April 2017, Vol. 244, No. 4

In The News

World News

Fluor JV Nets FEED Contract for Pump Project in Kazakhstan w/photo 

Fluor Corp.’s joint venture team, KPJV, was selected by Tengizchevroil LLP (TCO) to execute the front-end engineering and design (FEED) for the multi-phase pump project in Kazakhstan. The project scope includes FEED, detail design and procurement services.

Part of TCO’s major capital program, the project will implement multi-phase pump technology across the gathering network of existing oil and gas facilities at the Tengiz and Korolev fields to maintain crude production by reducing wellhead pressure and increasing well deliverability. The project includes the modification or upgrade of some utility systems.

The integrated project team will be based at Fluor’s Farnborough, U.K. office. Fluor began working in Kazakhstan in 1982 and at Tengiz in 1997 on a condensate stabilization project. Since then, Fluor has performed ongoing work in Kazakhstan on numerous additional projects. KPJV is executing the world-scale Future Growth Project, which will use sour gas injection technology to maximize Tengiz production capacity to 39 million tons of oil annually.

During peak construction, the project is expected to employ approximately 20,000 construction workers. First oil is planned for 2022.

Exxon Pays $2.8 Billion for Stake in Mozambique Project

ExxonMobil is purchasing a 25% indirect stake in Eni’s Mozambique operations. Eni was searching for a partner to help develop the southeast African country’s huge offshore natural gas resources. ExxonMobil was considered the leading candidate as it already has exploration licenses in Mozambique.

ExxonMobil will pay Italy-based Eni $2.8 billion. Eni now holds a 50% indirect share in the gas project. The deal will leave Eni and ExxonMobil with equal stakes in Eni East Africa of 35.7% each, with China National Petroleum Corp. holding a 28.6% stake. Eni will direct a smaller-scale Coral floating liquefied natural gas project proposal and all upstream operations, while ExxonMobil will lead construction and operation of the much larger LNG facilities proposed for onshore, the company said March 9.

Interest Falling for Floating LNG Production Ships

A report by Reuters suggests interest is fading for floating liquefied natural gas (FLNG) projects, as gas producers seek cheaper ways to compete with a surge in U.S. shale supplies and slumping prices. FLNG projects – mega-vessels fitted with gas production, liquefaction and storage capabilities – allow producers to tap offshore gas wells and ship LNG without having to build pipelines to onshore plants. Owners can move the vessels to new fields when production at an old one ends, slashing asset end-of-life costs.

The projects were popular with producers in the early-2010s when gas demand and prices were rising, and before the shale revolution unlocked U.S. reserves that crushed global prices. Woodside Petroleum has shelved plans to build the $30 billion Browse FLNG project off western Australia because of global oversupply of LNG. GDF Suez and Australia’s Santos also scrapped a proposed FLNG project for the Bonaparte gas field off northern Australia. “With the market headed for oversupply until the early-2020s, it would be difficult to find a bankable new FLNG project in the near term,” Edmund Siau, a gas analyst at energy advisory FGE, told the news service.

IEA Warns Investment Cutbacks Could Create Tight Oil Supply

Global oil supply may struggle to match demand after 2020, when the pinch of a two-year investment decline in new production could leave spare capacity at a 14-year low and send prices sharply higher, the International Energy Agency said March 6.

Investors generally are not betting on a sharp rise in the price of oil any time soon, but the contraction in global spending in 2015 and 2016 and growing global demand means the world could well face a “supply crunch” if new projects are not soon given the go-ahead, the IEA said in its five-year market analysis and forecast report, according to Reuters.

Most supply growth is expected to come from the United States, where the IEA said shale, or light-tight output, will grow by 1.4 MMbpd by 2022 even if prices remain close to current levels. If prices climb to $80 a barrel, U.S. light-tight oil production could grow by 3 MMbpd in five years,” the IEA said.

“We are witnessing the start of a second wave of U.S. supply growth, and its size will depend on where prices go,” said Fatih Birol, IEA executive director. “But this is no time for complacency. We don’t see a peak in oil demand any time soon. Unless investments globally rebound sharply, a new period of price volatility looms on the horizon.” U.S. shale investments are picking up, and there is evidence of supply growth from Canada and Brazil, but the IEA said early indications of global spending were “not encouraging.”

Onshore Pipelines Forecast: – O&M Spending to Rise

Douglas-Westwood’s World Onshore Pipelines Market Forecast suggests there is room for optimism for the onshore pipelines construction business over the next five years. The report notes that the sector has been hurt by the sustained low oil price environment in which reduced investment in early feasibility and front-end engineering and design (FEED) work is expected to affect the latter years of the forecast period. However, overall expenditure is expected to be bolstered by greater installation activity in the near-term, due to projects that were sanctioned prior to the downturn.

According to report author Katy Smith, “DW expects total onshore pipeline capex [capital expenditure] over the forecast (2017-21) period to increase slightly to $203 billion, a rise of 5% compared with $194 billion over the preceding five-year period. Pipeline additions are predicted to increase overall, compared to 2012-16, though many regions will see declines during the forecast. Global installed kilometers over the forecast will exceed 276,000 km, representing an increase of 2% compared to the previous five-year period.”

North America and Asia remain the highest volume markets, together accounting for 53% of global capex over the forecast period. Australasia, having seen a large increase in installations over recent years due to the number of LNG projects in the area, is expected to see a significant decline in capex as several of these projects begin operations mid-forecast, the report said.

Eastern Europe and the FSU is expected to be the most resilient pipeline market with 2021 expenditure of $5.6 billion seeing only a 7% decline from $6 billion in 2017, owing to key pipeline projects such as Power of Siberia 1 and 2.

The operations and maintenance market has a more positive outlook, as the majority of regions already possess a large installed base of pipeline. Total operational expenditure (opex) is expected to be $132 billion over the 2017-21 period, compared to $114 billion in the preceding five years, representing a 16% increase. Unlike capex, this sector is somewhat sheltered by stringent pipeline regulations and the need to continue operations.

“North America will see the greatest operations and maintenance expenditure – 37% of total opex during the forecast – due to the region having the largest installed base,” Smith concluded. “Over half of the $10.5 billion opex expenditure in North America will be associated with pipeline operation costs (covering routine expenditure associated with the day-to-day operation of the pipeline facility, including monitoring, routine pigging, and cleaning), due to aging infrastructure and more stringent pipeline regulations, while a quarter of it will be linked to station costs.”

GE Signs Orders for Integrated Compressor Lines

GE has been awarded contracts to provide eight integrated compressor line (ICL) units up to 14MW to two European energy operators. The ICL technology will help Open Grid Europe (OGE) and Trans Austria Gasleitung GmbH (TAG) transport gas across the heart of Europe, responding to the area’s for gas transport system availability and efficiency. These agreements create GE’s largest ICL unit in terms of power capacity.

Compared to a traditional solution, the ICL fully integrated compression system incorporates a high-speed electric motor and a centrifugal compressor in a single sealed casing, with no need of lubrication due to active magnetic bearings (AMB) technology.