Intelligence brief: Majors slash 2016 budgets; UK output up for first time in 15 years

Upstream oil and gas news you need to know.

Supermajors slash 2016 budgets

A number of the supermajors slashed their 2016 budgets as the previous year closed with spot oil prices at less than $40 per barrel.

Royal Dutch Shell said in a letter to shareholders on its proposed takeover of BG Group that the combination would spend around $33 billion on capital investments in 2016, $2 billion less than previous guidance of $35 billion and $14 billion less than the two companies’ combined capital expenditure in 2014.

Chevron announced a $26.6 billion capital and exploratory investment program for 2016, 24% lower than total expected investments for 2015. It allocated $24 billion to upstream activities, of which 23% will go to US assets and the remainder to other projects worldwide.

ConocoPhillips allocated $7.7 billion to its capital budget and $7.7 billion to operating costs. The 2016 capital budget represented a 25% reduction compared to 2015 capital spending, and a 55% reduction on 2014.

Total SA expects to reduce capital expenditure to $20-21 billion in 2016, down from $23-24 billion in 2015.

ExxonMobil and BP typically update their spending forecasts during the first quarter of the given calendar year.

UK production rises for first time in 15 years

Production of oil and gas in British waters almost certainly rose for the first time in 15 years in 2015, but Oil & Gas UK chief executive Deirdre Michie has warned of an uphill battle to sustain such increases into 2016 and beyond.

Government data for the first 10 months of 2015 showed that the total volume of oil and gas produced on the UK Continental Shelf (UKCS) was up 8.6% compared with the corresponding period in 2014, with production of liquids up 10.6% and gas up 6.1%.

“Given the difficulties being faced by the industry this is welcome news,” Michie said.

“In February 2015 we predicted a marginal increase in production for 2015, but the industry-wide focus on improving production efficiency coupled with investments of more than £50 billion (US$73 billion) over the last four years to bring new fields on stream across the last 12 months is paying off and yielding a better result.”

The upturn underlines the industry’s commitment to the UKCS, Michie said, noting Abu Dhabi National Energy Company’s (TAQA) announcement in the last week of 2015 of first oil from the Cladhan field development in the North Sea.

Cladhan, located about 100km north-east of the Shetland Islands at depth of about 150m, was developed as a subsea tie-back to the TAQA-operated Tern Alpha platform. It is expected to produce 10,000 bbl/d of oil.

UK oil production looks certain to rise year-on-year in 2015 for the first time in 15 years (Source: UK Department of Energy & Climate Change)

World’s heaviest casing string landed in GoM

Weatherford has set a new world record by landing a 1,180-ton (2.36 Mlb) casing string at a total depth of 26,805 ft (8,170m) on a deepwater rig in the Gulf of Mexico, the oilfield services company announced.

The operator of a deepwater rig in the Green Canyon portion of the GoM called upon Weatherford to install a 14-inch, 112.6 lb casing string. The added weight was needed in order to reach the required depth.

Weatherford deployed landing-string slips after providing an engineering analysis to verify that the pipe could reach total depth without damaging the tubulars from excess stress, the company explained. It said the team then ran the string to total depth with no issues. Without the increased load capacity provided by the landing-string slips, the operator would have needed to drill a second hole section and run two separate casing strings at a cost of about $15 million, it said.