared to an operating loss of $32.1 million for the respective prior year quarter.
International Offshore revenue declined to $49.0 million in the third quarter 2011 from $74.4 million in the third quarter 2010. The decline was primarily driven by new contracts at lower market rates on the Hercules 208, Hercules 258, Hercules 260 and Rig 3, as well as the downtime related to transition between contracts. The reduction in revenue related to these aforementioned rigs was partially offset by the increased utilization on the Hercules 185. Overall, average revenue per rig per day declined to $96,388 in the third quarter 2011 from $138,344 in the third quarter 2010, and operating days declined to 508 days from 538 days, in the respective periods. Third quarter 2011 operating expenses were $29.1 million compared to $31.1 million in the third quarter 2010, as lower costs associated with new contract terms on the Hercules 258 and Hercules 260 were partially offset by higher costs on the Hercules 185. International Offshore general and administrative expenses during the third quarter 2011 include an $8.0 million benefit, compared to a $1.5 million benefit during the third quarter 2010, from the reversal of an allowance for doubtful accounts related to payments received from a customer in Angola. Operating income decreased to $12.9 million in the third quarter 2011 from $26.9 million in the third quarter 2010.
Inland revenue for the third quarter 2011 increased to $8.1 million from $5.7 million in the third quarter 2010, primarily driven by an increase in average revenue per rig per day to $31,008 in the third quarter 2011 from $21,357 in the third quarter 2010. Utilization of 94.9% during the third quarter 2011 is comparable to 97.5% for the prior year period. Third quarter 2011 operating expenses were $3.5 million, which includes approximately $2.6 million in gains for asset sales, compared to $8.3 million in the comparable period in 2010. Year ago results include an accrual of approximately $3.0 million related to a multi-year state sales and use tax audit. Inland recorded operating income of $0.9 million in the third quarter 2011 compared to an operating loss of $8.6 million in the third quarter 2010.
Domestic Liftboats generated revenue of $16.7 million in the third quarter 2011 compared to $24.6 million in the third quarter 2010. Year ago results were positively impacted by coastal remediation work related to the BP-Macondo incident. The absence of the BP-Macondo related work led to a decline in utilization to 69.8% during the third quarter 2011 from 91.6% for the prior year period. Average revenue per liftboat per day was down slightly to $7,443 in the third quarter 2011 compared to $7,684 in the third quarter 2010. Operating expenses were essentially flat at $11.4 million in the third quarter 2011. Operating income for Domestic Liftboats was $0.6 million in the third quarter 2011 compared to operating income of $9.4 million in the comparable prior year period.
International Liftboat revenue increased modestly to $28.9 million in the third quarter 2011 compared to $27.8 million in the third quarter 2010, largely due to higher utilization, which rose to 64.1% in the third quarter 2011 from 56.6% in the prior year period. This was partially offset by a decline in average revenue per liftboat per day to $21,325 from $23,176 in the same periods, respectively. Operating expenses increased to $14.1 million in the third quarter 2011 versus $13.0 million in the prior year period due to higher labor and maintenance costs. Operating income for International Liftboats was $8.5 million in the third quarter 2011, compared to $9.4 million in the same period of the prior year.
Discovery Offshore S.A. Investment
Since Hercules Offshore’s initial $10 million investment in Discovery Offshore S.A. (Oslo Axess: DISC), which gave the company an 8% ownership stake, the Company has completed several purchases of Discovery common stock, totaling approximately $24.2 million. The most recent purchase on September 13, 2011 increased Hercules’ holding in Discovery to 18.4 million shares, corresponding to 28.0% of Discovery’s share capital.
Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 49 jackup rigs, 17 barge rigs, 65 liftboats, two submersible rigs, and one platform rig. The Company offers a range of services to oil and gas producers to meet their needs during drilling, well service, platform inspection, maintenance, and decommissioning operations in several key shallow water provinces around the world. Hercules Offshore currently holds 28.0% of share capital in Discovery Offshore, a pure play, ultra-high specification jackup rig company.
- High-Spec Jackup Market: Hercules Offshore increases stake in Discovery Offshore (mb50.wordpress.com)
- Bermuda: AOD to Increase Water Depth Capacity for its Jack-ups (mb50.wordpress.com)
- Shallow Gulf Waters Get Lonely; Hercules Offshore Holds Hope That It Can Dominate in Aging Energy Field (gcaptain.com)
- Push for permits in Gulf of Mexico (mb50.wordpress.com)
by Brett Clanton Posted on May 3, 2011 at 11:25 pm
The Chevron Genesis platform in the Gulf of Mexico (AP file photo/Mary Altaffer)
As the global offshore oil and gas industry meets in Houston this week, leaders say they are aware the reputation of their business is still bruised after the BP Gulf of Mexico oil spill and that motorists and politicians are fuming over $4 gasoline prices.
But they cautioned Washington against overreaching with new regulation and taxes, stressing the enormity of the challenge ahead in meeting the world’s surging energy needs.
“We cannot afford to have emotions control business and policy decisions,” Zuhair Hussain, vice president of Saudi Aramco’s drilling and workover unit, said during a panel discussion Tuesday at the 2011 Offshore Technology Conference.
With global energy demand expected to rise 40 percent by 2035, industry must be unencumbered to invest in finding more resources and developing new technology, said other panelists.
“You can’t be emotional about our business based on gas prices,” said Ali Moshiri, president of Chevron Corp.’s Africa and Latin America exploration and production company.
But Obama administration officials and oil company executives agreed that last year’s Macondo well blowout, which killed 11 workers and launched the nation’s worst oil spill, gave the industry a major image problem that could take years to quash.
Christopher Smith, U.S. deputy assistant energy secretary, noted that “blowout preventer” and “fracking” have become familiar words since the Deepwater Horizon disaster and amid controversy surrounding the fracturing process used to unlock natural gas. And that’s not a good thing, he said.
“These terms have entered into the public consciousness in a way that is going to be a net negative for industry and for government as we try to advance our goals,” Smith said.
But government, industry and environmentalists can work together on shared goals, such as advancing safe development of natural gas, he said.
Farouk Hussain Al Zanki, CEO of Kuwait Petroleum Corp., described a key lesson industry should take away from events of recent months, including the Gulf oil spill and Japan’s tsunami-triggered nuclear power plant disaster.
“Energy safety has moved to the forefront of industry challenges,” he said.
Dave Payne, Chevron’s vice president of drilling and completions, said the damage from the spill will be particularly long-lasting.
“A large percentage of the American public doesn’t understand our business,” he said. “We have not regained trust. It will take us years as an industry to get to where we need to be.”
He cautioned against an adversarial relationship between federal regulators and the offshore drilling industry. We “need a partnership with government,” he said. “We cannot work at loggerheads with the government and be successful.”
In an afternoon panel on the Gulf spill, speakers explored specific ways that the industry could learn from the blowout last year.
One big lesson: The data streaming from the seafloor to the drilling rig may not be displayed in the best way to help workers make quick decisions.
There’s a concern that amid a barrage of data, “someone working in real time has to tease out” what’s relevant “and make real consequential decisions on the fly,” Smith said.
The oil and gas industry can take cues from how information is presented to pilots in airplane cockpits and engineers in nuclear reactors, he said.
“Instead of relying on a person who is smart and quick and who has that intestinal fortitude to stop work on a $350 million rig,” Smith said, the airlines and nuclear industry use more checklists and automation.
Chevron’s Payne said industry stalwarts likely would resist safety checklists, but acknowledged they could go a long way to improving safety offshore.
“We need to start bringing procedures and checklists into our business,” he said. “We have an opportunity to work together as an industry and hold each other accountable.”
OTC attendance so far is up about 10 percent from last year, when 72,900 came to the four-day annual event, said Stephen Graham, OTC’s associate managing director.
Nathan Bell April 18, 2011 - 2:50PM
There’s an old joke among oil drillers: “We didn’t hit oil, but at least we didn’t hit gas”.
Just 10 years ago, gas was an irritating, near-worthless by-product of oil production. Now an oilman’s job depends on it.
Major oil producers like Chevron and ExxonMobil are chasing gas because they can’t get their hands on any more oil.
What’s more, it’s now much less expensive to transport, to the point here gas is now a real substitute for oil. The switch to LNG is on.
But what really accelerated the pace of change was the advent of Liquefied Natural Gas, or LNG.
Prior to this development, gas had to be transported through huge, and hugely expensive, pipelines. Only those projects close to customers or existing pipelines made economic sense. LNG did away with all that.
Through a process known as liquefaction, gas is chilled into LNG, occupying a volume just 1/600th of its gaseous state. This small fact changed the face of the industry.
Where once large and expensive pipeline networks were required to transport gas point-to-point, now ships deliver it anywhere in the world.
Nevertheless, it’s still a complex process. Once LNG reaches its destination, it has to be turned back into its gaseous state – a process somewhat unimaginatively known as regasification – and transported conventionally via pipelines to end users.
At both ends of the LNG chain, nature and technology collide. And the costs of that battle aren’t cheap.
The supply glut
LNG prices are traditionally linked to the oil price. In days when oil fetched $US20 a barrel this quirk was seen to benefit buyers of gas. Today, with oil prices at over $US100 a barrel, it’s a boon to gas producers.
Producers have responded by scrambling to increase output. There’s now every sign of a global glut of LNG.
Qatar is home to the world’s largest gas fields, where enough oil and condensate by-product lowers the effective cost of gas production to almost zero. Cost-free cargoes of Qatari LNG thus ply the world’s oceans, holding prices down.
In Australia, new capacity worth nearly 60 million tonnes per annum (mtpa), has already been committed. With coal seam gas reserves yet to come on stream, that figure is likely to grow.
The shale gas revolution in the US will also have an impact, turning what might have been an importer of LNG into a possible exporter.
And shale and coal seam gas discoveries that have transformed the North American gas market may also occur in new markets like China, India and Brazil. If that occurs, some of the world’s largest potential markets may not need to import LNG at all.
A glut of LNG over the next few years appears likely. Indeed, we’ve been warning of this possibility.
But over the longer term, demand for LNG should easily catch up and perhaps even exceed new capacity.
Growing demand for LNG
The world’s biggest and hungriest energy consumers have barely embarked on their conversion to gas.
In 2005 China had no re-gasification terminals at all. Today, there are six in various forms of development. Each will be able to process millions of tonnes of LNG each year. Currently, Chinese LNG imports are less than 6mtpa. In 15 years’ time, they’re forecast to increase 10-fold. India, Brazil, South Africa, Vietnam and others are constructing new terminals to import LNG.
Overall, demand is expected to grow 15mtpa for the foreseeable future. That’s the equivalent of a new North West Shelf every year.
With Qatar indicating it has reached its supply limit – volumes are not expected to exceed 77mpta for some years – Australian producers are well placed to fill that supply shortfall.
The switch to gas is already on. Developing countries are increasingly seeing LNG, not oil, coal or renewables, as the primary solution to their growing energy demands. Investors take note: this is a sector that will offer rich pickings for investors.