Category Archives: Oil & Gas

Statoil Is Not On An Artic Roll

Extracting oil is never an easy job and neither is balancing the needs of national governments, shareholders and environmentalists. Statoil, the Norwegian oil company, with a majority holding of 67% by the Norwegian government is presently navigating these choppy waters.

The Arctic seemed to offer unlimited riches but the small issue of finding the oil and extracting it is proving more troublesome than first thought. Royal Dutch Shell and Cairn Energy have spent billions of dollars with little or no progress. The permanent ice conditions and extremes of environment make extraction much more difficult and expensive than other areas. Contrast this to the Norwegian Barents Sea, where there is no ice. Statoil, Lundin Petroleum (Sweden) and OMV ( Austria) have all found oil there. Helge Lund, Statoil’s CEO, said “No doubt there is a huge resource potential in the Arctic, but the contrast needs to be made between the workable Arctic and the so called stretch Arctic”. Independents think the “stretch Arctic” would include Alaska though Mr Lund would not confirm this.

At the same time the Norwegian government is trying to stem a decades long drop in oil production by increasing exploration in the Barents Sea. It plans to sell 72 licenses this summer for exploration blocks as well as opening up its first new acreage in two decades after resolving a 40 year old border dispute with Russia. Statoil has made some of the biggest discoveries in the past few years. Off the eastern coast of Canada it found 2013’s biggest; the Bay du Nord.

This presents a quandary for Mr Lund who despite Statoil having a target of increasing production says he is not bound by the goal. He is focused on value, not volume. This chimes with the discomfort of shareholders who have seen the oil companies spending heavily to replenish depleting reserves and boost production. With not enough cash being generated to cover capital expenditure and dividend payouts, investors have been pressuring them to show more capital discipline.

In June 2013 Statoil postponed construction of a $15 Billion Arctic oil hub, 1500km from Oslo. Reasons cited for this were costs of the infrastructure, uncertainties on the amount of oil in the Johan Castberg field which was estimated at 400-600million barrels as well as Norwegian government tax increases. Other projects on hold include the Bressay heavy oil development in the UK North Sea costed at $5.5 billion. In December 2013 it announced it was selling its 10% stake in the Shah Deniz 2 natural gas project in Azerbaijan for $1.45 billion. The company has also increased its 2013 dividend payment to $1.13, a 4% increase on 2012. As well as this dividends will now be paid quarterly.

The new direction for Statoil of restricted capital expenditure and more focused spending could see it losing out to its competitors as could the Norwegian Sovereign Wealth Fund.

The sources for this article are from the  FT. One , Two, and Three.

For career opportunities for oil engineers with Statoil please click here.

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Going All Out For Shale

The ultimate fracking incentive was unveiled yesterday, 13th Juanuary 2014, when David Cameron, the Prime Minister, announced that local councils which approve shale gas projects will keep millions of pounds generated through windfall business rates. In this instance they will keep 100% of rates, up from the usual 50%, which is an estimated £1.7m for a 12-well site.

Yesterday it was also announced that the French company, Total, one of the world’s big five oil companies, was to invest close to £50 million in shale exploration in the UK. The fact that there is a ban on fracking in France has not gone unnoticed. Total is paying £1.6m to acquire a 40% stake in two exploration licences in the Gainsborough Trough, a geological basin in Lincolnshire, eastern England, and committing funding to a £45m exploration programme.

The existing partners, eCorp of the US, Dart Energy and UK-listed iGas and Egdon Resources will remain in licences but with reduced stakes. John Thrash, chief executive of eCorp International, said “The entry of this highly respected global shale operator into the UK shale gas exploration effort is a watershed event, not only for the UK, but also, we believe, Continental Europe”.

David Cameron is fully behind shale gas exploration in the UK. He said “Shale is important for our country. It could bring 74,000 jobs, over £3bn of investment, give is cheaper energy for the future, and increase our energy security.”

The technique of hydraulic fractruring, commonly known as “fracking”, involves extracting gas trapped in shale rock by drilling deep underground and pumping in pressurised solutions of water, sand and chemicals to shatter fissures in the rock. This process releases trapped gas which can then be pumped to the surface. Its proponents promote it on its economic merits of cheaper energy costs, job creation and as a pathway to greater energy independence.

This local government incentive has received condemnation from some corners, with local councils having to balance economic proseperity with environmental protection, potentially undermining community trust in their decision-making process. Jane Thomas, Friends of the Earth, accused the government of “Having to go to extreme measures to persuade people to accept fracking. These are community sweeteners”.

There are concerns over the pollution of water tables in rural areas, the risk of tremors and earthquakes, and the negative impact on air quality and local infrastructure. Existing drilling sites at Barton Moss, Manchester, operated by iGas, and at Balcombe, West Sussex, under Cuadrilla, have come under considerable pressure from community protest. Ministers are keen to persuade local communities to accept this relatively new technology which stand to benefit by £100,000 when a test well is fracked and receive 1% of revenue over the life of a well, typically £5-10m per site.

On the plus side jobs in drilling are created with fracking and for every new job created in drilling, more than three are created in supplies and service. Construction and engineering jobs can equally be in demand due to the increase in building. Retail, food and entertainment businesses expand as they support the increased population.

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Unmanned Oil Production Platforms | Amec and UPB’s £756m Plan

Unmanned Production Buoy (UPB) has signed a memorandum of understanding with the engineering giant AMEC for the development and construction of its first unmanned oil production platforms for use in small North Sea fields and other reserves in Danish and Irish waters according to a report in the FT.

The expectation is that buoy based production is practical only for marginal fields but UPB estimates that it is possible to recover 2bn barrels from the North Sea alone using their technology and that its European programme will cost £756m. The Scottish governement is supplying funds off £500 for this project. Amec will provide engineering, procurement, construction management and support services for the first three platforms in the Angus, Fife Fergus and Flora fields. The UK governement has granted licenses for these fields.

Richard Selwa is founder and chairman of UPB and started it in Aberdeen in 2009 to develop the concept of providing unmanned production systems to the offshore oil industry to enable access to previously uneconomical and untapped markets of offshore production. He got his inspiration while working in landlocked Wyoming in the US where he saw automated machinery quietly pumping crude oil and thought the system could be used offshore.

His systems are designed to operate safely and autonomously and are 100% redeployable with the seabed restored upon exhaustion of the field. The unmanned buoys use temperature based stabilisation where heat is provided by burning gas from the well itself. This is a slower method than the pressure based system commonly used offshore. There is no requirement for permanent rigs, floating production storage or offloading vessels.

AMEC is a supplier of consultancy, engineering and project management services to clients in the world’s oil and gas, mining, clean energy, environment and infrastructure markets and for career opportunities click here.

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Mexico May Allow Investment in Their Oil Industry

Mexican President Enrique Pena Nieto would like to change the Mexican constitution in order to allow private companies to invest it its oil industry. The ban on private investment has been in place since 1938 following worker protests against foreign owned oil companies when the then President, Lazaro Cárdenas, formed the state owned company Pemex by expropriating fields from US and British companies. Since then all stages of the energy chain from production, refining and distribution are the legal property of the people.

The forming of Pemex, a state oil monopoly, is a source of great pride to the Mexican people and they celebrate this on the 18th March every year and the company provides one third of government revenues. The downside is that this has led to years of under investment in the company and output has fallen by 25% over the past ten years. Mexico’s oil fields are drying up and they lack the equipment to explore for new reserves in deep water or to extract shale gas. Pemex’s oil pipelines are old and insufficient and are often drilled into by fuel thieves. A lot oil is is transported in tanker trucks which is a lot more expensive than using an oil pipe.

Mexico has to change it’s approach or risk becoming a net energy importer a few years down the line. They already allow private contractors to operate drills and wells, provide supplies and maintenance but these contracts are not attractive to investors. The President’s plan is to invite companies such as Exxon Mobil and Royal Dutch Shell to sign profit sharing contracts with Pemex where they could explore and extract oil and could also apply for permits for refining and transportation. These companies would have the equipment and expertise. However, these companies would normally have production sharing contracts where they can book reserves.

President Enrique Pena Nieto may well have the political clout to have the constitution changed but it remains to be seen if profit sharing rather than production sharing contracts will secure the right investors.

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Sources for this article were the FT and Latino Fox News

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Business Bridge Visa Service for Astana in Kazakhstan

Kazakhstan was brought to the attention of the world by Sacha Baron Cohen in 2006 when he lampooned the country in his movie Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan. The Kazakhstan people were a little uneasy about the film but the government were delighted with the tenfold increase in visa applications from tourists. David Cameron’s visit there on Sunday to cut the ribbon on the opening of the world’s costliest (£89bn) oil project at Kashagan, on the Caspian Sea, may show the country in a more serious light and cement its status on the world stage as a rising economic power.

The Kashagan oilfield was discovered in 2000 and is twice the size of Greater London and estimated to contain 35 billion barrels of oil. However, it is a challenging environment to work in not least because the Kashagan is located in shallow water that freezes for five months of the year. Another problem is created by the large number of partner companies in the consortium which include Royal Dutch Shell, ConocoPhillips, Total, ExxonMobil, KazMunaiGas and Inpex. No one company has a big enough stake to take the lead and so the decision making process is slowed down.

The Prime Minister(PM) was accompanied on the two-day visit by a 33-strong business delegation with a mission to secure £700m worth of deals. Not all of the deals are oil related as the hope is to broaden the scope of investment and trade into new sectors, such as education, healthcare, retail and financial services. The PM said

Kazakhstan is on the rise, a dynamic country that is poised to become a high‑income country by the end of this decade. And a country that also wants to play a bigger role in the region and in the world, not just an emerging market but an emerging power. That is why I want to strengthen relations between our two countries to help us both to succeed in the global race.

Under the Bolashak (means future) Program more than 3,000 Kazakhs study in the United Kingdom. The PM talked about extending this and said that he wanted to attract the brightest and the best students to come to Britain.

The PM also wants to encourage Kazakh companies to invest in Britain. To help with visa applications he announced the piloting of a new visa service, called the Business Bridge, in the new capital of Astana for selected companies. Britain still processes visas in the old capital, Almaty, which is 60 miles away.

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