Oil price spurs joint tech programs; BP sees break-even at $60/bbl; Enbridge to spend big on GoM storage

Upstream oil and gas news you need to know.

Most oil and gas executives are in favor of joint tech initiatives

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Oil price drives firms towards joint tech programs

More than three-quarters of oil and gas executives say oil price instability has led them to slow down or halt most innovation initiatives, according to a survey by Lloyd’s Register. 

The biggest barriers to new technologies and innovation cited by the execs were: uncertainty over returns (33% of respondents), skills shortages (29%), and cost of development (28%). 

However, more than half the respondents said they were in favor of collaborating with third parties to develop new techniques or technologies. Some 16% called themselves “enthusiastic collaborators” who actively seek to join forces with various types of third parties to push innovation forward. A further 43% said they were “selective collaborators,” meaning those who are open to developing new techniques and technologies but only with a small number of third parties.

BP technology chief David Eyton told Lloyd’s: “The current oil-price environment encourages us to do more rather than less of that collaboration. Not, however, in the areas where we choose to remain competitive with other industry players.”

BP plans to break even at $60/bbl by 2017 

BP will slash capital expenditure as it sets out to achieve a break-even oil price of $60 a barrel (bbl) by 2017.

The Brent crude oil price averaged about $50/bbl in the third quarter.

The oil giant initially planned to allocate $24-$26 billion to capital expenditure in 2015, but now expects that figure to be around $19 billion, and to stay in the range of $17-$19 billion a year through to 2017.

Around 80% of potential investments are currently expected to breakeven at below a $60 Brent crude oil price, and this breakeven is expected to move lower as BP takes further advantage of “market deflation”, chief executive Robert Dudley said following the release of third quarter results.

Since starting a program to reset upstream costs in 2013, BP has reduced unit production costs by about 20%, Dudley said. Detailing some of the reductions, he said the company now has 10% fewer upstream employees and 42% fewer agency contractors than it had in 2013, and has reduced third-party spend by about 15% in that time.

Transocean reaches $30m settlement with five US states

A US district judge has dismissed law suits against Transocean, after the owner of the Deepwater Horizon oil rig, which exploded in the Gulf of Mexico (GoM) in 2010, reached a settlement with the five states involved in the suit.

Transocean will pay Alabama $20 million, Florida $5 million, Louisiana $4 million, and Texas $2 million. Mississippi also reached a settlement with the rig owner but did not disclose the value.

Earlier this year BP, which operated the rig at the time of the explosion, reached a settlement with the states that was estimated to be worth more than $20 billion.

In April 2010, the Deepwater Horizon floating drilling rig experienced a well destabilization that led to an explosion, fires and a leak of more than 3Mbbl of oil into the GoM. The incident caused the deaths of 11 people and significant environmental and economic damage to coastal regions.

Deepwater Horizon oil rig pictured in 2007, three years before it exploded. (Image credit:  Bradford Martin)

Enbridge to spend $5bn on three GoM storage facilities

Canadian firm Enbridge is planning to spend $5 billion to build three oil-storage facilities in the GoM after the US House of Representatives recently voted to repeal a 40-year export ban on crude oil.

The move comes in response to requests from customers that include oil producers, refiners and traders, general manager Mike Moeller told The Wall Street Journal.

Enbridge’s Gulf Coast plan calls for three terminals between Houston and New Orleans, the report said. Each could have crude storage tanks, ship docks, pipelines and other infrastructure to allow the import and export of US and Canadian crude, processed condensate and refined products.

The plan is still in its early stages, but Enbridge expects the facilities to be rolled out in phases over the coming years.

Statoil delays Mariner by one year on construction hurdle

Norwegian oil firm Statoil will delay work on the Mariner heavy oil field in the North Sea by a year, due to a construction delay.

The topsides construction at Daewoo Shipbuilding and Marine Engineering in South Korea has not progressed according to expectations, and sailaway will be delayed from 2016 to 2017, the company said. As a result, production start-up has been postponed by one year to 2018.

Pre-drilling of production wells will begin in the second half of 2016 when the purpose-built jack-up rig Noble Lloyd Noble arrives in UK waters. The Mariner floating storage unit is progressing well at the Samsung Heavy Industries yard in South Korea, and will be ready for sailaway in the spring of 2016, Statoil said.