Hess Corporation (NYSE: HES) has announced several additional steps in the continued execution of its strategic plan to further focus the company’s portfolio and allocate capital to higher return assets:

• An agreement to sell its oil and gas interests in Norway for total proceeds of $2 billion
• Commencement of a process to sell its interests in Denmark
• Implementation of a cost reduction program expected to deliver annual cost savings of more than $150 million starting in 2019

Hess: offshore Denmark. Photo credit: Hess

“With the continued success of our asset sale program, we are focusing our portfolio on higher return assets and reducing our breakeven oil price,” CEO John Hess said. “Proceeds from these asset sales, along with cash on the balance sheet, will prefund development of our world class investment opportunity in offshore Guyana, where we have participated in one of the world’s largest oil discoveries of the past decade – positioning our company to deliver more than a decade of cash generative growth and significant value for our shareholders.”

The sale of its interests in Norway combined with the company’s previously announced divestitures of its enhanced oil recovery assets in the Permian Basin and interests in Equatorial Guinea have captured approximately $3.25 billion in cash proceeds year to date. These reshaping moves including the planned sale of interests in Denmark will also extinguish approximately $3.2 billion in future abandonment liabilities. In addition, with a portion of these cash proceeds, we expect to reduce Hess Corporation debt (excluding midstream) by $500 million in 2018. Together with the planned $150 million annual cost reduction program, these actions are expected to reduce cash unit production costs by approximately 30 percent – to less than $10 per BOE – by 2020.

Sale of Interests in Norway, Sales Process in Denmark

Hess has entered into an agreement to sell its subsidiary Hess Norge, which owns interests in the Valhall and Hod fields in Norway, to Aker BP ASA for total proceeds of $2 billion, effective January 1, 2017. The Valhall and Hod fields produced an average of 26,000 barrels of oil equivalent per day net to Hess over the first six months of 2017. Hess holds a 64.05 percent interest in Valhall and a 62.5 percent interest in Hod. The sale is subject to customary conditions for completion, including approval by the Ministry of Oil and Energy, Ministry of Finance and relevant competition clearance and is expected to be completed by year end 2017.

In addition, Hess will commence a process to sell its interests in Denmark, where it holds a 61.5 percent interest in the South Arne Field. This sales process is expected to be completed in 2018. The South Arne Field produced an average of 11,000 barrels of oil equivalent per day net to Hess in the first six months of 2017.

Lower Cash Unit Costs from Portfolio Reshaping and Associated Cost Reduction Program

Starting in 2020, cash unit costs are expected to be reduced by approximately 30 percent from 2017 levels. This reduction results from investment in higher return growth assets, the sale of higher cost assets and a cost reduction program that is expected to deliver annual cost savings of more than $150 million starting in 2019.

Statoil Brasil Oleo e Gas Ltd., a subsidiary of Statoil ASA (OSE:STL, NYSE:STO), ExxonMobil Exploracao Brasil Ltda., a subsidiary of Exxon Mobil Corporation (NYSE:XOM), and PETROGAL BRASIL, S.A., a subsidiary of Galp (NYSE: GALP.LS), were the high bidders for a production sharing contract for the Carcará North block in Brazil’s second pre-salt offshore licensing round held on 27 October.

The consortium comprising Statoil (operator, 40%), ExxonMobil (40%) and Galp (20%) presented the winning bid (67.12% of profit oil) for the Carcará North block in the Santos basin. The pre-determined signature bonus to be paid by the consortium is BRL 3.0 billion, approximately USD 910* million. Statoil’s share is USD 364* million.

Statoil, ExxonMobil and Galp have also agreed a number of subsequent transactions in the adjacent BM-S-8 block to align equity interests across the two blocks that together comprise the Carcará oil discovery. The aggregate total potential consideration to be received by Statoil in these transactions is around USD 1.55 billion and, following the licensing round, the potential net cash inflow to Statoil is around USD 1.19* billion.

First, Statoil has agreed to divest 33% out of its current 66% interest in BM-S-8 to ExxonMobil for a total potential consideration of around USD 1.3 billion, comprising an upfront cash payment of around USD 800 million and a contingent cash payment of around USD 500 million.

Furthermore, upon the future closing of its acquisition of the 10% interest in BM-S-8 held by Queiroz Galvão Exploração e Produção (QGEP), Statoil has agreed to divest a further 3.5% to ExxonMobil and 3% to Galp for a total consideration of around USD 250 million, comprising an upfront cash payment of around USD 155 million and a contingent cash payment of around USD 95 million.

As a result, both Statoil and ExxonMobil will have a 36.5% interest in BM-S-8 and a 40% interest in Carcará North. Galp will have 17% in BM-S-8 and 20% in Carcará North. The partners in Carcará North have also agreed that Statoil will be operator for the unitized field development, subject to government approval.

“This further strengthens Statoil’s presence in the prolific Brazilian pre-salt area and these transactions help build a strong and aligned partnership across the two Carcará blocks. Together they significantly advance our strategy in Brazil, a core area for Statoil. Developing a world-class asset like Carcará as operator is a good match with our competence and capacity,” said Statoil CEO Eldar Sætre.

“We look forward to working with our partners, the Brazilian authorities and Pré-Sal Petróleo S.A. on a timely unitization process in support of our plan for first oil production from Carcará in the mid-2020s. This plan will create jobs, economic growth and revenues to the state,” said Statoil’s country manager for Brazil, Anders Opedal.

The closing of the transactions with ExxonMobil and Galp is subject to customary conditions, including partner and government approvals.

*Based on exchange rate from Bloomberg 27 October 2017 for BRL/USD = 0.30327

Royal Dutch Shell plc (“Shell”) and its partners won three, 35-year production sharing contracts for pre-salt blocks located in the Santos Basin, offshore Brazil. Shell will pay its share of the total signing bonuses, equating for all bids, of to approximately USD $100-million [R$ 332.5-million].

The winning bids for Shell include a block adjacent to Shell’s Gato do Mato field (Shell 80% operating, Total 20%), a now unitized area to the Sapinhoá field (Petrobras 45% operating, Shell 30%, Repsol 25%), and the new Alto de Cabo Frio – West block (Shell 55% operating, Qatar Petroleum 25%, CNOOC Limited 20%).

“We are very pleased to expand our number of operated fields in Brazil,” said Andy Brown, Upstream Director, Shell. “These winning bids were submitted after our thorough evaluation and add strategic acreage to our already leading set of global deep-water growth options. We will determine our next steps with a focus on continued value to Shell and our shareholders. Our deep-water expertise is well-suited for the opportunities that lie ahead.”

Prior to these bidding results, Shell had previously stated plans for $10-billion investment into the early 2020s for its existing offshore developments in Brazil to support deep water as its Upstream growth priority. Shell first began working under a production sharing contract in Brazil in 2013 when it entered the Libra consortium, led by Petrobras. Shell’s history in Brazil covers more than 100-years with businesses in Upstream and Downstream.

Shell pioneered deep-water exploration and production 40-years ago in the U.S. Gulf of Mexico, and together with its partners in Brazil, the company will combine that expertise to grow its offshore production. World-wide last quarter, Shell produced more than 710-thousand barrels of oil equivalent per day (boe/d) from its deep-water business, with approximately 330-thousand boe/d production in Brazil. Other deep-water projects for Shell are in the Gulf of Mexico, offshore Nigeria, and offshore Malaysia.

Global Oil Surplus is Mostly Gone

Booming world economic growth to stay strong and durable with credit conditions remaining constructive. Upward oil demand revisions continue. This demand growth together with the OPEC/non-OPEC cuts have substantially reduced surplus stocks in 2017. OPEC’s surplus stock estimate is way too high for it ignores required stocks for both new infrastructure and for increased U.S. crude and product exports. Hence, OPEC is likely to keep the cuts longer than necessary with a resulting positive benefit to prices. 2017’s 1 MMB/D flow deficit together with strong demand growth keep stocks declining in 2018 despite overall supply exceeding demand growth. Crude oil prices are revised up again. The upside risk to prices remains supply interruptions with many countries looking vulnerable while the downside risk is U.S. rig count resuming its upward trend. The call on refining is very strong and will continue to support relatively robust margins, even in the least sophisticated capacity. Gasoline cracks stay healthy while diesel cracks increase further assuming normal weather. WTI-Brent strengthens but stays wide enough to allow U.S. exports. Brent-Dubai generally will have to be weak enough to keep the arb open from the Atlantic Basin to Asia.

U.S. and Europe Ethanol Prices Bottom in October

U.S. manufacturing margins decline. RIN prices jump. Brazil ethanol output in the South-Central region drops in the first half of October as the harvest winds down. U.S. biodiesel output of 149 million gallons in August equals a record high.

Liftoff Delayed – Not Cancelled

More than a few physical traders have commented that this month’s bid-week felt more like a lackluster injection month, rather than the kick-off to the heating season. When considering the direction of winter prices, it is critical to understand that the sub-$3 futures settlements for November are sending a strong message about supply concerns. Yet, we see the market messaging evolving as the industry begins to clear excess supply. Indeed, it bears mentioning that Henry Hub cash prices last December averaged $1 over November, with the arrival of more seasonal temperatures. Should cold weather arrive early, it is easy to imagine a step-change in cash prices unfolding next month.

Fall Maintenance/Summer Heat

The return of extreme temperatures to Southern California in late October coincided with seasonal outages of generation (including Palo Verde 1) and transmission (including the PDCI) along with limitations on gas imports to the region. Prices at Southwest hubs spiked lifting October monthly averages well above projected levels. National gas price forecasts have been revised down, but low storage and pipeline constraints could support renewed upside volatility at the SoCal citygate under colder than normal conditions this winter. Columbia River basin precipitation has begun the new water year slightly above normal. The return of La Niña conditions this winter could result in increased heating demand and a larger, later runoff.

Winter Risks Remain at the Forefront

Seaborne coal prices were again on the rise over the past month, on low stockpiles in China and India, and underwhelming supply. PIRA continues to assert that the risks remain to the upside over the short-term, as seasonal demand has not yet reached peak levels. However, the pricing risks shift to the downside in 2Q18 and beyond as Chinese imports fade and LNG prices become more competitive with coal in the global market.

PJM REC Balances to Tighten in 2018

Prices for PJM tri-qualified (PA, MD and NJ) Tier 1 RECs continued to fall this year, reflecting oversupply. Secondary market trading volumes were strong in the first part of 2017, dropping off after the end of the compliance year; current OI represents about 1/3 of the annual RPS obligation. The REC bank will grow again in 2017, but balances narrow in 2018. Large spot REC procurement needs to satisfy the IL RPS represent a major wildcard. PA legislation limiting out-of-state solar affects supply for that market. Increases in REC requirements taper off after 2020, and a transmission line project could deliver significant renewable energy supply to the region. However, the phase-out of federal tax incentives puts upward pressure on long term REC prices, and PIRA expects extensions to state RPS targets.

Crude Rises as Global Surplus Shrinks; WTI Discount Widens

WTI prices are now over $57/Bbl, as the global oil surplus continues to shrink and geopolitical risks to supply grow. The spread between Cushing and Gulf Coast crudes widened, as PADD III crude stocks fell sharply in October, while Cushing stocks rose 1 MMB. Once local refining maintenance concludes this month, Cushing stocks will fall rapidly, with WTI moving into backwardation, as the wide spreads will incentivize shipments south out of Cushing, while new pipelines in the Permian Basin will take barrels away from Cushing and move them to the coast. Additionally, the Diamond pipeline will begin shipping Cushing crude to Memphis in a few weeks. The increasing volumes of crude reaching the Gulf Coast will both go to satisfy refinery demand and to sustain crude exports at record levels, as the export arb stays wide open through at least year-end. Midland grades have begun to strengthen with the new pipeline additions, and Midland Sweet will likely trade at a premium through the first half of 2018. New oil sands projects starting up in Alberta will cause light grades to weaken from current strong levels, while heavy differentials weaken further and move toward Gulf Coast rail parity.

Rebounding U.S. Jobs, Synchronized Grobal Growth, and Continuing Constructive Credit Conditions

Hurricanes Harvey and Irma caused great destruction during August and September, and created distortions in key U.S. economic data. Distortions remain in recent data, but the dust is starting to settle, and the emerging picture is of an economy picking up steam. Specifically, employment data for October were constructive, and confidence indicators sent encouraging signals. But an increasing tightness in the labor market is not yet resulting in sharply higher wage growth. Meanwhile, Europe, emerging Asia, and commodity-intensive emerging economies are also showing strength – indications are that the positive momentum is spreading globally through trade and other channels.

Mild Fall Weather Leads to a Boost in Propane Inventories

U.S. propane/propylene inventories increased by 726,000 bbl for the week ending October 27 according to the EIA. While propane exports remain strong, domestic res/com demand has been soft due to mild fall weather. In response, propane prices ran counter to crude and gas prices last week with propane prices falling 1.5% to 96.9 cents/gal. In contrast, ethane prices rose 4.4% to 27.25 cents/gal. Ethane is the most economical U.S. steam cracker feedstock but due to rising ethane prices coupled with an 8.6% decline in ethylene prices, ethane’s steam cracker margin fell 11.9% last week to 18.2 cents/lb of ethylene, which is the first time since 30 December 2016 that the ethane steam cracker margin has been under 20 cents/lb of ethylene. Propane exports beat expectations and topped 1.0 million b/d for the week ending October 27. Platts Analytics expects propane exports to drop to about 800,000 b/d for the week ending November 3 based on lower ship activity at Gulf Coast LPG terminals. U.S. LPG cargoes to Asia have been supported by the extension of the October propane Saudi CP of $575/mt into November pricing, which makes landed U.S. propane in Asia cheaper than landed Middle East barrels.

WASDE Week

The November WASDE splits this trading week with its midday release on Thursday. Looking over the CFTC Commitment of Trader’s report, positioning appears to be in line with the general consensus that corn yields will be raised while much uncertainty still looms over the size of the soybean crop. The week is also expected to bring improving soil moisture conditions to the main soybean growing areas in Brazil, which should be the market driver late in the trading week after the WASDE release.

Venezuelan Default Saga Evolves

On November 2, Venezuelan President Nicolas Maduro stated intentions to restructure or refinance all future debt obligations, but only after making a final $1.12 billion PDVSA principal payment on November 3. Payments on principal and interest became increasingly delinquent throughout October, indicating a notably higher risk of default in 2018 (when the government and PDVSA owe a combined ~$9 billion). A default could disrupt Venezuelan exports because of potential creditor claims on its cargoes, but with most Venezuelan oil sold FOB this risk appears limited. However, concerns on the part of Western buyers could cause even more crude to head to Asia. PIRA understands 850 MB/D of October’s export program of 1.6 MMB/D went to Chinese, Russian, and Indian buyers, with only 500 MB/D headed to the U.S. Meanwhile, CITGO’s status as an “insulated subsidiary” makes it unlikely to be dragged into PDVSA bankruptcy proceedings, and apparently has only been importing 80 MB/D of Venezuelan crude. Regardless, oil investment is likely to be squeezed, raising downside production risk to PIRA’s forecast. We currently assume 90 MB/D of crude declines between 4Q17 and 4Q18, to 1.8 MMB/D.

Storage is Well Prepared for Short-Term Cold, Less So Seasonally

Optimizing seasonal storage has not been one of the market’s most profitable jobs for some time. One of the main problems has been the low summer/winter spreads that still plague the market – even in the wake of the Rough storage closure. Seasonal spreads have been recently trading at 7.3 p/th on the NBP compared to more than double that for summer’12 /winter’12. With storage entering the month 4-BCM higher than normal and 2-BCM short of record levels, one would think that most storage facilities would be brimming and ready to withdraw. When digging into the numbers, one can see how the market is shifting towards more flexible storage with more cycling ability and away from facilities with longer emptying periods. This coincides well with gas’ future as a more flexible source of supply, as the market moves more towards a balancing role for renewables.

Has India’s Power to Move the Market Been Underestimated?

As JKM takes another giant leap forward this week despite even more bearish fundamental indicators (Wheatstone loads a first cargo for Japan just as Japan demand continues to plunge), our attention turns from China to India. The consensus among traders has been that a series of winter spot tenders for China has tightened up the spot market considerably. Yet as shortages in coal stockpiles at power plants around India register close to historic lows, it may be that India is driving this unexpected price surge, at least in part.

As Wind Blows, Coal-to-Gas Switching Remains a Limited Feature in Germany

The high price volatility observed in recent weeks in Germany is the result of large swings in wind output. Last year the hourly dispatching profiles for coal and gas tracked each other across most of the wind spectrum, suggesting that the two technologies were responding in similar fashion to variations in wind output. By contrast, this year the two profiles overlap only when wind is low, but overall the gas profile is flatter than the coal one. In particular, gas plants do not seem to ramp down as much as coal, most likely the result of already low average dispatching levels for gas.

Reports of Chinese Port Constraints Limits Coal Pricing Upside

Coal prices continued to move higher in the first half of the week, on tight market conditions heading into the winter peak season, although prices shifted lower on news of import constraints at Southern Chinese ports and lowered nuclear generation risks in France. While fundamental pricing risks remain to the upside in our view if Chinese imports are constrained by policy/quotas, FOB Newcastle prices could move closer to $90/mt than $100/mt over the next 90 days.

U.S. Another Stock Decline

Overall U.S. commercial oil inventories declined again last week by 5.8 million barrels as crude oil inventories uncharacteristically declined by 2.4 million barrels, bucking the historical trend, while product stocks drew 3.4 million barrels led by a sharp decline (-4.0 million barrels) in gasoline. Commercial U.S. inventories are now down 75 million barrels versus last year, a testament to global oil market rebalancing and the success of the OPEC/non-OPEC cuts. Demand has been especially weak, except for gasoline and jet, but is forecast to pick up in the weeks ahead. Cushing crude stocks built 0.09 million barrels this past week and probably have one more week to build with a 0.8 million barrel stock build forecast for next week’s EIA report. In sharp contrast, overall crude inventories drop 5.7 million barrels this week as runs increase and imports fall, another counter-seasonal stock decline. All three of the major light products show significant stock decline in this week’s EIA report, rounding out another week of bullish data.

Credit Indicators Perform Well, Amid More Record Highs

Credit conditions remain highly constructive, with the S&P 500 continuing to set new records. Volatility declined about -7.9%. Energy was particularly strong and this spilled over into certain credit indicators. Overall investment grade credit gained about 0.7%, while investment grade energy and high yield energy credit were up about 1%. Overall high yield (HYG), was lower by -0.6%, while emerging market debt was down -0.3%. The dollar was little changed on a DXY basis. The St. Louis financial stress indicator ticked higher on the week.

U.S. Ethanol Output Increases again the Week Ending October 27

U.S. ethanol production rose sharply for the third consecutive week, increasing from 967 MB/D to a near-record 1,056 MB/D over that time. Total inventories built by 440 thousand barrels last week to 21.5 million barrels, nearly erasing the 446 thousand barrel draw during the preceding week. Ethanol-blended gasoline production rose for the fifth time in six weeks, increasing by 3 MB/D to 9,185 MB/D.

The Blame Game

Too often the blame for low grain prices gets set squarely on the shoulders of the Non-Commercials. Fund traders are always wrong when they’re heavily short, like now, but rarely mentioned when they’re long. Too often we hear, “the shorts will get squeezed soon” or “they’ll have to get out at some point” by those dissatisfied with price, which is obviously the farming community that we monitor quite closely. U.S. producers are on the record as saying they will not sell at current prices, in essence trying to squeeze the Non-Commercial shorts in corn, but will a time come when they don’t have a choice?

U.S. Gas Weekly Report

Thus far this week, Henry Hub cash prices have averaged ~$2.75/MMBtu — a slight decline from the prior week’s average of ~$2.85/MMBtu. From the standpoint of total U.S. supply and demand, such declines conflict with balances tightening W/W by ~7 Bcf/d. Yet, beyond ongoing worries about subpar heating demand, bearish sentiment is also being stoked by robust U.S. production. In particular, onshore production averaged a record ~72 Bcf/d, ~0.5 Bcf/d more than the prior week.

Japan Runs Ready to Rise, with Higher Demands Absorbing Supply

The key takeaway in the data last week was a solid demand performance, which drew finished product stocks. If demand continues to perform well, it will readily absorb the increasing refinery output resulting from reduced maintenance. Runs were unchanged, with lower crude imports, which drew crude stocks 2.35 MMBbls. Gasoline demand rose again, last week by 47 MB/D, and beat expectations. Stocks drew on lower refinery output and slightly higher exports. Gasoil demand also rose again and stocks drew 0.44 MMBbls (63 MB/D), similar to the previous week and close to yearly lows. Kerosene demand also again rose, last week by a strong 108 MB/D. Stocks saw an accelerating draw rate of 85 MB/D, with the 4-week build rate easing to 37 MB/D. The deficit position vs. year-ago remained about 1 MMBbls. Refining margins remain strong and supportive of the run rise that will be forthcoming. The indicative marketing margin has again been easing as refining margins have held firm. Both gasoline and gasoil/diesel are below statistical norms, with gasoil/diesel showing the larger variance.

Global Equities Setting More Record Highs, but Some Rotation Noted

Global equity markets continue to set more broad based records in a host of countries and across a host of market indices, but some sectorial rotation was noted. In the U.S., the S&P 500 was again modestly higher on the week, but set new records. The best performing sectors were energy (+1.9%), and technology (+1.65), while housing (-1.9%) and banking (-1.1%) were the laggards. Internationally, tracking indices generally performed better than those in the U.S. Japan was higher by +1.3%, emerging Asia higher by +1.1%, while world, ex-U.S., gained +0.8%. Latin America fell -3.6% and driven by weakness in Brazil and Mexican markets.

U.S. August 2017 DOE Monthly Revisions: Demand and Stocks

EIA just released their monthly August 2017 (PSM) U.S. oil supply/demand data. August 2017 demand came in at 20.161 MMB/D, which is 33 MB/D lower than PIRA had assumed, and 772 MB/D lower than the weeklies had indicated. Total product demand growth slowed and turned modestly negative, -114 MB/D or -0.6% versus year-ago. Even so, the negative performance was concentrated in “other” product demand, a decline of 373 MB/D or -8%. All the major products showed demand gains and outperformed. Middle of the barrel demands continued to post strong growth, with distillate demand higher by 112 MB/D or 2.9%, and kero-jet higher by 47 MB/D or 2.7%. End-August total commercial stocks stood at 1,307.4 MMBbls, which were 6.6 MMBbls lower than PIRA had assumed. Crude came in 5.6 MMBbls lower and products were 1.0 MMBbls lower. Compared to the preliminary weeklies, total commercial stocks were revised down 2.0 MMBbls, with crude lowered 2.4 MMBbls, and product raised modestly. Compared to August 2016 PSA data, total commercial stocks are now lower than year-ago by 63.9 MMBbls vs. 52.4 MMBbls at end-July.

U.S. Production in August Declines on Hurricane Harvey

U.S. crude and condensate actuals for August 2017 came in at 9,220 MB/D, down 32 MB/D month-on-month, up 440 MB/D year-on-year. The drop is concentrated in Texas and the Gulf of Mexico due to Hurricane Harvey. PIRA’s Reference Case outlook calls for U.S. crude and condensate production to grow 420 MB/D in 2017 and 730 MB/D in 2018.

October Weather: U.S. and Europe Warm, Japan Cold

October weather for the three major OECD markets turned out to be 4% warmer than the 10-year normal and the resulting oil-heat demand impacts were 222 MB/D below normal. On a 30-year-normal basis, the markets were 15% warmer.

Aramco Pricing Adjustments: Fundamentally Justified Tightening of Terms

Saudi Arabia's formula prices for December were just released. Prices were tightened on most crudes in the key refining centers. The adjustments were justified by changes in the market drivers that Saudi focuses on when setting prices. Volume is clearly not being pushed, while refiner demand remains high and increasing. Global runs rise 1.8 MMB/D in November vs. October, and then an additional 1.4 MMB/D in December. The adjustments to Asia were in keeping with the change in Dubai market structure, while European pricing was tightened in line with a reduced discount on Urals vs. Dated Brent.

The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

InterMoor, a leading provider of mooring services, foundation solutions and offshore installations in subsea services group Acteon, has named Mark Jones, global chief executive officer. Key objectives of this new role include building more structure and greater collaboration amongst business units, focusing on areas of growth and mobilizing new services across the regions, with the goal of strengthening InterMoor’s global position.

Mark, currently vice-president at Acteon, has a significant track record within the oil industry in leadership roles, having been managing director for a division of EXPRO, as well as prior to joining Acteon being head of strategy and business development for Siemens Subsea.

Bernhard Bruggaier, vice president operations at Acteon, said “Building on his strong track record and experience, Mark will work closely with our worldwide locations to ensure that we continuously improve our services and deliver them consistently to the highest standards across the globe. Mark’s appointment as global CEO of InterMoor further strengthens InterMoor’s position as the global market leader in all of Acteon’s mooring related services.”

On the announcement, Mark Jones stated “I feel privileged to be considered for this opportunity and am looking forward to working with the InterMoor team towards our global vision. The breadth and depth of knowledge and experience within InterMoor is second to none in this specialist field”.

Further to the appointment of Mark Jones as CEO, Blair Wilson will undertake the role of global director of operations, reporting directly to the CEO, and leading programs of work to implement InterMoor’s reinforced global strategy.

At the next MTS Houston lunch on December 7, David Gilbert with ExxonMobil will present a summary of the HOOPS dead-leg inspection project. His presentation will include the summary results of the AUT and Time of Flight Diffraction (TOFD) inspections. David will also present and discuss the project’s diving safety assurance process from both the company and from industry guidance viewpoints.

The Hoover Offshore Pipeline System (HOOPS) runs from the Gulf of Mexico offshore Galveston to Jones Creek, Texas. It transports crude oil from a number of offshore production facilities, including Gunnison, Hoover-Diana, Perdido, Boomvang and Nansen to Seaway’s facilities at Jones Creek and Texas City.

Two pipeline dead legs exist near the GA-A244 platform on the HOOPS pipeline. Dead Legs are sections of the pipeline circuit that contain idle, stagnant or intermittently flowing fluids. They often form part of the circuit that is only engaged during start-ups, shutdowns or regeneration cycles or may be associated with closed block valves, spare pump piping, etc. Since they are not in continuous services they are particularly susceptible to corrosion and degradation.

The primary scope of work for this project was to examine the pipe segments in the dead-leg zones for internal wall loss that might have been caused by microbial influenced corrosion (MIC), or any other local internal corrosion mechanism.

The basic tasks included the following:

Contractor selection – with contracts awarded to Aqueos Subsea and Bibby Offshore.

Vessel, dive system and crane assurance inspections.

Subcontracting of Sonomatic to develop a site-specific kit for the NDT inspection, including mock-up SIT.

Mobilization of the Bibby Sapphire to GA-A244.

Uncovering each dead leg and preparing the pipe sections for inspection.

Performing NDT inspections.

Upon completion of NDT work installing grout/sandbags and mattresses to support and protect each dead leg.

ABOUT THE SPEAKER
David Gilbert has over 30 years' experience in the offshore diving industry and is currently the ExxonMobil USP Diving and Subsea Construction Advisor. David is responsible for planning and safe execution for all US Production subsea projects. He is involved with several diving industry organizations and is currently serving as Chairman of the US GoM Diving Safety Work Group.

UPCOMING MTS HOUSTON PRESENTATIONS AND EVENTS
January 25, 2018 – Lunch, Shell Deepwater Development -Edwin Verdonk, Shell International E&P
February 22, 2018 – Lunch - To be announced
March 22, 2018 - Outlook Conference
March 24, 2018 - Clays Tournament - (Online registration will open November 15, 2017)

InterMoor, a leading provider of mooring services, foundation solutions, and offshore installations in subsea services group Acteon, has been awarded a 2017 Top Workplaces honor by The Houston Chronicle. The Top Workplaces lists are based solely on the results of an employee feedback survey administered by Energage, LLC (formerly WorkplaceDynamics), a leading research firm that specializes in organizational health and workplace improvement. Several aspects of workplace culture were measured, including Alignment, Execution, and Connection, just to name a few.

“The Top Workplaces award is not a popularity contest. And oftentimes, people assume it’s all about fancy perks and benefits.” says Doug Claffey, CEO of Energage. “But to be a Top Workplace, organizations must meet our strict standards for organizational health. And who better to ask about work life than the people who live the culture every day—the employees. Time and time again, our research has proven that what’s most important to them is a strong belief in where the organization is headed, how it’s going to get there, and the feeling that everyone is in it together. Claffey adds, “Without this sense of connection, an organization doesn’t have a shot at being named a Top Workplace.”

This year, 2,317 companies in the Houston area were nominated and only 150 made the list. In the survey, InterMoor employees shared that they appreciated the fact that new ideas and different points of view are frequently encouraged at InterMoor. In addition to employer-provided health and dental plans, InterMoor employees are awarded with regular team building activities and a company-matched 401K program.

“We are proud and honored to have been nominated by our employees for a spot on The Houston Chronicle’s Top Workplaces list,” said InterMoor president Tom Fulton. “Despite a challenging industry downturn, our group has been able to maintain a positive and can-do attitude throughout. We strongly believe that our employees’ wellbeing is key to our strong work ethics and, consequently, to our success.”

The Houston Chronicle published the complete list of Top Workplaces on Sunday, November 5th.

Cyberhawk Innovations, a world leader in inspection and survey using unmanned aerial vehicles (UAV), has been certified as an External Specialist by the American Bureau of Shipping (ABS) in providing inspections for internal tanks using UAVs.

Achieving ABS recognition means that the data captured by Cyberhawk’s UAVs can now be used by ABS surveyors to make decisions affecting classification surveys of cargo oil tanks (COT) and other bulk storage tanks on vessels.

As part of the External Specialist certification procedure, Cyberhawk completed two internal tank inspections on an Aframax class oil tanker in the USA in collaboration with an ABS Surveyor. The inspection took place in Portland, Oregon, where the Surveyor examined all safety and inspection processes required to accept Cyberhawk’s high quality inspection technique. The two inspections were part of a larger project, involving a survey of all 14 COTs using a drone on a sister vessel. The project was completed in just six days by the Cyberhawk team.

Aside from significant time and efficiency savings, the use of UAVs by experienced operators means minimised risks to personnel, offering a safer, more economical solution for detailed structural inspections. One current industry method for COT inspection on tankers is to use a technique called rafting. Rafting involves filling the tank being inspected with water, allowing the ship surveyor to use a raft or dinghy to view critical inspection areas of the tank, inaccessible from the tank floor. Rafting creates a large volume of oil-contaminated water which has to be decanted from the vessel at a port that can handle such waste. Using a UAV eliminated the generation of oil-contaminated water and the safety risks associated with rafting.

ABS auditors carried out a detailed review of Cyberhawk’s UAV equipment, operator training, and maintenance and inspection processes both at Cyberhawk headquarters in Scotland and onsite in the US.

“UAVs are enabling the next generation of marine and offshore surveys and inspections, providing less intrusive, safer and more efficient ways of assessing critical areas,” says ABS Chief Surveyor Joseph Riva. “By applying ABS guidance, Cyberhawk was able to demonstrate its ability to carry out drone inspections and surveys, which can support the class survey process and provide additional savings and efficiencies to the owner and shipyard.”

Chris Fleming, CEO at Cyberhawk, said: “The feedback received from the auditors confirms what we already know – that UAVs offer an incredibly efficient solution when it comes to asset inspection, across a multitude of industrial sectors. Few methods offer the same safety, time and cost advantages.

“The technology is particularly attractive thanks to its use in improving safety. For example, sending unmanned aircraft instead of people into confined spaces to conduct inspections not only reduces risk, but it also effective and efficient.

“Having completed more than 25,000 commercial inspection flights, clients who have worked with us know that they can trust our highly-trained teams to safely capture data and deliver detailed inspection reports in the most efficient way possible.’’

Chrysaor has awarded Sparrows Group a three-year crane management services contract for the three operating assets it took ownership of from Shell in November.

The operator became the largest independent E&P company in the region following the US $3 billion deal with Shell earlier this year to acquire the platforms as part of a larger asset package.

The scope of work will see Sparrows operate and maintain seven cranes across the Armada, Everest and Lomond gas platforms located 233 to 250 km east of Aberdeen in the UK Continental Shelf (UKCS).

The campaign will be a continuation of the work Sparrows has carried out over the past decade for BG and subsequently Shell on the three installations. This includes the delivery of offshore crane operations and maintenance, including the supply of rigging lofts and inspection services, as well as overseeing the onshore management of all crane maintenance strategies and related engineering scopes.

Sparrows chief executive officer, Stewart Mitchell, commented: “We have a long and accomplished history working on these assets, having supported Shell and BG for a number of years. This award is testament to our team’s reputation for delivering results and our safe working practices.

“With our unrivalled knowledge of the existing platform cranes on the Armada, Everest and Lomond platforms, we look forward to supporting Chrysaor on these important Central North Sea developments and delivering all their crane maintenance requirements.”

Chrysaor currently has more than 400 staff working in the UKCS.

Trelleborg’s engineered products operation has supplied a bespoke, flexible rubber membrane to WETFEET, a €3.46 million, three-year research and development project designed to foster the exploitation of ocean wave energy.

Funded by the European Union’s Horizon 2020 program, the WETFEET project, which has brought together 12 partners spanning six EU countries, aims to address a number of the major constraints that have delayed the sector’s progress to date and develop innovative technology solutions for use in wave energy devices.

José Cândido, Head of Economy & Industry at WavEC Offshore Renewables, the company leading the project, says: “Wave energy has enormous potential to fulfill part of the global demand for a clean, safe and sustainable energy source and as a result, contribute to the creation of jobs across not only the EU but worldwide. In recent years however, wave energy research has revealed a number of challenges such as the reliability of technical components, high development costs and risks, as well as industrial scalability of proposed and tested technologies.

“WETFEET was set up to address these issues and pull together a team focussed on developing viable components, systems and processes to help fulfill wave energy’s potential.”

To date, the project has seen the development of a set of breakthrough technology solutions integrated into two wave energy converters, a floating oscillating water column and Symphony, a variable-volume submerged point-absorber.

Jacco Vonk, Marketing & Business Development Manager for Trelleborg’s engineered products operation, says: “We are delighted to be working with the WETFEET project. Using our experience and insights in supplying high performance polymer solutions to the offshore wind energy sector, we have developed a bespoke flexible rubber membrane for Symphony to drive forward innovation in the wave power category.

“Our polymer membrane technology ensures that the membrane not only acts as seal to protect internal components from external water pressure, but as a bearing to prevent the hull and compensation tank from colliding. Both of which ensure a best-in-class submerged pressure differential device in a smaller geometry, helping to reduce concerns around the cost of Symphony’s development.”

For more information about Trelleborg’s engineered products operation, or any of its products and solutions, please visit the Trelleborg Engineered Products website.

Chairman and CEO Shane Guidry of Harvey Gulf International Marine announces the delivery of the second, large capacity 340’ Multi-Purpose Support Vessel (MPSV) significantly enhancing the domestic Jones Act Fleet. This vessel, the M/V HARVEY BLUE-SEA, is a “best in class” Jones Act-qualified vessel that has the technical capabilities to efficiently, effectively and safely perform high quality field development activities. Harvey Gulf now owns and operates the two largest US FLAG construction vessels in the US Gulf of Mexico, having taken delivery of the sister vessel Harvey Sub-Sea in July of 2017.

Harvey Blue-Sea and sister ship, Harvey Sub-Sea, have both been delivered in 2017

The Harvey Blue-Sea & Harvey Sub-Sea have the size, crane capacity, deck space, accommodation, equipment, and station keeping capability that far exceeds any other vessels in this Class. The Harvey Blue-Sea can perform a broad spectrum of subsea installations and removals, inspection, repair and floatel services. It can be equipped to lay umbilical’s and cables and perform well-intervention and hydrate remediation operations. If there is a MPSV job needed in the Gulf, The Harvey Blue-Sea and Harvey Sub-Sea will deliver.

The M/V HARVEY BLUE-SEA is a Jones Act compliant 340’MPSV, equipped with a 250-ton knuckle boom, active heave compensated crane equipped with 4000 meters of wire. The crane’s winch is below deck, expanding her lifting capacity and enabling loads of 107 metric tons to be delivered to water depths of 12,000 ft. The Blue-Sea has 150 berths, all in 1 or 2 person rooms, 13,000 sq. ft. of deck space and a 24’ x 24’moon pool. It has a S61 (Heavy) Helideck and meets ABS DP2, SPS Code and MLC 2006 certification requirements, among many others.

TechnipFMC (NYSE: FTI) and (PARIS: FTI) has been awarded a subsea contract by Murphy Sabah Oil for the Phase 1A Block H Gas Development Project. The project is located in offshore Sabah, Malaysia, at a water depth of approximately 1,300 meters.

This contract covers the Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) of the umbilicals, risers and flowlines as well as the transportation and installation of subsea hardware and controls.

Hallvard Hasselknippe, President Subsea Projects at TechnipFMC, commented: “We are proud to have been awarded this contract from Murphy Sabah Oil which demonstrates the strength of our solutions and deepwater capabilities in Malaysia.”

Shell has completed the sale of a package of UK North Sea assets to Chrysaor for a total of up to $3.8bn, including an initial consideration of $3.0bn and a payment of up to $600m between 2018-2021 subject to commodity price, with potential further payments of up to $180m for future discoveries. This sale was announced on 31 January 2017 and has an effective date of 1 July 2016. Completion follows receipt of all necessary regulatory and partner approvals.

The package of assets consists of Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Area, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion. Shell retains a significant, more focused and strengthened presence in the UK North Sea, to which it remains committed.

253 staff transferred from Shell to Chrysaor upon completion of the transaction. In Q4 2017, Shell will record an accounting gain on sale of $1.0bn against the values of both the Shell and former BG assets included in the package. Completion of this deal shows the clear momentum behind Shell’s $30bn divestment programme and is in line with Shell’s drive to simplify the upstream portfolio and re-shape the company into a world class investment.

Bibby Offshore’s Houston-based division, Bibby Subsea, has successfully completed a significant contract with Shell Pipeline, a subsidiary of Shell Oil US.

Through its strategic alliance with US diving company, Aqueos Corporation, Bibby Subsea completed the subsea decommissioning project in the Gulf of Mexico, utilizing its diving support vessel Bibby Sapphire.

Fraser Moonie, Bibby Subsea president and managing director

For the 16-day campaign the Bibby Sapphire was equipped with an SMD Quasar work class ROV to disconnect a previously decommissioned eight-inch oil export pipeline from a hot tap tee installed on the Amberjack Pipeline. The team was also tasked with removing the connecting subsea tie-in assembly, 353ft below sea level.

Fraser Moonie, Bibby Subsea president and managing director, said: “Securing this contract was a direct result of our strategic alliance with Aqueos, and we are delighted to have been selected to execute this project; it is an example of the commitment and capability that the teams possess, and builds on completed work from earlier this year.

“It reinforces Bibby Offshore’s successful and long-standing track record with the leading international oil company, in a highly competitive marketplace. I look forward to continually strengthening this relationship through future projects."

Digital technologies are dramatically impacting almost every aspect of our personal and professional lives—enabling businesses and individuals to freely communicate, share critical information and do things more efficiently and cost-effectively. The marine industry is no different, and owners, operators and shipbuilders now recognize the role that digitalization can play in transforming their businesses by reducing capex, opex and enabling new value-added revenue opportunities throughout the maritime life cycle.

Such adoption is best achieved with an evolutionary approach, enhancing monetization of existing operations and assets and enabling a re-think of new methodologies leading to autonomous operations. GE’s solutions have been designed to accelerate marine operations along this evolutionary digital journey, starting by shifting from the traditional “gauges and gut-feel” approach to “data-driven” decisions and “de-manning,” from offshore to onshore and ultimately to fully “autonomous” operations. The solutions enable a holistic digital transformation across people, processes and culture.

1. Shifting from “gauges and gut-feel” to “data-driven” decisions

The first step in the digital journey is to establish anytime-anywhere decisions and eliminate the need for equipment proximity—separating man from machines. Data will allow for informed and rapid decision-making.

This degree of separation of the operator from the equipment is achieved by connecting disparate existing control networks onboard the vessels and then providing automated insights, presented in a comprehensive dashboard that spans across all equipment performance, reliability, energy consumption and logistics readiness.

Today, only about 3 percent of data from industrial assets is used for decision-making or any meaningful purpose, which means that there is room for significant improvements.

For vessel, rig, or fleet owners, this means either building new smart ships with connected networks and assets or enhancing existing ships by making the connection to existing networks and assets to provide the path towards optimized operational performance. The path can be accelerated with a unified digital platform. Operational data from various equipment is rapidly centralized and harmonized to avoid deviations in operational methods and facilitate early correction of any anomalies detected. This rapidly maximizes productivity and minimizes performance variance across the fleet.

By creating a digital model of each asset or each vessel, we can compare real-time operational data with a digital model of the asset or the vessel to optimize the operational profile—when this comes alive, we call this the “digital twin.” Fleet owners or operators can get early warnings on equipment degradation and therefore correct problems before they cause an operational disruption to the process.

This foresight is enabling a shift from calendar-based maintenance to genuine condition-based maintenance, enhancing a vessel’s operational efficiency through reduced downtime and increased productivity. For example, offshore drilling customers have been using GE’s Asset Performance Management solution, SeaStream Insight, powered by Predix, to optimize vessel maintenance and operational efficiency on their vessels for a few years. The technology is being deployed on multiple rigs, targeting critical assets to achieve an opex reduction up to 20 percent and improve drilling efficiency.

2. De-man from offshore to onshore

As the insights from the onboard dashboards can be transmitted from onboard to onshore, it allows knowledge and expertise to be centralized onshore and shared fleetwide.

Equipment performance data can be used for many performance optimization activities. One such example is to better determine fuel efficiency and overall trip efficiency. This is achieved by combining data from external sources, such as weather forecasts, tidal patterns and status updates from ports, to automatically calculate the optimized speed (and thus fuel consumption) and what fuel to burn in real time; which a human operator will then select for action.

The shift of visibility and decisions from onboard to onshore helps centralize and share experts across the fleet instead of dedicated experts onboard and can enable more informed decisions on equipment performance, maintenance, logistics and energy optimization. Other industries, such as aviation, have achieved similar efficiencies with great success. For example, GE’s diagnostic-based digital solution has helped Emirates Airlines gain 12 additional days of utilization and a 43 percent decrease in disruptions.

3. Fully autonomous operations

According to the U.S. Coast Guard, human error accounts for up to 96 percent of all marine casualties, and carrying sailors accounts for 44 percent of a ship’s costs. Therefore, the goal of autonomy is clear and necessary. The new generation of control and automation technologies will accelerate the progression to autonomous “no-man” vessels, where intelligent digital solutions make all decisions about navigation, control, route, port and logistics.

Much of the technology for autonomous operations is already available, but just as smart cars can’t be their smartest without a smart city to support them, an entirely smart ecosystem is needed to unleash the full potential of an autonomous smart ship.

Every stakeholder in the ecosystem needs to engage in the transition; from shipyards, bunkering, logistics, ports and of course the ships themselves. We can create a world where a cargo ship will automatically alert a retailer that a delivery of new cargo is going to arrive ahead of schedule or where oil carriers are able to predict bad storms weeks ahead of schedule and avoid them, thereby reducing supply interruptions, which can truly transform the maritime life cycle.

We all face key challenges and questions around safety and liability, which are also addressed. Remote and autonomous ships must be as safe as existing vessels if they are to secure regulatory approval, that of the marine ecosystem and the wider public. Maritime law also needs to be discussed and updated to take this kind of vessel into account, and we are engaging with these key stakeholders.

Today, the marine ecosystem is just beginning its digitalization journey, and pioneering customers have fully embraced the need for change. As we provide more and more specific marine use cases proving the benefits, it’s a journey that everyone in the ecosystem can engage in order to stay competitive.

Digitalization should be approached as an evolutionary journey, rather than a single-step leapfrog to autonomy as some are advocating. Collaboration with the right ecosystem partners that take an inside-out data approach—whereby digitalization starts from connecting individual assets within a vessel and then progressively collaborating with more external data sets—and sharing knowledge and best practices along the way can lead to an accelerated return on investment.

With the right industry-wide collaboration, we are sailing in the right direction to capitalize on digital opportunities with our partners today as well as those further on the horizon. Please join us on this journey transformation and partner with us to unleash the potential of our industry.

Author: Andy McKeran, general manager, GE’s Marine Solutions

Ocean Installer has been awarded an agreement with Siccar Point Energy and Baker Hughes, a GE Company to support the appraisal and early production phases of the Cambo Project, with the ability to extend into the future developments.

Ocean Installer will execute the job as part of an innovative alliance with Baker Hughes, one of the world’s largest oil field services companies, which targets projects where Ocean Installer and Baker Hughes, a GE Company (BHGE) benefits each other.

Image credit: Siccar Point Energy

“An alliance like this enables us to improve execution efficiency and risk mitigation through the creation of shared project objectives, and minimize tendering costs, with the ultimate objective of creating more efficient subsea solutions,” says Steinar Riise, CEO of Ocean Installer.

This is Ocean Installer’s first contract with Siccar Point, which has established itself as a key operator after acquiring OMV UK earlier this year. The field is located North-West of the Shetland Islands in the UK at a water depth of 1,100m, one of the deepest fields in Northern Europe yet to be developed. Over 100 million barrels of recoverable resources have already been discovered.

“We are delighted that Siccar Point has chosen to work with us. With several other upcoming projects in the pipeline, we hope this will be the first of many jobs we win with Siccar Point. We also look forward to working together on this project as part of a long-term collaboration with BHGE,” says Steinar Riise, CEO of Ocean Installer.

Phase 1 of the Cambo Field Development will be an early production system (EPS), followed by a Phase 2 full-field development. The project is scheduled to commence in 2018 and will be managed from the Ocean Installer Aberdeen office. The Construction Support Vessels Normand Vision and Normand Reach will be utilised for the offshore execution.

Whilst the reefing of retiring offshore structures makes sense to many, such projects often struggle to address the regulatory hurdles, public perception and who takes the enduring liability for the asset. The Integrated Rigs to Reefs^TM (IR2R^TM) solution resolves the many challenges owners face by augmenting and integrating the retiring assets into purpose built reefs.

Xodus Group is pleased to announce their new collaboration with stabilisation and artificial reef specialist Subcon International which will deliver IR2R^TM decommissioning solutions globally. This partnership combines Xodus’ decommissioning capabilities with Subcon’s extensive track record in the design and construction of purpose-built marine habitats.

Enrico Salardi, Xodus Group’s Director of Decommissioning said: “IR2R^TM is a decommissioning solution which provides many benefits to oil and gas operators, governments, local industries, communities and ultimately to the environment. The IR2R^TM solution delivers material cost savings to operators whilst enabling them to turn a legacy asset into a positive legacy for the environment.

“Importantly, this industry-first offering provides a clear pathway for the transfer of ownership to state agencies.”

While the rigs to reef solution has a proven track record for generating decommissioning cost savings and for creating effective habitat, the question of who has enduring liability for the structure remains open. The IR2R model employs methods of relocation, augmentation and integration to completely reinvent the retired structures as productive, purpose built artificial reefs. Ownership and liability for the new asset is then able to be transferred to appropriate government agencies.

Subcon International CEO, Matthew Allen added: “Our collaboration with Xodus enables more operators to benefit from our innovative IR2R^TM model. The creation of new, purpose built habitat through the integration and augmentation of retiring marine structures, means degraded habitats can be restored and new habitats established. It reduces costs for the operator, reduces waste onshore, and establishes a more vibrant and productive marine environment for future users. It is a true win-win for all stakeholders”.

The partners in the Fram license have decided to invest in a new project to increase production from the Fram field in the North Sea. The decision is taken in agreement with the partners in the Troll license.

This means that the Fram license is investing NOK one billion in a new gas module on the Troll C platform. This will help to increase oil production and gas exports from the Fram field and provide conditions for further development in the area.

The Troll C platform in the North Sea. (Photo: Øyvind Hagen)

This will help increase oil production and gas exports from the Fram field.

“Statoil is pleased that we, together with the partners, have made an investment decision for this strategically important project,” says Siv Irene Skadsem, vice president, tie-back and brownfield projects. “By using standardized solutions and equipment, in addition to focusing on making this a maximum lean project, and working closely with Statoil’s operations and suppliers, we have come up with a very cost-efficient and profitable gas module,” Skadsem says.

The investments are key to further developing Troll C as a hub for the Troll C and Fram area. The module will help boost production from the Fram license, and as well as improving the profitability of the Troll C installation by increasing and accelerating production by means of the enhanced gas capacity.

"The new gas module at Troll C will accelerate production from Fram by considerable and profitable volumes,” says Gunnar Nakken, Statoil’s senior vice president for Operations West. Consequently, we will be able to mature more wells and explore for new resources in the Fram Area, which all together will make it possible to extend the economic life time for the field," Nakken adds.

EPCI contract awarded to Aibel
On behalf of the partnership Statoil has awarded the EPCI contract (Engineering, Procurement, Construction, Installation) for the Troll C gas module to Aibel. The contract has an estimated value of 600 MNOK.

Aibel in Bergen will be responsible for engineering, and the module will be fabricated at Aibel’s Haugesund yard. The work has started, and the project aims at start-up at the end of 2019.

FACTS – FRAM

Fram is an oil and gas field in the northern part of the North Sea, some 20 kilometers north of Troll. The water depth in the area is approximately 350 meters.

The field includes a number of reservoirs and is developed with Fram West and Fram East both with two 4 slots templates each. Both are developed by two subsea templates tied back to Troll C.

The Fram H-Nord and Byrding fields are developed with a third template daisy chained to the Fram Vest. The Fram field came on stream in 2003.

The Fram well stream is transported by pipeline to Troll C for processing, and the oil is piped from there through the Troll II pipeline to Mongstad. The gas is exported through Troll A to Kollsnes.

Licensees: Statoil Petroleum AS (45%), ExxonMobil Exploration and Production Norway (25%), ENGIE E&P Norge AS (15%), Idemitsu Petroleum Norge AS (15%).

U.S. Commercial Stocks Decline Again

Sharply rebounding product demand pulled the four week adjusted average 3.5%, or 700 MB/D, higher than last year and caused product stocks to fall 11.3 million barrels last week. The bulk of the product stock decline was in the three major light products while crude oil inventories showed a surprise build of 2.2 million barrels as crude exports collapsed to an inexplicably low figure of 870 MB/D. Cushing crude stocks built 0.7 million barrels last week and now that regional refineries are returning from maintenance, supply to inventory will be declining with this week expected to show a flat inventory profile. Gasoline and distillate both show another week of significant inventory decline in this week’s EIA data, further widening their year on year inventory deficits. Overall crude stocks are forecast to be flat this week.

Winter - Peak or Boo?

Spot on-peak energy prices in Northeastern locations were mostly higher y/y due to warmer weather driven loads and higher gas prices. Most PJM, Midwest and ERCOT prices were lower y/y. Eastern Interconnect average loads increased ~ 2% y/y in October, following four consecutive months of y/y raw load declines. Cooler revisions to November’s temperature outlook led to some bullish price action and Henry Hub cash prices moved higher averaging ~$3/MMBtu this week. While PIRA shares the market’s view on robust gas supply gains during the summer, strengthening demand will necessitate prices above $3.15/MMBtu to help guide inventories to a tenable end October figure.

California Carbon: Weak Emissions, Supply Coming at Auction

Benchmark contract prices for California carbon allowances were equivalent to September, but with sharply higher trading volumes and open interest at its highest level in a year and half. November pricing has dropped as the WCI auction nears, but is still well above the price floors, suggesting oversubscribed auctions and sending a market signal, given the high volumes offered. PIRA expects surplus balances along with the return of unsold allowances, to temper near term pricing momentum. CARB will make key decisions on Cap and Trade design, addressing “overallocation,” offsets limits and the price cap and intermediate pricing “speed bumps.” The weak emissions data released November 6th could lead to a more bullish policy response. A new draft Scoping Plan, to be finalized this year, suggests a larger role for Cap and Trade reductions. Linkage with Ontario is set for January and joint auctions could start as early as February. Election results are favorable for WA state carbon policy and possible WCI linkage.

What Can Get in the Way of U.S. Economic Momentum?

Recent U.S. activity data releases were solid, but they contained negative distortions from Hurricanes Harvey and Irma. Confidence surveys (which are immune from weather effects), in fact, suggest that the economy’s true strength has been understated by GDP-related indicators. While the near-term outlook for the U.S. is solid, there are potential stumbling blocks. A key concern is whether strong economic growth will eventually lead to shortages of workers. Global industrial production for the third quarter showed broad gains. Many of the economies that reported positive results, however, are capable of even faster growth.

Steam Cracker Feedstock Margins Rebound

Steam cracker feedstock margins received much needed support from a decline in ethane and propane prices coupled with an increase in ethylene and propylene prices. Ethane’s margin averaged 23.3 cents/lb ethylene last week after falling below 20 cents/lb the prior week. Butanes and natural gasoline prices rose last week with isobutane trading at a small discount to normal butane, which is normal for winter gasoline blending season upon us. NGL raw mix production was over 3.8 million b/d last week and grew by 27 Mb/d. However, raw mix production in PADD 3 decreased by 26 Mb/d. On the inventory front, propane stocks fell by 1.15 million barrels for the week ending November 3 with almost 90% of the draw in PADD 2 as expected. For the week ending November 3, U.S. propane exports fell to 832,000 b/d from over a million b/d the previous week. Propane exports are expected to rebound to about 950,000 b/d for the week ending November 10.

Japan Runs Rising Out of Turnaround, but Demands Ease on the Week

The key takeaway in the data last week was the dramatic return of capacity previously down for maintenance, with runs rising 223 MB/D. Even with the higher crude demand, crude stocks built 2.6 MMBbls. Finished product stocks drew slightly and driven by moderate draws on jet and naphtha. Gasoline demand eased by 54 MB/D, but was slightly better than expected. Gasoil demand fell by 105 MB/D and came in well under forecast. Aggregate major product demand broadly eased 259 MB/D on the week. Refining margins have eased, with a softening in gasoil cracks being the big driver. Fuel oil cracks are also modestly weaker. Still, refining margins are acceptable. The indicative marketing margin has again been easing as refining margins have been satisfactory. Both gasoline and gasoil/diesel marketing spreads remain below statistical norms, with gasoil/diesel spread still showing the larger variance.

Ethanol Prices Rise in the U.S., Brazil and Europe

The U.S. EPA sent the 2018 biofuel and 2019 biomass-based diesel to the OMB for review and approval. The standards are due by November 30. U.S. ethanol manufacturing margins rise. September exports drop to a five-month low. Brazil October ethanol exports more than doubled the volume shipped in the same month in 2016. U.S. biodiesel prices reached a five-week high.

Post-Sanctions: Where Did Increased Iranian Oil Exports Go?

PIRA estimates Iranian crude and condensate exports more than doubled to 2.5 MMB/D between 4Q15 and 3Q17, due to the lifting of oil export sanctions in January 2016. The majority of the growth can be attributed to the four largest Asian buyers (China, India, South Korea, and Japan), which continued to import Iranian oil during the sanctions regime, albeit at reduced volumes due to U.S. restrictions. Imports to the four countries grew from 900 MB/D in 4Q15, to 1.7 MMB/D in 3Q17. China remains the largest buyer of Iranian crude and condensate, importing 720 MB/D in the third quarter, followed by South Korea (430 MB/D), and India (370 MB/D). Export growth is nearly as impressive to the EU, which essentially stopped buying Iranian oil by July 2012 due to sanctions, but imported over 500 MB/D in each of the first three quarters of 2017.

U.S. Gas Weekly Report

Henry Hub cash reached $3.18/MMBtu —the highest mark since late-May 2017 as robust heating degree days engulfed the Northeast and Midwest. The national benchmark has averaged $2.95/MMBtu this week, an increase of 7% from the week-ended November 3rd. Long awaited heating demand and more supportive forecasts generally have played a role in lifting the bal-winter 2017/2018 strip, which is up 18 cents/MMBtu (6%) from last Friday’s close.

High Eastern European Stocks May Be Ukraine's Fault, Not Cold Winter Fears

Ukraine is still on its quest for non-Russian self-sufficiency after cutting itself off directly from Russian gas. Since the Gas Year has begun, it has slowly been demanding more and more gas from Central Europe through a combination of Slovakia, Hungary, and Poland. This Eastern European gas ecosystem is developing, but also has implications for our general views on storage sufficiency across Europe. PIRA entered the winter thinking unusually high Central European storage was a function of asset optimizers hoping for a repeat cold winter, but increasingly it seems to be caused by deal origination with Ukraine that helped spur high stocks.

Timing of Maintenance Supports Ultra High JKM: Coincidence or Calculated?

With JKM support running strong (Dec. front month up to $9.40/MMBtu), the demand side of the equation in India and China only goes half way to explaining the phenomena in a world where an average of 111-mmcm/d has been added to the supply rolls though October. On the supply side, two primary factors are in play: the rate of supply growth is slowing just as peak seasonal demand approaches, and timing of planned shutdowns remains a question mark.

Tightness in the Belgian System Re-Emerges with Low Nuclear Availability

While this week France has gone through another round of extensions to its nuclear reactor maintenance, spot prices reflect an already tight situation in NWE. Daily prices in Belgium have been settling at a premium over the French, Dutch, and German ones since the end of October, as the Belgium system shows signs of stress. The availability of the 5.9-GW nuclear fleet is down to 4.0 GW since mid-September following the outages at the two Tihange-1 reactors and Doel-3, making the balancing of the system heavily reliant on interconnectors.

Coal Pricing Mixed Despite Strong Gains in Oil and Gas

Despite a significant strengthening in global oil and gas prices, coal pricing was mixed over the past week, with slight gains in the CIF ARA and FOB Richards Bay forward curves, while FOB Newcastle forwards dipped modestly. News that unionized rail workers in Australia have suspended industrial actions (at least temporarily) took some of the steam out of FOB Newcastle prices. Despite the fact that coal demand is rising to the seasonal peak, buying activity seems to be taking a breather, highlighted by weaker Chinese imports. However, PIRA believes that expectations of a significant decline in price is premature at this point, although we acknowledge that some of the bullish supply risks have been trimmed in Australia.

Agreement on EU ETS Reform; Focus Moves to Brexit

Agreement was reached on post-2020 EU ETS reforms at the Nov 8th Trialogue meeting, though EU Carbon (EUA) prices fell on that day as market participants “bought the rumor and sold the fact.” Agreed-to efforts to strengthen the Market Stability Reserve will not be enough to bring market oversupply to its targeted range. The market now has two proposals regarding Brexit and the ETS. Brussels’ approach could create two EUA instruments for the next year. The U.K. proposal could require them to enforce an EU obligation a week before Brexit. Both proposals present new market uncertainties absent broader resolution to post-Brexit ETS participation by the U.K. Near-term EUA prices remain driven by the impact of the French nuclear situation. However, PIRA expects nuclear gen to increase in Dec, along with winter power demand. In terms of supply, auction volumes remain high in 2018, also suggesting downward pressure on EUA prices in the coming months.

U.S. Energy Trade: Making an Increasing Difference

The U.S. energy industry has become an economic juggernaut with regards its contribution to the U.S. macro trade picture. Its contributions include reduced oil imports, increased oil exports (both product and crude), increased natural gas and LNG exports, and increased NGL exports. The U.S. enjoys a competitive advantage in many facets of the global picture, both from a cost standpoint and security of supply to the market. Those advantages are not likely to wane anytime soon, with their contribution expected to grow in the medium term. Lastly these advantages in energy are fed through to trade in downstream industries, such as chemicals in plastics.

Some Evidence of Weaker Credit Conditions

While credit conditions remain constructive, there was evidence of pullback this past week. The S&P 500 began to test the 2,600 level on Tues/Wednes, but then fell back. Credit indicators showed steeper pullbacks, principally high yield and emerging market debt. Investment grade and investment grade energy, held up nicely. The dollar was slightly lower, while energy performed well on the week. The St. Louis financial stress indicator moved to a new cyclical low.

U.S. Ethanol Output Rose for the Fourth Consecutive Week

U.S. ethanol output rose for the fourth consecutive week, increasing by 1 MB/D to a near-record 1,057 MB/D. Total inventories declined by 129 thousand barrels to 21.3 million barrels, led by a large draw on the East Coast. Approximately 35 MB/D (10.3 million gallons) of imports from Brazil were received in California. Ethanol-blended gasoline production dropped 71 MB/D to a six-week low 9,114 MB/D.

Fracking Policy: Push to Loosen Federal Rules, State Developments Still in Flux

Momentum to overturn Obama-era methane regulations stalled in recent months, although Trump administration efforts to delay or repeal them will continue through the courts and traditional (lengthier) rulemaking. EPA attempts to delay implementation of methane rules from new oil and gas sources hit a judicial roadblock, as did BLM efforts to delay methane rules on federal lands, while, the Republican-controlled Congress failed to overturn the methane rules on federal lands. At the state level, efforts to reign emissions associated with fracking are resulting in lower emissions intensity and often lower actual emissions, despite more drilling. A bi-partisan effort to institute a severance tax in PA passed the Senate but stalled in the House. The scope of local authority to regulate fracking in CO is being re-tested. A lawsuit settlement in OK regarding blame for induced earthquakes still leaves the broader issue unresolved. Internationally, the IEA’s upcoming World Energy Outlook release will focus on Natural Gas, including assessment of the emissions associated with the supply chain.

U.S. Crude Exports Soar to China and Other Long Haul Destinations, Pushing Up In-Transit Inventories

U.S crude exports are surging and PIRA believes this will continue over the next few months as high inland stocks (hurricane Harvey legacy) continue to be drained.

Global Equities Testing New Milestones, but Ease

Global equity markets continue to set more broad based records, but fell back at end-week. The U.S. S&P 500 attempted to breach the 2,600 level, but was unsuccessful and eased modestly on the week. Consumer staples (+2.1%) and energy (+1.4%), posted solid gains, while banking fell -4.3%. Internationally, China posted a solid gain of 2.1%, while there was broader weakness in European indices, along with those in Latin America.

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Leading international subsea solutions company, Kreuz Subsea, has announced AJ Jain as chief executive officer and Balaji Bhashyam as chief operating officer.

AJ Jain, CEO, Kreuz Subsea

Jain brings over 25 years of executive industry experience to the role having held a number of leadership positions in the oil and gas industry across the globe.

His previous posts include managing director at Harkand Group where he was responsible for operations in North America and Africa. Prior to Harkand, he was also part of the senior management team at Dynamic Industries International LLC responsible for international operations. He also held several senior executive assignments at Global Industries Ltd including chief operating officer and sr. vice president responsible for Asia Pacific and the Middle East earlier in his career. Global Industries was acquired by Technip in 2011.

Balaji has been with Kreuz Subsea for the last two years as vice president, business development & corporate strategy. He has more than 25 years’ operational experience in subsea project management and engineering. He previously worked in senior operational roles for Technip in Asia Pacific, Global Industries Ltd. and McDermott International.

The board of directors announced the appointments following the departure of former chief executive Kurush Contractor from the integrated marine and subsea services business after nine years of service.

Kreuz Subsea director, Vincent Low, said: “After an extensive industry-wide search, AJ Jain was identified as the clear choice for the CEO role. He brings the ideal combination of drive, commitment and operational knowledge to take the business to the next level and deliver further positive results for the business.

The multi-purpose DP2 vessel, Kreuz Installer

“It’s an exciting time for Kreuz with AJ at the helm and Balaji’s internal promotion, which brings continuity, having developed an intimate knowledge of the company, our clients, and our people since he joined.

“We look forward to our new senior management team leading continued growth and development for Kreuz Subsea.”

Kreuz Subsea employs around 250 people onshore and offshore in Singapore, Brunei and India and has projects currently underway valued at US $150million.

The company has three multi-purpose support vessels (MSV) and expects delivery of its new Kreuz Challenger DP2 MSV in November. It also has an extensive fleet of diving systems and work-class ROVs.

As CEO, AJ Jain will be responsible for the strategic direction of the firm and growing the business in new markets. Jain commented: “I am honoured to have been appointed by the board and am fully committed to the company’s vision and core values. Kreuz has built an excellent reputation in the market over the last nine years and is recognized as a company that delivers on its commitment.

“There are some exciting opportunities on the horizon including delivery of the new DP2 vessel, Kreuz Challenger, which will add exceptional quality to our specialized fleet.

“I look forward to working with newly promoted chief operating officer, Balaji Bhashyam, and the other talented personnel at Kreuz to drive further strategic growth for the business and adding to our existing client portfolio.”

Kreuz Subsea was established in 2008.