Oil prices could fall into the low $20s for the global market to rebalance, as Rystad Energy expects an increase in global supplies in the next three months. OPEC+ countries are locked and loaded to add between 1.5 million and 2.5 million barrels per day (bpd), which Rystad estimates is their realistic short-term capability.
“Without OPEC+, the global oil market has lost its regulator and now only market mechanisms can dictate the balance between supply and demand,” said Espen Erlingsen, Rystad Energy’s Head of Upstream Research.
Rystad Energy estimates that global liquids demand was reduced by around 4 million bpd in February, primarily driven by the coronavirus. Over the next months, demand might be weakened by between 2 million to 4 million bpd due to the virus, Rystad said.
The cost of supply curves can be a good barometer to gauge how the market will react to various scenarios, says Erlingsen. Rystad Energy has updated its estimates of the short-run marginal (SRM) cost for the global liquids market.
For conventional fields, the SRM only includes transportation costs, effects of gross taxes and price differentials to Brent. All other costs, such as production cost and investments, are excluded, as Rystad Energy believes that these costs will not affect production levels from producing fields in the short term.
For tight oil assets, producing wells include the same costs as conventional fields, while the drilled uncompleted wells (DUC wells) also include the costs for completing the wells. For not yet drilled tight oil wells, both drilling and completion costs are included.
The shape of this curve is rather flat, as the SRM for the majority of the oil fields is below $5 per barrel. In fact, around 92 million bpd of production has an SRM below $5 per barrel. Total production with an SRM cost above $15 per barrel is around 4 million bpd.
Rystad Energy estimates that the total demand for liquids will be around 100 million bpd in June 2020, assuming no coronavirus impact.
The cost of supply curve moves to the right if OPEC+ increases production. The equilibrium price moves from around $25 per barrel (no additional OPEC+ supply) to $19 per barrel in the modest 1.5 million bpd increase scenario and $14 per barrel in the large 2 million bpd increase scenario.
If demand weakens by 2 million bpd in June (total demand of 98 million bpd), the equilibrium oil price moves from around $19 per barrel to around $11 per barrel in the modest OPEC+ increase scenario. If demand weakens by 4 million bpd in June (total demand of 96 million bpd), the equilibrium oil price moves down to around $9 per barrel in the modest OPEC+ increase scenario.
Oil and gas company Tailwind Energy has filed an environmental statement for its Evelyn development, located in the UK North Sea, to the UK authorities. A final investment decision for the project is expected to be made this year.
Tailwind is working towards committing to development of the Evelyn field located in the Central North Sea.
Ensuring that environmental matters have been fully considered for the Evelyn Development, before the full field development decision is taken, Tailwind has prepared an Environmental Statement presenting the findings of the Environmental Impact Assessment and has been submitted to the UK’S Secretary of State for Business, Energy and Industrial Strategy (BEIS), the company informed on Tuesday, March 10.
A public consultation on the plans is underway. Tailwind will make a final investment decision on the Evelyn field in 2020, conditional upon the approval of the Environmental Statement.
Tie-back to Triton FPSO
The first phase of development will consist of a single well, subsea tie-back to the Triton FPSO. The subsea tieback will include a new 10ʺ production line, 4ʺ gas lift line and umbilical for control services. The first oil is expected by the end of 2022.
There is also a possible phase 2 development consisting of a second well also covered by the field development plan. A decision whether to proceed with Phase 2 will be taken following review of the success of the first phase of production to decide if it is necessary to maximise hydrocarbon recovery. The development of a second well (EV2) will include the installation of a new 10ʺ pipeline, 4ʺ gas lift pipeline and umbilical between EV2 and the Evelyn valve skid (EVVS).
No significant topside processing system modifications are required to process the Evelyn fluids over the Triton FPSO. The tie-in point for Evelyn will be via the new Triton P1 riser, which is already being replaced as part of a Dana maintenance subsea scope during the major 2022 shutdown, and is outwith the scope of this ES.
The Triton area consists of six producing oil fields developed via common infrastructure in the UK Central North Sea, located approximately 190km east of Aberdeen in water depths of 90m. The six fields currently producing oil and gas via the Triton FPSO, are Bittern, Guillemot West, Guillemot Northwest, Clapham, Pict and Saxon.
Dana Petroleum and Endeavour Energy are Tailwind’s partners in the Triton cluster. Dana currently operates the Triton FPSO along with the Clapham, Saxon, Pict and Guillemot West fields. Following the recent Tailwind transaction with Shell/Esso, Dana now also operates the Bittern field. Tailwind is operator of the Gannet E Field, with Dana as pipeline operator and Petrofac as well operator. Tailwind also operates the Belinda/Evelyn discoveries with Petrofac as well operator.
The worldwide offshore rig count in February 2020 has risen by two units sequentially, but dropped by the same number year-over-year, according to a rig count report by Baker Hughes Company.
BHGE splits its rig counts into international and North America rig counts, which combined make the worldwide rig count.
The international rig count for February 2020 was 1,085, up 7 from the 1,078 counted in January 2020, and up 58 from the 1,027 counted in February 2019.
The international offshore rig count for February 2020 was 245, unchanged from the 245 counted in January 2020, and down 5 from the 250 counted in February 2019.
Looking at separate regions, the Asia Pacific region had the highest number of offshore rigs during February 2020, totaling 91 units – the same as in January 2020. This is down 14 rigs from 105 in February 2019.
In the Middle East region, there were 54 rigs active during February 2020, down four from January 2020 as well as February 2019.
Latin America took third place in the offshore rig count for February 2020 with 37 active units after a long time of Europe holding that spot. Europe dropped to fourth with 32 and Africa was fifth with 31 active units.
The average U.S. rig count for February 2020 was 791, unchanged from the 791 counted in January 2020, and down 258 from the 1,049 counted in February 2019.
The average Canadian rig count for February 2020 was 249, up 45 from the 204 counted in January 2020, and up 19 from the 230 counted in February 2019.
The worldwide rig count for February 2020 was 2,125, up 52 from the 2,073 counted in January 2020, and down 181 from the 2,306 counted in February 2019.
The worldwide offshore rig count for February 2020 was 270, up two from 268 in January 2020, and down two from 272 in February 2019.
Babcock’s Offshore business has secured a new five-year shared contract with three oil and gas operators for helicopter transport in the northern North Sea.
Babcock said on Friday that the contract would initially see the company operate over 100 helicopter flights each month from Sumburgh in Shetland, on behalf of CNR International, EnQuest, and TAQA.
Flights are expected to begin on July 1, 2020.
Babcock Offshore Director, Simon Meakins, said: “We are delighted to welcome this new customer group to Babcock Offshore and look forward to working with them. We are committed to delivering the safe and efficient aviation support they require.”
Offshore support vessel specialist Sentinel Marine has won a package of contract awards and extensions to operate its fleet of emergency response and rescue vessels (ERRVs) in the North Sea worth a total of £36 million ($46m).
The Aberdeen-based firm said on Thursday that the contracts were a mix of ongoing multi-year agreements and shorter-term contracts to support oilfield operators involved in decommissioning projects.
New contract wins are with Chrysaor – Bailey Sentinel will be used to support decommissioning activities in the southern North Sea – and Spirit Energy, which has chartered Biscay Sentinel to support the Borr Ran drilling rig in the Irish Sea.
There has also been an extension to the contract for Mariner Sentinel, which is chartered to Equinor’s Mariner field, and for Forties Sentinel’s contract with Ineos.
Forties Sentinel is currently tasked in the firm’s Breagh gas field in the southern North Sea in support of routine operations and drilling.
Chief executive officer, Rory Deans, said: “In an age when we are all becoming more mindful of the impact that our actions have on the environment, our clients appreciate that Sentinel Marine’s fleet is one of the cleanest and greenest in the North Sea.
“It’s estimated that our fleet is around 60% more fuel-efficient than some of the oldest ERRVs in the North Sea, and as much as 30% more efficient than ships that were built only five years ago.”
The vessel owner said at the time that the Island Victory would be heading straight into operation after delivery. It was agreed that the vessel would first spend a couple of weeks in the spot market, before starting a series of awarded contracts, securing work for potentially throughout October this year.
In an update on Wednesday, Island Offshore said that the Island Victory had just finished mobilizing for its first campaign in the Barents Sea.
According to the company, 24,500 meters of chain, equivalent to 3,773 tonnes, was loaded on to the vessel as well as 16 anchors weighing 18 tonnes each.
The anchors and chain will be used for two anchoring locations in the southern Barents Sea, where each line consists of about 1,500 meters of chain and one anchor.
Offshore accommodation specialist Prosafe and oil major Shell have agreed on a contract extension for one of Prosafe’s units for operations in the UK North Sea.
Prosafe said on Monday that it had agreed with Shell to amend the original June 1, 2020, start date of the Safe Zephyrus at the Shearwater platform to May 2, 2020, by extending the contract by 30 days.
Safe Zephyrus completed its contract for BP at Clair Ridge in the West of Shetland on October 15, 2019, and it has been in lay-up ever since.
The flotel was supposed to mobilize for the 80-day Shell Shearwater contract in 2Q 2020. However, Shell has decided to exercise its 30-day option in the contract and the timing for the rig’s contract start date has now changed.
Safe Zephyrus is a DP3 semi-submersible accommodation rig. With beds for 450 persons, in single man cabins, the vessel is designed for worldwide operations in the harshest offshore environments.
Safe Zephyrus, a sister ship to the Safe Boreas, was built at Jurong Shipyard, Singapore, to the GVA 3000E design and is equipped with a DP3 system and 12-point wire mooring arrangement providing maximum cost efficiency and flexibility. It was delivered in 2016.
The unit was granted the Acknowledgement of Compliance (AoC) from the Norwegian Petroleum Safety Authority (PSA) on July 19, 2016.