Modest Spending Increase Forecast for Maintenance and Production
Significant Potential in Natural Gas, New Offshore Exploration and Production Opportunities in Eastern Mediterranean
Abu Dhabi, UAE – 22 October 2017 – The Offshore and Marine industry is expected to see increased business at this year’s Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), with analysts predicting modest increases in spending for maintenance and production in the oil sector, and significant investment expected for new offshore natural gas projects in the Eastern Mediterranean.
Analysis by consultancy Douglas-Westwood has found that, although investment in new offshore production remains low, compared with pre-2014 levels, the outlook for maintenance, modifications and operations is ‘notably more positive’. Much of the rebound is caused by work orders, that have been delayed, coming back online.
Within the GCC area, 2017 has seen Saudi Aramco sign agreements with Abu Dhabi-based National Petroleum Construction Company (NPCC) to purchase four offshore platforms and associated equipment, as well as a separate deal for the supply of 17 offshore jackets – the steel frames that support the platform.
Globally, consultants Wood Mackenzie are predicting renewed exploration and production for deep-water projects, with efficiency improvements having lowered the breakeven price by 20 per cent in the past three years.
“We are seeing renewed optimism among companies supporting offshore production, with demand underpinned by an industry that is now more efficient, stabilising prices, and the need to meet anticipated rising demand,” said Ali Khalifa Al Shamsi, Al Yasat CEO and ADIPEC 2017 Chairman.
“ADIPEC supports this growth as a market where suppliers can network with purchasing decision makers and generate new business. Its comprehensive strategic and technical conference programmes provide an unrivalled opportunity for specialised knowledge exchange.”
Natural gas is a significant contributor to the positive outlook, particularly in the Middle East and North Africa, where Egypt is seeing around USD 27.3 billion worth of investments across the Zohr, North Alexandria and Noras gas fields, and 76 new upstream exploration concessions have been signed worth around USD 1.5 billion. Cypriot and Lebanese waters also offer fresh opportunities for offshore exploration and production in the Eastern Mediterranean.
As investment moves into the sector, new projects will create business opportunities at ADIPEC’s unique Offshore and Marine area, which returns in 2017 for its third year.
Set directly on the waterfront, adjacent to the main ADIPEC venue, it is held in a dedicated purpose-built exhibition and conference space, with product displays encompassing the full value chain, from rigs, vessels, ship building, and subsea drilling equipment, to certification, pipelines, mooring, and tools for reservoir production and mapping.
The display’s defining feature will be the temporary quay, with a series of state-of-the-art offshore vessels berthed directly alongside the venue, including a jack-up barge, high-speed craft and landing craft, tugboats, and platform supply vessels up to 70 metres in length. Visitors will be able to tour the vessels on display, seeing the latest evolution in marine engineering and technology first-hand.
Mohammad Rizal, Chief Operating Officer at UAE-based shipyard group, Drydocks World, says the unique venue is an ideal setting for offshore suppliers to demonstrate their achievements and generate new business.
“At ADIPEC 2017, Drydocks World intends to update the marine industry on the yard’s offshore capabilities, while showcasing the world-first cutting-edge projects completed in the yard that demonstrate our competency to execute large-scale projects with a proven track record of excellent HSEQ standards,” said Mohammad Rizal. “We look forward to taking our business further and discussing future possibilities during ADIPEC 2017.”
For 2017, an expanded conference programme will underpin continued efficiency, innovation, and growth, as well as offer insights into new opportunities.
The breadth and quality of ADIPEC’s conference schedule has long set it apart from its peers. This year’s Offshore & Marine programme will offer unrivalled opportunities to hear from leading executives and experts in their field, and will cover an array of important topics from both a strategic and technical perspective. There will also be a dedicated session on the Emirates Maritime Arbitration Centre, and the processes available for resolving maritime legal disputes quickly and without unnecessary cost.
The specialised exhibition and conference area is expected to attract more than 15,000 visitors and 150 exhibitors. Companies with confirmed spaces include NPCC, Zakher Marine International (ZMI), Horizon Geosciences, Seajacks, Seacontractors, Seatrax, Guidance Marine, ADNOC, Khalid Faraj Shipping, Overseas Marine Logistics, Drydocks World - Dubai, and Maridive Group.
Panel discussions will be held over three days, covering future expectations and challenges, driving growth, and adapting to new market conditions. Confirmed speakers include senior executives from National Petroleum Construction Company (NPCC), Wintershall, Cepsa Gas Comercializadora, McDermott, Foresight Group, Abu Dhabi Ship Building, Cyprus Hydrocarbons Company (CHC), Lebanese Petroleum Administration (LPA), Scottish Government Oil and Gas Taskforce, Kuwait Oil Tanker Company (KOTC), and ADNOC Logistics & Services.
Held under the patronage of His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE, hosted by the Abu Dhabi National Oil Company (ADNOC), and organised by the Global Energy division of dmg events, ADIPEC is one of the world’s leading oil and gas events, and the largest in Africa and the Middle East.
ADIPEC will be held at Abu Dhabi National Exhibition Centre from 13 to 16 November 2017.
– ENDS –
Held under the patronage of the President of the United Arab Emirates, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, and organised by the Global Energy division of dmg events, ADIPEC is the global meeting point for oil and gas professionals. Standing as one of the world’s top energy events, and the largest in the Middle East and North Africa, ADIPEC is a knowledge-sharing platform that enables industry experts to exchange ideas and information that shape the future of the energy sector. The 20th edition of ADIPEC will take place from 13-16 November, at the Abu Dhabi National Exhibition Centre (ADNEC). ADIPEC 2017 will be hosted by the Abu Dhabi National Oil Company (ADNOC) and supported by the UAE Ministry of Energy, Masdar, the Abu Dhabi Chamber, the Abu Dhabi Tourism & Culture Authority (TCA Abu Dhabi), Abu Dhabi Ports and the Department of Education and Knowledge. dmg Global Energy is committed to helping the growing international energy community bridge gaps by bringing oil and gas professionals face to face with new technologies and business opportunities.
For media enquiries, please contact:
Senior Marketing Manager, DMG Events Global Energy
Twofour54, Park Rotana Offices, 6th Floor
PO Box 769256, Abu Dhabi, UAE
T: +971 (0)2 6970 515
T: +971 4 275 4100
Mark Robinson (English): +971 (0)55 127 9764
Feras Hamzah (Arabic): +971 (0)50 798 4784
For more info: http://www.adipec.com/
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There are things brewing within OPEC. At a meeting in Baku, Azerbaijan last week – which was meant to set the stage for a formal meeting in April to review the current supply deal among the 24-country OPEC+ block – the conclusion of the meeting was that the April meeting would be deferred. The review will now take place at OPEC’s regular meeting in Vienna in June, which is mere days before the current supply deal is scheduled to end. That’s cutting it close, but more interesting for market observers is that it points to the Saudi Arabia-Russia bromance souring.
Prior to the meeting, Saudi Arabia had gone on record to state that the Kingdom believed that OPEC’s job in rebalancing the oil market was far from over and that output cuts were necessary to continue into the second half of 2019. Defying US President Donald Trump’s Twitter tantrums – especially with the Kingdom implicated in the assassination of Saudi dissident Jamal Khashoggi – Saudi Arabia is firmly behind continuing restricted supply. In the past, Saudi Arabia would most likely to be able to bully its way into an OPEC consensus. But now, it has to deal with an equally powerful 20-ton gorilla in the same room: Russia.
The success of the OPEC+ club over the past two years has been down to this close relationship between the world’s two largest oil producers. This had allowed crude prices to recover from sub-US$50/b levels. But the latest meeting is also the latest sign that all may not be well in the friendship. First, a joint Saudi-Russia meeting at the World Economic Forum in Davos was called off. Second, February data showed that while Saudi Arabia and its allies were doing far more than necessary to cut their crude production, Russia was shuffling its feet with less than 50% adherence, claiming that it needed more time to implement the cuts. And last week, despite Saudi Arabia lobbying for an extension to the cuts and general backing from members including Iraq, Russian Energy Minister Alexander Novak was in opposition. The official reason was that OPEC+ would need clarity on market situation before planning the next move, given the disruption brought about by ongoing and developing American sanctions on Iran and Venezuela. In the absence of necessity, the two crude powerhouses have drifted back to their default positions: Saudi Arabia’s aggression and Russia’s conservatism.
So while the world waits and watches for OPEC+’s next move, the market is analysing the potential impact of a strained Saudi-Russia relationship. But necessity might bring the two back together again, since they now face a common foe – rising US crude production. OPEC’s secretary general recently met with key executives in the US shale oil industry. This was billed as a ‘friendly conversation on current industry trends’ and interpreted as an attempt to cajole American shale producers in a mutually-beneficial stabilisation of the market. It is ridiculously unlikely for the US to ever join the OPEC+ club, but if the move could convince US shale firms to temper their expansion to prevent global oversupply, it might be worth it. Because OPEC has accompanied the olive branch with a threat – if OPEC does all the work to stabilise markets only to have American shale take advantage of the situation, it could very well reverse its stance and turn the OPEC tap on full to swamp the market once again. It’s a classic example of game theory, and one to watch as the power dynamics of global oil continue to change.
Key upcoming dates for OPEC:
Headline crude prices for the week beginning 18 March 2019 – Brent: US$67/b; WTI: US$58/b
Headlines of the week
Midstream & Downstream
Risk and reward – improving recovery rates versus exploration
A giant oil supply gap looms. If, as we expect, oil demand peaks at 110 million b/d in 2036, the inexorable decline of fields in production or under development today creates a yawning gap of 50 million b/d by the end of that decade.
How to fill it? It’s the preoccupation of the E&P sector. Harry Paton, Senior Analyst, Global Oil Supply, identifies the contribution from each of the traditional four sources.
1. Reserve growth
An additional 12 million b/d, or 24%, will come from fields already in production or under development. These additional reserves are typically the lowest risk and among the lowest cost, readily tied-in to export infrastructure already in place. Around 90% of these future volumes break even below US$60 per barrel.
2. pre-drill tight oil inventory and conventional pre-FID projects
They will bring another 12 million b/d to the party. That’s up on last year by 1.5 million b/d, reflecting the industry’s success in beefing up the hopper. Nearly all the increase is from the Permian Basin. Tight oil plays in North America now account for over two-thirds of the pre-FID cost curve, though extraction costs increase over time. Conventional oil plays are a smaller part of the pre-FID wedge at 4 million b/d. Brazil deep water is amongst the lowest cost resource anywhere, with breakevens eclipsing the best tight oil plays. Certain mature areas like the North Sea have succeeded in getting lower down the cost curve although volumes are small. Guyana, an emerging low-cost producer, shows how new conventional basins can change the curve.
3. Contingent resource
These existing discoveries could deliver 11 million b/d, or 22%, of future supply. This cohort forms the next generation of pre-FID developments, but each must overcome challenges to achieve commerciality.
Last, but not least, yet-to-find. We calculate new discoveries bring in 16 million b/d, the biggest share and almost one-third of future supply. The number is based on empirical analysis of past discovery rates, future assumptions for exploration spend and prospectivity.
Can yet-to-find deliver this much oil at reasonable cost? It looks more realistic today than in the recent past. Liquids reserves discovered that are potentially commercial was around 5 billion barrels in 2017 and again in 2018, close to the late 2030s ‘ask’. Moreover, exploration is creating value again, and we have argued consistently that more companies should be doing it.
But at the same time, it’s the high-risk option, and usually last in the merit order – exploration is the final top-up to meet demand. There’s a danger that new discoveries – higher cost ones at least – are squeezed out if demand’s not there or new, lower-cost supplies emerge. Tight oil’s rapid growth has disrupted the commercialisation of conventional discoveries this decade and is re-shaping future resource capture strategies.
To sustain portfolios, many companies have shifted away from exclusively relying on exploration to emphasising lower risk opportunities. These mostly revolve around commercialising existing reserves on the books, whether improving recovery rates from fields currently in production (reserves growth) or undeveloped discoveries (contingent resource).
Emerging technology may pose a greater threat to exploration in the future. Evolving technology has always played a central role in boosting expected reserves from known fields. What’s different in 2019 is that the industry is on the cusp of what might be a technological revolution. Advanced seismic imaging, data analytics, machine learning and artificial intelligence, the cloud and supercomputing will shine a light into sub-surface’s dark corners.
Combining these and other new applications to enhance recovery beyond tried-and-tested means could unlock more reserves from existing discoveries – and more quickly than we assume. Equinor is now aspiring to 60% from its operated fields in Norway. Volume-wise, most upside may be in the giant, older, onshore accumulations with low recovery factors (think ExxonMobil and Chevron’s latest Permian upgrades). In contrast, 21st century deepwater projects tend to start with high recovery factors.
If global recovery rates could be increased by a percentage or two from the average of around 30%, reserves growth might contribute another 5 to 6 million b/d in the 2030s. It’s just a scenario, and perhaps makes sweeping assumptions. But it’s one that should keep conventional explorers disciplined and focused only on the best new prospects.
Global oil supply through 2040