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Shell Starts Drilling at Cebus Well, Offshore French Guiana
Shell has started drilling at Cebus prospect (GM-ES-4), the third well of the current four well exploration programme in the Guyane Maritime Permit (French Guiana), Northern Petroleum, which holds a stake in the permit, has announced.
The drilling operations are being conducted with the Stena Ice Max drillship.
Northern through holding 50 per cent of Northpet Investments Limited, owns a net 1.25 per cent interest in the offshore exploration licence ‘Guyane Maritime’. Northern is in partnership with Shell (Operator, holding 45 per cent), Total (25 per cent), Tullow Oil (27.5 per cent) and Wessex Exploration (also holding 1.25 per cent through owning the remaining 50 per cent interest in Northpet Investment Limited).
Keith Bush, Chief Operating Officer of Northern stated:
“This is a new, exciting opportunity for the joint venture to further establish the oil production potential in French Guiana. We look forward to the results of this well with great interest.”
SDLP – Seadrill Partners files plans for $225 mln IPO
Seadrill Partners LLC filed plans for an initial public offering estimated at up to $225 million.
The limited liability company was formed by Norwegian oil-services company Seadrill Ltd. (SDRL, SDRL.OS) to own, operate and acquire offshore drilling rigs.
Seadrill Partners said it will use the proceeds to buy from Seadrill Ltd. interests in Seadrill Operating LP and Seadrill Capricorn Holdings LLC, which own and operate Seadrill Partners’s offshore drilling rigs.
After the planned offering, Seadrill Partners said it will own a 30% stake in Seadrill Operating and a 51% stake in Seadrill Capricorn Holdings.
The company said its drilling rigs are under long-term contracts with major oil companies, such as Chevron Corp. (CVX), Total S.A. (TOT, FP.FR), BP PLC (BP, BP.LN) and Exxon Mobil Corp. (XOM), with an average remaining term of 3.1 years as of June 30, according to its regulatory filing.
Seadrill Partners said its profit rose 5.6% to $93.9 million as revenue increased 11% to $275.2 million for the six months ended June 30.
The company has applied to list its common units on the New York Stock Exchange under the symbol SDLP.
Seadrill Ltd. reported last month its second-quarter earnings fell 14% as higher operating expenses masked the company’s 13% rise in revenue.
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Brazil government fails to benefit blocking oil firms
International oil companies looking to start exploring Brazil, home to the largest discoveries in the past decade, can’t get near the crude.
Brazil has repeatedly delayed the sale of exploration areas since 2007, leaving Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA) shut out of an offshore area that holds at least $5 trillion of oil. Meanwhile Petroleo Brasileiro SA (PETR4), the state-run company that pumps more than 90 percent of the country’s crude, is struggling to develop deposits it has already found. Petrobras’s output grew 1.5 percent in 2011, the slowest pace in four years.
Companies including Total SA (FP) have accelerated exploration off the coast of West Africa, where the geology is similar to Brazil and which holds large discoveries in deep waters. OGX Petroleo & Gas Participacoes SA, controlled by billionaire Eike Batista, began exploring in Colombia amid delays in offering new exploration tracts in Brazil.
“Brazil is someplace where we would like to be more present; at the same time we are in 130 countries, it’s not one against the other, it’s one plus,” Total Chief Executive Officer Christophe de Margerie said in a June 18 interview in Rio de Janeiro. “I hate to say it but if it doesn’t work it doesn’t work. We would like it to work.”
Petrobras this month increased its five-year spending plan 5.3 percent to $236.5 billion, the biggest in the oil industry, to develop deposits in waters as deep as 2,800 meters (9,200 feet) and trapped under a layer of salt.
Price-to-Earnings
Petrobras trades at 6.81 times its estimated 2013 earnings, compared with a ratio of 9.74 for Exxon, 7.12 for Shell and 6.28 for Total, according to data compiled by Bloomberg.
Revenue at the Brazilian producer totaled $150.7 billion in the trailing 12 months, less than Exxon’s $442.9 billion, Shell’s $480.2 billion and Total’s $236.2 billion.
While a legislation change in 2007 put Petrobras in charge of all new contracts in the so-called pre-salt area off Brazil, the company hasn’t been able to extract oil fast enough to meet targets. Petrobras cut its long-term production guidance by 11 percent to 5.7 million barrels a day in 2020. Output will remain within 2 percent of 2011 levels until 2014, it said on June 14.
The lack of new exploration areas in Brazil has encouraged some companies to concentrate on other regions such as offshore Africa, where Tullow Oil Plc (TLW) and Cobalt International Energy Inc. (CIE) have made discoveries in deep waters. Last year, Anadarko Petroleum Corp. (APC) announced plans to sell all its Brazil blocks, granted before the 2007 legislation change, as it boosts investment in natural-gas projects in Africa.
Bid Rounds
“The absence of bid rounds is affecting all oil companies in Brazil,” Joao Clark, the head of Ecopetrol SA (ECOPETL)’s Brazilian operations, said in an April 17 interview in Rio de Janeiro. “We need new blocks, we have to improve our portfolio.”
Exxon quit its only Brazilian block this year after drilling three dry holes in deep waters, Patrick McGinn, a company spokesman, said by e-mail from Irving, Texas. The explorer is seeking more opportunities in the country, he said.
Petrobras is failing to meet output goals after new offshore wells didn’t compensate for declines at older fields. That jeopardizes its 2020 target. Brazil is counting on the company to provide national energy self-sufficiency to meet demand from a growing economy. Petrobras pumped 93 percent of the country’s oil and 99 percent of its gas in April.
Pre-Salt Zone
Foreign producers including Exxon and Total, with little acreage in Brazil, are seeking to eat into that share as fields dwindle in other areas such as the North Sea and Alaska’s North Slope. Brazil hasn’t auctioned any offshore permits since before announcing the potential of the pre-salt zone in 2007 and hasn’t sold any blocks at all since 2008, when it sold tracts on land.
“I understand quite well the anxiety of those companies,” Petrobras Chief Executive Officer Maria das Gracas Silva Foster told reporters in Rio on Feb. 13, the day she was promoted to the role. “For them it might be really important. For Petrobras, it makes no difference. We have a lot of work to do.”
Brazil probably won’t offer any areas in the region until 2013 because lawmakers are debating how to distribute future revenues, Marco Antonio Almeida, the Energy Ministry’s oil and gas secretary, said in a May 3 telephone interview from Brasilia. The pre-salt auctions will only occur after Congress votes on how to distribute the royalties from future output, the Energy Ministry said in an e-mailed response to questions.
Political Wrangling
The combination of political wrangling, requirements to buy locally built equipment and Petrobras’s budget constraints may even push new rounds to 2014 at the earliest, according to Christopher Garman, a Latin America analyst at Eurasia Group.
“The sentiment within the upper levels of government is they already have their hands full,” Garman said by phone from Washington. “What is really hurting the decisions of international oil companies to stay is the lack of a pipeline of new opportunities.”
Petrobras is required to have a minimum 30 percent stake in new pre-salt blocks. That means the Rio de Janeiro-based company can sign contracts before knowing who it will work with, making it hard to set up the auctions, Almeida said. “It’s a situation that doesn’t exist anywhere else in the world,” he said.
The lack of auctions has put a premium on existing permits. Companies that bought exploration areas before the discovery of Lula — the field previously known as Tupi, which was the Americas’ largest oil discovery in more than three decades — have seen the value of those areas increase as a result of oil- price gains and scarcity of acreage, Peter Gaw, head of oil, gas and chemicals at Standard Chartered Bank, said in an interview.
BG, Repsol
BG Group Plc (BG/) owns 25 percent of Lula, while Portugal’s Galp Energia SGPS SA (GALP) has a 10 percent stake. Repsol SA owns 25 percent of a neighboring block. Their properties, purchased years before anyone knew what they were worth, have since attracted global peers to the south Atlantic.
China Petrochemical Corp., Asia’s biggest refiner, has agreed to invest $12.3 billion to become a minority partner with Repsol and Galp in Brazil. BP Plc (BP/), who skipped the first pre- salt auctions, paid Devon Energy Corp. $3.2 billion last year for nine blocks in the country.
Petrobras doesn’t need to worry about the timing of new sales because oil will only gain in value in coming decades, Silvio Sinedino Pinheiro, elected to the company’s 10-member board by workers this year, said in an April 11 interview at its headquarters.
“Here at Petrobras we talk a lot about if it makes more sense to sell now at $100 a barrel, or sell in 30 years when it costs $200 a barrel,” he said.
Related articles
- Ocean Rig Corcovado Starts Drilling Offshore Brazil (mb50.wordpress.com)
- Brazil And Petrobras: Oil Potential Or Oil Dream? (businessinsider.com)
France: Total Allocates Billions for Upstream in 2012
French oil major Total said today it intended to continue to actively manage its asset portfolio with, in particular, a program of non-strategic asset sales.
The 2012 budget for organic investments is $24 billion , of which more than 80% will be dedicated to the Upstream.
In the Upstream, Total expects in 2012 to implement its strategy to accelerate production growth and increase the profitability of its asset portfolio.
The ramp-up of Pazflor in Angola and the start-up of several major projects, including Usan in Nigeria, Angola LNG, and Bongkot South in Thailand, will contribute to production growth in 2012 and to achieving the objective of growing production by 2.5% per year on average between 2010 and 2015.
“The successful start-up of the Pazflor field in Angola was the crowning achievement of an important year for Total. This start-up and the ones to follow will ensure a return to production growth in 2012 and the years to come”, Chairman and CEO Christophe de Margerie said.
After launching Ichthys in Australia, announced at the start of this year, Total said it intends to continue work on the drivers for post-2015 growth by preparing to launch, notably, projects in West Africa, Russia and Canada.
Income Soars
The Group today announced 2011 adjusted net income of $15.9 billion which is an increase of 17 per cent when compared to full year results from 2010.
Commenting on the results de Margerie said:
“In a period of economic slowdown, ongoing tensions on the global oil supply supported the Brent price above 110 S/b in 2011. This environment has been favorable for the Upstream, but it was difficult for the Downstream activities, notably in Europe. In this context, the Group posted a 17% increase in earnings, expressed in dollars, compared to 2010. With its track record of operational excellence, the Group also confirms its constant improvement in safety performance.”
Articles
- France: Total Announces 72% Profit Increase Compared to 2nd Q 2009
- Angola: Total Inaugurates Pazflor
- USA: KBR President Pleased with 1Q Business Results
- Total Starts Production at Pazflor, Offshore Angola
- Norway: Statoil 3Q Net Income Rises 39 pct
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- Oceaneering Bags Angola Gig from BP (mb50.wordpress.com)
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- Angola: Oil Ministry Says US Will be Main Market for LNG Export (mb50.wordpress.com)
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Worldwide Offshore Exploration Heats Up
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.
Offshore Focus
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.
‘Courageous Activity’
“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.
‘Exploring More’
“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.
‘Recent Softening’
“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.
Market Turmoil
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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SPECIAL REPORT: Study expects 120-175 more floating production units during next 5 years
FPSO
May 2, 2011
Jim McCaul
International Maritime Associates
Washington, DC
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.
Orders
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.
Planned projects
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.
Forecast
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.
Long-term outlook
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.
The author
James R. McCaul (imaassoc@msn.com) 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.
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