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Shell, BP and many other oil and gas companies saw their share prices jump after the surprise election result in May, with expectations that tax treatment in particular is likely to be more favourable under a Conservative government than it would have been under any other. The new government comes at an important time for the offshore oil and gas industry, which is facing perhaps its greatest challenge ever, as low oil prices conspire with rising costs and shrinking reserves, to make life hell for some.

Most observers expect the result to maintain business-friendly policies, supportive to the oil and gas sector, alongside a level-headed approach to offshore renewables. Earlier in the year, oil company heads, including BP CEO Bob Dudley and Tullow Oil CEO Aidan Heavey, were among UK business executives who signed a letter before the election, claiming Tory leadership had been “good for business” and that changing course would send a “negative message” about

any suspicion oil companies might have had after steady $110/bl-plus oil led George Osbourne to impose a 12 percent tax increase in 2011.

Under the Coalition, the UK’s oil and gas sector also underwent a major overhaul at a regulatory level, and the results of this are continuing to fall into place. The

ImplIcatIons of tory vIctory In the UK

the UK. This clearly compliments the Libdem part of the Coalition, under the old minister Ed Davey, rather than just the Conservatives, but there is little indication of any major change in policy so far, apart from perhaps on onshore wind. The March budget provided considerable support to the industry at a time of need, reversing

new faces at oGa aS the election dust settled, the OGA announced the majority of the remaining appointments to its senior management team. Gunther Newcombe, CEO of Indonesia’s VICO, a joint venture owned by BP and Eni, joined as director of exploration and production, while ex-Royal Dutch Shell manager, Angela Seeney, has taken on the role of director of technology and projects. Hedvig Ljungerud, previously a deputy director at HMRC, has been taken on as Director, Policy, Performance and Economics, and experienced accountant, John Ogden, as Chief Financial Officer.

These new directors will report directly to OGA head Andy Samuel, who joined from BG earlier in the year, and will sit on the OGA Leadership Team alongside Simon Toole, Director, Licensing and Legal, and Stuart Payne, Director of Change and Organisational Design, who were appointed earlier this year. The new directors will be in post by mid-June.

Nick Richardson, a senior exploration geologist with Dana Petroleum, has been named manager of exploration and new ventures, while Brenda Wyllie and Scott Robertson have been confirmed as area managers of the Northern North Sea and

West of Shetland and Central North Sea respectively. The new area manager Southern North Sea and Morecambe Bay is due to be announced within the next few weeks.

“Given the many challenges currently facing our industry my priority was to move quickly to establish the OGA as a strong and effective regulator. The creation of this high-calibre leadership team is an important milestone,” said Mr Samuel. “We will continue to develop the organisation in the coming months, increasing our capability but remaining ruthlessly focused on those priorities that will help maximise

economic recovery of the country’s oil and gas resources and the wider benefits this delivers for the UK.”

Welcoming the appointments, Deirdre Michie, Oil & Gas UK’s CEO, said: “The Wood Review recommended a new well-resourced regulator to work alongside HM Treasury and the industry in a tri-partite approach to maximise economic recovery of the UK’s oil and gas resources so we are extremely encouraged that the recruitment of the OGA’s senior leadership team is now almost complete.”

The OGA has also published its initial findings in response to the UKCS Maximising Economic Recovery Review commissioned by the government in 2014. In a report, Call to Action: The Oil and Gas Commission 2015, released in mid-May, the OGA laid out its plan to rejuvenate the North Sea fields

and identifying two “key” risks. These are that the chance profitability of producing UK fields will be “insufficient” to attract continued investment, which would lead to the premature decommissioning of projects resulting in lost production; and the declining confidence in the potential of the UK Continental Shelf, which would see long-term investment dwindle.

To try to improve profitability, the authority said the industry must “protect critical infrastructure,” improve efficiency, and create a “more competitive and efficient cost base” to ensure the North Sea attracts investment.

On 1 April 2015 the OGA became an Executive Agency of Department for Energy and Climate Change. It is expected to become a Government-owned Company in October 2016 when key legislation has been passed.

continued on page 10

newly formed Oil and Gas Authority (OGA) has announced seven new members of its management team, and is now close to launching full operations (see below).

The Tories hope a firm hand at the OGA will help provide greater certainty and clear incentives for investors. So it will be a powerful body, with the ability to fine

producers up to £1 million, revoke licences, view data and attend company meetings. Further changes may now come in the wake of the election, as new appointments settle into their new roles.

Among these new appointments are Amber Rudd - the 16th Secretary of State for Energy and Climate Change in 18 years. And Andrea Leadsom will be made energy minister to the Cabinet Office, replacing Matt Hancock, who was in the position for less than a year.

While the 2015 Budget provided sorely needed support, a lot more needs to be done to encourage a transformation in the industry that will enable it to profitably extract a far larger proportion of the oil and gas than has been achieved so far. Technology, collaboration, unconventional techniques, and low-cost business and recovery models, are all areas which must be brought together to contribute to this goal.

New Secretary of State for Energy and Climate Change, Amber Rudd.

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bacKlog oF north sea assets For sale set to Weigh on PricesAn increAse in assets for sale in the North Sea could depress asset values and spur acquisition activity this year, with some companies under growing pressure to sell as low oil prices bite. Others, espe-cially the majors, are seeking to rationalise portfolios, divesting older more mature assets, while another group is keen to spread the ownership of more expensive operations. According to information pro-vider, 1Derrick, the total value of assets on sale in the UK North Sea had risen to $5.9 billion at the end of April, with $1.6 billion or 27 percent of that being added in the first three months of 2015.

“Top packages by value include ones offered by almost all the Majors - Total, ConocoPhillips, BP, Eni and Shell,” as well as Statoil, E.ON and Fridman’s LetterOne, said Mangesh Hirve, Managing Director of 1Derrick. “The number of packages on the market has increased by 52 percent to 46 from 30 a year ago,” he added. Smaller companies offering assets include Stir-ling Resources, Endeavour Resources and NORECO, while companies such as Antrim Energy, North Sea Energy and Sorgenia are also reported to be “considering strategic alternatives for their UK North Sea portfo-lio”, said Mr Hirve.

The increase in assets on offer, combined with a slight uptick in prices over the last couple of months, is expected to boost ac-quisition activity - as happened in the af-termath of the price slump of the late 1990s - as some companies seek to buy before asset values recover, while cash-strapped sellers look to share investments and re-plenish cash reserves. Globally, Morgan Stanley said activity slumped to a 20 year low in the first quarter of 2015, when only 30 deals were completed, with a combined value of $4 billion. But since the start of the second quarter, there have been another 38 deals completed worldwide – led by Shell’s takeover of BG – worth a total of $93 billion.

In the UK, only three deals have been done since the start of the year, according to 1Derrick (see table 2), and (apart from the Shell/BG deal) activity has been thin for

some time, allowing assets to accumulate. According to Mr Hirve, 21 percent of assets stayed on the market for more than a year in 2014, up from 13 percent in 2013. Farm-in deals during 2015 slowed down to just four in the first four months as compared to the historic average of about 5 per quarter. Among the deals, E.ON acquired an interest in Manhattan prospect from Nexen, and Azinor bought a licence from Stavanger.

Companies maybe holding back from UK buying in the belief that valuations have yet to fall sufficiently, with some sellers still to fully adjust to the new lower priced long term environment. Potential buyer Statoil, for example, has said it is looking at assets, but does not believe they are yet well priced.

It expects offers to fall as profit margins are increasingly squeezed, especially for small operators.

While sellers are being pressured by the North Sea’s rising costs, there are several additional factors that could drive down prices in the North Sea. These include Rus-sia’s Mr Fridman, who must sell his stakes in 13 fields within three to six months, and while the deal is still expected to fetch up to $1 billion, the time constraint could add to downward pressure on prices. “We are still reviewing all options, including pre-paring for a sale, or swap, of our UK assets and are soliciting offers – and looking at investment opportunities elsewhere,” a Let-terOne spokesman said. “Our focus – given

circumstances – is to achieve an agreed sale on commercially acceptable terms and conditions.”

E.ON’s decision to divest from its fossil fuel operations – many of which are in the North Sea - for long term strategic, rather than short term commercial, reasons could also weigh on market sentiment, especially if others – such as DONG Energy - that are considering a similar move, also go ahead.

The assets now on offer in the North Sea include all E.ON’s assets, as well as some of Total's 80 percent stake in the Laggan-Tormore field, West of Shetland, which it co-owns with DONG Energy.

Table 1: uk asseTs puT on The markeT since augusT 2014. (Source 1Derrick)

Date seller Value $m Assets Available Deal type

4/29/2015 Atlantic $10 - $25 25% P1606 (Block 3/3b, Orlando oil field) Discovery

3/19/2015 Sumitomo 50% P2157 (Block 15/16d, Ranger prospect) Farm-in

3/17/2015 Cluff P2252 (Blocks: 41/5, 41/10 and 42/1) Farm-in

3/17/2015 LetterOne $500 - $1k Breagh, Clipper South, Cavendish, Saturn, Mimas, Tethys, Windermere, Markham, Orca, Minke, Topaz and Devenick fields

Producing

3/13/2015 Eni $100 - $500 Judy area, Hewett area, Jade field, Jasmine field, MacCulloch field, Liverpool Bay fields, Elgin and Franklin fields

Producing

3/11/2015 Total $100 - $500 20% Laggan-Tormore field Discovery

3/3/2015 EnQuest $25 - $100 20% Kraken fields Discovery

2/23/2015 OMV 35% P1830 (Blocks 204/4b and 204/5b) Farm-in

1/12/2015 Sterling Resources $100 - $500 15% Breagh gas field Producing

1/12/2015 Iona Energy 25% P1606 (Block 3/3b, Orlando oil field) Discovery

1/12/2015 Iona Energy P1971 (Blocks: 3/8c and parts of 3/7c and 3/12, Ronan and Oran discoveries)

Discovery

12/12/2014 Egdon P1929 (Blocks: 41/18 and 41/19) Farm-in

12/02/2014 InfraStrata; Brigantes; Terrain Energy

16.67% P2123 (Blocks: 111/1, 111/2, 111/7, 125/30 and 126/26)

Farm-in

11/30/2014 E.ON $100 - $500 Babbage, Caister, Elgin, Franklin, Glenelg, Hunter, Huntington, Johnston, Merganser,

Producing

10/15/2014 NORECO $100 - $500 20% P1114 (Block 22/14b, Huntington oil field); P1934 (Blocks: 210/7, 210/12 and 210/13); 50% P1989 (Blocks: 14/11, 14/12 and 14/16); 15% P2032 (Blocks: 21/8c, 21/9c, 21/10c, 21/14c and 21/15c) and 22.5% P1889 (Blocks: 12/26b and 12/27)

Corporate

10/7/2014 First Oil $25 - $100 15% P1077 (Kraken field) Discovery

10/6/2014 Endeavour Resources $100 - $500 25.68% Alba oil field; 30% Bacchus oil field and 44% Rochelle liquids-rich gas field

Corporate

9/15/2014 ConocoPhillips $1k - $10k 24% Clair oil field Producing

8/22/2014 Dana $100 - $500 26% Western Isles development project (Block 210/24a, Harris and Barra oil fields)

Discovery

8/21/2014 ExxonMobil $10 - $25 15.5% P1239 (Block 44/24b, Wingate gas field) Producing

8/20/2014 BP 16% P111 (Block 22/25a) Discovery

continued on page 12

NEWSoffshoreaberdeen.com | June 2015 | Offshore Aberdeen | 3

Fortunes are looking slightly brighter for oil and gas in the North Sea following the recent price recovery, tax reform and Tory election result – which, although they may not be popular in Scotland generally, was widely welcomed in the industry, where their policies are generally seen as pro-business and level-headed on environmental issues. In the first of our in-depth articles for issue five, we take a look at the reaction to and implications of the Conservative UK election victory in May on the upstream energy sector, as well as at some of the new faces in power, on page 1.

Tory policy towards shale gas is particularly favourable, which could mean a boost for attempts to develop unconventional hydrocarbons around the country. In the US the rapid expansion of shale drilling was facilitated by a highly skilled industrial base of companies able to take on the drilling and associated service roles required to develop their giant onshore plays, such as the Marcellus and Bakken. We ask if there are opportunities for Aberdeen-based oil and gas companies to provide the same services here in the UK; And while Scotland appears to have a fracking ban in place, some of the keenest proponents of fracking lie north of the border, such as the Grangemouth partners, while offshore fracking could provide a massive boost to recoverable reserves in the North Sea, if it can be done cheaply enough - see article on page 14.

Whether or not fracking is allowed onshore, the potential for unconventional techniques to boost recoverable reserves from conventional fields is only just becoming apparent. In a detailed study, consultants IHS suggest that up to 140 billion barrels of additional production could be achieved worldwide by these means, with the UK North Sea one of fifteen areas benefiting most from the technology – see article on page 15.

The change of government comes against a background of falling investment in the UK offshore oil and gas sector, and many observers are claiming that more fundamental changes to operating practices are required, in addition to policy improvements, in order to rescue the industry, led by technology and a greater focus on costs, as discussed on page 13. Edinburgh-based consultants

Wood Mackenzie, however, are recommending the government take a close look at the Dutch fiscal model, which they claim might prove a useful tool in helping maximise recoverable reserves – see article on page 16.

Whatever the outcome on costs and regulation, many operators have already decided to vote with their feet and shed assets in the UK North Sea. Over the last year the value and number of assets on offer has risen sharply, and so far buying interest has been failing to keep up, leading to a build-up of selling interest. This has been added to by strategic and forced sales, as well as possible divestments as a result of the Shell takeover of BG, which altogether could lead to significant downward pressure on asset values in upcoming months. With the help of data from information providers, 1Derrick, we review the situation, and also take a look at some potential buyers, on page 2.

The ease with which equity holders are able to sell their North Sea assets is likely to depend on what happens to prices, more than any other factor. While the oil price has recovered from lows earlier in the year, many market commentators are suggesting that, as we approach OPEC’s six monthly meeting in June, continued strong production levels around the world could signal a further price slide over future weeks. On the other hand, could market fundamentals be about to tighten, or perhaps OPEC will pull something unexpected out of the bag? – We look at some of the important issues affecting the market in Price recovers, new equilibrium sought, on page 17.

Activity in the North Sea is now well into the summer maintenance and drilling season, although this year operators are under more pressure than ever as they seek ways to reduce costs. As well as a growth in the list of assets up for sale, there are a number of reports of decommissioning decisions this month, which is an even more worrying trend for the sector. Nevertheless, activity is brisk, and much will depend on the price, and how long it stays low. Most banks and other forecasters are pointing to weakness and volatility in the short run, stabilising at $70-80/bl in a year or two. Let’s all hope we can innovate and regulate a viable growing industry around that figure, because it looks like the days of $100/bl oil might be over for some time to come.

coMMentDate seller Value $m Assets Available Deal type

7/7/2014 Spike Exploration $25 - $100 15% Athena oil field; 30% P1214 (Block 16/3d, Cairngorm oil discovery); 30% P1892 (Block 16/2b, Cairngorm oil discovery)

Discovery

5/27/2014 First Oil 30% P1854 (Blocks 208/1b, 208/2, 208/3b, 217/27b and 217/28b, Lyon prospect)

Farm-in

4/24/2014 Antrim Energy $10 - $25 100% P077 (Block 21/28a, Fyne discovery); 50% P1875 (21/29d, Erne Discovery)

Corporate

4/22/2014 First Oil P1887 (Blocks 12/16b and 12/17b, Valanginian prospect)

Farm-in

4/15/2014 Sterling Resources P1914 (Blocks: 49/18b and 49/19b); Blocks 42/2 (part), 42/3 (part), 42/4, 42/5, 36/30

Farm-in

2/19/2014 Sherritt International P1888, P2031, P2013 Farm-in

2/16/2014 ConocoPhillips P1773 (Block 15/29c) Farm-in

2/13/2014 Shell $100 - $500 Anasuria (Teal, Teal South and Guillemot A and Cook sub-sea fields) and Nelson (Howe and Bardolino fields)

Producing

1/26/2014 Apec Ltd P2002 (Kumutage field Blocks 42/30d 43/26c) Discovery

12/10/2013 Carrizo $10 - $25 P2121 (Block 49/8b) Farm-in

12/10/2013 InfraStrata; Corfe Energy

P1918 (Blocks: 97/14, 97/15 and 98/11) Farm-in

12/09/2013 Parkmead P1966 (Blocks: 132/3a, 132/8 and 132/13a) P1957 (Blocks: 29/27, 29/28, 37/3 and 37/4)

Farm-in

10/11/2013 Endeavour Energy P1615 (Block 15/26c, Rossini oil prospect) Farm-in

10/04/2013 Talisman; Sinopec $25 - $100 P1880 (Block 29/20a) Andromeda discovery; P1622 (Blocks 22/28c and 22/29c, Seagull discovery); P185 (Block 30/11b and Block 30/12b, Apple Beta discovery); P240 (Block 16/22, Terrace prospect); P294 (Block 20/5a); P241 (Block 21/1a, sub-areas North Buchan, North Non-Buchan and Non-Buchan) and P593 (Block 20/5e)

Discovery

8/19/2013 OMV $25 - $100 10-20% Rosebank development project Discovery

8/07/2013 Premier Oil 33.33% P2018 (Blocks: 214/24b, 214/29a and 214/30c, Ainslie prospect); 40% P1998 and P2001 (Blocks: 21/9b, 21/10b and 22/6e, Val D’Isere and Les Arcs prospects)

Farm-in

7/22/2013 Atlantic Petroleum $25 - $100 13.35% Perth field Discovery

6/24/2013 Sorgenia $5 - $10 20% P1763 Aragon prospect, 25% P1482 Doyle prospect, 25% P2124 (Block 113/22a), 20% P1633 (Blocks 211/11b and 211/16b)

Corporate

6/07/2013 Providence 100% Polaris prospect P1885 (Blocks: 125/18, 125/19, 125/20, 125/23, 125/24 and 125/25)

Farm-in

5/13/2013 Ithaca 46% P1392 (Block - 11/29a), 50% P1392 (Block - 17/4a), 55% P2064 (Block - 29/5e) and 8% P902 (Block - 2/4a)

Farm-in

4/10/2013 BP $10 - $25 Suilven field in Blocks: 204/14a, 204/19b and 204/20b

Discovery

3/04/2013 Carrizo $10 - $25 Manhattan prospect (P1801 Blocks: 22/14d and 22/19b)

Farm-in

2/26/2013 NSE $10 - $25 20% Block 12/26c (Polly field), 20% Blocks 12/16b (Norfolk prospect) and 12/17b (Norfolk East prospect), 50% Block 12/30 (Badger prospect), 15% Blocks 13/24c (Bagpuss prospect) and 13/25 (Blofeld prospect), Promote licences (Bobcat, Bass and Bluebird/Blackbird prospects)

Corporate

2/20/2013 Total P1626 Corfe, P1822 Horne Farm-in

2/19/2013 Statoil $100 - $500 P335 (Block 9/11a, Mariner heavy oil field) Discovery

Table 1 (continued)


how will the global oil and gas downturn effect young professionals?It is no secret that global oil prices have resulted in the industry experiencing realigned projects, budget cuts and, perhaps, most noticeably, significant job losses. The current market conditions have caused a great sense of unease for those working in the oil and gas sector and, for young professionals who have just started out in the industry, this can be a particularly unsettling time.

From 2010 until mid-2014, world oil prices were fairly stable at around $110 a barrel. However, since June 2014, the price of oil has more than halved. Brent crude oil dipped below $50 a barrel in January 2015 for the first time since May 2009 and US crude oil dropped to below $48 a barrel. The oil price has stabilised somewhat at $60 a barrel but the market remains uncertain.

This uncertainty has led to companies delaying projects and putting a hold on making new investments. Alarmingly, the 2014 Oil and Gas UK activity survey estimated that planned investment for 2015-2017 projects yet to get company sanction, has fallen from £8.5 billion in last year’s survey to just £3.5 billion in current forecasts. There are other measures companies operating in the North Sea are taking to reduce costs, including reducing contractor rates and head counts. It is not surprising that in the current climate, young professionals are concerned about their future.

There are companies, however, that view the downturn as an opportunity to offer young professionals the training that they require to fast track their learning and development. Enhancing the skills set and knowledge of a young professional allows them to increase their competency levels early in their careers, and ultimately ensures they become an integral part of the company’s future growth. Therefore as a young professional, going the extra mile and completing an industry ac-credited training course, can prove your capabilities and put you ahead of your peers in your current job position or in an interview, which can pay off in this current market situation.

It is well documented that the UK oil and gas industry has suffered a number

of oil price crashes over the past four decades and job losses have been felt during these times. However, it has been noted that when the market has peaked again, companies have been faced with a critical skills shortage as a result of the cuts. An industry skills shortage can cause major problems for companies looking to bounce back as quickly as pos-sible when the market stabilises. Compa-nies operating within the current climate should use the previous examples of this as a lesson learnt and continue to invest in developing new industry talent.

One lesson we can learn from the past is how companies successfully thrived during these challenging times and the role that the senior members of the businesses played in making this possible. Listening and taking on board advice from today’s highly-experienced industry leaders can be very beneficial. Aberdeen is a great city to meet industry professionals due to the high number of conferences, workshops and informal networking opportunities organised by industry clubs and societies.

The Society of Petroleum Engineers (SPE) Aberdeen Section, in partnership with Aberdeen Formation Evaluation Society, the Petroleum Exploration Society of Great Britain (PESGB) and with support from Department of Energy and Climate Change (DECC), once again hosted the DEVEX conference on 20 and 21 May at the Aberdeen Exhibition and Conference Centre. During the confer-ence, the ‘How Should Young Profession-als Cope During a Reduced Oil Price?’ workshop was held which saw a number of industry experts come together to discuss the challenges young profession-als face during a downturn and helped to address their concerns. The work-shop also offered a fantastic networking opportunity for young professionals to meet others facing a similar situation.

It is customary for the oil price to fluctu-ate and to eventually stabilise. As young professionals working in this turbulent market, it is essential that we remain op-timistic by looking for new opportunities, enhancing our skills set and, most impor-tantly, by learning from past experiences.

Ross Taylor, Young Professionals Committee Chair, The Society of Petroleum Engineers (SPE) Aberdeen Section

society of petroleum engineers www.spe.org

enegi builds Marginal Field consortiuMstructurAl engineering specialist Apollo Offshore Engineering has joined Enegi Oil’s consortium looking at ways to exploit marginal oil fields in the North Sea, and further collaborative deals are expected to be announced over the coming weeks, including in the areas of process engineer-ing and project management. However, talks being held with Wood Group have proved unsuccessful, and the local oilfield services giant will not participate. The venture is something the OGA would very much approve of, as it shares the OGA’s goal of using technology to bring down costs, and exploit marginal reserves.

Apollo joins Kongsberg Maritime and Braemar ACM Shipping as part of the Mar-ginal Field Delivery Consortium, which has at its heart Enegi’s joint venture with AB Technology (ABTOG) - any intellectual property resulting from the collaboration stays with ABTOG. The consortium is already working on both fixed and tethered oil rigs for the North Sea, with the aim of developing unmanned platforms to keep operating expenditure to a minimum.

Alan Minty, Enegi’s CEO and chairman, said Apollo’s structural engineering exper-tise would be invaluable in ensuring the delivery of its solutions. “Sadly, agreement was unable to be reached with Wood Group PSN, but we believe that with the members we already have and those we are in discus-sions with we are creating a consortium with the ability to provide a 'one stop shop' to deliver our Marginal Field Initiative and look forward to working with Apollo and the other members of the consortium to take this venture forward."

Enegi and ABTOG see themselves as being “at the vanguard” of industry efforts to find solutions to extend the life of the North Sea, according to ABTOG chairman Mike Bowman. “The current challenges

centrica aWards atKins Five-year oil Well decoMMissioning contractAtkins hAs won a five-year offshore contract to assist UK's Centrica Energy with oil and gas decommissioning activ-ity. Atkins will provide pre-FEED (Front End Engineering Design) services for any fields to be decommissioned in the UK or Netherlands during the contract period, as decided by Centrica.

"As more oil and gas infrastructure begins to reach the end of its design life, multi-industry expertise and decommissioning experience from the nuclear sector, as well as the oil and gas industry, has become an important differentiator for Atkins in winning work," Atkins oil and gas business managing director Alex Campbell said.

Centrica Energy’s UK projects director, Myrtle Dawes, said: "We are determined to maximise the potential of all our assets in the North Sea, but in a mature region like the UK Continental Shelf the industry must also think about how we decommission our offshore platforms, subsea infrastructure and pipelines."

faced by the industry in the [UK Conti-nental Shelf (UKCS)] provide substantial hurdles and require innovation and col-laboration to change the trend of declining production,” he said.

Enegi aims to focus on reducing the costs of onshore projects and exploiting some of the less economic oil and gas discoveries in UK waters. Mr Minty said low oil prices had created an opportunity for their business model. “We can develop marginal fields, eco-nomically, at the current oil price,” he said, using a combination of the specialist skills and services bought together in the consortium.

“Kongsberg are renowned for their control systems, automations and process so consequently will aid us enormously in

reducing the op-ex side,” he said. “Braemar, they bring a plethora of contacts and op-portunities”– which will help fund a new platform, as well as carrying out the ne-gotiations with ship yards. Each company involved will provide its expertise to the consortium, helping it exploit some of the less economic oil and gas discoveries off the coast of the UK.

“We expect these companies, as well as the addition of further industry players in the near future, to significantly increase the venture's activity,” said Mr Minty. “We look forward to working with our new partners, gaining further projects and taking the marginal field initiative to the next stage of its development."

Alan Minty, Enegi CEO and

Chairman

Atkins: Experience in nuclear and other

industries key advantage in decommissioning


enQuest raises Production by over 20 Percent; cuts costsequity proDuction for leading UK independent, EnQuest, averaged 30,768 b/d for the four months to the end of April 2015, up 20.2 percent on the same period in 2014. Full year 2015 production guidance has been confirmed at between 33,000 and 36,000 boe/d, representing a 24 percent annual increase. EnQuest is also undergo-ing a major program of cost reductions, which, it said in May, remained on target.

Among the additional production coming online is the EnQuest Producer Floating Production, Storage and Offloading (FPSO) vessel for the Alma/Galia development (see photo), which remains on track for first oil in mid-2015. The FPSO has been securely moored on location in the field and the prep-aration process for pulling in the risers has commenced. Further forward, the Kraken development continues to be on budget and on schedule for first oil in 2017.

In May, EnQuest CEO Amjad Bseisu said: “Production of 30,768 boe/d to the end of April is a good start to the year and was achieved as a result of ongoing strong opera-tional performance across EnQuest’s assets and the inclusion of Malaysia, in line with our expectations. The strong performance in our newly acquired Malaysia assets, where we took over operations late last year, is testament to our ability to quickly impact production in late life assets.”

“Across the business, we continue to imple-ment our program of cost reduction, improved efficiency and capital expenditure rationalisa-tion. The extensive 2015/2016 oil price hedging programme remains in place and we have taken a further precautionary measure in resetting the covenants on the retail bond. EnQuest is positioned to achieve substantial increases in production from both Alma/Galia and Kraken over the next two years, delivering material increases in cash flow.”

In the North Sea, Thistle’s production declined year on year due to Q1 2014 pro-duction benefiting significantly from new wells. The field’s average underlying decline rate remains low and Q1 2015 production efficiency was above 90 percent. Drilling recommenced at Thistle in April 2015. Completion operations are ongoing on the first well, ‘A61’, which exceeded pre-drill ex-pectations. Two further wells are planned.

Don area production was reduced in January and February because the West Don Well W4 was shut-in; production was successfully restored in March. Drilling operations on the Ythan production well completed in April. The well will be tied in and brought online by mid-2015. Drill-ing of the Ythan AA injector is planned for H1 2016.

Following encouraging results from the H66 production well, the latest redevelop-ment drilling was completed on Heather in March. Replacement of the Broom water injection flow-line is ongoing and expected to be completed in Q2 2015. Following the success of the Mallard workover last year, a

enQuesT neT producTion (boe/d, working inTeresT basis)

Gadwall sidetrack is expected to be drilled in mid-2015 at the Greater Kittiwake Area.

In Q1 2015, the EnQuest Producer vessel left the yard in Newcastle. It was then moved to its location on the Alma/Galia field where it was made ‘storm safe’ and the final (ninth) anchor chain was successfully installed in early May. The preparation process for pulling in the risers has begun and Alma/Galia remains on course for first oil in mid-2015, with five wells available to come onstream. Drilling on the Galia production well is to be completed and tied in during H2 2015.

The Kraken programme for 2015 includes the installation of subsea hardware. The manifolds for the first drill centre which connect to the templates are already in-stalled, as are the two templates for the second drill centre. Installation of the mooring system for the FPSO has com-menced. The drilling rig is due to leave the shipyard for the Kraken field during Q2 2015, after undergoing its five year ‘special peri-odic survey’. It is then expected on location

at Kraken in H2 2015, to commence the Kraken batch top-hole drilling programme.

As well as the North Sea, EnQuest has begun replicating its UKCS model in a small

net daily average, Jan-Apr 2015 net daily average Jan-Apr 2014

thistle/Deveron 9,354 7,809

Dons 10,079 6,587

heather/Broom 4,030 4,238

kittiwake 8,451 2,774

Alba 1,289 1,192

total ukcs 25,597 22,601

EnQuest Producer FPSO for Alma/Galia on track for first oil mid-2015

EnQuest: More wells planned for Thistle

number of other maturing regions, such as Malaysia, where its operated assets include the PM8/Seligi Production Sharing Contract (‘PSC’) and the Tanjong Baram development.

NEWSoffshoreaberdeen.com | May 2015 | Offshore Aberdeen | 5

w fqmltd.com e [email protected]

t 01224 628 260

HOW DO WE MANAGE SAFETY IN OUR INDUSTRY WITH EVERYTHING PAST IT’S SHELF LIFE?

Degradation or deterioration is a natural phenomenon which no-one and nothing can escape from. There is a catchy slogan within our industry which says “Our Assets are Safe and We Know It” which inherently dictates that something needs to be done…sometime.

The simple answer is that cosmetics won’t cut it! There is no wonder treatment that will bring our aging assets eternal youth, but there are actions we can take which will extend their safe working life.

Management of this issue must be firmly based on a meticulous and consistent approach to asset care, through a rigorous inspection, maintenance and repair regime using the right methods, tools and people and timely application of subsequent programmes.

This will invariably amount to a significant investment in technology, services and management input. In addition to this there should also be a proportionate investment in the people involved.

The people investment will include an increased awareness throughout the organisation of the risks involved in operating ageing assets. The latent nature of this risk means that it may well remain unseen until the failure event – when it’s too late.

Revisiting the training and competencies required for asset integrity roles, complimentary to conventional engineering qualifications and experience and in some cases a shift in the behaviours of key staff – with the clock ticking this may not be a project that can be put back another year!.

EVERY MONTH THE EDITOR, JEREMY BOWDEN ASKS FQM A FACT FINDING QUESTION...


shell cuts deePershell hAs wArneD that further jobs and investment are at risk in the North Sea as it slashed annual global spending by a further £1.3bn and reported a 56 percent slump in first-quarter profits.

Simon Henry, the chief financial officer, said the planned takeover of rival BG could be a “springboard” for further cutbacks, adding that Shell “is not necessarily a natural owner of assets in the North Sea but there are other companies who may well have more expertise” given the age of the fields.

Shell cut 250 jobs from its UK offshore base at Aberdeen last summer and sig-nalled others could go as the oil company announced a further reduction in its overall global spending from $35bn to around $33bn this year.

Henry said positive North Sea tax changes by the government and the es-tablishment of a new Oil and Gas Authority

FairField decision to decoMMission dunlinfAirfielD energy hAs announced plans to decommission its Dunlin Alpha platform in the North Sea. Production from all Dunlin cluster fields will shut down in mid-June ahead of the decommissioning process. Fairfield said the depressed oil price and “challenging operational con-ditions” were behind the move, which is expected to cost about £400 million.

The Dunlin field started production in August 1978, with production peaking at about 120,000 b/d in 1979. The oil field is situated 300 miles north-east of Aberdeen in the East Shetland basin, just a few miles

from the Norwegian boundary line. It was originally operated by Shell but Fairfield acquired the Dunlin, Dunlin SW, Merlin and Osprey fields in 2008.

had only gone so far. “[Ministers] have to move quickly to make it attractive – at the moment it’s not.” However, Shell CEO Van Beurden said the company was to invest £4bn in the North Sea between 2016 and 2018 and was committed to the region.

Hannon Westwood’s CEO, Ian Norbury commented: “Shell’s move to acquire BG has been expected for some time and obvi-ously makes sound strategic sense. Shell has struggled with its worst production performance for over 15 years and several expensive dry holes internationally. The acquisition will increase Shell’s oil and gas reserves by almost 30 percent, will access a management team with a successful explo-ration track-record, and will position Shell as a key player in international LNG. Whilst the North Sea will remain a key production area, mature and non-strategic elements of the combined portfolio are likely to form part of the promised global asset sales”

neW estiMate For conventional layer at england’s horse hill oil FieldestimAtes hAVe Been revised to 21 million barrels for the conventional, upper layer of reserves at the Horse Hill oil deposit near Gatwick, up from the 8.2 million re-ported on 17 December 2014. However, the company said meaningful estimates of recoverable oil within the Upper Port-land layer could only be made following a flow test.

The Upper Portland is the uppermost conventional oil-saturated reservoir found at the field, and it overlies the Kimmeridge, Oxford and Lias oil-saturated unconven-tional layers, which could contain many bil-lions of barrels, as reported earlier this year.

Stephen Sanderson, UKOG's CEO, com-mented: "[This] supports the Company's view that the Horse Hill and Collendean Farm oil pool constitutes a significant conventional Upper Portland Sandstone oil discovery in the Weald basin."

Subject to approval, the company intends

lundin secures loan to Maintain Position lunDin remAins in a precarious posi-tion, with the company warning late in April that higher than expected explora-tion costs of around $45 million and a $204 million foreign exchange loss would hit profits in the first quarter of this year. However, the company has been able to secure a $600 million loan, which should help cover the expenses, which are seen as one-offs.

The 2-year loan, which is an exploration refund facility (ERF), was secured from a group of ten international banks, against tax refunds generated from the compa-ny’s exploration and appraisal activities in Norway.

The pre-exploration costs are mainly related to two exploration wells Lundin

to flow test this conventional sandstone zone later in 2015. Development of the conventional part of the field could pave the way for application of unconventional techniques at a later date. Once the local population is used to operations at the field, it may be easier to move onto frack-

ing at the site. The Conservative victory in May’s UK

election has given the project a boost, and the operator, Horse Hill Developments Ltd, intends to ask the Oil and Gas Authority for permission to move the PEDL137 licence into production as soon as practicable.

drilled in Norway during the first quarter. These are Production Licence 338C’s Gemini well, which turned out to be dry, and the Zulu well on PL 674BS, which yielded a gas discovery. The foreign exchange loss was caused by a stronger US dollar and relates to the revaluation of loans.

Lundin has also reduced capital require-ments through the farm out of a 30 percent stake in the PL544 concession in Norway to Lime Petroleum Norway, a subsidiary of Hibiscus Petroleum. The companies are already partnering on a number of other li-cences on the Norwegian Continental Shelf.

CFO Mike Nicholson stressed that the company has a strong balance sheet with multiple sources of liquidity available for funding its future development and explo-

ration program. The facility is simply “a low-cost source of funding which provides us with an additional source of liquidity, particularly in a low oil price environment.”

Xcite eXPands bentley estiMatesXcite energy hAs upgraded the reserve estimate for its Bentley field in the UK North Sea to 265 million barrels of heavy oil reserves, up from 257 million previously, as well as 36 billion cubic feet (1 bcm) of gas. Based on these figures, the company said proven and probable reserves at the field were now worth $2.3 billion, up from a pre-vious estimate of $2.1 billion, making the project economic at below $35 per barrel.

Last year Xcite signed a deal to buy a drilling rig from China Oilfield Services Ltd (COSL) that will be used for the Bentley field. Other companies involved in the project include AMEC, Aibel, Arup, Baker Hughes and Teekay. It has also signed col-laboration agreements with Statoil, Royal Dutch Shell and EnQuest to evaluate poten-tial development and operational synergies with neighbouring fields.

“Shell’s move to acquire BG has been expected for some time and obviously makes sound strategic sense”

Ground zero for UK oil? Drilling equipment lies next

to a shipping container housing the exploratory

well-head at Horse Hill, near Gatwick airport.

Rowan Norway drill floor on Bentley Phase 1A


nPd: Johan sverdruP Faces delay and cost over-runthe stArt-up of Norway’s Johan Sver-drup oilfield could be delayed by six months until mid-2020, while costs are expected to be $1.3 billion over-budget because opera-tor Statoil failed to plan for schedule or cost overruns, according to the Norwegian Petroleum Directorate (NPD).

“The NPD believes the schedule for the first phase is ambitious compared to com-parable projects in the petroleum industry,” the oil ministry said last week. The ministry said there was no reason to panic, though. “Even with the Directorate’s higher cost estimate, this is well within the uncertainty interval given [Statoil’s] plan for develop-ment and operations of plus or minus 20%, and the project could break even at around half the current oil price,” the ministry said.

Based on Statoil’s analysis, the expected net present value before tax of the field’s first phase of development is around 270 billion Norwegian krone ($36 billion). This means it would be profitable at anything above $32/boe, compared with Statoil’s previous breakeven price forecast of under $40/bl. Although Johan Sverdrup has been plagued with cost and schedule overruns, it remains a low-cost field, largely because its resources lie in relatively shallow waters

statoil seeKs to boost aasta hansteenstAtoil is prepAring to drill a wildcat well in the Norwegian North Sea in an attempt to locate additional resources near its Aasta Hansteen prospect. Statoil is under pressure to boost the high-cost project’s value, especially given the slump in oil prices.

The company submitted an application with the Environment Directorate for the Gymir exploration well (6706/11-2), which is to be drilled by the Transocean Spitsber-gen semi-submersible. The Spitsbergen was recently responsible for a discovery at the Roald Rygg prospect, which is located 6 km away from Gymir.

Both wells bear some similarities, sharing the same depth and the same reservoir with closely matched characteristics in the Nise formation. The new well is to be drilled to a total depth of 2,655 metres, with operations slated to begin in June 2015.

Any new find would be the fourth dis-covery in the vicinity of Aasta Hansteen this year. Drilling in the 6706/12-3 explora-tion well reached a subsea depth of 3,296 metres at Roald Rygg, which is in Production Licence 602. It uncovered a 38-metre gas column in the Nise Formation with excellent reservoir quality. Early estimates indicate gas volumes of between 1.8 and 6.7 billion cubic metres at the Statoil-operated site.

close to existing infrastructure.The first phase of Johan Sverdrup, which

Statoil operates and is also partly owned by Lundin Petroleum, Maersk, Det norske and Petoro, was originally predicted to cost 117 billion krone ($15.6 billion). The field is expected to produce 1.86 billion boe in that first phase, with total recoverable resources of around 2.3 billion boe for the full field development. The second phase is expected to start in 2022.

Production could continue for around 50 years with an oil recovery rate of around 63 percent. Statoil has also demonstrated

that various measures, such as alternating water and gas injection or adding polymer to the injection water, could further improve recovery at the field. The NPD has encouraged the licensees to adopt these measures.

The NPD has also called for licensees to adopt measures aimed at reducing emis-sions to air and discharges to sea. Water produced at the field will be cleaned and re-injected into the reservoir, helping to make Johan Sverdrup the least polluting field on the Norwegian Continental Shelf (NCS) in terms of air emissions and sea discharge.

Snefrid Nord, located less than 7 km to the east, was completed in March, making a comparatively larger find of between 4.7 and 6.7 bcm. Put together, the discoveries added an additional 25 percent of recoverable resources to the Aasta Hansteen project, which Statoil hopes to bring on-line in 2017.

Aasta Hansteen, which now consists of five discoveries, is one of the largest develop-ments in Norwegian waters, and is targeting a confirmed resource of 47 bcm. Located 300 km from land and outside established infrastructure, the $5.6 billion project will require the construction of the 480-km Po-larled pipeline to connect it to the mainland.

china’s cosl drilling signs deal With PsWnorwAy’s psw group has signed a deal with China Oilfield Services’ subsidiary, COSL Drilling Europe, to provide subsea and riser maintenance services for COSL’s drilling rigs. Under the contract, which covers a dura-tion of three years plus an extension option for two years, PSW will inspect, maintain and repair marine risers and related subsea equipment for all COSL Drilling Europe’s drilling rigs starting April 2015 to 2018.

Work will be carried out at PSW’s subsea &

drilling facility at Mongstad, Norway, close to COSL Drilling Europe’s logistical warehouse. “(With) COSL Drilling Europe being a tier one supplier of purpose-built rigs for the mid-water segment in Norway, it is crucial that our equipment is correctly and well maintained at all times. Awarding this contract to PSW Group will give us the support and quality we need in order to deliver the services we are known for,” said CEO of COSL Drilling Europe Jorgen Arnesen.

hertel oFFshore changes naMe to cKt ProJectshertel offshore hAs now changed its name and will continue its business as per May 1, 2015 under its new name: CKT Proj-ects. Hertel Offshore came about as result of the merger of three companies between 2005 and 2008: Hertel Marine Services BV, CKT Projects BV and McGill Services Ltd. The name change has now been made due

to greater CKT brand recognition. Robert Jan Dubbeldam, Managing Direc-

tor of CKT Projects said: “We are convinced that we have a strong potential to further develop CKT Projects as a market leader in our businesses and to serve our customers locally and around the globe under our new brand name CKT Projects”.

“...we have a strong potential to further develop CKT Projects as a market leader”


talisMan drills duster near vargtAlismAn energy norge, operator of production licence 672, has finished drill-ing wildcat well 15/12-24 S in the central part of the Norwegian North Sea about six kilometres north of the Varg field, and 220 km southwest of Stavanger. The well was classified as dry. It was the first exploration well in production licence 672, which was awarded in APA 2012.

New discoveries have already been made near Varg, and new production wells drilled, serving to extend the life of the field. Located in a water depth of 84 meters, the Varg development comprises one unmanned platform and the Petrojarl Varg FPSO. The field has been a success, in that it has produced three times the oil estimated when the project was approved

cathelco boosts scottish Presence With acQuisition oF graMPian electrotechgrAmpiAn electrotech Services, which specialises in electrical equipment installation for offshore vessels and fishing craft in Scotland, has been acquired by Cathelco Ltd, a UK manufacturer of ships’ equipment. The Kintore based firm, now renamed Cathelco Grampian, is headed by Gavin Fisher, who has been tasked with expanding the company’s business in Scotland.

Cathelco equipment is widely used on offshore supply vessels operating out of Ab-erdeen and also protects numerous Scottish trawlers. The company has also undertaken a number of projects to protect offshore platforms against corrosion, an increasing problem with ageing North Sea assets.

“The company is a well-established sup-plier to the offshore oil market and fishing industry in Scotland. Now our aim is to create a stronger presence in the commer-cial shipping sector where Cathelco can offer a range of products to reduce main-tenance costs,” Gavin Fisher commented.

Cathelco manufacture a range of prod-ucts for marine applications. They are world leaders in seawater pipework anti-fouling systems used to prevent blockages caused by bio-fouling in ships’ engine cooling systems. They also produce ICCP corrosion protection systems which safe-guard the hulls of ships and offshore plat-forms against corrosion.

More recently, Cathelco have introduced a series of reverse osmosis desalinators, and developed an innovative ballast water treatment system for vessels.

Varg field: Talisman 65 percent (operator), Petoro 30 percent, Det norske oljeselskap 5 percent

Gavin Fisher, head of Cathelco

Grampian

by the Norwegian authorities.In 2014 the Varg field began exporting

gas. Until then, the field – which began oil production in 1998 – had no economically accessible infrastructure for gas export in the area, so the associated gas was in-jected into the field, partly to stimulate the recovery of oil and partly as a storage site. The gas is now exported through a new six-kilometre long pipeline to the Rev Field, for further export via the Armada Field to the UK.

The well was drilled by the Maersk Giant drilling facility, and has now been plugged and abandoned. The Maersk Giant will now start permanent plugging of wells on the Varg field in production licence 038, where Talisman is also operator.

oFFshore installation services Wins MultiPle-Well decoMMissioning deal With centricaoffshore instAllAtion serVices (OFS) has been awarded a contract to de-commission multiple wells in the North Sea by Centrica Energy. In the first phase of the operation, OFS will deal with six subsea wells in the central North Sea, which will be decommissioned using a diver-less, vessel-based approach. Planning and engineering are already underway on the project, and the offshore scope will mobilise this summer.

The high degree of flexibility permitted with the rig-less operations, means OIS continues to engage with other North Sea operators interested in joining the cam-paign, which would enable operators to share project costs. The company has

performed 17 multi-operator campaigns of this sort since 1996. Since 1996, OIS has successfully completed more than 118 well decommissioning projects without a single lost-time incident.

“In the first phase of the operation, OFS will deal with six subsea wells in the central North Sea...”


right now, offshore oil and gas decommissioning is hitting the headlines on a frequent basis - and no wonder. It’s a growth industry and in the UK, we are ideally placed to make the very most of the prospects North Sea decommission-ing represents. Thanks to the events run by Decom North Sea and our partners, those immersed in the oil and gas sector are becoming increasingly aware and knowledgeable of the sector and challenges ahead. However, we feel that the industry’s supporting operational and professional services could often benefit from further education on the hugely significant busi-ness opportunities held within decommis-sioning activity.

As the dedicated North Sea decommis-sioning industry forum, DNS plays a pivotal role in ensuring the entire supply chain ap-preciates the background, scope and key issues associated with the decommissioning sector. Decommissioning legislation, safety and environmental issues, identifying best practice and improvement opportunities across the field should be accessible topics for anyone who is involved – or likely to become involved – in decommissioning.

So how do we ensure we get that infor-

mation and those messages out across all relevant sectors? In addition to events like the recent Decom Offshore and upcoming Decom Conference, DNS hosts a variety of workshops and training sessions, which are aimed at all levels – from those who are involved with decommissioning on a daily basis to those who are looking for an intro-duction to the sector. Aimed at the latter group, Decom North Sea has partnered with Strategic Decom to develop An Introduc-tion to Decommissioning - From Planning through Execution which introduces the activities involved in the whole life-cycle of a decommissioning project, highlighting the associated key issues from initial plan-ning through execution. With unparalleled consultancy expertise in decommissioning, the course facilitators have over 100 years’ of operator experience and have also been instrumental in the development of global decommissioning strategies, whilst leading a number of decommissioning-related in-dustry expert groups.

It’s the perfect course for those who are new to decommissioning, including manag-ers across all operational and professional services who wish to gain a better under-standing of decommissioning and a typical

decoMMissioning – hoW Much do you really KnoW?

Nigel Jenkins is Chief Executive of Decom North Sea, responsible for leading the representative body for the decommissioning industry. Previously a director with Decom North Sea from 2011 – 2013, he took up his current position in July 2014. Previous roles include board leadership positions with AMEC and AECOM, and most recently as board director with KDC Contractors – specialists in decommissioning. He is passionate about industry’s collective responsibility to efficiently manage and deliver end-of-asset life solutions.

“An Introduction to Decommissioning - From Planning through Execution” takes place in Aberdeen on 10/11 June 2015.

FOR FURTHER INFORMATION on both, please visit www.decomnorthsea.com or email [email protected] 2014, planning is now underway for our 2015 annual event. This event will bring together 250+ decommissioning professionals from all tiers of the industry, providing the operators and supply chain with an excellent opportunity to engage with one another. The event will showcase the innovation,

within the sector and consider how this

faced with the current market challenges.

SPONSORSHIP AND EXHIBITION OPPORTUNITIES

AVAILABLE

FOR FURTHER DETAILSPlease contact Izzie [email protected] 914044www.decomnorthsea.com

Save the DateWednesday 27th May 2015Aberdeen Exhibition and Conference Centre, Aberdeen

project. Without going into detailed engi-neering or contractual models, this type of course draws upon experience and examples from previous decommissioning activity to reinforce points and issues. The principles introduced are transferable across most assets and facilities, providing that vital insight from an Operator’s perspective.

Decom North Sea has a very clear strategy

that is built upon fundamental elements: informing all our stakeholders, learning, collaborating and improving. Participa-tive courses like this clearly and effectively reflect that strategy, providing a real depth of information and opportunity for industry newcomers, as well as for those currently working in the sector who are looking to expand their knowledge.

subsea 7 Wins $300 Million Maria contract suBseA 7 hAs won a contract with a value of $300 million for the Norwegian Maria field development from Wintershall Norge. The field is located in the Norwegian Sea at a water depth of 300 metres. The pipeline and subsea construction contract consists of engineering, procurement, construc-tion and installation (EPCI) of 95 km of rigid flow-lines and associated structures to develop the Maria field.

Project management and engineering work will start immediately at Subsea 7’s offices in Stavanger, Norway. Offshore activities will utilise a variety of Subsea 7 vessels, including the new-build vessel, Seven Arctic, with its high-end capabil-ity and capacity. Offshore operations are scheduled to commence in 2016 and are expected to be completed in 2017. The pipeline production for clad, mechani-cally lined pipe, plastic lined and carbon steel pipelines will take place at Subsea 7’s spoolbase at Vigra, Norway.

no lucK For suncorsuncor energy norge, operator of production licence 375, has completed drilling of appraisal well 34/4-14 S in the oil discovery 34/4-11, with the well turning out to be dry. The well had been expected to access recoverable reserves of about 7 mcm of oil and 700 mcm of gas.

The well did, however, encounter a res-ervoir in the Statfjord group from the Early Jurassic Age and proved 11 metres of net sandstone of good quality. The reservoir is in the Brent and Statfjord groups and was proven in 2010. It is located 20 km northwest of the Snorre field in the Norwegian North Sea. This well is the third exploration well in production licence 375, awarded in APA 2005.

Offshore Aberdeen | June 2015 | offshoreaberdeen.com10 |

FOCUS

Continued from page 1

Commenting on the moves, Deirdre Michie, CEO of trade body Oil and Gas UK, said: “We are looking forward to meeting the new ministers as soon as possible in

order to support them in understanding the contribution our industry makes, and to outline the issues we face.” “For our industry stability is very important, and therefore we also hope to see continuity of office within this new cabinet.”

“These ministerial positions are absolutely crucial to the ongoing success of our industry, which contributes so much to this country, not only through supplying

Oonagh Werngren, Oil & Gas UK’s Operations Director.

Conservative impliCations

a secure supply of oil and gas, but through the support of some 450,000 jobs and a £35 billion supply chain which is recognised as world-leading.

“In order for the UK to thrive in the long term, energy policy needs to be at the heart of economic policy. We are looking forward to meeting the new Ministers as soon as possible in order to support them in understanding the contribution our industry makes, and to outline the issues we face. For our industry stability is very important, and therefore we also hope to see continuity of office within this new Cabinet.”

Oonagh Werngren, Oil & Gas UK’s operations director, said in Aberdeen last month that Coalition policy had laid the foundations for the regeneration of

the North Sea, but that the industry now needed to build on this by delivering the cost and efficiency improvements required to secure its long term future.

“Although tough decisions on resources and projects are having to be taken by individual companies, there is also now a concerted effort to work together to tackle the fundamental behaviours that have driven cost escalation on the UKCS. The goal is to achieve a more internationally competitive oil and gas province and attract the fresh investment needed to unlock the North Sea’s remaining potential. Achieving this will require a 40 per cent reduction in the industry’s cost base.”

“Our vision for 2020 is an industry actively exploring and maximising recovery of the

UK’s oil and gas, a supply chain providing a strong engine for growth with lifting costs less than $20 per barrel. The sector now has to deliver the bold action and behavioural change needed to make the vision a reality. Everyone has a part to play,” she added.

Falling investment Speaking recently in Aberdeen, RBS chief economist, Stephen Boyle, said that even with the most favourable UK government policies, investment was likely to fall over upcoming years. He pointed out that oil and gas industry expenditure for 2014 was £26.5 billion, while the Office for Budget Responsibility forecast in its March 2015 Economic and Fiscal Outlook that the average annual spend between 2015 and

2019 would be £18.2 billion, marking a 31 percent drop in expenditure.

Mr Boyle continued: “Oil and gas is going through a significant structural change, and addressing this requires a strategic structural response. Service companies have already been receiving requests to cut costs for many months now, so that operators can in turn reduce their bottom line.”

“This is a short term measure, however, and in order to implement a sustainable, long-term response, the industry must look at smarter ways to meet clients’ needs. Doubling down on innovation and productivity are becoming of greater importance than ever before.”

Niall Farquharson, joint managing partner at Johnston Carmichael’s Aberdeen office, re-iterated that innovation and research and development into new technologies are key factors in the long term sustainability of the oil and gas industry. “Aberdeen is well established as a centre of excellence for innovation, and the city, in recent years, has been second only to Cambridge in terms of the number of patent applications submitted,” he said.

“In addition to the recently announced changes to the oil & gas regime, a number of announcements were also made as part of the 2015 Budget to improve access to R&D tax credits for small and medium sized businesses. This will work alongside previously announced increases to R&D tax relief. These are very welcome measures which come at an extremely appropriate time, as the oil and gas industry goes through a radical shift.”

Other senior figures have also been highlighting the importance of technology and innovation, which Conservative policy is expected to encourage. Neil Gordon, CEO of Subsea UK said: “Research and development work is one of our key priorities. It helps us identify and deliver

“In order for the UK to thrive in the long term, energy policy needs to be at the heart of economic policy.”

FOCUSoffshoreaberdeen.com | June 2015 | Offshore Aberdeen | 11

“Despite the concern over the decline in the price of oil, the UK still boasts the single largest concentration of subsea capability and excellence in the world.”

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Conservative impliCations

Joint managing partner at Johnston Carmichael, Niall Farquharson and RBS head of group economics Stephen Boyle

smarter, more cost effective ways to meet customer needs, which is crucial in the current climate. Essentially there needs to be a fundamental shift in the way we develop and deploy technology if the full potential of the remaining hydrocarbons in the North Sea is to be realised.”

“Despite the concern over the decline in the price of oil, the UK still boasts the single largest concentration of subsea capability and excellence in the world. Collaboration and innovation is what will drive the industry forward… It’s this type of pioneering technology that will help the industry meet its future needs in even deeper waters, with higher pressure and increasing complexity.”


FOCUS

north sea baCklogt he assets now on offer in the

North Sea include all E.ON’s as-sets, as well as some of Total’s 80 percent stake in the Laggan-Tormore field, West of Shetland,

which it co-owns with DONG Energy. DONG and Total have investments across four fields in the west of Shetland area – Laggan, Tormore, Edradour and Glenlivet. Total has said it would be investing less in mature fields to focus on assets with po-tential for higher returns.

Last year Shell announced that it would sell some of its North Sea up-stream assets (Anasuria along with Teal, Teal South, Guillemot A and Cook, and Nelson), as well as concluding the sale of its stake in Sean. It is thought that the acquisition of BG’s UK North Sea port-folio – valued at $4.9 billion - was not central to its takeover of BG in April, and some of these assets could also end up on the market. BG produced 17 percent of its production from the North Sea in 2014, with assets including three mature platforms and infrastructure hubs of Armada, Everest and Lomond; and non-operated interests in Buzzard, Elgin/Franklin and the J-Area fields.

Simon Henry, Shell’s chief financial of-ficer, said that Shell “is not necessarily a natural owner of assets in the North Sea but there are other companies who may well have more expertise” given the age of the fields. Hannon Westwood said it was likely that Shell would divest “mainly mature fields, and planned develop-ments where an investment decision has yet to be made.”

Other assets on offer include Cono-coPhillips’ 24 percent stake in Clair, and its interests in the Det Norske-operated Alvheim and Statoil-operated Grane fields in the North Sea, along with a stake in the Aasta Hansteen discovery being developed by operator Statoil in the Norwegian Sea. Mid-sized independent EnQuest is offer-ing a stake of 10 to 20 percent in Kraken, the heavy oil field it is currently developing, while Dana Petroleum is looking to sell up to 26 percent in its Western Isles develop-ment project.

Earlier in the year BP sold its stake in the Central Area Transmission system (CATS) pipeline system for $486 mil-lion, giving the investment firm Antin Infrastructure Partners nearly complete ownership. This keeps BP active in its program for 2014 and 2015 to dispose of assets in an effort to raise $10 billion in cash. "CATS has been a great business for BP," said Trevor Garlick, BP's regional president for the North Sea, but he added, "[We] believe securing this new owner will ensure a better long-term future for this key piece of North Sea infrastructure."

Last year major deals included Repsol’s purchase of Talisman’s UK North Sea port-folio worth $375 million as a part of its $13

billion corporate offer, as well as Ithaca ac-quiring producing assets from Sumitomo, Cairn selling interest in five licences to Dyas. Significant farm-ins in 2014 included Oyster Petroleum acquiring interest in Red Castle prospect, Trap Oil acquiring inter-ests in Romeo discovery from Suncor En-ergy in exchange for its interest in Niobe prospect and Eni acquiring interest in a licence from JX Nippon.

Factors including forced and strategic sales on the part of companies such as LetterOne and E.ON, along with aggres-sive mature asset divestment programs on the part of majors like Shell, could add to the downward pressure on North Sea asset values from rising costs and low prices. This could leave asset values under greater pressure in the North Sea than elsewhere over upcoming months.

Potential buyersThere are a number of companies looking for bargains in the North Sea, although many observers think buying interest may be thinner than elsewhere in the world. "The area where we believe there is going to be less interest is in the North Sea, which is a mature, high-costs oil province," HSBC said.

One of the companies looking out for acquisition opportunities is Statoil, with the company’s Mr Reitan telling Bloom-berg in May that, “acquiring barrels might be cheaper than exploring for bar-rels, so we are monitoring it very closely,” but that the good deals “have yet to be-come cheap”.

“There are a lot of assets for sale. But I think it’s fair to say that high-quality as-sets are still not cheap…. History never repeats itself, but it tends to rhyme,” he told the news agency. “Fifteen years ago there was a wave of consolidation. It’s not obvious that that will happen this time as well, but we never know.”

BP is another oil major that has said it would consider acquisitions even as it sheds operations in higher-risk, higher-cost regions such as Nigeria and Iraq. "The North Sea is an important region for BP. Our strategy here is to focus our resources and investment to create an efficient, sustainable and competitive business which will contribute to UK energy security for many years to come," said North Sea chief Trevor Garlick re-cently. Shell has also said it is looking, although the North Sea is not thought to be a priority area.

Strong downstream earnings have helped integrated majors hedge against lower oil prices. That is not the case with smaller upstream companies focused on extraction. So as far as the smaller firms are concerned, with the exception of spe-cialist low cost operators, there is little interest: "Portfolio rationalisation is ori-ented towards survival and restructuring - buying assets is not part of the discus-sion," said Philip Whittaker of the Boston

Continued from page 2

Consulting Group. "And even if there was appetite, the management bandwidth to get this done is very limited."

However, buying interest may come from high-profile oil and gas executives, who have teamed up with private equity funds seeking to invest billions in British North Sea assets and maximize profits by cutting costs, offering the ageing basin a badly needed lifeline. Reuters reported they had about $10 billion in backing, with large funds including Riverstone Energy, Carlyle Group and Blackstone in talks to buy producing assets or invest in

table 2: uk north sea deals 2014/5. (Source 1Derrick)

Date Buyer Seller Value $m $/2P BOE Assets traded

5/7/2015 Third Energy Atlantic 11 10% P1724 (Block 43/13b, Pegasus West discovery), 10% P1727 (Blocks: 43/17b and 43/18b, Harmonia Flank and Browney discoveries), 10% P2128 (Block 43/12, Andromeda discovery)

4/8/2015 Shell BG 4900* BG’s UK North Sea portfolio

1/13/2015 Edison Apache 10.47% Scott field and 15.65% Telford field

12/23/2014 Oranje Nassau Energy Shell; ExxonMobil

50% Sean field

12/16/2014 Hansa Hydrocarbons MPX Oil & Gas

23.077% P1566 (Blocks: 47/4d and 47/5d, Pharos gas discovery)

12/15/2015 Repsol Talisman 325* Talisman’s UK North Sea portfolio

10/30/2014 Total DONG 5% P1453 (Blocks: 206/3a, 206/3b and 206/4a, Edradour field)

9/26/2014 Total First Oil 10% P1195 (Block 214/30a, Glenlivet gas discovery)

9/25/2014 Dyas Cairn Energy 182 20.5 10% P1430 (Blocks: 28/9a and 28/10c, Catcher, Burgman and Varadero fields), 10% P2070 (Block 28/4a), 10% P2077 (Block 28/8), 10% P2040 (Block 29/11) and 10% P2086 (Blocks: 28/9b an 28/14)

9/22/2014 Total Faroe Petroleum

16 10% P1195 (Block 214/30a, Glenlivet gas discovery)

8/04/2014 Fosun International Roc Oil * 12.5% P111 (Block 30/3a, Blane field) and 12% P219 (Blocks: 16/13a and 16/13e, Enoch field)

7/03/2014 Total DONG 60% P1195 (Block 214/30a, Glenlivet gas discovery)

6/30/2014 MOL Premier Oil 130 9.1 21% Scott field; 15% Rochelle field; 1.59% Telford field in P185 (Block 15/22), P218 (Block 15/21a), P300 (Block 14/26a), P1298 (Block 15/26b), P1992 (Block 15/8b) and P1771 (Blocks 15/9, 15/10, 15/14 and 15/15)

6/23/2014 Ithaca Sumitomo 170 14.2 20% P185 (Block 21/20a, Cook field); 7.48% P111 (Block 23/22a, Pierce field); 7.43% P534 (Blocks 98/6a and 98/7a, Wytch field)

6/17/2014 Serica Energy BP 16 18% P57 (Block 23/26a - AREA B, Erskine field); 18% P264 (Blo 23/26b - AREA B, Erskine field)

struggling exploration and production (E&P) companies. The funds are hiring high-profile executive teams who will use their experience to drive costs lower by introducing efficiencies and slash contrac-tor costs at new assets. Such companies include Siccar Point, created late last year and headed by Jonathan Roger, a former executive at Conoco and British energy supplier Centrica, and backed by Black-stone and BlueWaterEnergy.

Hungary’s MOL is another proven buyer, having paid $90 million to acquire Ithaca Energy’s Norwegian portfolio, in-

cluding three operated and 11 non-oper-ated licences, with a combined reserves of around 600 million boe. “Entering Nor-way as one of the most investor-friendly countries is an important milestone in our E&P strategy,” said Alexander Dodds, MOL’s executive vice president for the upstream sector. “It enhances our posi-tion in the lower-risk offshore North Sea, where we are in the process of building a new production hub and know-how cen-tre along with the whole E&P value chain that should serve as a solid basis to our long-term goals in the region.”

* Multi region deals; only UK North Sea assets mentioned


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Could uk shale provide opportunities for aberdeen Companies?

a s well as being a strident advo-cate for renewable energy and reducing carbon emissions, the new minister, Amber Rudd, is a strong supporter

of the UK’s shale industry. She backed de-velopment of the industry in comments earlier this year, provided the work can be done “extremely safely”, although she ac-cepted proposals put forward by Labour to ban the use of hydraulic fracturing (frack-ing) in national parks.

This follows the line in the Conservative manifesto, which stated that the party would “support the safe development of shale gas” in order to boost employment and domestic energy security. While she also favours most renewables, she is less positive about onshore wind. In 2011, she said that “the benefits of onshore wind have been hugely exaggerated” and that the government “needs to look much more closely at other sources of renew-able energy.”

Cameron has said: "On fracking, we do

need to take action across the board to help enable this technology to go ahead...There is a worry people are going to have to go through so many different permits in order to start fracking that they sim-ply won't bother, so we need a simplified system." Many companies involved in the offshore sector see shale oil and gas as a potential diversification opportunity, according to industry studies. But this might not have chance to happen in Scot-land, where the SNP has imposed a mora-torium on fracking.

“If the North Sea and shale sectors are to reach their full potential, supportive policies will be required. In the North Sea, the tax burden must continue to adjust as the basin matures. The future of the embryonic shale sector will depend on whether it is nurtured by policymakers; if not, the UK’s ‘shale boom’ could be over before it even begins,” said Will Scargill, a GlobalData Senior Analyst.

While support is likely to come from Westminster, the position of the Scottish

government is unclear. While it might not be favourable to onshore fracking, offshore it is something SNP representa-tives have said should qualify for public funding, for research at least. Taking the practice offshore, and indeed into regions where conventional oil and gas projects have long been in operation, can be more politically and socially acceptable.

Offshore fracking has been around for years but its extent has been limited in comparison to the onshore boom. As well as being used to boost output from mature fields, fracking is being employed in new offshore projects. For example, RWE Dea used the technique on its Clipper South gas field, which came on stream in 2012 – which also involved horizontal drilling. Meanwhile, Trapoil, announced earlier in 2013 that it was seeking a partner to hunt for oil in the Central North Sea, using frack-ing. As well as the UK, the offshore sector has fracking operations in the Gulf of Mex-ico, Mexico, Brazil, the Arabian Gulf and West Africa. The major oilfield services

companies – Halliburton, Schlumberger and Baker Hughes – all operate fleets of

Prime Minister David Cameron visits the Total Oil Depot shale drilling site in Gainsborough, Lincolnshire

stimulation vessels. (For more on this see review of IHS study on page 15)


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sCotland needs shaleW hether it is onshore or off,

it is a Scottish customer – The Grangemouth refin-ery – upon which many Scottish jobs depend that

is among those which need the cheap gas most. Today, Grangemouth site employs over 1300 people directly, generating 3 percent of Scotland’s GDP and exports goods worth £9bn per annum. The rise in North Sea gas prices has meant Grang-emouth has to ship in cheap US shale gas

The Sun Sets On Grangemouth Oil Refinery

to remain competitive. However, longer term Grangemouth

owner, Ineos, is looking to domestic shale. The company has secured a number of shale licences in the UK over the last 18 months, including a 100 percent share in Licence 133, which covers the Midland Val-ley of Scotland and includes a 127-square mile area around Grangemouth and the River Forth. INEOS has also acquired 50 percent interests in seven areas in North West England, making it the third largest

shale player in the UK.Currently it is unclear whether the com-

pany will be able to drill on its Scottish li-cences. So far, the SNP has not declared whether the moratorium, issued in Janu-ary this year, covers testing for fracking, or commercial feasibility studies, and some observers claim it was put in place for populist political reasons, and may be reversed. It is difficult to see how the ban fits with the SNP’s view on offshore frack-ing, or the oil and gas sector generally –

for which it favours more public support. It’s all a far cry from Texas, where anti-

fracking bans have themselves been pro-hibited by the state legislator. The move came in response to a surprise voter-driven ban on fracking in the city of Den-ton, Texas, late last year, where people objected to truck traffic and the large in-dustry presence in town. The Texas state legislature, with the support of the in-dustry, quickly responded, passing a law that will prohibit bans on fracking and

removes some of the zoning power that Texas towns and cities had over the siting of drilling, allowing oil companies a freer hand in drilling where they want – while it might create opportunities for the indus-try in the UK, it is difficult to imagine such a thing happening here, and I think most companies would feel rather uncomfort-able about it. However, if we don’t develop our own shale gas, there is little doubt that dependence on Russian gas imports – and imports from elsewhere - will grow.


unConventional teChniques Could expand aCCess to north sea’s mature reservesW hile the fracking debate

continues in the UK, technically its potential is increasingly being un-derstood. A new study

from consultants IHS, shows that apply-ing unconventional techniques to mature conventional wells, could unlock reserves of more than 140 billion barrels outside North America, including in the UK’s North Sea.

IHS energy researchers conducted a high-level assessment that identified more than 170 mature oil plays worldwide with untapped oil potential that might benefit from horizontal drilling and hy-draulic fracturing. The study found that the UK is one of 15 countries where the techniques could provide most benefit.

“While our analysis was an initial, high-level assessment of low productiv-ity plays outside the US, we were quite surprised at the impressive potential for increased recovery using these uncon-ventional techniques,” said Susan Far-rell, vice president of upstream energy research at IHS, and one of the authors of the IHS analysis. “As many of the world’s oil and gas producers struggle to lower costs and optimize existing as-sets, we wondered what kind of impact the application of newer technological innovations could deliver to the industry in terms of expanding conventional re-

source potential outside North America.”The rock properties in these mature

plays are less than desirable for produc-tion using conventional techniques, and as a result, many of them have produced only a small portion of the total oil in place. Of the estimated 141 billion barrels of potentially recoverable oil using uncon-ventional techniques, the IHS assessment determined that 135 billion of it existed in plays that would probably require hy-draulic fracture stimulation to produce, which has already been carried out on some North Sea fields (see examples on page 13).

“Drilling horizontal wells allows access to thinner zones, where vertical wells are not commercially productive,” said Leta K. Smith, Ph.D., director of upstream energy research at IHS Energy, and the principal analyst behind the IHS analy-sis. “Also, horizontal wells allow engi-neers to connect compartmentalized portions of the reservoir with one well instead of many vertical wells, which addresses cost and footprint consider-ations as well as increasing the well-to-reservoir contact ratio.”

In addition, the study said, modern seismic and measurement-while-drilling (MWD) technologies would allow op-erators to achieve better placement of fractures to take advantage of natural fracturing and other geologic features for maximizing production and avoid-ing water zones. “Combined with other technologies developed for shale devel-opment, such as pad drilling, these im-provements could breathe new life into some of these older, conventional fields,” Ms Smith said.

Three recent examples were cited in the IHS analysis that showed operators already leveraging some of these newer techniques to address different geologic and production challenges. They included the Saint Martin de Bossenay field in the Paris (France) basin; the Tahe Complex in China’s Tarim basin, and the Bir Ben Tar-tar field in Tunisia.

The Saint Martin de Bossenay field was first discovered in 1959. By 1996, the field’s wells produced mostly water and it was abandoned. Recently, the field was redevel-oped using modern technology, including seismic targeting non-produced portions of the field. Hydraulic fracturing was not used, since it is not permitted in France. Following redevelopment, the field’s recov-ery factor improved from 40 percent to 44 percent--adding 1 million barrels to the 2P (proven plus probable reserves).

“modern seismic and measurement-while-drilling (MWD) technologies would allow operators to achieve better placement of fractures to take advantage of natural fracturing and other geologic features”

Saint Martin de Bossenay, France 1962


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Wood maCkenzie reCommends dutCh fisCal models ince the oil price collapse,

there has been increasing discussion regarding how to incentivise developments that have been deemed marginal

or uneconomic in the UK offshore. In May Edinburgh-based global energy con-sultants, Wood Mackenzie, said that in its opinion, the best working model upon which to base regulation was to be found in The Netherlands.

To encourage the development of marginal offshore gas fields, the Dutch government implemented the Marginal Field Tax (MFT) for fields and prospects in 2010. Wood Mackenzie looked at 16 projects, and found that they would add 17 bcm of additional reserves thanks to the incentives. Although falling short of the desired 21 bcm, they add 10 percent to Dutch reserves (excluding the giant Gron-ingen field), over €700 million in value to

companies and €825 million in direct gov-ernment take.

Crucially, Woodmac notes that the effects of the tax are different under various price scenarios. At $50/bl, gov-ernment take exceeds its €685 million objective from marginal fields by nearly 28 percent. However, at $100/bl, the gov-ernment take is 36 percent lower than its €2,575 million target.

With the MFT applied, value is trans-

ferred from government to companies in order to improve economics and make the projects attractive enough to invest in - clearing company hurdle rates which are typically between 10 and 15 percent.

The success of the Netherlands in cre-ating significant value for the state and operators indicates that similar models could be utilised in other mature oil and gas regions where projects face profitabil-ity hurdles, such as the UK North Sea.

The Tasman toren by night, Groningen, the Netherlands

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priCe reCovers, neW equilibrium soughtin early June, oil market observers will

be focused on the OPEC meeting in Vienna, where it will be plotting its course for the second half of 2015. Saudi production rose to a record

high of 10.3 million b/d in April, and the group looks firmly set on maintaining a market-share strategy, pumping at high rates to weaken the market and drive out high cost producers, including in the North Sea.

So is the meeting still important to the market? Well if they cut production it is, but that is highly unlikely, according to most observers. Having said that, there is nothing stopping OPEC members from increasing supply further, and Iraq seems set on doing just that. In June it plans to increase oil exports by 26 percent, to a re-cord 3.75 million b/d, according to ship-ping programs seen by Bloomberg. The additional Iraqi exports are equivalent to roughly 800,000 b/d, which represents a huge addition into already-saturated global market.

Whether or not Iraq adds these bar-rels to supply, maintaining current OPEC policy means the US will continue to re-place Saudi Arabia, as the world’s "swing producer." This means market forces will play a bigger part in determining the oil price, because the lower it is the fewer wells will be drilled, and vice-versa. In the US unconventional sector, supply can be responsive to price because operators can more quickly react to market signals than they can with long lead-time conventional projects, slowing down or accelerating drilling at short notice.

However, as OPEC is no longer cutting supply to defend a price target, it is less clear where the price should actually be. This creates considerable uncertainty in the market, and could lead to an increase in volatility as the market as-sesses what supply is being shaken out, particularly over the next year or two. Until the market manages to establish an equilibrium price once again, it will be more difficult to make investment decisions, and many commentators are

“Altogether the global oil industry will spend an estimated $129 billion less this year as a result of low oil prices, a recent analysis from the FT showed,”

“International Monetary Fund estimates that UK producers have the highest operating costs in the world, at around $40/bl”

expecting a downturn in the market as we head into the summer.

Statoil’s Torgrim Reitan – who moved from CFO to EVP for Development & Production USA in May - said his com-pany anticipated more volatility in the market over the next few years. “[It’s] the name of the game,” he said. “The last three years have been an exception, with a very stable oil price above $100. It was almost like we got used to it, and al-most forgot what we are actually dealing with.” One option to defend against the volatility is to make more use of hedging, and some observers expect more compa-nies to lock in margins on new projects through the use of options and deriva-tives over upcoming years.

To illustrate what a low opinion OPEC has of market driven prices, we only need look to a recent General Bulletin from OPEC in April, which said: "When it comes to the supply of petroleum, there is a stubborn willingness of some non-OPEC producers to adopt a go-it-alone attitude, with scant regard for the consequences. These parties consider producing to the maximum as being the norm. To them, ra-tionalizing the development of one's pre-cious natural resources in keeping with market demands appears to be an alien concept." This clearly represents the view-point of autocratic states heavily depen-dent for everything on one commodity.

Saudi Arabia and its Gulf peers have consistently pursued a market share protection strategy since the group's last meeting on November 27, rather than defending a market price, as on the ma-jority of occasions in the past. In the days leading up to the June meeting, the more cash-strapped OPEC members – such as Venezuela and Iran - will increasingly call for Saudi and the Gulf states to cut pro-duction in order to support prices, and thus buoy their struggling economies. But they are not expected to be successful.

Prices will be left to be determined by unrestricted supply and demand, so de-rided in the OPEC comment above. While there may be further falls, fundamentals have put a degree of upward pressure on

prices again, with high cost operations cutting output and investment, and signs of rising demand in some markets. Alto-gether the global oil industry will spend an estimated $129 billion less this year as a result of low oil prices, a recent analy-sis from the FT showed, which will cut anticipated supply substantially, helping provide support to prices.

The cutbacks include spending reduc-tions, layoffs, and significant delays at major projects. High-cost projects such as Canada’s oil sands, several major LNG ex-port projects, and operations in the North Sea – where the International Monetary Fund estimates that UK producers have

the highest operating costs in the world, at around $40/bl, while costs in Saudi Arabia and Kuwait are around $5/bl – are expected to be hardest hit. The spending reductions will allow oil companies to re-trench, save cash, and wait for oil prices to rebound. But waiting will also allow up-stream producers to force their suppliers to renegotiate contracts and offer better terms for drilling services.

These cuts mean that OPEC’s strat-egy of pursuing market share is working – even if Iraq could absorb much of the gains. OPEC could capture an additional 2 million b/d of market share over the next five years as a result of the dramatic scal-

ing back from non-OPEC producers. US production growth has started to slow, for the first time since the start of the shale revolution in 2006. By April, the IEA said in its most recent monthly report, US shale oil production had "buckled", bring-ing "a multiyear winning streak to an ap-parent close."

With the IMF calling the North Sea the world’s hardest-hit oil region, it could be a tough time for the industry in Scotland. So far Aberdeen’s chamber of commerce says more than 1,400 job cuts have been announced in the city, where more than 40,000 people depend on jobs in more than 900 energy companies.

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Oil Ministers Attend 127th OPEC Meeting

INFORMEDOffshore Aberdeen | June 2015 | offshoreaberdeen.com18 |

Aberdeen firm supports student plAcementsMacGreGor (GBr) Ltd has established a new relationship with Robert Gordon University by providing work placements that support the career development of graduates.

The Aberdeen office of MacGregor’s Global Lifecycle Support Division will work with the university to provide practical workplace opportunities for undergraduate and post-graduate students that will assist with their development activities.

Through a series of planned short-term placements students will assist with marketing and commercial development

World’s first smAll compAny icheme Gold corporAte pArtnership AWArded to inGen ideAsaBerdeen-Based consuLtancy, Ingen Ideas, has received a prestigious award from the Institution of Chemical Engineers (IChemE) for its training and development programme, as well as its dedication to the chemical engineering profession. Ingen now joins engineering giants Shell, BP, Qatargas, Sellafield and Bechtel, as one of just nine IChemE Gold Corporate Partners in the world, and the only one headquartered in Aberdeen.

Ingen’s HR Manager, Cheryl Newman, who leads Ingen’s learning and development programme added: “Today is very important to Ingen. It places our small company amid huge engineering organisations, and we’re delighted that the IChemE has recognised the role that Ingen has to play on the world stage regardless of our comparatively smaller size. At Ingen we have 50 people, and are the only IChemE Gold Corporate Partner with less than 1,000 employees. I hope that other small organisations considering working towards partnership with the IChemE are encouraged by our success to take that step forward.”

The IChemE is the global professional membership organisation for people with relevant experience or an interest in chemical engineering and the only organisation to award Chartered Chemical Engineer status. Corporate Partner status is awarded to organisations in the process industries that demonstrate good practice, initiative, and passion for the development of chemical engineers. Ingen achieved Bronze Status in 2012 and three years later it has reached the highest level of Gold; recognising its high standards in attracting, training and developing chemical engineering talent, as well as engaging with schools, universities and the wider chemical engineering profession.

Neil Atkinson, IChemE Director – Qualifications said: “I would like to offer my personal congratulations to all those involved in achieving this milestone. As a Gold Corporate Partner we will welcome Ingen’s sustained inputs to IChemE’s agendas, be they in the areas of professional development, dissemination of good technical practice or special interest, industry panels, inputs to policy on issues

for MacGregor’s UK-based operations, including its new training centre.

Recently introduced to deliver specialist skills and competencies to MacGregor engineers and its customers, the centre includes a bespoke, real-time davit training rig, which replicates the operations of on-board lifeboat launch and recovery davit systems, including towing boom operation.

The Aberdeen operation is the leading launch and recovery service provider within MacGregor’s Global Lifecycle Support Division and is Lloyds Approved

Engineers working at Ingen

to LR IRZ17 for servicing and testing of lifeboats/launching appliances and on-load release gear. It also supports MacGregor’s Original Equipment Manufacturer (OEM) Unit in Kristiansand, Norway.

Robert Gordon University’s Aberdeen Business School works closely with business and industry across the city to support the skills development and transition of students into employment through a successful placement programme. More than 90 percent of its undergraduate courses have a placement option with a growing number

of postgraduate programmes also offering workplace development opportunities.

Christopher Byles, UK Branch Financial Controller for MacGregor (GBR) Ltd, said: “Establishing this new relationship with Robert Gordon University fuels our ambition to support the development of talented and motivated people, keen to apply their skills in our sector.

“The university’s enthusiastic students bring fresh ideas that will benefit the development and marketing of our services, while, at the same time, they gain

invaluable real-world experience that will assist them in their future careers.”

Lisa Dunn, placement manager at Robert Gordon University’s Aberdeen Business School, said: “We are delighted to work with MacGregor to provide our students with the chance to support the company’s business development and marketing activities. The offshore industry is multi-faceted as are the career opportunities and this new relationship demonstrates to our students the range of roles that are available in businesses operating in the sector.”

that affect or are impacted by chemical engineering”.

Ingen General Manager, Wayne Strachan said: “It’s a great honour to receive the Gold Partner Status on behalf of Ingen. We’ve always recognised that our people are the catalyst of our success, and that engineering should be used for the betterment of society, and so it’s very important to us that we maintain a sustainable and enduring commitment to the professional development of our engineers, as well as the wider profession”.

peter sheves joins mActech europe’s Aberdeen operAtions fAcilityto support the development of Mactech Europe’s Aberdeen operations facility and oversee the introduction of the Mactech Offshore range of Diamond Wire Cutting equipment, which has been proven over years of operation in the US Gulf, the services of Peter Sheves have been secured.

Having previously managed Hydratight’s Aberdeen operations base and latterly overseen the development and growth of Mach-Ten into its current Stork guise, Peter brings decades of specialist knowledge to Mactech Europe and will enhance the already existing high standards of quality and services being provided, with the additional benefits of having all stocks being located locally at our new Dyce operations facility.

INFORMEDoffshoreaberdeen.com | June 2015 | Offshore Aberdeen | 19

succession plAnninG pAys dividends At hseQ consultAncy compAny fQm ltd.as expected froM a company that specialises in business management systems, Aberdeen based HSEQ consultancy company FQM, has confirmed the smooth transition of Chris Docherty from Director to Managing Director. He replaces Allan Dick, who will remain in an executive role until early next spring.

Chris Docherty has been with FQM for the past four years overseeing a 150 percent growth in profit at the business, coming to the company after an international career in reliability and quality engineering with technology giants Motorola and Samsung. The handover is a carefully planned move for the company, which coincides with a sales team expansion and a new training portfolio launch.

Since joining FQM, Chris has made significant growth in building strong relationships with clients and is looking to build strategic teams to concentrate on the organisational development work which the company is currently promoting in oil and gas to other sectors.

Of his appointment Chris said: “I have a personal interest in systems learning due to my former career in Asia and the US and have a genuine desire to smarten the way we all do business. Business development and relationship development will be a focus of my leadership. In the mid to longer term I

once More, deLeGates and organisers are preparing for the SPE’s summer conference in Aberdeen. Over the four days of SPE Offshore Europe 2015 - the world’s largest upstream oil and gas conference and exhibition outside North America - there will be a series of keynote sessions, technical sessions, topical lunches and breakfast briefings. A key message will be that the industry is far from over and that it has a long and bright future, despite the current tough market conditions.

In 2013, SPE Offshore Europe achieved an all-time attendance record of almost 40,000, and saw the largest ever exhibition area covering a net area of 27,180 square metres, with more than 1,500 exhibiting companies and international pavilions.

The choice of this year’s theme, inspiring the next generation, empowers the industry to address both the technical and people challenges facing the oil and gas business today to secure future success. At the heart of this is a need to attract and encourage the next generation of talent into the industry.

The keynote programme, chaired by Michael Engell-Jensen, Executive Director of the International Association of Oil & Gas Producers (IOGP), will feature 11 sessions focusing on the basic challenge of meeting energy demand while balancing concerns over climate change, security

of supply and consumer affordability. Topics to be addressed include: health; the safety and security of people and assets; well intervention; financing investments; oil spill response; and inspiring the next generation to join the industry. Speakers will comprise a mix of senior representatives from international operating companies and contractors, as well as trade association representatives, government regulators and academia.

The technical program, chaired by Charles Woodburn, Chief Executive Officer, Expro, will feature more than 75 papers, demonstrating that the industry’s engineering, manufacturing and technology excellence is set to assure a long-term sustainable future. Speakers drawn from all over the world will discuss topics such as asset and well integrity, maximising economic recovery, smarter field development, pipelines and risers, subsea processing, talent development, unconventional gas development, process safety, and decommissioning.

Planning is also well under way on the dedicated Deepwater Zone, the breakfast and lunch agenda, and on an ambitious ‘Inspire’ programme aimed at the younger generation. Visit www.offshore-europe.co.uk for further information and to register for this free-to-attend event.

spe conference desiGned to inspire the next GenerAtion

will also be aiming to internationalise our offering and to this end am pleased that we have just been accepted by Scottish Development International onto their Accelerated Export Programme.”

SPE Offshore in full swing

Retiring MD, Allan Dick said: “This appointment has perfect timing. After more than four years together Chris is excellently placed to build upon foundations we’ve created together, to provide a legacy that

allows me to also move towards retirement, and which sustains all we have achieved so far. He is an incredibly high achiever, with a detailed understanding of HSEQ, business management and relationship

development. He is the person to take the business to the next level, with existing offerings into new sectors and new products being launched with our existing client base.”


diAry of An offshore WorkerMy naMe is BoB eGan, and I recently went on one of Step Change in Safety’s Helicopter Safety Awareness courses. I first worked offshore more than 23 years ago, and although I’ve never been afraid of flying in a helicopter I have been apprehensive some times, and I now wish I had attended this course years ago.

The course was run by Christina, an S-92 pilot, and Graham, an Avionics Instructor, both from Bristow Helicopters. All three operators take it in turns to deliver the courses that run throughout the year.

Christina told us all about the rigorous training that pilots have to go through, and the continuous proficiency checks and simulator training they have to complete. She also told us about the pre-flight preparation and all of the double checks they make, including flight planning and weather checks. I was really impressed with the information the pilots get from the MET office, particularly with regards to triggered lightening which mostly occurs in the North Sea in the winter. The maps are very detailed as obviously the weather changes all the time, so crew are always on the ball. Christina made it very clear that pilots don’t compromise on their own safety, let alone passenger safety.

We were given a detailed account of engineer training – did you know that it takes longer to become a helicopter engineer than it does to become a pilot? Graham told us about the importance of human factors when maintaining a helicopter. For example,

any major safety work is always done before midnight because most of the maintenance team is down at the end of the day. The focus on fuel checks is very important, as the implication of water getting into fuel could be harmful to the aircraft. We were also told that engineers have to do a mandatory report on any faulty safety system and have to inform the manufacturers.

After lunch, we were taken to Bristow’s heliport and shown around the control room. We saw their daily plans, flight schedules and the weather reports from the MET office. It’s a busy room but the pilots were still extremely focused on their work and I really began to appreciate the amount of work to be completed before they even go near a helicopter.

During our tour of the hangar, we saw up-close the type of maintenance work that goes on. We were shown how the engineers manage, record and store their tools and helicopter parts – it may sound boring, but using the wrong one could reap repercussions. Christina and Graham answered all of our questions very openly and honestly. You could tell they really knew their stuff and place a huge importance on safety in every aspect of their work.

The course was a great insight into the amount of work and effort the whole helicopter industry puts into keeping the aircraft in the air and flying people from A to B safely. I’d definitely recommend the course for anyone who flies in a helicopter offshore.

university professor Appointed to leAdinG subseA educAtion role. professor ekaterina pavLovskaia, from the University of Aberdeen’s School of Engineering, has been appointed Director of the Global Subsea University Alliance. Professor Pavlovskaia will hold the Directorship for the next two years. Her appointment means the University will become the host organisation for the Alliance during that period.

In addition to Aberdeen, Alliance members include the University of Houston, Curtin University in Australia, the National University of Singapore, the Federal University of Rio De Janeiro, and Bergen University College in Norway.

Commenting on her appointment, Professor Pavlovskaia said: “The Global Subsea University Alliance aims to promote and enhance the education of subsea engineers around the globe and to utilise the complimentary research capabilities of the Universities involved in order to

bring innovation and new technology to the subsea industry.

“I am very honoured to be asked to lead the Alliance for the next two years, and I am looking forward to exploring new opportunities with members and facilitating productive collaboration.”

Mrs Kathryn Fowler, Deputy Executive Director of the University’s Aberdeen Institute of Energy, said: “Ekaterina is an excellent choice for this role, which will see the University of Aberdeen take a prominent role in the work of the Global Subsea University Alliance.

“Subsea engineering at the University of Aberdeen has a unique relationship with the subsea industry both locally and internationally, and our accredited Subsea Engineering programmes are renowned as producing high-calibre graduates who fulfil the need for key skills in the industry.”

Members of the Global Subsea University Alliance in Houston, where Professor Pavlovskaia was appointed Director. From left to right: Professor Matthew Franchek, University of Houston, Professor Brian Evans, University of Curtin, Professor Ekaterina Pavlovskaia, University of Aberdeen, Prof Geir Anton Johansen, Bergen University College, Rod Wai Lam Loh, National University of Singapore.


faLck safety services, which has 32 training centres across the world, including two in Aberdeen, has been presented with the IADC Safety Award, for its long-term commitment in maintaining robust safety procedures.

The IADC North Sea Chapter Annual Safety Award recognises an associate member’s new initiatives and achievements in safety over the past 12 months, including schemes to improve safety performance, environmental projects, safety management initiatives and technical and operational innovations that reduce risk.

Over the past year, Falck’s primary method of improving its safety performance has been through staff participation. By incorporating safety practices into all UK staff ’s personal development plans, Falck encourages all staff to take ownership of safety in the workplace. These practices included attending HSE inspections, emergency response drills and safety committee meetings, as well as encouraging staff to undertake IOSH Working Safely or Managing Safely courses.

The company has also invested heavily in energy savings initiatives, installing new boilers at its Teesside facility, as well

as investigating methods to maintain its safety pool temperatures during inactivity and looking towards in-house renewable energy solutions.

Managing director, Colin Leyden, said: “We have always been dedicated supporters of safety and environmental standards both within our company and in the industry as a whole, and it is a great achievement for Falck to be recognised as a leader in this field. Not only did we introduce safety practices for all employees, but we also increased communication between them, ensuring information regarding safety flows throughout the organisation, using our safety volunteers, and implementing committee meetings, toolbox talks and a suggestion box scheme.

“Safety is at the core of everything we do, and by ensuring all our staff is safety- and environmentally-aware, this enables us to create a strong, safety culture for all our employees, delegates and clients.”

This award follows qualification in both ISO:9001/14001 and BS:OHSAS 18001 certifications, as well as achieving the internationally recognised ‘British Safety Councils’ five-star award for health and safety standards across all of its UK sites.

online electronics Wins 2015 subseA pipeline technoloGy AWArd onLine eLectronics Ltd (OEL), part of the IK-Group AS (IK), has won the Subsea Pipeline Technology Award at the Pipeline Industry Guild Technical Awards in London. The award recognises the most significant contribution to subsea pipeline technology, and was won for OEL’s flagship technology, MEG ARTS® (Mono-Ethylene Glycol Analyser with Real Time Display and Subsea Sampling).

MEG ARTS® autonomously provides highly reliable information on MEG or other chemicals at the subsea pig receiver. The system offers real time display, logging of density, temperature and pressure data and automated sample capturing capability. The function of the technology is to measure subsea the density of MEG in real-time at the pipeline termination, ensuring the integrity of conditioning. OEL said the product can change standard practices for assessing the integrity of MEG, giving the owners of subsea pipelines certain confirmation that their pipeline is fit for purpose.

It can be operated without the need for a second support vessel on location, while the product was judged to be game changing, because never before had the industry been able to access such data in such an immediate way.

fAlck sAfety services Wins iAdc sAfety AWArd

From left to right: Sally Magnusson, broadcaster and presenter, M - Neil Burr, Key

Account Manager Falck Safety Services, and Lee Reborse,

Chair of the IADC North Sea Chapter, Noble Drilling.


ikm rov estAblishes neW office in Aberdeen; mAkes key Appointmentin response to a period of sustained interest and growth, particularly from the subsea UK sector, IKM is expanding its ROV Subsea Services division with a new office in Aberdeen, and the appointment of Gary Thomson as its Managing Director. This new IKM Subsea Aberdeen office is expected to employ 50 people by the end of the year.

IKM Subsea is headquartered in Stavanger, Norway, and employs more than 2900 people worldwide in a variety of locations. It provides Subsea ROV

Completion, Commissioning, Engineering & Operations services, to top global oil and gas, power generation operators.

“We’re thrilled that someone of Gary’s experience and reputation has joined our team,” said Ben Pollard, Managing Director of IKM Subsea Norway. “There is an existing demand for ROV subsea services provision from oil and gas customers operating on the UK Continental Shelf, Europe and West African regions. Gary brings with him an exceptional skill set and knowledge of key areas of the oil and gas industry which will

undoubtedly help us grow and improve our subsea services and offering.”

Gary Thomson has several years of experience leading efforts in the Subsea oil and gas industry. In his new role with the IKM group, he will oversee all Subsea ROV services provision, business expansion, and the development of the new office location. He most recently served as General Manager at Marine Platforms Limited, and has also held key positions at Canyon Offshore/Helix Group and Sonsub/Saipem.

jee ltd secures contrAct on Ground-breAkinG enhAnced oil recovery project aBerdeen-Based Jee Ltd, an independent multi-discipline subsea engineering and training firm, has been awarded a contract from Amec Foster Wheeler for the front end engineering design (FEED) of a jacket rigid polymer injection riser package (including J-tubes), as part of an enhanced oil recovery (EOR) field development.

This EOR pilot project is designed to demonstrate the use of polymer chemical injection technology - a pioneering new technique to maximise the economic recovery of UK hydrocarbon reserves. The project is a world-first, and will utilise ground-breaking technologies including 4-D seismic imaging, horizontal drilling and pump technology. Development drilling is expected to take place from 2015 until 2020.

On the project, Amec Foster Wheeler will engineer a new bridge-linked platform which will be tied into existing facilities and utilised to store, mix and pump the polymer. In 2015, Jee’s engineers will support the first phase of the project by conducting the FEED for the polymer riser injection package as part of the entire EOR field development programme.

Jonathan McGregor, Head of Engineering at Jee, said: “Being awarded a contract of such high-profile and economic importance is testament to Jee’s reputation as a leading engineering firm with extensive capabilities in the field of subsea analysis and design.

“ The ever-changing downhole environment represents a challenge when injecting chemical agents into existing reservoir fluids. The work carried out by Jee’s engineers on this innovative project will allow for informed decisions to be made, with the aim of successful long-term oil recovery.”

Jonathan McGregor, Head

of Engineering at Jee

Gary Thomson, new Managing

Director at IKM Subsea UK.*the draw for the ipad will be on the 1st october 2015

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subseA diAmond Wire sAWs criticAl in decommissioninG And mAintenAnceWith 470 offshore oil and gas installations and over 10,000 km pipelines in the UK North Sea, there is an incredible amount of sub-sea equipment fixed to the Ocean floor and this includes platforms both large and small. Many have been productive for years but are now quickly coming to the end of their lifespan. Industry estimates are that over 90% of offshore structures will be completely removed from their marine sites and brought to shore for re-use, recycling or other disposal means.

With many huge decommissioning activities scheduled up to 2017 the UK Offshore Supply Industry is expecting a high demand for its support services and expertise. Therefore aligning with a company that can provide a large portfolio of sub-sea machines and support machining services is critical to future decommissioning deadlines and to eliminate any costly delays.

Mactech Europe machines includes a range of Diamond Wire Saws for subsea and topside cutting of a variety of materials and projects. These saws are ideal for cutting multi-string applications or heavy wall legs and cross members and have been successfully tried and tested in the Gulf of Mexico following the devastation left by Hurricane Katrina.

Typical uses include offshore decommissioning, and subsea or topside maintenance. The compact and robust design creates an ideal cutting environment, reducing setup, installation, and removal time – saving you time and money.

Mactech Europe have developed a unique and growing range of specialist machines including Portable Hydraulic Clamshell Lathes, Gantry Mills, In-Line Diamond Wire Saws and Portable Rack Drills. Our technicians are backed by a fully stocked new Aberdeen Operations Centre, which means downtime or delay is a rare event.

“We are very pleased that Maersk Drilling once again has chosen us as their partner. It makes us proud to receive recognition of our efforts from one of the biggest players in the oil and gas industry.”

blue WAter AWArded neW yArd stAy projectMaersk driLLinG has chosen Aberdeen’s Blue Water to handle transportation and related assignments for a future yard stay for their semi-submersible rig “Maersk Deliverer”. It will also act as logistics partner for the five-year special periodical survey of the Maersk rig. Blue Water has provided the same services to Maersk on previous occasions.

“We are very pleased that Maersk Drilling once again has chosen us as their partner. It makes us proud to receive recognition of our efforts from one of the biggest players in the oil and gas industry. We are committed to delivering top-class service to Maersk Drilling in every respect”, said Stewart Greig, General Manager at Blue Water Aberdeen.

The yard stay project will be carried out in South Africa from July until the end of August, where Blue Water will be responsible for all transport-related assignments, warehousing and quayside crane operations. The project will involve many of Blue Water’s worldwide offices in arranging a large number of very crucial and time-sensitive shipments by air and ocean.

“Our experience is important as these types of projects are complex. When coordinating the transports of spare parts and other services in connection with yard stays for these rigs, there is no room for errors. We focus on precision, flexibility and high quality as vital elements throughout our entire involvement in the project”, says Stewart Greig. Photo courtesy of Mearsk Drilling.

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Offshore Aberdeen June 2015

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