Current Issue: February 2017 ///

Special Focus

The upturn begins

James West, Evercore ISI

After two years of spending declines, North American E&Ps are set to increase capex during 2017, while international outlays are set to fall for a third consecutive year.

A new day dawns in D.C. for the U.S. E&P industry

Dr. Roger Bezdek, Contributing Editor

The eight-year regulatory nightmare in Washington has ended for the U.S. upstream industry, now that former President Barack Obama is gone. The new administration of President Donald Trump is carving out a much friendlier regime for hydrocarbon development.

U.S. plays role as swing producer, gas production down slightly

The vast number of shale oil operators in the U.S. combined to act as unwilling swing producers during 2016, with the medium-to-small operators scrambling to survive the downturn. Marketed gas production dropped slightly, compared to last year.

Rig counts finally bottom during 2016

Craig Fleming, World Oil

Operators continued to idle rigs in the U.S. during 2016. The average U.S rotary rig count for 2016 was just 525 units, a 46.3% decline in activity compared to the previous year’s average of 977. Starting in Jan. 2016, the average monthly rig count dropped four times, before bottoming in May at 407.

Producing oil wells down slightly, rebound in sight

Roger Jordan, Craig Fleming, World Oil

The total number of active, producing oil wells in the U.S. dropped 2.7% last year. In spite of increased activity in the second half of the year, World Oil’s forecast data show the total number of active oil wells in the U.S. declined to 578,167 from 594,281.

Rebalancing of markets and a new U.S. administration will speed recovery

Kurt Abraham, Craig Fleming, World Oil

The two-year oil price decline, and resulting plunge in activity and downsizing of assets and personnel by industry companies, appears to be over. Now, the industry is preparing to get back to work. A combination of OPEC’s quota deal in late 2016, along with lower North American oil production, service/supply cost reductions, high-grading of prospects by operators, and operational efficiencies, has done much to prop up oil prices and encourage a rebound in activity.

Producing gas wells edge lower, but growth should resume

Roger Jordan, Emily Querubin, World Oil

The number of producing gas wells in the U.S. slipped 1.5% last year, from 502,251 to 494,806, as the country’s output retreated from a peak of 91.7 Bcfd in April 2015 to 89.3 Bcfd in 2016.

U.S. oil reserves fall for first time in seven years

Emily Querubin, World Oil

According to the U.S. Energy Information Administration (EIA), U.S. crude oil and lease condensate proved reserves dropped 4.7 Bbbl in 2015. This represents an 11.8% decline, from 39.9 Bbbl to 35.2 Bbbl. This was the first drop in crude oil and lease condensate reserves since 2008.

Output losses in some regions cancel out gains in other areas

Staff, World Oil

Last year will be remembered for its stark contrasts in global production rates, with North America absorbing the largest loss, while the Middle East and Russia chalked up big gains. It remains to be seen how OPEC’s quota deal in December will alter the rules of the game.

Canadian operators anticipate slow, steady improvement

One of the longest, most challenging periods in Canadian oil patch history appears to be drawing to a close. For the first time in three years, optimism is in the air for the country’s beleaguered producers.

Features

Smarter hole enlargement-while-drilling achieves new levels of efficiency

Alex Goodwin, Weatherford International

In a program that already totals four extended-reach wells, a major operator used a dual-reamer BHA solution to reduce rig time and costs.

ShaleTech: Marcellus/Utica Shales

Jim Redden, Contributing Editor

Rigs, deals up amid brighter gas prospects

Tie-backs and seafloor pumping improve economics in deepwater developments

Dr. Stuart L. Scott, Petroleum Emerging Technology Corp.

Reduced commodity prices have eliminated many options to improve deepwater project economics. Seafloor boosting, as an enabling technology for tie-back developments, has emerged as the most effective means to achieve, and sustain, economic flowrates from new discoveries. However, these tie-backs require different considerations than recently installed, hub-based, seafloor boosting systems, and require a unique approach and new technologies.

Regional Report: Southeast Asia/Australia

Emily Querubin, World Oil

With a dense population and, therefore, a growing energy demand, Southeast Asia relies heavily on the oil and gas industry. This urgency has given rise to the region’s E&P efforts during an industry downturn, as producers have been forced to contend with low prices and aging fields.

EMGC to underline region’s era of opportunity

Emily Querubin, World Oil

The fourth Eastern Mediterranean Gas Conference (EMGC) is being held at Hilton Cyprus in Nicosia, Cyprus, March 14-15. The event venue is conveniently located, allowing easy access to some of the capital city’s main attractions, such as the city center, the Old City and the modern business district.

Columns

Energy Issues

William J. Pike, World Oil

The drama of waning IOCs

Executive viewpoint

Donald W. Young, Hoover Ferguson Group

Global oil and gas M&As in the current, challenging market

First oil

Kurt Abraham, World Oil

North America climbs out of its historical hole

What's new in exploration

William (Bill) Head, Contributing Editor

Sometimes B-to-A is the right path

The last barrel

Roger Jordan, World Oil

A better day

What's new in production

Don Francis, Contributing Editor

In upstream oil and gas, incremental improvement is relentless. Consider today’s Point B; then compare it to a Point A of, say, 25 years ago. In the aggregate, those increments can have a remarkable result. Even so, organizations sometimes still swing for the fences. Today, we look at a couple of outside-the-box ideas that have reached the commercial stage.

Innovative thinkers

Emily Querubin, World Oil

Born and raised in Waukesha, Wis., Ken Havlinek’s first attraction to technology was prompted by his father, who worked as an electrician. He had been fascinated by the construction and processes behind different tools and technologies. Today, Havlinek serves as V.P. and Technology Center manager for C&J Energy Services, where he helps generate and execute ideas that will benefit service companies and operators in the oil and gas industry. He said, “I found that I had a passion for mechanisms, and for engineering.”

Oil and gas in the capitals

Dr. Anas Alhajji, Contributing Editor

Saudi Arabia is back to its swing producer role. That was the most important outcome of the agreement among OPEC and non-OPEC producers that took place last December in Vienna. While some analysts might view the change in Saudi policy as a reversal, especially after the change at the helm of the Saudi oil industry from the former oil minister Ali Al Naimi to the current energy minister Khalid Al Faleh, others believe it is an evolvement.

Offshore in depth

Ron Bitto, Contributing Editor

The Gulf of Mexico continues to be an important contributor to the U.S. energy supply, and the nation’s economy. Offshore fields in the Gulf produced 550 MMbbl of oil and 1.35 Tcf of natural gas during 2015. The offshore oil and gas industry is credited with providing 650,000 direct, indirect and induced jobs. According to the Congressional Budget Office, the Federal government collects an 18.5% royalty on hydrocarbons produced in the Gulf, about $2.7 billion per year, and has collected $1.8 billion from lease auctions since 2005. More than 600 companies have financial interests in around 3,000 fixed structures and thousands of miles of pipelines in the Gulf.

Drilling advances

Jim Redden, Contributing Editor

After a two-year drought, financially-parched drilling contractors and service companies can be excused for expecting a measure of payback, as more shale operators lay out plans to dust off their wallets this year. While the higher spend announced of late is unlikely to completely heal ravaged balance sheets, it at least would help recoup some of the rock-bottom discounts that have been extended, to keep some rigs drilling and mud flowing.

News & Resources

World of oil & gas

Roger Jordan, World Oil

Shell will sell a package of UK North Sea assets to Chrysaor, in a deal worth up to $3.8 billion, including an initial consideration of $3.0 billion. The asset package consists of Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion. The decommissioning costs associated with the package are expected to be $3.9 billion, of which Shell will retain a fixed liability of $1 billion. Chrysaor will assume the remaining liability. The deal, which is expected to close in second-half 2017, has an effective date of July 1, 2016. Following its completion, Shell will retain a more focused presence in the UK North Sea, with production from the Schiehallion redevelopment and Clair Ridge project expected to come onstream.

Industry at a glance

Craig Fleming, World Oil

The 11 OPEC countries subject to the well-publicized production cuts achieved more than 90% compliance with the agreed reductions. Saudi Arabia slashed its output by the most in eight years, going beyond its obligations under the deal. Combined, the group’s output fell 890,000 bopd in January, to around 29.3 MMbpd to 32.1 MMbpd, in spite of Iraq, Venezuela and Iran pumping more than allowed under the accord. The reduction helped establish a solid floor under benchmark crudes at $51–$54/bbl. The reduction in crude output has caused U.S. drillers to continue to add rigs in the oil-rich shale plays. In January, U.S. rig usage averaged 683 units, a 7.7% increase compared to 634 working in December 2016. The international count gained 50 rigs in December, an increase of 4.5% compared to November.

People in the industry

Emily Querubin, World Oil

Subsequent to his nomination for U.S. Secretary of State, Rex W. Tillerson has retired as Exxon Mobil’s chairman and CEO. He served the company for more than 41 years. Darren W. Woods has been elected as the new chairman and CEO. Woods has been an employee of Exxon Mobil since 1992. In 2014, he was elected senior V.P. and became a member of the company’s management committee.

Companies in the news

Emily Querubin, World Oil

Petronas’ PFLNG SATU—the company’s first FLNG facility—has achieved first gas from Kanowit gas field, offshore Sarawak in Malaysia. The vessel has an LNG production capacity of 1.2 MMtpa, and is moored by an external turret and mooring system designed and supplied by SOFEC, Inc. Presently, a 12-leg mooring system is being used to moor the vessel in a water depth of about 246 ft. Its turret design allows redeployment in water depths from about 230 ft to 656 ft. It can be deployed for up to 20 years, without dry docking. According to Petronas, first commercial LNG offtake is expected in first-quarter 2017.

New products and services

Emily Querubin, World Oil

Salunda Limited has released its MudChecker drilling mud analyzer, which provides consistent analysis of mud properties during the drilling and completion of oil and gas wells. The hand-held device is battery-operated, and offers a faster alternative to conventional retort and titration testing. Using sensitive radio-frequency technology, the diagnostic device accurately measures the oil, water, solid and salt content of drilling fluids, allowing early kick detection and the prevention of wellbore collapse and NPT. A sensor probe is used to test samples and provide real-time measurements of mud fluid content in the field. Results are displayed on an integral LCD screen, indicating percentage oil, solid and water volumes, as well as oil/water ratio, oil/brine ratio and water-phase salinity. Additionally, data can be uploaded, using a USB interface, and exported for reporting and archiving. The analysis unit is supplied as a part of a portable test kit, which includes a mains adapter, downloadable software and a variety of spare tubes, probes, syringes and proprietary sample mixtures.