Intelligence brief: Seven billion barrels held back by delays; Producers slammed for poor methane reporting
Upstream oil and gas news you need to know
Seven billion barrels held back by project delays
Oil and gas producers around the globe deferred $380 billion worth of capital expenditure on upstream projects from the beginning of the oil-price slump in mid-2014 to the end of 2015, according to a Wood Mackenzie report.
Final investment decisions (FIDs) were delayed on 68 large projects holding 7 billion barrels of oil equivalent in commercial reserves, the energy consultancy said. Deepwater projects were hit hardest, with delays on 29 projects and about $213 billion of capex.
Six countries accounted for almost 90% of all deferred liquids reserves: the United States, Canada, Norway, Kazakhstan, Angola and Nigeria.
One reason for the harsher impact on deepwater projects was cost deflation, according to Angus Rodger, Principal Analyst – Upstream Research for Wood Mackenzie.
“The biggest jump in pre-FID delayed projects over the last six months was in the deepwater, rising from 17 to 29, where costs have only fallen by around 10% despite the global crash in rig day-rates,” he said.
“Despite the size of these fields, the combination of insufficient cost deflation and significant upfront capital spend has discouraged companies from greenfield investment in the sector.”
Wood Mackenzie expects 2.9 MMbbl/d of deferred volumes to come into production by the year 2025.
Meanwhile, the International Energy Agency last week said global oil supplies reached 96.88 MMbbl/d in the fourth quarter of 2015, compared to 95.4 MMbbl/d in the corresponding period in 2014. The IEA expects demand to fall from 95.05 MMbbl/d in the fourth quarter of 2015 to 94.69 MMbbl/d in the first quarter of 2016, before pushing above 96 MMbbl/d by the second half of this year.
World oil supplies were 1.6% higher in the final quarter of 2015 than in the same period one year earlier (Image credit: IEA)
Producers slammed for poor methane reporting
Lack of transparency on methane emissions is affecting the bottom lines of the largest US oil and gas producers and putting their investors at risk, the Environmental Defense Fund has warned.
The EDF analyzed the filings of 40 of the country’s largest producers and 25 large midstream companies. It found that zero companies disclosed a quantitative emissions-reduction target, four reported a position on methane-related policy, and 18 reported their methane emissions as a percentage.
The larger companies in the survey group disclosed more information than the smaller ones, the report found, leading the authors to conclude that the state of disclosure among the smaller companies not surveyed may be even worse.
“Targets are important for driving performance and creating a basis of accountability,” the report said. “Targets help investors understand a company’s long-term plans concerning methane, and their absence creates uncertainty over whether the issue is being appropriately managed.”
Improved reporting is needed to address a loss of resources, the authors said, citing a study by the Rhodium Group which found that about 3.5 trillion cubic feet of unburned natural gas was emitted by the oil and gas industry in 2012, at a cost of $30 billion globally and $2 billion in the US alone.
Tougher regulations provide an additional reason for companies to become more transparent, the report said. It noted that a number of government agencies were working on new emissions standards following the Obama Administration’s announcement of a national strategy to reduce methane emissions from oil and gas to 40-45% below 2012 levels by the year 2025.
Lastly, the report said methane emissions are a long-term reputational risk for the industry, noting that it “reduces the climate benefits of natural gas and thus undermines its ability to hasten the transition towards a lower-carbon economy”. It noted the finding by consultancy ICF International that a 40% reduction in methane emissions by 2018 is achievable using existing technology and would cost the industry about $2 billion in capital expenditure and $108 million per year in operational expenditure – roughly one penny per thousand cubic feet of gas produced in the US.
Drone operator claims first legal inspection in GoM
Sky-Futures has completed a drone inspection for a leading service and drilling firm in the Gulf of Mexico, in what it claims is a first for the region.
This came just 10 months after the Federal Aviation Authority awarded the British firm permission to operate drones in the USA, Sky-Futures said.
For this project, the drone inspected the derrick, a heli-deck and four cranes on a drill ship. The entire inspection was completed in two days, whereas the usual inspection methods would have taken 17 days, according to Sky-Futures. The inspection was carried out by a highly experienced crew consisting of an inspection engineer and remote pilot, who had both completed oil and gas drone-inspection training at Sky-Futures' specialist training center in the UK.
Previously, Sky-Futures had conducted inspections in the North Sea, the Baltic Sea, and offshore Malaysia, on behalf of clients including Shell, ConocoPhillips, Petronas, Statoil and Apache.