January 2017, Vol. 244, No. 1

In The News

World News

Global Oil, Gas Exploration Likely to Return to Profitability in 2017

A new study by Wood Mackenzie on what to expect from global oil and gas exploration in the year ahead Global Exploration: What to look for in 2017 indicates exploration should return to profitability in 2017 after five years of only single-digit returns. Dr Andrew Latham, vice president of exploration at Wood Mackenzie said: “The industry has a good chance of achieving double digit returns in 2017. Smarter portfolio choices and lower costs are already paying off.” 

Wood Mackenzie’s analysis of the 2017 global exploration outlook shows:

  • Exploration in 2017 will continue its transformation to a smaller, more efficient industry;
  • Overall investment will at best match 2016 year’s spend of around US$40 billion, and may yet fall further. On the bright side, lower costs mean well counts may hold up close to 2016 numbers. Flat budgets should mean exploration’s headcount cuts are now mainly in the past;
  • The majors and a handful of bolder independents will drill most of the wells to watch, as in both 2015 and 2016. The best discoveries should come from new plays and frontiers despite greater emphasis on infrastructure-led drilling from many explorers.

“Over half of the volumes are expected to be found in deep water where some well costs will fall to US$30 million or less, with full-cycle economics that are positive at less than US$50 per barrel,” Latham said.

The report notes that the industry has cut exploration deeper than other upstream spending. Its share of upstream investment will dip to a new low of just 8% in 2017. An eventual return to historic norms – around one dollar in seven – depends on oil-price recovery. The Brent price should rise sharply from 2019, averaging US$77 per barrel in real terms for the year. If this happens, then recovery in exploration spend will follow a year or two later.

“The industry is focusing on acreage capture and reloading for the longer term. A spate of new licensing in outer slope plays will continue as explorers digest news of better-than-expected reservoir quality and source rock potential in these ultra-deepwater settings,” said Latham.

Emerging exploration themes in 2017 include:

–       Exploration for pipe gas opportunities near under-supplied markets such as parts of North Africa, Eastern Europe and Latin America;

–       Oversupplied LNG plays will be de-emphasised;

–       High-cost frontiers, such as the ice-impacted offshore Arctic and extreme high pressure/high temperature plays, will be shunned.

“After a decade in the doldrums, the majors’ returns from conventional exploration improved to nearly 10% in 2015. The rest of the industry is heading in the same direction. Fewer, better wells promise a brighter future for explorers,”Latham added.


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To read the full report click on: Global Exploration: What to look for in 2017  

Total to Develop Next Phase of Iran’s Giant South Pars Gas Field

Total has signed a non-binding agreement with the National Iranian Oil Company (NIOC) for development of Phase 11 of South Pars (SPII), the world’s largest gas field. The project will have production capacity of 1.8 Bcf/d with the gas being fed into Iran’s network.

Total will operate the SP11 project and own a 50.1% interest, alongside NIOC subsidiary Petropars (19.9%) and China’s state-owned oil and gas company CNPC (30%).

The first of two phases of Phase 11, with an estimated cost equivalent of $2 billion, will include 30 wells and 2 wellhead platforms connected to existing onshore treatment facilities by two subsea pipelines. At a later stage, a second investment phase, involving construction of offshore compression facilities, will be launched when needed. 

Wärtsilä Teams with ENGIE to Provide LNG Solutions

Wärtsilä signed a memorandum of understanding (MoU) with the French multinational energy company ENGIE to develop solutions and services within the small-scale LNG business sector.

The agreement involves LNG for ships, LNG distribution in island and remote areas, LNG to power solutions, and small-scale LNG and bio-liquefaction. Through this partnership, the two companies will share Wärtsilä’s technical expertise, along with ENGIE’s expertise, and experience in natural gas distribution and commercialization. Operation and maintenance services will also be offered. 

Both companies have LNG experience, Wärtsilä is the EPC contractor for an onshore small-scale LNG terminal in Finland, and has successfully delivered several small-scale power barges and a biogas liquefaction plant. ENGIE is one of the pioneers in the development of small-scale LNG markets and solutions.

Gazprom, Engineers India Explore Routes for Russian Gas

Alexey Miller, chairman of the Gazprom Management Committee, and Sanjay Gupta, chairman and managing director of Engineers India, signed a memorandum of understanding to explore the use of export routes to pipe gas supplies from Russia and other countries to India.

According to experts, India’s need for gas imports will increase threefold as early as 2022 and more than sixfold by 2030.

“I am convinced that Gazprom and Indian companies have significant prospects for mutually beneficial cooperation in the gas industry,” said Miller.

DEA to Develop Dvalin Field off Norway

Deutsche Erdoel AG (DEA) plans to develop the Dvalin field with Norway’s Ministry of Petroleum and Energy. Dvalin is DEA’s first development as field operator in Norway. It will be developed with a four wells subsea template, which is connected to the Heidrun platform.

DEA Norge awarded Technip a contract for a tie-back from a new 4-slot template to the Heidrun platform through a 15-km pipe-in-pipe production line. The development also will connect the Heidrun gas export from Heidrun to the Polarled Gas Transport pipeline through a new 7.5-km pipeline.

The contract includes engineering, procurement and installation of the pipelines, spools, riser bases and pipeline end modules (PLEMs), as well as rock installation and commissioning. Also included in the contract is the installation of a control umbilical between Heidrun and the Dvalin template.

The company plans to produce about 18.2 Bcm of natural gas from the two reservoirs. The development cost is expected to cost 1.1 billion Euros, with a planned production start in 2020.

Petrobras, Total to Partner on Projects in Brazil

Pedro Parente, CEO of Petrobras, and Patrick Pouyanné, chairman and CEO of Total, have signed a memorandum of understanding setting the framework for a strategic alliance covering upstream and downstream activities in Brazil. The companies jointly participate in 15 consortiums worldwide in exploration and production, nine of which are in Brazil and six abroad. In Brazil, the companies are partners in the development of the giant Libra area, which is the first production-sharing contract in the Brazilian pre-salt in Santos basin.

They are also partners in the Chinook field in the U.S. Gulf of Mexico, on the deepwater Akpo field in Nigeria, and the gas fields of San Alberto and San Antonio/Itau in Bolivia, as well as the Bolivia-Brazil gas pipeline.

ODE Signs Four-year Framework Agreement with DONG Energy

ODE finalized an engineering services and consultancy framework agreement with DONG Energy to provide support to the company’s oil and gas assets across the Danish, Norwegian and UK continental shelves. The scope of work includes front-end engineering, maintenance and modifications, discipline engineering (specialist services), late life and decommissioning and procurement services. The contract will run until 2020.

Contractors Establish Association of Gas Construction Companies

Gazprom and major construction companies recently entered into an agreement establishing the Association of Gas Construction Companies. The goal is to ensure technical regulation of construction, maintenance and repair activities in the gas industry, as well as the development of national and transnational construction standards, rules and regulations. 

ExxonMobil Makes Significant Oil Discovery off Nigeria

ExxonMobil discovered a significant amount of potential recoverable resource, possibly measuring between 500 MMbbls and 1 Bbbls of oil from the Owowo 2 and Owowo wells drilled in the Owowo field offshore Nigeria. ExxonMobil holds 27% interest and is the operator for OPL 223 and OML 139. Joint venture partners include Chevron Nigeria Deepwater G Limited (27%), Total E&P Nigeria Limited (18%), Nexen Petroleum Deepwater Nigeria Limited (18%) and the Nigeria Petroleum Development Company Limited (10%).


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