North Sea output rises, investment threatens recovery
New developments are helping to offset declining output at mature assets in the North Sea
North Sea crude production is expected to rise this year as the start-up of new developments offsets declines at more mature fields.
North Sea liquids output will be 2.77mn b/d this year, Argus estimates, up by around 1pc from 2.73mn b/d in 2015 and nearly 7pc higher than production in 2014. Increased output in the UK and Norway is behind the rise.
The start-up of new fields has outweighed declines at mature assets. Output from Italian firm Eni's 100,000 b/d Goliat field in the Barents Sea rose to close to capacity in July after it started up in March, although production has halted twice for safety reasons. Production at Lundin's 100,000 b/d Edvard Grieg field has been steadily climbing since it came on line in December last year. The field produced more than 78,000 b/d in September.
The start-up of Premier Oil's 25,000 b/d Solan field in April has added to UK supply, although lower-than-anticipated water injection capability is constraining production to nearer 12,000 b/d. The more recent start-up of Enquest's Scolty-Crathes development will add around 20,000 b/d to the North Sea Forties crude stream once it reaches capacity.
Exports of 12 North Sea grades for which programmes are available are scheduled to reach a three-year high of 2.12mn b/d in December.
Efficiency improvements and cost cutting have extended the life of some North Sea fields. The average unit operating cost in the UK is set to fall to $16/bl of oil equivalent (boe) this year, compared with a peak of $29.30/boe in 2014, industry body OGUK says. It notes that the final production date of 33 assets has been deferred in the past 12 months.
But a sustained period of lower oil prices has also resulted in the shutdown date for 72 assets being brought forward in the past 12 months.Drilling and exploration — which are key to future production — are also suffering, with the number of exploration and appraisal wells being drilled falling to six and three, respectively, by mid-year, compared with 13 exploration and 13 appraisal wells during the whole of 2015. And UK capital investment will fall to £9bn ($11.4bn) this year from a record £14.8bn in 2014.
Releasing the Kraken
Several projects, such as Enquest's 50,000 b/d Kraken and BP's 130,000 b/d Schiehallion redevelopment, will help buoy North Sea production next year. But both projects were approved when the oil price was significantly higher. Only one offshore project has been approved this year, compared with five greenfield projects in 2015. "The lack of new development projects must be urgently addressed if we are to avoid a repeat of the sharp production decline that dominated the early part of this decade," OGUK says in its annual economic report.
But new entrants may bring fresh ideas. The increase in acquisitions by private equity firms — such as Siccar Point Energy's purchase of OMV's UK North Sea assets and Ancala Partners' purchase of Apache's interests in the Sage and Beryl pipelines — could extend the life of some assets. Ancala Partners aims to "maximise throughput for all producers, extend the life of the system, connect new fields and support efforts to maximise economic recovery in the North Sea for many years to come."
Private equity-backed developments "are not burdened with the legacy of the past, culturally, operationally, or technologically", UK consultancy PwC says. "They are not wedded to existing processes and they can take full advantage of advanced new technology, which in turn allows them to more easily operate at lower cost."
Related news posts
Pemex bajo presión para mantener refinación alta
Pemex bajo presión para mantener refinación alta
Mexico City, 7 May (Argus) — La refinación de crudo de Pemex, propiedad estatal de México, en marzo alcanzó sus niveles más altos en casi ocho años antes de las elecciones presidenciales del 2 de junio, pero la empresa podría enfrentarse a desafíos para mantener niveles de refinadoaltos en los próximos meses. Las seis refinerías nacionales de Pemex procesaron más de 1 millón b/d de crudo en marzo por primera vez desde junio de 2016, impulsadas por el progreso en la rehabilitación de las refinerías y una disminución de las exportaciones de crudo para alimentar el sistema de refinación. El presidente Andrés Manuel López Obrador busca reducir las importaciones de combustible en su último año en el cargo, en línea con su promesa de campaña de volver a México más independiente en energía. Sin embargo, los niveles de proceso de crudo podrían disminuir en abril-mayo después de que se produjeran incendios en las refinerías Minatitlán y Salina Cruz a finales de abril. Además, las refinerías de Salina Cruz (330,000 b/d) y Tula (315,000 b/d), las más grandes de México, siguen batallando con una producción elevada de combustóleo con alto contenido de azufre, lo que limita las capacidades de las refinerías para operar a altas tasas simultáneamente. Pemex lleva mucho tiempo luchando con la elevada producción de combustóleo, ya que México produce principalmente crudo pesado, lo que crea una serie de desafíos operativos. El combustóleo suele ocupar valioso espacio de almacenamiento necesario para productos de mayor valor, lo que puede limitar la producción de combustibles más ligeros. Las exportaciones récord de combustóleo en marzo, impulsadas por un aumento de la demanda en la costa del Golfo de EE. UU. después de los reacondicionamientos de la refinería, permitieron a Pemex elevar las operaciones en ambas refinerías simultáneamente. Sin embargo, el problema podría volver a afectar a Pemex en los próximos meses cuando la demanda de combustóleo disminuya y la empresa se vea obligada a almacenar el producto. Pemex está construyendo unidades de coquización en ambas refinerías para resolver este problema, pero no se espera que la unidad de Tula comience a funcionar hasta al menos finales de año, mientras que la unidad de coquización de Salina Cruz comenzaría a finales de 2025. Mientras tanto, la refinería Cadereyta de 275.000 b/d podría compensar parcialmente una disminución en el procesamiento de crudo en Tula y Salina Cruz, ya que su configuración le permite producir menos combustóleo, una fuente familiarizada con las operaciones de Pemex ha dicho a Argus . Las tasas de refinación de Pemex comenzaron a caer en 2014 después de que la administración anterior decidiera depender menos de la producción nacional y centrarse en abrir el mercado de la energía, antes hermético a inversiones externas. En cambio, López Obrador invirtió al menos $3.7 mil millones en mantenimiento para las refinerías antiguas de Pemex de 2019-2023, excluyendo proyectos importantes como las coquizadoras en construcción, además de $17 mil millones para la nueva refinería Olmeca. Cambios en el flujo de crudo y combustible Los mayores niveles de refinación de Pemex han disminuido el flujo de crudo y combustible entre México y EE. UU., y el arranque de Olmeca podría alterar aún más los flujos. Pemex redujo sus importaciones de gasolina y diésel en 25pc a 419,000 b/d en marzo, comparado con 562,000 b/d el año pasado, como resultado de un mejor rendimiento de las refinerías. Las exportaciones de crudo de México cayeron un 29pc hasta un mínimo histórico de 687,000 b/d en marzo, por una menor producción y mayores niveles de refinación. El flujo de crudo y combustible entre México y EE. UU. podría disminuir aún más una vez que Olmeca comience operaciones comerciales y si Pemex mantiene un alto nivel de refinación en sus otras refinerías. La refinería Olmeca comenzará a producir diésel de ultra bajo azufre esta semana, procesando destilados enviados desde la refinería Madero, dijo Pemex el 3 de mayo. Pero la refinería no ha cumplido varios plazos prometidos, el más reciente en abril. La unidad de destilación de crudo de la refinería, la primera unidad de procesamiento, se enfrenta a "problemas importantes" que han retrasado el inicio de la refinería, aunque otras unidades de procesamiento secundario están listas para comenzar, dijo a Argus una fuente familiarizada con las operaciones de Pemex. Sin embargo, el mercado se mantiene escéptico de que se puedan mantener los niveles de refinación después de las elecciones del 2 de junio, ya que Pemex sigue enfrentándose a problemas operativos en sus refinerías. Pero la candidata del partido gobernante Claudia Sheinbaum lidera la votación con doble dígito y se espera que continúe el proyecto actual del gobierno para reforzar Pemex y aumentar los niveles de refinación de la empresa. Por Antonio Gozain Exportaciones de crudo, importaciones de combustible de Pemex ’000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US set to resume crude purchases for SPR
US set to resume crude purchases for SPR
Washington, 7 May (Argus) — The US is set to resume crude purchases for the US Strategic Petroleum Reserve (SPR), after calling off a planned 3mn bl refill last month following a rise in crude prices. The US Department of Energy (DOE) today said it plans to purchase up to 3.3mn bl of sour crude for delivery in October to the SPR's Big Hill storage site in Texas. The solicitation sets a maximum price of $79.99/bl for the offers, a slight increase from the $79/bl ceiling it used in the recent monthly purchases. The agency last month called off two pending solicitations that sought to buy 1.5mn bl/month for delivery to the SPR's Bayou Choctaw site in August and September, citing higher crude prices. The most recent SPR refill, nearly 2.8mn bl of sour crude for delivery in September, cost an average of $81.34/bl. DOE says it has has already purchased a total of 32.3mn bl at an average price of $76.98/bl, well below the average $95/bl it received from the sale of 180mn bl of crude from the SPR to respond to market turbulence after Russia invaded Ukraine in 2022. Energy secretary Jennifer Granholm told lawmakers last week that two out of four SPR sites were undergoing maintenance and would not be able to accept SPR deliveries until the end of the year. "We want to continue to fill it, and we will," Grahnolm said. The SPR held 367.2mn bl as of 3 May. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Panama's new president faces copper, canal issues
Panama's new president faces copper, canal issues
Kingston, 6 May (Argus) — Stand-in candidate Jose Raul Mulino will take office on 1 July as president of Panama with a challenge to decide on the future of one of the biggest copper mines in the Americas. The 64 year-old lawyer won yesterday's presidential election in the central American country, promising a "pro-investment and pro-business" policy. He won with 35pc of the vote and an about 10 percentage point lead over his next closest rival, Ricardo Lombana. But he has delivered no comment on the future on the shuttered Canadian-owned copper facility that is one pillar of the country's economy. His government will use public works projects and incentives for foreign investors to restore economic growth, Molino said, without giving details. Panama also faces a crippling drought that has lowered water levels and reduced transit through the economically important Panama Canal. First Quantum intends to meet the new government to discuss reopening the mine, the company's chairman Robert Harding said in March. "Whatever government is elected, we will work with it," Harding said. "We would like to see this mine reopen." Panama closed the $10bn Cobre Panama mine after a supreme court ruling in November that First Quantum's contract was unconstitutional. The mine accounted for 5pc of the country's economy and 1.5pc of global copper output, according to the government. The shutdown will limit the country's economic growth to 2.5pc this year against 7.5pc in 2023, the IMF has forecast. The supreme court's order to close the mine followed weeks of protests over the terms given to First Quantum in October. Protests wracked the country as opposition parties, trade unions, environmental lobbies and non-governmental organizations objected to the terms. "Although the mine's owners would be happy to negotiate a reopening with the new administration, this is a very hot and controversial matter for the new government," a senior official of the outgoing government of President Laurentino Cortizo told Argus today. "Any suggestion of negotiating a reopening would again bring people on the streets." Mulino ran with former president Ricardo Martinelli until the courts disqualified Martinelli because of a money laundering conviction. Martinelli had proposed that Panama renegotiate the contract with First Quantum to secure higher royalties and a stake. "Mulino is a mentee of Martinelli, but I doubt he would stoke public anger by seeking to reopen the mine," the official said. Cobre Panama produced 331,000 t in 2023, 5pc less than 2022 output, First Quantum said. By Canute James Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US majors widen output gap over European rivals
US majors widen output gap over European rivals
New York, 6 May (Argus) — ExxonMobil and Chevron are seeing investments in Guyana and the Permian shale basin pay off, widening a gap with their transatlantic counterparts that could get even bigger with the completion of recent mega-deals. ExxonMobil is championing a speedy ramp-up of a massive offshore oil discovery in Guyana, where production has surged to more than 600,000 b/d of oil equivalent (boe/d) in the space of just a few years. And Chevron recorded a 35pc jump in first-quarter US output from a year earlier, buoyed by better-than-expected performance from the Permian basin, as well as the $7.6bn acquisition of US independent PDC Energy that bolstered its footprint in Colorado's DJ basin. And after years of delays and cost overruns, its highly vaunted expansion project in Kazakhstan is finally close to seeing the light of day. Even though European rivals including Shell and BP are backtracking on previous plans to scale back their reliance on oil and gas production, the US majors are poised to extend their lead after dominating a recent round of industry consolidation. ExxonMobil will become the top producer in the Permian after wrapping up its $59bn takeover of shale giant Pioneer Natural Resources. Anti-trust regulators at the US Federal Trade Commission cleared the deal after barring Pioneer's former chief executive, Scott Sheffield, from gaining a seat on the board, following allegations that he sought to collude with Opec members. And Chevron is still optimistic that its pending $53bn purchase of independent producer Hess will close by the end of the year, even though ExxonMobil has thrown a spanner in the works by claiming its right of first refusal over Hess' 30pc stake in Guyana's prolific Stabroek block, where it is the operator. Chevron's attempt to muscle in on Guyana's oil riches would answer lingering concerns over its long-term growth profile. The dispute has now been referred to international arbitration in Paris and the company hopes the transaction can be completed this year. A failure of the deal to close would not "materially" hit Chevron's near-term valuation, according to bank HSBC. "However, the strategic gap between Chevron and ExxonMobil could widen over time if the Hess deal does not happen," the bank says. Advantage Exxon Excluding the Pioneer transaction, ExxonMobil forecasts its output will grow to 4.2mn boe/d by 2027 from about 3.8mn boe/d this year. Chief executive Darren Woods has doubled down on so-called "advantaged" projects including Guyana and the Permian, which offer the most profitable and low-cost barrels that will be key drivers of revenue growth. The company's share of overall production from such assets has increased to 44pc from 28pc in recent years. Woods sees the growing cash flow from those projects as vindication of his strategy to direct "counter-cyclical" investments before and during the pandemic, which were unpopular with some investors at the time. Spending discipline remains a key priority even as new projects start up. ExxonMobil has achieved $10.1bn of cost savings from 2019 levels, and is on course to hit $15bn by 2027. And Woods says there is scope for even more savings to be found. Meanwhile, Chevron says its output from the Permian is trending better than previous guidance for a 2-4pc decline in the first half of 2024, with more wells due to come on line later this year. The company is also preparing to start up its Anchor offshore platform in the Gulf of Mexico in the middle of the year, with more projects in the region to follow. "The outlook in the US is especially strong," chief executive Mike Wirth says. Chevron is guiding for 4-7pc overall output growth this year, after pumping a record 3.1mn boe/d last year. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more