www.upstreamonline.com http://www.upstreamonline.com/ www.upstreamonline.com Tullow hits oil pay in Kenya http://www.upstreamonline.com/live/1374607/Tullow-hits-oil-pay-in-Kenya More than 280 metres of pay found across two African blocks bianca.bartucciotto@upstreamonline.com (Bianca Bartucciotto) http://www.upstreamonline.com/live/1374607/Tullow-hits-oil-pay-in-Kenya Thu, 28 Aug 2014 06:57:29 +0000 live The Ngamia-3 appraisal well in the Ngamia field on Block 10BB, found 150 metres of net oil pay in the Auwerwer and Lokone reservoirs.

It has been suspended for use in future interference testing, appraisal and development activities.

The Marriot PR46 will now move on to the drilling of the Ngamia-4 and Ngamia-5 wells.

On the same block, the Amosing-2 appraisal well over, about 30 metres of net oil pay were intersected after it was deviated from the original well.

After the well reached total depth, it was sidetracked back about 400 metres from the discovery to provide a look into the reservoir.

The Amosing-2A encountered about 90 metres of oil in different oil pools.

The Sakson PR5 rig have moved to the southern area of the South Lokichar basin to drill the Ekosowan-1 well, set to start in September as well.

At the Etom-1 well in Block 13T, the company recovered 10 metres of net oil pay extending the proven South Lokichar oil basin further north.

The well was drilled to a final total depth of 2000 metres and will now be suspended for use in future appraisal and development drilling.

The Weatherford 804 rig will now be moved to the well site for the Kodos-1, which is set to start drilling in September.

Based on the results of this well, the ongoing South Lokichar seismic has been extended.

Tullow has also carried out testing at the Ewoi-1 well where flow rates were limited to about 50 barrels of oil per day.

This was because of the high wax content and the shallow depth of the drill stem test.

The two blocks are 50% owned and operated by Tullow, with partner Africa Oil which owns the other 50%.

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Salamander narrows first half losses http://www.upstreamonline.com/live/1374608/Salamander-narrows-first-half-losses Lower exploration write-offs help offset a fall in output due to unplanned maintenance Josh.Lewis@upstreamonline.com (Josh Lewis) http://www.upstreamonline.com/live/1374608/Salamander-narrows-first-half-losses Thu, 28 Aug 2014 06:57:32 +0000 live The company posted a loss of $30 million for the first six months of the year, compared to a loss of nearly $87.5 million over the first half of 2013.

Helping reduce losses this year was a drop in exploration expenses from $111.2 million a year ago to just $6.7 million in the first half of this year, with only $2.7 million of the 2014 figure related to the write-off of unsuccessful exploration costs, versus $108.7 million a year ago.

The fall in exploration costs helped offset a fall in revenue to $177.8 million, compared to the $197 million generated in the first six months of 2013.

This came as output over the six months to 30 June averaged 11,800 barrels of oil equivalent per day, down from an average of 14,900 boepd a year ago.

Salamander attributed the production decline to the unplanned shutdown of the Bualuang oilfield in the Gulf of Thailand which it said masked the underlying positive effect of the continued programme of Bualuang development drilling, which was uninterrupted by the outage.

It added that without the outage output would have grown 6%, relative to the second half of 2013 and revenue would have totalled about $231 million.

Salamander expects output for the entirety of 2014 to average between 13,000 and 15,000 boepd, with output since 30 June averaging roughly 15,300 boepd.

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Oz investment to shrink: report http://www.upstreamonline.com/live/1374590/Oz-investment-to-shrink-report Report from economics consultants predicts drop in Oz investment bianca.bartucciotto@upstreamonline.com (Bianca Bartucciotto) http://www.upstreamonline.com/live/1374590/Oz-investment-to-shrink-report Thu, 28 Aug 2014 01:31:53 +0000 live EnergyQuest chief executive Graeme Bethune said the boom in investment that protected Australia from the effects of the Global Financial Crisis was fading fast and there are few signs of new projects.

He said the industry’s August report card emphasized the importance of both increasing labour productivity and new oil and gas discoveries.

“Australia has plenty of gas but the highest quality fields are already under development,” Bethune said.

“The best fields always get developed first. Australia needs to reduce the cost of developing remaining lower-quality fields while going all out to make new discoveries.”

He added there was little hope of moderating labour costs, which adds an extra challenge to developing lower quality fields.

“However, the news on exploration is more encouraging.”

Chevron, ConocoPhillips, Santos and Apache have all made high-quality discoveries off the coast of Western Australia.

“While investment in new projects is falling, spending on exploration is holding up at historic highs of around US$4 billion a year and achieving good success.

“Discoveries in the Browse basin in particular have the potential to underpin further LNG investment.”

Bethune said Australia could expect to see LNG exports top out at US$19 billion in 2014-2015 – compared to the $16.5 billion for the latest 30 June balance date.

This report comes as cargoes from four new Australia liquefied natural gas projects are scheduled to take off.

On the production side, Australia is going to see an increase, but without further investment this is unlikely to have long-term positive impacts for the country.

BG's Queensland Curtis LNG (QCLNG) is expected to start deliveries next quarter.

Chevron's Gorgon is expected to start in the middle of 2015 for Train 1, followed by Train 2 six months later and Train 3 another six months after that.

Bethune said the value of the LNG market is expected to grow next year, assuming six months of QCLNG production, with a number of other projects to come online.

“When all projects are in production, total LNG exports could reach over US$50 billion, assuming current prices,” Dr Bethune said.

He added that there is potential for LNG projects globally but many are not reaching final investment decision.

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EOC takes full ownership of OSVs http://www.upstreamonline.com/live/1374604/EOC-takes-full-ownership-of-OSVs Deal reached for Singaporean player to take full control of 50:50 OSV venture Josh.Lewis@upstreamonline.com (Josh Lewis) http://www.upstreamonline.com/live/1374604/EOC-takes-full-ownership-of-OSVs Thu, 28 Aug 2014 06:30:09 +0000 live EOC has agreed to buy Konquest’s 50% share in Lewek Antares Shipping which owns the Lewek Atria platform supply vessel and the Lewek Antares mutli-purpose service vessel.

EOC will pay Konquest US$18.3 million in exchange for its 50% share, which the former said would be funded via bank borrowings.

Both the Lewek Atria and the Lewek Antares are currently chartered to customers.

EOC said it expected the deal to close on or around the 28 August.

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Brent drops on Thursday http://www.upstreamonline.com/live/1374597/Brent-drops-on-Thursday Supply weighs down on oil price, driving it below $103 (News Wires) http://www.upstreamonline.com/live/1374597/Brent-drops-on-Thursday Thu, 28 Aug 2014 05:23:37 +0000 live Global oil supply is expected to exceed demand this year, cooling prices. Oil futures on both sides of the Atlantic Basin are on track to post a second monthly decline.

October Brent crude has been unable to break through the $102 to $103 range this week, just off a 14-month low hit last week. It was down $0.06 at $102.66 per barrel by Thursday morning.

US crude was unchanged at $93.88 per barrel. The October contract stayed between $93 and $94 this week, hovering just above the year's low reached in January.

"It's just dropped so much from its peak and rightly so as it looks like there is crude everywhere," Mitsubishi risk manager Tony Nunan told Reuters.

"There's just too much supply and we've had terrible demand."

OECD oil inventories rose sharply in the second quarter, while tit-for-tat sanctions between the European Union and Russia have curbed growth in Europe, Nunan said.

Hopes that the presidents of Russia and Ukraine could reach a ceasefire deal dimmed after Ukraine accused Russia of launching a new military incursion across its eastern border on Wednesday.

Oil futures were little changed in the previous session following a neutral inventories report from the US, while investors looked ahead to economic data to gauge the outlook for demand in the world's largest oil consumer.

US crude stocks fell 2.1 million barrels last week, more than expected, but Cushing inventories rose 508,000 barrels, data from the Energy Information Administration showed on Wednesday.

Political instability in Iraq and Libya continued to weigh on investors' minds even though exports managed to rise instead of fall in recent months.

Analysts have warned that a comeback by Libya's oil industry may be short-lived as armed groups and two parliaments fight for control of the North African country.

Similarly, an Islamist insurgency in Iraq has threatened to derail long term output plans set by OPEC's second largest oil producer.

Exports from Iraq's southern terminals so far in August have fallen by about 140,000 barrels per day, according to loading data and industry sources who attributed the decline to bad weather.

"That's why I think Brent has stabilised around here because there's so much uncertainty in the Middle East," Nunan said. 

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Loyz gets boost from Thai sales http://www.upstreamonline.com/live/1374591/Loyz-gets-boost-from-Thai-sales First sales from recently-acquired assets have pushed Singapore player into black bianca.bartucciotto@upstreamonline.com (Bianca Bartucciotto) http://www.upstreamonline.com/live/1374591/Loyz-gets-boost-from-Thai-sales Thu, 28 Aug 2014 02:18:12 +0000 live Revenue has made a dramatic jump in the fourth quarter to the end of July over the same period in the previous year, with the company booking S$8.5 million (US$6.8 million) this year and S$1.2 million last year.

This was due to the first crude oil sales from the company’s 20%-owned Thailand concessions, the company’s first “significant producing assets”.

About 75,281 barrels of crude were sold from the project during the quarter.

The company’s profit mirrored this jump in revenue from the sales, with the company posting a 402% increase in profit year-on-year.

In the fourth quarter of 2013, Loyz booked S$1.26 million of profit, compared to this year’s figure of S$6.36 million.

Loyz managing director Adrian Lee said this was part of the company’s growth strategy and was pleased the results have already started flowing through.

“We are now moving into our next growth phase,” he said. “Our immediate focus is to ramp up production in Thailand and add new strategic producing assets that will augment the group’s recurrent income stream.”

Loyz took a 20% stake in SW1, L44/43 and L33/43 in the Phetchabun basin in April.

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US growth higher than disruptions http://www.upstreamonline.com/live/1374592/US-growth-higher-than-disruptions Crude oil price stability thanks in large part due to increase in US liquids production bianca.bartucciotto@upstreamonline.com (Bianca Bartucciotto) http://www.upstreamonline.com/live/1374592/US-growth-higher-than-disruptions Thu, 28 Aug 2014 03:41:30 +0000 live Its latest report said the record-setting production seen in the US over the past few years has more than offset the rise in unplanned global supply disruption.

While there are differences in quality and location, it is thought that substitution may not be exactly one-for-one.

US production grew by more than 4 million barrels per day from January 2011 to July 2014, of which 3 million was crude oil production.

The EIA said unplanned supply disruptions grew by 2.8 million bpd.

This, the administration says, is what has caused crude oil price stability since 2011.

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Mahalo reserves shored up http://www.upstreamonline.com/live/1374588/Mahalo-reserves-shored-up Gas reserves booked for Queensland project tapping into increasing demand bianca.bartucciotto@upstreamonline.com (Bianca Bartucciotto) http://www.upstreamonline.com/live/1374588/Mahalo-reserves-shored-up Thu, 28 Aug 2014 00:21:44 +0000 live MHA Petroleum Consultants provided an independent reserve certification for the coalbed methane explorer for ATP 337P.

The report booked proved and probable gas reserves of 22 petajoules and best case contingent resources of 328PJ, an extra 107PJ from the last reserves update in 2010.

High estimate contingent resources have been booked at 468PJ, up from the 442PJ booked in 2010.

Comet Ridge managing director Tor McCaul said this booking showed the potential of the gas project and was a milestone for the company.

“The project is located just 11 kilometres from an infrastructure connection to the Gladstone LNG market with significant gas supply requirements and rising prices,” he said.

“Our plan is to continue to build reserves and upgrade the category of these reserves as further production data from Mahalo is collected and additional appraisal is undertaken.”

He added that uncommitted gas reserves on the East Coast of Australia are becoming increasingly scarce so the company was pleased to find a commercial amount of gas from its reserves booking.

“The combination of the size of the resource, the measured deliverability in the initial pilot wells proximity to market [and] infrastructure, and the state of the gas market makes this a very valuable resource.”

The assessment related to the northern part of the block where appraisal activities have been concentrated to date, which covers about 25% of the total permit area.

Comet Ridge confirmed that there was significant upside to the rest of the project.

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Yoho cuts spending on Duvernay delays http://www.upstreamonline.com/live/1374583/Yoho-cuts-spending-on-Duvernay-delays Canadian junior to spend about 25% less this year due to planned and unplanned infrastructure maintenance Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/live/1374583/Yoho-cuts-spending-on-Duvernay-delays Wed, 27 Aug 2014 22:40:02 +0000 live The Calgary-based company is also pushing back the drilling schedule into next year for a number of Duvernay wells due to the delays.

For the year, Yoho now plans to spend between C$30 million ($27.6 million) and C$32 million, about $10 million less than previously budgeted. Production is expected to average 1700 barrels oil equivalent per day for the year.

Activity in the Duvernay is increasing, with new gas plants recently built and old ones upgraded. However, planned an unplanned maintenance issues on these plants forced Yoho to undergo "a substantial amount of shut-in time" between May and September.

"These restrictions have also delayed on-stream dates for recently drilled wells," Yoho said, adding that it expects relief to come early next month, "at which time Yoho's Duvernay production will be restored to 100% of capacity".

Yoho estimates current production capacity of between 2400 and 2500 boepd, about half of which comes from the Duvernay.

Production for the third period averaged 1,563 boepd (27% oil and NGLs). Infrastructure issues in the Kaybob Duvernay area took a toll.

Yoho plans to participate in up to eight gross Kaybob horizontal Duvernay wells in 2015.

"Yoho has demonstrated that recent changes to completion methodology have been very successful and will utilize this methodology where applicable in the upcoming drilling programme," the company said.

Yoho is also planning to drill at least one horizontal well at Inga, British Columbia, targeting the Montney formation.

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Shell 'reaches deals' in Nigeria http://www.upstreamonline.com/live/1374578/Shell-reaches-deals-in-Nigeria Supermajor reportedly agrees on sales of certain assets included in divestment plan Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/live/1374578/Shell-reaches-deals-in-Nigeria Wed, 27 Aug 2014 20:39:46 +0000 live Shell last year put up for sale its 30% stakes in four oil blocks in the Niger Delta - Oil Mining Licences (OML) 18, 24, 25, 29 - as well as a major pipeline, the Nembe Creek Trunk Line.

"We have signed sales and purchase agreements for some of the oil mining leases, but not all that we are seeking to divest," a Shell spokesman told Reuters on Wednesday.

Shell has been moving away from Nigerian onshore oil, which is plagued by industrial-scale oil theft, security problems and oil spills.

Politics have also played a role. The government is keen to put indigenous operators in charge of onshore oil extraction, leaving the international majors to manage more difficult and capital-intensive deep-water projects offshore.

Firms have also been hampered by uncertainty over the particulars of an oil bill designed to overhaul the industry, which has been stuck in parliament for two years and looks unlikely to be passed before February 2015 elections.

Guaranty Trust Bank is among the banks financing the deals. The CEO of the bank, Segun Agbaje, told an investor conference call on Wednesday that two of them will close within the next two months.

Other companies including Total, Eni, and Chevron have also looked to dispose of assets. ConocoPhillips sealed a $1.5 billion deal with Nigeria's Oando last month.

No details were available on the value of the deals Shell signed, nor when the full process would be completed. Oando's deal with ConocoPhillips took more than 18 months to sign off.

The Financial Times on Wednesday reported that Shell was close to selling the assets for about $5 billion to domestic buyers, citing banking sources.

In March, Reuters reported that Nigerian firms Taleveras and Aiteo had made the highest bid of $2.85 billion for OML 29, the biggest of the four oilfields.

Two market sources told the news wire that Aiteo had won that bid, although it was not clear whether the two companies were still working as partners. One banking source said Aiteo may have gone in without Taleveras.

A senior Nigerian oil executive said a consortium headed by Pan Ocean Oil had bid for OML 24 at a price of about $1 billion.

He said it worked out to about $10 per barrel of crude in the ground, similar to Oando's deal, and that the price was "high, especially considering the issues with the trunkline".

The banking source said Crestar had clinched OML 25. It wasn't clear who had got OML 18, the sources said. The FT reported it went to Eroton, a consortium of Midwest Oil and Gas and Mart Resources.

There is widespread speculation in the local market that Shell is also seeking to offload OMLs 11 and 17 in Ogoniland, where it has faced criticism from the United Nations Environment Programme and human rights groups for failure to adequately clean up decades of oil spills.

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Small boost for Penn West on assurance http://www.upstreamonline.com/live/1374582/Small-boost-for-Penn-West-on-reserves-assurance Company says no impact on estimated reserves as accounting audit continues Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/live/1374582/Small-boost-for-Penn-West-on-reserves-assurance Wed, 27 Aug 2014 22:07:34 +0000 live It also said that an internal audit of its books is ongoing and that its 2014 second-quarter "restated" historical financial results would be disclosed "as soon as practicable", or by 14 October at the latest.

"The company... has determined that the accounting practices under review have no effect on the independent estimates of the volumes of its proved and proved plus probable crude oil, natural gas and natural gas liquids reserves and the net present values of the future net revenues of such reserves," Penn West said in a statement.

Penn West, one of Canada' largest conventional oil producers, said on 7 March that its proved plus probable gross reserves came to 625 million barrels of oil equivalent, about 66% of which were proven.

The company has been under pressure since it revealed last month that accounting mistakes misidentified C$181 million in operating expenditures as capital spending over the past two years and C$200 million in expenses were classified as royalty payments.

The changes did not affect the company's net income or cash flow, but its shares lost more than a fifth of their value since the mistakes were reported.

The company faces potentially dozens of lawsuits.

However, after reiterating their reserves base after close of business on Tuesday, Penn West shares were up about 4.5%, closing at C$7.70 in New York on Wednesday.

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NuVista adds to Montney holdings http://www.upstreamonline.com/live/1374587/NuVista-adds-to-Montney-holdings Canadian minnow pays C$35m for 7680 net acres in BC shale play Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/live/1374587/NuVista-adds-to-Montney-holdings Wed, 27 Aug 2014 22:52:57 +0000 live The land, which comprises 12 net sections, is contiguous with the companies Wapiti properties.

The seller was not identified.

The deal, expected to close in early October, expands NuVista's land position to 121,600 acres, or 190 net sections.

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Wintershall passes Skarfjell milestone http://www.upstreamonline.com/ONS/1374559/Wintershall-passes-Skarfjell-milestone German operator completes screening phase and passes DG1 stage for North Sea find Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/ONS/1374559/Wintershall-passes-Skarfjell-milestone Wed, 27 Aug 2014 17:06:10 +0000 live After studying more than 20 different scenarios for the field, the company last week completed the screening phase and passed the so-called DG1 stage for the North Sea find, Bernd Schrimpf, managing director for Wintershall in Norway, told Upstream.

Both a stand-alone development and a tie-back solution to the Gjoa field remain on the table, as well as a possible combination of new and existing infrastructure, Schrimpf said. Much will depend on talks with operators of other discoveries in the area, as well as the results from upcoming exploration wells.

"We have made very big progress on Skarfjell," Schrimpf said. Skarfjell and the other nearby discoveries "have to come together in one development, and I think the other operators are also prepared to do that".

"Then we can see what the volumes are, and what is the most economical solution."

Wintershall, Statoil, RWE and other operators in quadrant 35 are working together on a joint plan to ensure that no resources are left stranded. Skarfjell - currently the largest and the most centrally located of the finds - is likely to get a leading role in the project.

While a tie-back to Statoil-operated Gjoa is an option, the platform can probably not provide all the services a Skarfjell development would need, Schrimpf said. Therefore the company is also looking at solutions that combine a tie-back with a small floating production, storage and offloading vessel.

The most important part is that the development is flexible enough to take on additional resources later, as there is much more exploration potential in the area, Schrimpf said.

In addition to studying technical options, the various operators and licensees are also likely to look at the ownership structure of the licences, Schrimpf said. With many small players involved, there will probably be some changes before a project reaches the more costly stages.

Further north, Wintershall’s Maria discovery in the Norwegian Sea is also moving down the road towards production. The company expects to submit a plan for development and operation early next year, with first oil expected in 2018.

Maria is a complex subsea development tied back to three different installations. Here, too, there will be enough flexibility to tie in other discoveries, possibly including Wintershall’s own Rodrigues and Solberg finds.

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Eni, Quicksilver in first Permian flows http://www.upstreamonline.com/live/1374548/Eni-Quicksilver-in-first-Permian-flows Joint venture producing oil from well in Pecos County, Texas Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/live/1374548/Eni-Quicksilver-in-first-Permian-flows Wed, 27 Aug 2014 16:03:01 +0000 live Stallings-1H began flowing back on 15 August and is currently producing about 750 barrels of oil equivalent per day on a restricted 34/64-inch choke with 90% oil.

The well was completed in the third Bone Spring interval on a 2900-foot lateral at a vertical depth of 7400 feet. It was drilled in Pecos County, Texas, in the southern Delaware sub-basin.

Quicksilver, which operates the well, said on Wednesday that less than 15% of the fracture fluid had been recovered.

Last year, Eni bought a 50% stake in Quicksilver's 52,500 acres in Pecos County, paying the operator $52 million to carry up to five completed wells and fund other geophysical and associated land costs.

The deal followed an earlier joint venture between the companies in the Barnett shale in the Fort Worth basin, where Eni paid about $280 million for a 28% interest in Quicksilver’s holdings.

Eni said it is also providing expertise and "state-of-the-art and proprietary technological support" to Quicksilver.

The duo are currently drilling the second joint venture well, the Mitchell-1H, targeting a combined section of the Bone Spring and Wolfcamp formations about four and a half miles north of the Stallings well.

The second well is expected to be completed in a 5000-foot lateral beginning in late September "as completion equipment becomes available", Quicksilver said.

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Germany's energy shift 'on wrong track' http://www.upstreamonline.com/live/1374560/Germanys-energy-shift-on-wrong-track Wintershall calling for Berlin to change focus to gas as coal use 'defeats object' of Energiewiende Steve.Marshall@upstreamonline.com (Steve Marshall) http://www.upstreamonline.com/live/1374560/Germanys-energy-shift-on-wrong-track Wed, 27 Aug 2014 17:23:56 +0000 live The German player’s executive director for exploration & production, Martin Bachmann, told the ONS conference in Stavanger the country needs to wake up to the need for natural gas in its energy mix to offset fluctuations in the supply of renewable fuels such as solar power and wind.

As it is, Germany has increased its use of relatively cheaper coal rather than natural gas as it winds down the use of nuclear energy as part of its so-called Energiewiende, which has had the effect of increasing its emissions despite about €23 billion($30.3 billion) in renewable subsidies.

"Coal is increasingly being used as a fuel and natural gas is having to take a back seat – with grave consequences,” Bachmann said.

“Germany is pursuing a great dream that one day we will be able to live from the sun and wind alone. But if you look at the facts today this dream is in danger of turning into a nightmare,” he added.

A recent study carried out by the University of Cologne revealed that Germany could save around 40% of its emissions in the power segment alone on 1990 levels if it replaced coal with natural gas in its energy mix.

“The energy transition in Germany shows that focusing energy policy solely on renewable energies is akin to leading the country up a blind alley. Idealism is not enough. Pragmatism is just as important,” Bachmann said.

He cited the example of the US, which saved 740 million tonnes of CO2 emissions between 2007 and 2012 by using more natural gas.

Bachmann believes the North Sea - and specifically Norway – could in future provide a major source of gas to fill the gaps in German energy supply.

However, he criticised uncertain signals being sent by the government of Chancellor Angela Merkel over the future role of gas in the country’s energy strategy.

“Security of energy supply requires planning certainty, otherwise companies and states will not invest in production of oil and gas. Many export nations feel uncertain, including Norway,” he said.

Bachmann reminded the Merkel government the original goal of the Energiewiende was to develop energy supply that is ecological, secure and affordable, underlining it was primarily aimed at cutting greenhouse gas emissions rather than increasing the role of renewables.

While backing the use of renewables, Wintershall said the country needed reliable energy technologies to partner green fuel sources but that increasing the use of coal was “climate policy madness”.

The company instead wants Germany to boost gas imports from Norway - where it has production assets – that last year supplied nearly 30% of the country’s gas needs, with 78% of Germans polled in a survey saying they would favour Norway as a reliable supplier to offset declining European gas output.

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Drill disappointments for Faroe Islands http://www.upstreamonline.com/live/1374503/Drill-disappointments-for-Faroe-Islands Archipelago looking to rig maintenance market as Statoil wildcats fail Bill.Lehane@upstreamonline.com (Bill Lehane) http://www.upstreamonline.com/live/1374503/Drill-disappointments-for-Faroe-Islands Wed, 27 Aug 2014 13:11:01 +0000 live Both the Brugdan 2 well and the Sula/Stelkur well earlier this month were dry. However, the Atlantic island nation has received a small consolation price in the form of a maintenance stay for the semi-submersible rig West Hercules, owned by North Atlantic Drilling.

Now, local industry players are hoping for more work of the same kind while they wait for future exploration wells to come up trumps.

“The Faroes are at a crossroads, and we want to show that we have facilities and people to receive rigs that would otherwise be sent to Norway or Scotland,” Jan Mueller, managing director of the Faroes Oil Industry Group, told Upstream. “Then we can be an oil nation without oil.”

Increasing activity in the UK West of Shetland area could mean an opportunity for the island nation to grab some new business, Mueller says.

In addition to welcoming rigs in need of overhauls into its fjords, the Faroes is also looking at the decommissioning market as a way to generate oil-related income, says Mueller.

The West Hercules is on contract with Statoil. After completing the recent Faroes wells, the rig is now having some work done including installation of new thrusters, before it heads across the Atlantic for an exploration campaign in the Flemish Pass basin offshore Canada.

The Faroe Islands are part of Denmark, but have been self-governing in most matters since 1948. The country is eager to increase income from tourism and oil and gas to cut its dependency on North Atlantic fisheries.

The Faroes currently has six active oil and gas exploration licences, of which four are operated by Statoil and two by Dong Energy. ExxonMobil, OMV and Atlantic Petroleum also hold interests in the licenses.

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Repsol talks for Talisman 'stall' http://www.upstreamonline.com/live/1374568/Repsol-talks-for-Talisman-stall Takeover discussion hits a snag over Canadian player's North Sea assets Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/live/1374568/Repsol-talks-for-Talisman-stall Wed, 27 Aug 2014 18:33:05 +0000 live Sources told Reuters that Talisman's North Sea assets are the main stumbling block, and Repsol may no longer be interested in buying Talisman in its entirety.

Calgary-based Talisman, Canada's fifth-largest independent oil producer with a market capitalisation of nearly C$11 billion ($10.2 billion), said last month that it had been approached by Repsol with regards to various transactions.

Neither company responded to Upstream requests for comment.

Reuters reported that Talisman projects in the UK and Norwegian North Sea, which have consistently missed production targets, were complicating talks. Those assets are mostly held in a joint venture with China's Sinopec, making it difficult to exit the region quickly, Reuters said.

Talisman's assets include operations in prolific areas like the Eagle Ford and Marcellus shales in the US and Western Canada's burgeoning Duvernay and Montney shale regions.

The Canadian company, which also has oil production in Colombia and southeast Asia, has long been considered a takeover target as low natural gas prices and problems with the North Sea operations lowered profits and its share price.

Repsol, meanwhile, is cash-rich since settling a two-year dispute with Argentina earlier this year over the seizure of YPF - its business in the Latin American country.

The Spanish company has been looking to boost exploration and production to ensure future growth and fill a gap leftover from the loss of YPF, focusing on assets that offer instant cash flow and with a view to diversifying away from high-risk areas like Libya and into developed countries.

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Norway asset sales 'shift landscape' http://www.upstreamonline.com/live/1374552/Norway-asset-sales-shift-landscape WoodMac sees emergence of 'new breed' of operators willing to develop next generation of assets Steve.Marshall@upstreamonline.com (Steve Marshall) http://www.upstreamonline.com/live/1374552/Norway-asset-sales-shift-landscape Wed, 27 Aug 2014 16:39:01 +0000 live The sales of Marathon Oil’s Norwegian assets and RWE Dea to local player Det Norske Oljeselskap and Russian private equity investor LetterOne, respectively, add up to a total value of $4.2 billion, already exceeding the previous $3.2 billion record set in 2012 and roughly in line with WoodMac’s estimates.

Further disposals could also be in the offing before the year is out, according to WoodMac, which has previously forecast that merger and acquisition (M&A) deals off Norway would top at least $5 billion in 2014.

Talisman Energy has previously stated that its North Sea portfolio is up for sale, although WoodMac’s upstream analyst for Norway, Malcolm Dickson, told Upstream it was not clear whether the  Canadian company’s assets were still on the market.

Aside from the latest deals, Statoil has been the most active seller of assets off Norway, having racked up disposals worth about $18 billion since 2007 including sales of stakes in Brage, Gjoa and Vega to Germany’s Wintershall for $1.45 billion and a range of field interests to Centrica for $1.63 billion.

The state-owned giant also shed interests in the producing Gullfaks and Gudrun fields off Norway, as well as Schiehallion and Rosebank off the UK, under its record $2.65 billion deal with Austria’s OMV last year.

Statoil has been rationalising its portfolio as part of stricter capital discipline and project prioritisation with a focus on value over volume to boost investment returns, with a goal of cutting annual capital expenditure by $5 billion over the next three years in an effort to raise its profitability margins by 24%.

However, the flip side is that smaller companies are benefiting from the divestment trend by gaining assets with productive potential, promoting a new breed of operators that are more willing to develop assets on the Norwegian continental shelf.

“This has given opportunities for companies, such as Det Norske, to grow into strong mid-caps and build hubs to develop the next generation of field assets,” Dickson told Upstream on the sidelines of the ONS conference in Stavanger, also citing other players such as OMV, Wintershall and Centrica.

“In a time of capital discipline, it is really important to have companies that are willing to spend money assets to develop new areas.”

The analyst expects further divestments by Statoil and predicted the company’s current 55% share of all production off Norway will fall to 40% over the next few years as new players step into its development shoes.

Dickson explained “the needle has been moved” for independents such as OMV and Lundin with core projects that they are more focused on developing in a shorter time-frame as they do not have the same global asset spread as Statoil.

OMV and Lundin are leading the way in the Barents Sea with their respective Wisting Central and Gohta discoveries, with Norwegian tax breaks fuelling exploration in the frontier play, although development of the finds will depend on finding a critical mass of resources as well as future infrastructure to be developed in the remote Arctic region.

Notably absent from asset deals this year though have been Asian national oil companies, which have pulled back after a rash of earlier buys as they follow the trend of capital discipline by majors.

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Gas leak lands Shell safety warning http://www.upstreamonline.com/live/1374530/Gas-leak-lands-Shell-safety-warning HSE says supermajor has complied with prohibition notice issued on Brent Bravo platform Luke.Johnson@upstreamonline.com (Luke Johnson) http://www.upstreamonline.com/live/1374530/Gas-leak-lands-Shell-safety-warning Wed, 27 Aug 2014 15:17:24 +0000 live The gas release – described by Shell as low level - was detected on a pipeline valve on 9 June.

Inspectors from the Health & Safety Executive (HSE) issued the operator with a prohibition notice 10 days later, it emerged on Wednesday.

HSE said Shell had not taken measures "to prevent an uncontrolled release of hydrocarbon gas from the facility's gas export system", including in pieces of equipment called "pig traps".

HSE pointed out an unwanted accumulation of gas in pig traps could lead to difficulties in blowing down the export system – effectively derpessurising it - in an emergency.

A Shell spokesperson said: "The team on the platform took immediate action to depressurise the line and to bring the situation under control. These and subsequent actions have addressed the issues raised in the notice, and the affected system has been returned to normal operational service. The safety of our people remains our primary concern."

Jake Molloy, regional organiser of Aberdeen-based trade union RMT-OILC, said: "This gas leak is unfortunate. It should be pointed out, however, that the inability to be able to blow down in the event of accident is something that introduces a major element of risk."

An HSE spokesman said: "HSE can confirm the prohibition notice issued on Brent Bravo was complied with and the investigation will be concluding shortly."

Brent Bravo is located in Block 211/29.

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ZaZa gains Quantum as Texas partner http://www.upstreamonline.com/live/1374549/ZaZa-gains-Quantum-as-Texas-partner Equity player agrees joint venture with Houston explorer Bill.Lehane@upstreamonline.com (Bill Lehane) http://www.upstreamonline.com/live/1374549/ZaZa-gains-Quantum-as-Texas-partner Wed, 27 Aug 2014 16:14:40 +0000 live ZaZa chief executive Todd Brooks said the partnership was a validation of the explorer's advances in its East Texas drilling programme so far and would equip it for further acquisition and development progress at the play.

The Eagle Ford- and Eaglebine-focused explorer said the private equity fund had agreed to pay it around $17 million in cash. Zaza also has the right to receive Quantum's interest in the first 15 JV wells.

In return, ZaZa will assign to Quantum 6000 net acres in undeveloped leases within the joint venture area whereby ZaZa retains existing wells and the right to participate in reserved wells.

The acreage includes an East Texas development agreement comprising Walker, Grimes, Madison, Trinity, and Houston counties.

Following this assignment, ZaZa will have around 30,000 net acres in its East Texas joint venture and about 10,000 net acres in its East Texas focus area.

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Industry 'should look to skies' for ideas http://www.upstreamonline.com/live/1374528/Industry-should-look-to-skies-for-ideas Oil players can learn from aircraft industry to cut costs through standardisation, economist says Eoin.Ocinneide@upstreamonline.com (Eoin O'Cinneide) http://www.upstreamonline.com/live/1374528/Industry-should-look-to-skies-for-ideas Wed, 27 Aug 2014 15:13:51 +0000 live Technology has played and will continue to play a central role in driving down unit costs of projects, but oil companies need to innovate much further than at present to replicate the standardisation successes seen in other industries.

Norwegian economist Svein Harald Oygard, who is a director at advisory firm McKinsey & Co in Rio de Janeiro, told an audience at the ONS conference on Wednesday that the oil industry will likely be the last large industry to embrace standardisation.

Taking the example of the aircraft industry, Oygard said every new generation of aircraft - Boeing’s 737 or Dreamliner, for example – has entered the market at the high cost level.

“Basically, every generation of technology, or fire safety standard, brings you to a higher level. But then something happens: you replicate, you standardise, you industrialise, you innovate,” he said.

“What does this say for oil and gas? Well basically it says that we might be up for quite an industry revolution.

“We all fly Boeing 737s between Oslo and Stavanger these days. Yes, you could have had a bigger plane in the morning and a smaller plane at lunch time, but then of course the unit cost would go through the sky, the whole supply chain efficiency would go out, maintenance systems would break down.

“So, basically it is better to have a 737 that flies back and forth all day, which is of course exactly what the oil & gas industry is not doing.”

A particular area of wastage in the oil industry is the subsea installation sector, Oygard said, adding: “You go out today and look at a new subsea installation project and there could be 10 vessels operating at the same time, covering different tasks.”

Other industries such as the power and steel manufacturing spheres have already benefitted from standardisation. “You need to develop and have a view on when you innovate and when not to innovate. So basically, you don’t send a team to Houston on a best practice visit every time you build a new subsea installation - you do it every third year when you are working to develop the next generation of subsea installation, or you have a specific feature that you want to address,” Oygard insisted.

There are signs this is happening in the oil industry, however. “In the onshore US unconventional gas sector, this is now starting to evolve, with a standard drilling pad,” Oygard said

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Bashneft profits on higher output http://www.upstreamonline.com/live/1374537/Bashneft-profits-on-higher-output Production and prices hike earnings for Russian independent Bill.Lehane@upstreamonline.com (Bill Lehane) http://www.upstreamonline.com/live/1374537/Bashneft-profits-on-higher-output Wed, 27 Aug 2014 15:37:58 +0000 live The Moscow-listed independent netted 15.85 million roubles during the second quarter on sales revenues up 11% versus the first quarter at 13.17 million roubles.

Oil production rose 6.3% to about 30.6 million barrels.

On a six-month basis Bashneft earned net income of 29.81 million roubles as production rose 9.3% to about 59.42 million barrels.

As Upstream reported earlier this month, Bashneft has looked to postpone a planned secondary placement of stock in London in a delay coinciding with a legal battle linked to its privatisation in the 1990s.

The operator's majority owner since 2009 Sistema has lost an appeal against a bar on it selling its shares in the company pending the investigation, according to Reuters reports from Moscow.

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'Productivity key' to kill Norway costs http://www.upstreamonline.com/live/1374509/Productivity-key-to-killing-Norway-costs Det Norske boss calls for improved conditions for smaller players to challenge Statoil's production hegemony Steve.Marshall@upstreamonline.com (Steve Marshall) http://www.upstreamonline.com/live/1374509/Productivity-key-to-killing-Norway-costs Wed, 27 Aug 2014 13:50:56 +0000 live Exploration and development activity off Norway has been hit by a costs spiral that has led dominant player Statoil to slash investments and cut spending as it exercises greater capital discipline to boost returns for shareholders.

Det Norske chief executive Karl Johnny Hersvik believes a “fundamental problem with underlying productivity” in almost all areas of operation off Norway needs to be addressed to arrest the costs spiral.

“What other industry could have  survived a 40% drop in underlying productivity over the past 10 years?” Hersvik told delegates at the ONS conference in Stavanger.

He claimed, for example, that drilling operations now take much longer than previously despite the use of more advanced rigs, citing productivity statistics gathered over the past two decades.

Operators have not had an incentive to implement measures to boost productivity, and therefore cut costs, as the oil price has quadrupled over the past decade, according to Hersvik.

“In most other industries, competition and innovation are the fundamental drivers for improved productivity,” he explained.

While Norway has promoted a greater diversity of explorers on the exploration side through tax incentives and offering acreage under the Awards on Pre-defined Areas rounds, Hersvik believes it is now time for the country to promote competition on the production side where Statoil remains dominant.

“Competition in  the production space is fundamental to turning the cost curve,” he said.

“One of the key changes that need to be made is to put improved frame conditions in place that can ease operating parameters on the production side to enable participation by more players.”

Big discoveries such as Johan Sverdrup, in which Det Norske is a partner, with low per-barrel costs are becoming increasingly rare, he said.

Recent years have though seen the emergence of a new breed of producers such as Sweden’s Lundin Petroleum, Wintershall of Germany and home-grown player Det Norske itself, which recently took a major production leap with its recent $2.1 billion acquisition of Marathon Oil’s Norwegian assets including the producing Alvheim field.

However, Hersvik said “it is getting harder for smaller companies to make the transition from exploration to production”.

He also pointed out that rising costs were part of a wider malaise also encompassing trust and the sustainability of the industry.

“This industry has a trust problem, particularly in the Norwegian community, and it is impacting directly on how politicians and regulatory bodies, but also the man in the street, perceive our industry,” he explained.

Recent dramatic events in the Middle East and Ukraine had underlined the volatile geopolitical conditions affecting the local industry and it was vital for it to be able to adapt to such changes to ensure its long-term sustainability as a global energy provider, according to Hersvik.

“Who would have believed just a year ago that we would have warlike conditions in central Europe? That the liberalisation of the gas market would all of a sudden cry for security of supply again? And that gas from the north would be looked upon as a feasible alternative to gas from Russia?” he said.

Rapidly changing world events present a challenge for an industry that prizes stability and predictability, and must make investment decisions based on long-term forecasts, Hersvik said.

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Financing options 'awash for industry' http://www.upstreamonline.com/live/1374532/Financing-options-awash-for-industry Emergence of new sources of funds as energy industry spending set to soar, banking executive tells ONS Eoin.Ocinneide@upstreamonline.com (Eoin O'Cinneide) http://www.upstreamonline.com/live/1374532/Financing-options-awash-for-industry Wed, 27 Aug 2014 15:34:47 +0000 live Private equity funding will continue its importance to the industry, while sovereign wealth and pension funds are also core sources of financing, Michael O’Dwyer, regional head of natural resources at Morgan Stanley, said at ONS on Wednesday.

“We expect to see continued growth in the oil & gas expenditure, with investment of around $1 trillion per year in real terms over the next 20 years, with total spend estimated at $23 trillion,” O’Dwyer said.

“Ten years from now, we will likely be spending $1.7 trillion per year across all areas of the energy map,” encompassing more than just the oil & gas sector.

The emergence of new forms of finance – such as venture capital and crowd funding – has increased the options for oil players.

“With the help of innovation, they can tap pools of capital that would otherwise not be available to them, and finance themselves more efficiently.”

The global economic downturn in 2008 led to a growth in capital market funding, with a recent drive for bond markets from oil players, O’Dwyer said.

“Private equity and venture capital have been, and will continue to be an important source of funding for the sector.”

Meanwhile, sovereign wealth funds last year controlled assets totaling $5.7 trillion, with funds in the Middle East and Asia unsurprisingly leading the way.

“The energy sector is one that is well understood by these groups, and we see these groups becoming increasing creative in how they look to deploy capital,” O’Dwyer said of sovereign wealth funds.

“They look for high-quality, long-term investments – not necessarily with the highest risk and the highest return – and will continue to grow as an important source of capital for the sector.”

Pension funds are also significant players in the industry, the former Eni engineer adding: “These groups are sitting on trillions of dollars of capital and they need to earn a return in order to fund their liabilities.

“Their risk tolerance is very low but so are their return requirements, and their desire to invest in long-lived, low-risk assets make them excellent partners for energy companies looking to de-capitalise their low-return assets.”

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Dunquin data 'shows oil generation' http://www.upstreamonline.com/live/1374519/Dunquin-data-shows-oil-generation ExxonMobil's analysis of Irish wildcat suggests potential Bill.Lehane@upstreamonline.com (Bill Lehane) http://www.upstreamonline.com/live/1374519/Dunquin-data-shows-oil-generation Wed, 27 Aug 2014 14:54:14 +0000 live The initial results of the deep-water probe at FEL 3/14 proved disappointing last July when it emerged the reservoir had proved water-bearing together with oil shows.

Previously undisclosed post-drill analysis data has attributed pre-breach hydrocarbons initially in place of 1.2 billion barrels of oil equivalent and residual hydrocarbons in place of 600 million boe, junior partner Providence Resources said.

The US supermajor estimates that the nearby Dunquin South prospect could hold recoverable hydrocarbons in place of 1.389 billion boe, the explorer added.

Technical director John O’Sullivan told Upstream that the resource figures “demonstrate whole-scale oil generation, expulsion and entrapment has occurred in the southern Porcupine basin".

He added that notwithstanding the subsequent breach at Dunquin North, “it’s a big basin so a potentially big oil province on the door-step of Europe for the future”.

The ExxonMobil-led venture is still considering the prospect of drilling Dunquin South, where Eni and Repsol are also partners along with Atlantic Petroleum and Sosina Exploration on smaller stakes.  

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CCS 'needs rapid ramp-up' http://www.upstreamonline.com/live/1374500/CCS-needs-rapid-ramp-up Carbon capture must expand to make meaningful impact, says Shell CCS boss Bill.Lehane@upstreamonline.com (Bill Lehane) http://www.upstreamonline.com/live/1374500/CCS-needs-rapid-ramp-up Wed, 27 Aug 2014 12:54:48 +0000 live Speaking at an ONS 2014 conference session on Wednesday, Shell head of CCS Tim Bertels called for a substantial price on carbon emissions to encourage long-term capture and storage developments and a an injection of public funds to foster shorter term demonstration projects.

“Worldwide, there are 12 projects in operation, preventing some 25 million tonnes of CO2 per annum from reaching the atmosphere,” Bertels said. “This, by the way, is the equivalent of taking some 5 million cars off the road every year – a significant effort, perhaps, but in reality, it is insufficient.”

Shell is involved in a handful of CCS projects, including the Quest project in Alberta, Canada, and the proposed CCS demonstration project at the Peterhead gas power station in Scotland, which is in the front end engineering and design phase.

Despite a 2007 pledge by the European Commission to support the development of 12 large-scale CCS demonstration projects, the continent has fallen “far short” in the technology race, he said.

“In Europe, CCS is at a crossroads, and has made very limited progress,” Bertels said.

“More projects will be needed. And if the case for CCS is so strong, but global demonstration is lagging, then we should be asking the question, what is the right way forward to achieve more CCS demonstration?”

A “robust CO2 price” will be a sufficient market solution to drive CCS development over the long term, he said, while collaboration between governments, industry, and academia will be needed to accelerate deployment of the technology.

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Canacol flows gas from Palmer find http://www.upstreamonline.com/live/1374491/Canacol-flows-gas-from-Palmer-find Colombia-focused explorer to tie in Lower Magdalena discovery Bill.Lehane@upstreamonline.com (Bill Lehane) http://www.upstreamonline.com/live/1374491/Canacol-flows-gas-from-Palmer-find Wed, 27 Aug 2014 11:05:51 +0000 live Colombia-focused Canacol Energy has flowed 2730 barrels of oil equivalent per day of dry gas from its Palmer 1 discovery in the Lower Magdalena basin.

The explorer has hired an auditor to prepare a reserves report on the find, which was made the Esperanza E&P contract gained under the company’s 2012 acquisition of Shona Energy.

Toronto-listed Canacol plans to further test the Cienaga de Oro sandstone reservoir’s deliverability before tying the probe into its Jobo gas processing facility five kilometres to the east.

Later this year a further two exploration probes are planned on the block, Corozo 1 and Canandonga 1.

Two drill locations to appraise and develop the Palmer discovery have also been lined up for drilling early next year subject to permitting.

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Det Norske deals 'in pipeline' http://www.upstreamonline.com/live/1374523/Det-Norske-deals-in-pipeline Analyst sees further asset transactions as company beefs up cash flow with Marathon deal Steve.Marshall@upstreamonline.com (Steve Marshall) http://www.upstreamonline.com/live/1374523/Det-Norske-deals-in-pipeline Wed, 27 Aug 2014 14:49:22 +0000 live However, any reduction in the company’s 35% operating stake in the under-development Ivar Aasen project off Norway is now off the radar screen, Teodor Sveen Nilsen of Swedbank First Securities told Upstream on the sidelines of the ONS conference in Stavanger.

There was earlier speculation the Oslo-listed independent could carry out such a deal as it sought to release cash to fund its participation in the giant Johan Sverdrup project, due to come on stream at the end of 2019.

Nilsen said Det Norske’s recent $2.1 billion acquisition of Marathon’s Norwegian assets – including the producing Alvheim field – has left the company in a much stronger financial position “with meaningful cash flow and improved earnings”, which will be further fuelled by a tax refund on exploration costs next year.

“The future really looks bright for Det Norske now,” the analyst said, while cautioning the company still has significant debt.

Chief executive Karl Johnny Hersvik said the production revenue from the Marathon deal “gives us a much stronger financial foundation to carry out future field development projects” off Norway and is also set to boost earnings going forward after an earlier run of negative financial results.

The company has previously insisted fabrication work on the topsides and jacket for the Ivar Aasen platform – awarded to Singapore’s SMOE and Italy’s Saipem, respectively – remained on time and on budget, and Hersvik said there was “nothing negative to report in regard” to the Nkr24.7 billion ($4.43 billion) project that is due on stream in the fourth quarter of 2016.

The contract awards, made before Hersvik took the helm earlier this year, have come in for criticism by Det Norske’s major owner Kjell Inge Rokke due to the potential risk of cost overruns and delays at foreign yards.

Hersvik would not be drawn on whether the procurement decision was the right one, saying only that Ivar Aasen would be “a learning case” for the company.

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Sevan in Arctic rig design race http://www.upstreamonline.com/live/1374499/Sevan-in-Arctic-rig-design-race Norwegian player in key study with ExxonMobil as it targets first cylindrical newbuild for drilling ice-bound waters Steve.Marshall@upstreamonline.com (Steve Marshall) http://www.upstreamonline.com/live/1374499/Sevan-in-Arctic-rig-design-race Wed, 27 Aug 2014 12:44:03 +0000 live The Norwegian floater technology developer is applying its trademark cylindrical design to the innovative rig concept under study work being carried out in a joint effort with the US supermajor along with Seadill-owned North Atlantic Drilling Ltd and Sevan Drilling.

Sevan is looking to steal a march on a rival so-called Category I drillship concept being developed by Oslo-based engineering house Inocean for Statoil  to achieve the first deployment of a rig capable of extended operation in frozen waters.

Drilling operations in the Arctic, such as a well now being drilled by Seadrill-owned semi-submersible West Alpha for ExxonMobil and Rosneft in Russia’s Kara Sea, are currently limited to ice-free seasons in the region, which increases costs for operators having rigs on long-term charters.

Sevan’s mobile offshore drilling unit with a circular ice-breaking hull would be capable of working in up to two metres of Arctic ice, as well as ice ridges with depths of up to 20 metres, and in water depths of between 60 metres and 1500 metres.

Topsides as well as pipework and cabling would be fully enclosed on the winterised unit, which would also have a disconnectable mooring and riser system for areas exposed to icebergs.

The rig would be able to work self-sufficiently in the Arctic for at least 60 days, according to Sevan.

A presentation of the concept at the ONS show in Stavanger was told it “is a simple and robust design that would be easy to construct” given it is based on proven technology, with Sevan-designed cylindrical rigs such as Sevan Driller and Sevan Louisiana working off Brazil and the US, respectively.

Sevan has already gained approval in principle for the concept from Norwegian classification society DNV GL.

The company’s vice president for business development Fredrik Major told Upstream that, while more study work needs to be done to get the concept off the drawing board, he believes the first newbuild based on the design could hit the water within four years.

“We arre certainly working towards a newbuild with the study work we are doing and there has also been interest from other oil companies for the concept,” he said, with the Russian Arctic a target region for Sevan.

“We have developed the concept to the stage at which we would be able to start building a unit. But the timing of a newbuild will be dependent on acceptance from the oil companies.”

He claimed the cylindrical concept has a technical and cost advantage over a drillship as it would not have a costly turret-and-swivel that would be required on a ship-shaped unit for vaning in ice.

Major also pointed out that a drillship would be required to have mooring lines housed together with drilling equipment within the turret, which would be “very complicated”.

Sevan’s cylindrical concept, on the other hand, would have enclosed mooring lines and would carry out drilling through a protected moonpool, with no need for ice-vaning.

The study work could provide a springboard for Sevan’s concept to be a first-mover for drilling in Arctic ice, with Russian state-owned Rosneft requiring multiple drilling rigs based on new technology to tap its Arctic licences, estimated to hold 273 billion barrels of oil equivalent of recoverable resources.

However, current Western sanctions that ban exports of drilling equipment to Russia could prove an obstacle to securing a newbuild contract in Russian waters if such measures remain in place for the longer term.

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Sevan mulls Developer axe at Cosco http://www.upstreamonline.com/live/1374462/Sevan-mulls-Developer-axe-at-Cosco Rig player believes delays would see it recoup cash paid so far, but delivery still a possibility Eoin.Ocinneide@upstreamonline.com (Eoin O'Cinneide) http://www.upstreamonline.com/live/1374462/Sevan-mulls-Developer-axe-at-Cosco Wed, 27 Aug 2014 09:33:26 +0000 live Sevan Drilling may axe a rig newbuild contract at China’s Shipyard following “significant delays”, with the owner believing it could recoup all paid instalments.

The Norwegian contractor, which has rig giant Seadrill as its dominant owner, may also opt to delay delivery of the cylindrical unit Sevan Developer further, but appears unconvinced it can reach a mutually-beneficial agreement with the yard in this respect.

The Developer was due out of Cosco in April, but the latest estimate is October – the delay being caused by a delay in delivery of “critical equipment” to Cosco from sub-contractors.

“Marketing Sevan Developer continues to be a short-term challenge for the company,” Sevan said on Wednesday in its second-quarter result announcement.

“The soft ultra-deepwater market resulting from the pause in spending and subsequent lack of awards from oil companies continues to delay obtaining an operating contract for the rig.”

It continued: “The significant delay in the delivery of Sevan Developer means that the company may be able to cancel the order under the construction contract.

“A cancellation will give the company the right to a refund of instalments paid under the construction contract. Such amount would, likely, be in the area of $105 million.”

This is a turnaround from earlier in the year when Sevan was considering not taking delivery of the unit but would at that time have had to forfeit instalments.

It added on Wednesday, however: “The company may also negotiate a later date of delivery with Cosco in anticipation of an improvement in the market. Given the current market it is, however, doubtful whether a sufficiently long delay in the delivery date can be agreed on satisfactory terms.”

If the rig came out of the yard with no contract, it would have to be warm-stacked, something that would hit liquidity at the owner.

“The company expects to take a decision as to which option(s) to pursue in respect of Sevan Developer in the short to medium term,” Sevan said.

The company also reiterated that it may move headquarters from Norway to Bermuda, a move that would see it liquidate the parent company and set up a new one, which would then apply for a listing in Oslo. This mooted move is due to Norwegian tax laws and the fact the company has no operations in Norway, and does not see them materialising in the future either.

Sevan posted net profit in the three months to the end of June of $9.2 million, after posting a loss of $35.5 million a year earlier. A key driver was a hike in technical utilisation from 84.7% to 94.7%.

“The company believes the long-term fundamentals of the ultra-deepwater market remain robust, but the short-term will continue to be challenging well into 2015,” it said.

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Total nears Martin Linge probes http://www.upstreamonline.com/live/1374479/Total-nears-Martin-Linge-probes French player to soon start drilling on development off Norway with Maersk unit Eoin.Ocinneide@upstreamonline.com (Eoin O'Cinneide) http://www.upstreamonline.com/live/1374479/Total-nears-Martin-Linge-probes Wed, 27 Aug 2014 10:38:18 +0000 live The jack-up rig Maersk Intrepid reached the field this week, ready to start drilling six of the producers for the North Sea development, Martin Tiffen, outgoing head of Total’s Norway operations, told Upstream.

The wells will be drilled through the Kvaerner-built platform jacket, which was installed earlier this summer along with the export pipeline. The topside is on order from Technip and Samsung Heavy Industries and is due in the early summer of 2016.

”It is a big week for Martin Linge this week,” said Tiffen. ”So far so good. In terms of our operation plan offshore this summer we are pretty much bang on where we want to be.”

When Martin Linge comes on stream in the end of 2016, it will be Total’s first operated producing field in Norway since the company shut down the Frigg field in 2004.

Tiffen will not be around to complete the project, however, as he is heading back to Total’s headquarters in Paris. This week he handed over the reins to Isabelle Gaildraud, who has moved to Stavanger from Paris to lead the company’s Norwegian division in the coming years.

In addition to managing the company’s North Sea activities, Gaildraud will oversee increasing activity in the Barents Sea, where Total is already a partner at the Statoil-operated Snohvit field.

The company holds interests in several Barents Sea exploration licences and may participate in a new exploration well as early as next year. It is also looking at the southwestern acreage that will be offered in the 23rd licencing round, which is expected to be announced next spring.

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