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Among the more illustrious drilling contractors that have crashed and burned or have been swallowed up, such as Zapata, Reading & Bates, Offshore Company, Sedco-Forex, Pride, Global Marine, Santa Fe etc. there are a host of other smaller lesser known outfits who have disappeared over the years. One such is the little know, at least outside of South East Asia, Robray Offshore Drilling. I recently had an inquiry asking if I could direct them to an website that gave some history of this erstwhile Singaporean company but it predated the internet and there is precious little information available in the public domain. However, I worked for Robray for 25 years from its inception in 1974 and including the years when it was absorbed up by Norway’s Smedvig in 1986. It seems right to correct this lack of historical information about this small but pioneering company by at least a blog!

Robray was started and owned by Singaporean multi-millionaire Robin Loh who owned a shipping line, an airline, an IT company, a shipyard and more besides and had close connections to Pertamina’s then head Ibnu Sutowo, both of whom profited significantly from the relationship. Robin wanted to participate in the oil boom of the mid 1970’s and in partnership with Ray Williams, then Regional head of Reading and Bates, they formed Robray, placing a significant number of orders with National for drilling equipment for their planned fleet of drilling rigs. Initially they began with three heli-rigs that all worked in Indonesia while a sister company, Robin Shipyard, begin construction of the first two self-erecting tender assist barge rigs. Reading and Bates had pioneered the tender rig concept for development drilling off wellhead platforms and Ray Williams brought the concept to Robray as well as decimating his ex-company by stealing many of its regional management and rig crews. Before moving into Robin’s Robina House in Shenton Way the company began life in the Marco Polo Hotel. The conference room was the hotel lounge, renowned in Singapore for its Irish Coffee’s and the dresses worn by the waitresses!

The heli-rigs worked in Sumatra, Kalimantan and especially in Irian Jaya (Sorong) where Robin had family links. The rigs were eventually sold off, two to Indonesian contractor Medco/Apexindo and the other into Australia but they had served their purpose in getting the company started.

Meanwhile the first self-erecting tender rig, then called the HP Thrower after a founder member who had passed away but later re-named the Robray T-1, garnered a contract with Dubai Petroleum. Not long after the rig began work they had a major blow-out and the wellhead platform plus the rig’s derrick set were burnt to cinders. Robray quickly replaced the derrick set with that from under construction Robray T-2 (initially called Aquarius Star) thus gaining a reputation for fast action which it maintained throughout the life of the company. Replacement of T-2’s derrick set was made that much easier because Robin also owned manufacturer Pyramid Derrick who were in the yard next to Robray’s yard in Singapore. When Robray T-2 was completed it went to work off Balikpapan in Indonesia for Unocal.

Robray also built a platform rig, P-1, which was contracted to Esso Malaysia, and sat on the Tembungo platform off Kota Kinabalu in Sabah. When Malaysia introduced the PSC system Esso initially refused to play ball and shut down all its operations. P-1 was shut in for around one year, on standby rate and full crew, until Esso capitulated and agreed to Malaysia’s PSC terms. P-1 had become the cleanest and best kept rig in the world as the only action on board was chipping and painting.

By this time Ray Williams had retired and Jack Walters assumed the Presidency and the construction of the T-3 was underway. It also went to work for Unocal but in Thailand in 1980. A deal was also struck with Elf, in 1980, to build two more tender rigs, T-4 and T-5, for contracts in Gabon, won because by this time Robray had perfected the art of fast rig up/rig down operations that left their competition in the shade. Robray was the only company that was prepared to accept Elf’s limit on rig up times, which if memory serves me correctly was 12 days. By this time Robray had rig moves down to a fine art and averaged 5 days. Under the Elf contract Robray was paid full dayrate for 12 days irrespective of the time it took to complete the operation, which made it a lucrative contract.

Robray had by now established itself as the leading tender assist company, aided by the fact that their direct competition all operated less specialized and larger fleets that included more sexy jackups and floaters as well as their few tender rigs and their full focus was not always on keeping up with such a small market sector. In the spirit of that age Robray became known for being a  “can do” company, something that probably is not appropriate in today’s health and safety dominated world and they also developed a reputation as a very efficient and professional drilling company albeit operating in a small sector of the industry. Tender barges were limited by environmental factors to shallow water and benign environments which meant operations were restricted to South East Asia, parts of West Africa, Egypt and the Arabian Gulf. It also limited the number of clients it could work for as they could only drill off wellhead platforms in shallow benign waters but these clients included Unocal (later Chevron), Total, ExxonMobil. Elf, Total, Shell and Petronas among others. Robray befitted from being a small company that was based in the region where most of its fleet worked and had a small and young management team capable of making quick decisions without reference to a headquarters in Texas.

Unocal was an especially tough and demanding client to work for but they liked the job that T-3 was doing and called up Jack Walters and asked him if Robray would build four more tenders to work in Thailand. Much to many people’s chagrin Jack would only agree to build two thus allowing in new competition, Great Eastern Drilling, who built the other two rigs. Thus T-6 and T-7 came about and entered active service in 1982 and 1983 respectively. T-7 must hold the world’s record for the longest contract term as it worked for Unocal (and Chevron after the acquisition) for 30 years. The rig was scrapped in 2015 having only ever worked in Thailand and only for one client.

Earlier the company had sidetracked from the tender business into jackups, brought about when Robin purchased a jackup design (and the designer) from ETA for Robin Shipyard. While Robin Shipyard was building ETA Robco 300 jackups for India and China, Robray were themselves having two built of the same design but in Hitachi Zosen shipyard in Japan. The first, Ednastar, was completed in 1977 but did not go to work until the following year when it started up with Elf Oman before moving onto Total Iran and Total Abu Dhabi. The Iranian revolution put a stop to the Total contract and the rig was then sold off mysteriously to later emerge as the Yu Song in North Korea. It is now the COSL 935 and is working in China. The second, Ednarina, was sold after delivery to interests in Brazil but later also ended up in China as the Bohai IV. Robray never operated this rig.

Things were looking good by the early 80’s. By this time Jack Walters had gone and was replaced by Clyde Stephens, formerly with Unocal. But then came oil crisis of 1986 and like all drilling contractors Robray suffered financial difficulties with low rates for their rigs, loss of contracts and financing issues. T-4, by this time working in Egypt, was smuggled out of the country with creditors chasing it and Robin Loh had become disenchanted with the drilling industry and wanted out. Initially Clyde Stephens had seemingly reached an agreement for Foramer, a main competitor, to buy the company but Robin was not impressed with the offer and instructed Clyde to look at other options.  Unocal had already suggested to Clyde that he should approach Smedvig in Norway, an ambitious contractor looking to expand, and a deal was struck very quickly. Although some of Smedvig’s operations people were not impressed with these “simple drilling machines” Smedvig-Robray turned into one of Smedvig’s best and most profitable purchases.

Meanwhile Robray narrowly escaped a tragedy in 1989. Typhoon Gay struck the Gulf of Thailand where it capsized the Unocal owned and Great Eastern operated drillship Seacrest with the loss of 97 lives. The T-4 and T-7 also were operating in the Gulf at the time. The T-7 was hit first, losing 7 of its 8 anchor lines and only hanging on, with the help of a workboat, from either crashing into the platform or heading into the unknown. T-4 was hit next and was not so fortunate, losing all 8 anchor lines and took off under wind and wave power heading towards Cambodia, leaving the drilling crew abandoned on the platform. The rig’s main crane, a 150 ton Favco, was ripped off the deck by the force of the wind and lost overboard and although a workboat was gamely trying to keep up, the rig was out of control and in danger of sinking through water pouring into the hole in the deck where the crane had been. The Senior Pusher, Axel Lutz, is credited with saving the rig by filling the hole in the deck with mattresses and putting out sea anchors to slow the rig down. Meanwhile the drilling crew still on the platform had to survive a day of no food and water, wondering if they would ever see their colleagues on the rig again. Eventually the rig was collared by the workboat and returned to Songhla and the drilling crew rescued but the Seacrest, hit after the other two, was not so fortunate. Robray had been lucky.

With the North Sea market flat Smedvig had Robray market their big North Sea semis into Asia Pacific, with some success. Both the West Delta and the West Alpha mobilized into the region for charters in Indonesia, Vietnam and China. They were quickly yanked back to Norway when the North Sea market improved but had helped Robray gain more exposure in the region outside of the tender sector.

Smedvig were always looking for expansion. Owner Peter Smedvig’s aim was to be one of the top three biggest drilling contractors in the world and they looked to increase their already dominant share in the tender market by buying or building more rigs. Robray had always failed to penetrate Brunei, a Shell stronghold and then dominated by Petrodrill as Shell’s favoured contractor. Smedvig acquired Petrodrill thus acquiring the Tiga Kali, a non-self-erecting barge which became the T-8 and the Pelaut, built in 1994, the first ever semi-tender assist rig that was the brain child of Petrodrill owner Foster Manning. Apart from now gaining entry into Brunei, Smedvig then financed Robray to develop the semi-tender concept by building a second improved unit, West Menang, in 1999 which also went to work for Shell. Since then six more semi-tenders have been built by the company in its various iterations and the concept has been repeated by the likes of Atlantica, PV Drilling and Energy Drilling, the latter company basically a Robray Mark II.

When Clyde Stephens moved on, ex Smedvig CEO Staale Roed took over and become an enthusiastic exponent of the tender market, so much so that years later, after he left Smedvig, he became involved with Energy Drilling where he joined many ex-Robray colleagues.

The end for Robray came in 2006 when Seadrill acquired Smedvig and the Robray name disappeared forever. Seadrill later sold most of its tender rig division to Malaysian company SapuraKencana in 2013.

But Robray lives on through the many close knit ex-Robray personnel still with SapuraKencana and with Energy Drilling. As part of the Robray “family” we all were fiercely protective of the tender market and as was always said “Once a tender hand always a tender hand”. It was quite a ride. RIP 1974-2006.

Robray upstream drilling
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Your Weekly Update: 13 - 17 May 2019

Market Watch

Headline crude prices for the week beginning 13 May 2019 – Brent: US$70/b; WTI: US$61/b

  • Crude oil prices are holding their ground, despite the markets showing nervousness over the escalating trade dispute between the USA and China, as well as brewing tensions in the Middle East over the Iranian situation
  • China retaliated against President Trump’s decision to raise tariffs from 10% to 25% on US$200 billion worth of Chinese imports by raising its own tariffs; crucially, China has also slapped taxes on US LNG imports at a time when American export LNG projects banking on Chinese demand are coming online
  • In the Middle East, Saudi Arabia reported that two of its oil tankers were attacked in the Persian Gulf, with the ‘sabotage attack’ near the UAE speculated to be related to Iran; with the US increasing its military presence in the area, the risk of military action has escalated
  • The non-extension of US waiver on Iranian crude is biting hard on Iran, with its leaders calling it ‘unprecedented pressure’, setting the stage for a contentious OPEC meeting in Vienna
  • In a move that is sure to be opposed by Iran, Saudi Arabia has said it is willing to meet ‘all orders’ from former Iranian buyers through June at least; Saudi Aramco is also responding to requests by Asian buyers to provide extra oil
  • The see-saw trend in US drilling activity continues; after a huge gain two weeks ago, the active US rig count declined for a second consecutive rig, with the loss of two oil rigs bringing the total site count to 988, below the equivalent number of 1,045 last year
  • There is considerably more upside to crude prices at the moment, with jitters over the health of the global economy and a delicate situation in the Middle East likely to keep Brent higher at US$71-73/b and WTI at US$62-64/b


Headlines of the week

Upstream

  • Occidental Petroleum and Warren Buffet have triumphed, as Chevron bowed out of a bidding war for Anadarko Petroleum; Occidental will now acquire Anadarko for US$57 billion, up significantly from Chevron’s US$33 billion bid
  • The deal means that Occidental’s agreement to sell Anadarko’s African assets to Total for US$8.8 billion will also go through, covering the Hassi Berkine, Ourhoud and El Merk fields in Algeria, the Jubilee and TEN fields in Ghana, the Area 1 LNG project in Mozambiuqe and E&P licences in South Africa
  • BP has sanctioned the Thunder Horse South Expansion Phase 2 deepwater project in the US Gulf of Mexico, which is expected to add 50,000 boe/d of production at the Thunder Horse platform beginning 2021
  • Africa is proving to be very fruitful for Eni, as it announced a new gas and condensate discovery offshore Ghana; the CTP-Block 4 in the Akoma prospect is estimated to hold some 550-650 bcf of gas and 18-20 mmbl of condensate
  • In an atypical development, South Africa has signed a deal for the B2 oil block in South Sudan, as part of efforts to boost output there to 350,000 b/d
  • Shell expects to drill its first deepwater well in Mexico by December 2019 after walking away with nine Mexican deepwater blocks last year

Midstream & Downstream

  • China’s domestic crude imports surged to a record 10.64 mmb/d in April, as refiners stocked up on an Iranian crude bonanza due to uncertainty over US policy, which has been confirmed as crude waivers were not renewed
  • Having had to close the Druzhba pipeline and Ust-Luga port for contaminated crude, Russia says it will fully restore compliant crude by end May shipments, including cargoes to Poland and the Czech Republic
  • Mexico’s attempt to open up its refining sector has seemingly failed, with Pemex taking over the new 340 kb/d refinery as private players balked at the US$8 billion price tag and 3-year construction deadline
  • Ahead of India’s move to Euro VI fuels in April 2020, CPCL is partially shutting down its 210 kb/d Manali refinery for a desulfurisation revamp
  • China’s Hengli Petrochemical is reportedly now stocking up on Saudi Arabian crude imports as it prepares to ramp up production at its new 400 kb/d Dalian refinery alongside its 175 kb/d site in Brunei
  • South Korea’s Lotte Chemical Corp expects its ethane cracker in Louisiana to start up by end May, adding 1 mtpa of ethylene capacity to its portfolio
  • Due to water shortage, India’s MRPL will be operating its 300 kb/d refinery in Katipalla at 50% as drought causes a severe water shortage in the area

Natural Gas/LNG

  • Partners in the US$30 billion Rovuma LNG project in Mozambique now expect to sanction FID by July, even after a recent devastating cyclone
  • Also in Mozambioque, Anadarko is set to announce FID on its Mozambique LNG project on June 18, calling it a ‘historic day’
  • After talks of a joint LNG export complex to develop gas resources in Tanzania, Shell and Equinor now appear to be planning separate projects
  • Gazprom has abandoned plans to build an LNG plant in West Siberia to compete with Novatek, focusing instead on an LNG complex is Ust-Luga
  • First LNG has begun to flow at Sempra Energy’s 13.5 mtpa Cameron LNG project in Louisiana, with exports expected to begin by Q319
May, 17 2019
Shell Eclipses ExxonMobil Once Again

The world’s largest oil & gas companies have generally reported a mixed set of results in Q1 2019. Industry turmoil over new US sanctions on Venezuela, production woes in Canada and the ebb-and-flow between OPEC+’s supply deal and rising American production have created a shaky environment at the start of the year, with more ongoing as the oil world grapples with the removal of waivers on Iranian crude and Iran’s retaliation.

The results were particularly disappointing for ExxonMobil and Chevron, the two US supermajors. Both firms cited weak downstream performance as a drag on their financial performance, with ExxonMobil posting its first loss in its refining business since 2009. Chevron, too, reported a 65% drop in the refining and chemicals profit. Weak refining margins, particularly on gasoline, were blamed for the underperformance, exacerbating a set of weaker upstream numbers impaired by lower crude pricing even though production climbed. ExxonMobil was hit particularly hard, as its net profit fell below Chevron’s for the first time in nine years. Both supermajors did highlight growing output in the American Permian Basin as a future highlight, with ExxonMobil saying it was on track to produce 1 million barrels per day in the Permian by 2024. The Permian is also the focus of Chevron, which agreed to a US$33 billion takeover of Anadarko Petroleum (and its Permian Basin assets), only for the deal to be derailed by a rival bid from Occidental Petroleum with the backing of billionaire investor guru Warren Buffet. Chevron has now decided to opt out of the deal – a development that would put paid to Chevron’s ambitions to match or exceed ExxonMobil in shale.

Performance was better across the pond. Much better, in fact, for Royal Dutch Shell, which provided a positive end to a variable earnings season. Net profit for the Anglo-Dutch firm may have been down 2% y-o-y to US$5.3 billion, but that was still well ahead of even the highest analyst estimates of US$4.52 billion. Weaker refining margins and lower crude prices were cited as a slight drag on performance, but Shell’s acquisition of BG Group is paying dividends as strong natural gas performance contributed to the strong profits. Unlike ExxonMobil and Chevron, Shell has only dipped its toes in the Permian, preferring to maintain a strong global portfolio mixed between oil, gas and shale assets.

For the other European supermajors, BP and Total largely matched earning estimates. BP’s net profits of US$2.36 billion hit the target of analyst estimates. The addition of BHP Group’s US shale oil assets contributed to increased performance, while BP’s downstream performance was surprisingly resilient as its in-house supply and trading arm showed a strong performance – a business division that ExxonMobil lacks. France’s Total also hit the mark of expectations, with US$2.8 billion in net profit as lower crude prices offset the group’s record oil and gas output. Total’s upstream performance has been particularly notable – with start-ups in Angola, Brazil, the UK and Norway – with growth expected at 9% for the year.

All in all, the volatile environment over the first quarter of 2019 has seen some shift among the supermajors. Shell has eclipsed ExxonMobil once again – in both revenue and earnings – while Chevron’s failed bid for Anadarko won’t vault it up the rankings. Almost ten years after the Deepwater Horizon oil spill, BP is now reclaiming its place after being overtaken by Total over the past few years. With Q219 looking to be quite volatile as well, brace yourselves for an interesting earnings season.

Supermajor Financials: Q1 2019

  • ExxonMobil – Revenue (US$63.6 million, down 6.7% y-o-y), Net profit (US$2.35 billion, down 49.5% y-o-y)
  • Shell - Revenue (US$85.66 billion, down 5.9% y-o-y), Net profit (US$5.3 billion, down 2% y-o-y)
  • Chevron – Revenue (US$35.19 billion, down 5% y-o-y), Net profit (US$2.65 billion, down 27.2% y-o-y)
  • BP - Revenue (US$67.4 billion, down 2.51% y-o-y), Net profit (US$2.36 billion, down 9.2% y-o-y)
  • Total - Revenue (US$51.2billion, up 3.2% y-o-y), Net profit (US$2.8 billion, down 4.0% y-o-y)
May, 15 2019
EIA revises its crude oil price forecast upward as supply expectations change

monthly average Brent crude spot price

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January, April, and May 2019 editions

In its May 2019 edition of the Short-Term Energy Outlook (STEO), EIA revised its price forecast for Brent crude oil upward, reflecting price increases in recent months, more recent data, and changing expectations of global oil markets. Several supply constraints have caused oil markets to be generally tighter and oil prices to be higher so far in 2019 than previous STEOs expected.

Members of the Organization of the Petroleum Exporting Countries (OPEC) had agreed at a December 2018 meeting to cut crude oil production in the first six months of 2019; compliance with these cuts has been more effective than EIA initially expected. In the January STEO, OPEC’s crude oil and petroleum liquids production was expected to decline by 1.0 million b/d in 2019 compared with the 2018 level, but EIA now forecasts OPEC production to decline by 1.9 million b/d in the May STEO.

Within OPEC, EIA expects Iran’s liquid fuels production and exports to also decline. On April 22, 2019, the United States issued a statement indicating that it would not reissue waivers, which previously allowed eight countries to continue importing crude oil and condensate from Iran after their waivers expired on May 2. Although EIA’s previous forecasts had assumed that the United States would not reissue waivers, the increased certainty regarding waiver policy and enforcement led to lower forecasts of Iran’s crude oil production.

Venezuela—another OPEC member—has experienced declines in production and exports as a result of recurring power outages, political instability, and U.S. sanctions. In addition to supply constraints that have already materialized in 2019, political instability in Libya may further affect global supply. Any further escalation in conflict may damage crude oil infrastructure or result in a security environment where oil fields are shut in. Either situation could reduce global supply by more than EIA currently forecasts.

In the May STEO, total OPEC crude oil and other liquids supply was estimated at 37.3 million b/d in 2018, and EIA forecasts that it will average 35.4 million b/d in 2019. EIA assumes that the December 2018 agreement among OPEC members to limit production will expire following the June 2019 OPEC meeting.

annual changes in global liquids production

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January, April, and May 2019 editions

U.S. crude oil and other liquids production is sensitive to changes in crude oil prices, taking into account a lag of several months for drilling operations to adjust. As crude oil prices have increased in recent months, so too have EIA’s domestic liquid fuels production forecasts for the remaining months of 2019.

U.S. crude oil and other liquids production, which grew by 2.2 million b/d in 2018, is forecast in EIA’s May STEO to grow by 2.0 million b/d in 2019, an increase of 310,000 b/d more than anticipated in the January STEO. In 2019, EIA expects overall U.S. crude oil and liquids production to average 19.9 million b/d, with crude oil production alone forecast to average 12.4 million b/d.

Relative to these changes in forecasted supply, EIA’s changes in forecasted demand were relatively minor. EIA expects that global oil markets will be tightest in the second and third quarters of 2019, resulting in draws in global inventories. By the fourth quarter of 2019, EIA expects that inventories will build again, and Brent crude oil prices will fall slightly.

More information about changes in STEO expectations for crude oil prices, supply, demand, and inventories is available in This Week in Petroleum.

May, 15 2019