The last thing we need in the industry is more complications at the moment. Several sources are reporting that shipping etc in and out of Turkey is normal despite the coup attempt.
A lot of the world was shocked, but some not even surprised when dissident members of the Turkish military attempted to seize power on Friday. Within 24 hours the government were stating that all was being brought back to order. I was sceptical mainly because every time there is a coup the next bit of news is that all will be well. How many times have we seen it turn out to be the exact opposite?
With neighbour Syria in a mess, a chaotic and war split Turkey would have been awful for its people and terrible news for commerce in the Middle East and Europe.
Here Bloomberg confirm that as of yesterday, Sunday 17th July 2016, all appears calm. Click here
Maybe it is the idea of the sun rather than the cold edged wind that has me so interested in oil production in the Gulf of Mexico. Possibly, as a safety adviser, it was the tragedy of 2010 when the Deepwater Horizon exploded and sank claiming eleven lives. Whatever it is I find the decades of oil exploration starting with wooden platforms and iron will compelling. So who started paddling out into ever deeper waters in the first place? I wonder when they first started did they realise that Gulf oil was going to be over 70 years’ of hard work.
Image shows the Gulf to the north west. Looks like a tiny lagoon but at 600,000 square miles it is no blip on the map.The author of the work GLOBE and ETOPO1
Two of the big names were Dean A McGee and a robust Oklahoma politician called Robert S Kerr. In 1946 they formed Kerr-McGee and in 1947 they operated the first platform out of sight of land. However as early as 1936 Louisiana had granted licences to explore offshore and by 1938 the Creole Field had been discovered and a rig was constructed by Brown and Root of Texas.
That gives a good idea of how shallow the drop off is around the coast of the Southern States of America. The real boom came after WW2.
In some ways the Gulf was slow to catch on to the potential of offshore oil and gas. Piers of up to 300 feet from land had pushed early California’s development and lakes had hosted some pretty impressive production since as early as 1891.
That said, as we know, when the wind is howling and the sea is rising modern platforms and service vessels can be a little distressing to the new worker. Imagine trying to build strong and safe with treated pine pylons in an area of famous hurricanes.
Such was the fate of the Superior-Pure State No. 1, the first platform in the Gulf of Mexico. It was a true pioneer platform of 320ft in length by 180ft wide. Workers spent several hours a day taking small boats out from the nearest settlement and in rough weather there was no production at all. It might have been in only 14 ft of water and a mile offshore but it was taken out by a hurricane in 1940. Granted the stout hearts rebuilt it and it continued to produce despite all that.
Kerr-McGee was the first to break the taboo of losing the view of the shore. They were after oil from salt domes, high quality that could not be easily found unexplored on land. The technology was by and large none existent what needed to be learned, what needed to be adapted, came as always from the grit of the people out there. Kermac No 16 was 10 miles offshore in about 20 ft of water and was another effort by Brown and Root.
A week after it started production a huge hurricane with winds up to 140 mph caused the platform to be evacuated, however, unlike previous attempts to withstand the weather of the region there was not much damage. The first solid foothold had been established and the oil and gas industry was going nowhere.
The Kermac would produce 1.4 million barrels of oil and 307 million cubic feet of natural gas over the next 47 years.
Oil and Gas in the Gulf Since
In the last 70 years the oil production has topped 600,000,000 barrels per year and provides 25% of the massive amount used by the USA. Natural gas production provides 5% of the the nation’s needs and all along the coast almost half of the countries refining takes place.
Taking one platform at random, Mad Dog is a BP platform (Chevron and BHP Bilton) 150 miles south of Louisiana’s coast and can turn out 60 million cubic feet of gas and over 80,000 barrels of oil daily. It floats in almost a mile deep water with a 550 ft spa.
The size of the platform is the same as a cluster of 44 houses. That is a long way from the wooden deck of the pioneer platforms that were 34 times smaller.
No matter how much the technology, capacity and sheer size of the operation might have changed, one thing that those of today have in common with the people of years ago is the spirit to work day to day in anything the Gulf can throw at them.
April 20th 2010, 50 miles off the Louisiana coast the future of deep water drilling was called into serious question when the Deepwater Horizon exploded killing 11 workers. The environmental effects of 100 million gallons of oil spewing into the Gulf of Mexico after safety features failed has been felt in the area ever since.
People died and many more of the 126 crew were injured, the significance of which was almost forgotten in the scramble to decide who was to blame and who should pay to clear up the sea.
It presented the world with the reality that as exploration was pushing into deeper and deeper water so increased the challenge to ensure safety. This of course is in addition to the inherent technical problems of ultra deep, mile plus drilling.
Compounding the issue is the downturn in the market. Safety measures are never cheap after all. With fields near shore becoming crowded every effort in the area to drive down cost is welcome.
According to the article below there might be light coming from the gloom of the near future. Technology is the cornerstone of the oil and gas industry and from adversity come some of the best solutions.
If the profit is falling the ideal answer is to operate for less. Have a look at a few US suggestions for improving deep water efficiency.
Undersecretary Khalifa Hamada announced to the press that the Kuwaiti government were considering privatising oil service operations and currently a study is being carried out to decide what can and cannot be offered.
Kuwait is the home of the massive Burgan field which has an estimated production life of another 30 years. Though the amount of oil still under the sand of the country is a little vague there is small doubt that investment at the right price would yield a comfortable profit.
Hamada stressed that production facilities were not part of the deal and so there will be no loosening of the grip held by the Kuwait Oil Company.
Kuwait, which is the 10th largest producer of oil also possesses considerable gas production capacity, however, the drop in oil prices has given rise to concerns about the budget deficit. It is believed that the selling of operations not central to oil production will create revenue to offset a disappointing year.
It is quite possible that a recent similar move by Saudi Arabia has prompted this latest announcement from Kuwait.
The history of what we do is paralleled in the best movies. The Westerns, Sci Fi and all that is daring-do. As I go around the world picking up more information about oil and gas exploration the more I admire those who started it all. One of the latest such roles of the dice is of course in the waters around the Falkland Islands.
The evidence is that there is much to be gained from drilling in the South Atlantic. As always the environment is a challenge and as is often the case there are simmering disputes about legality and rights.
Currently we wait to see if the conditions are favourable to begin production of the estimated 1 billion barrels of oil that are down in the North Falklands Basin. The plan is to use Floating Production Storage Offloading (FPSO) to service the platforms, but of course the price of oil isn’t that good so how far back production will be pushed is at present not known. The fact is that the largest prospect in British territorial waters outside of the North Sea faces and an uphill battle get underway.
It truly is a case of holding your breath particularly, if you are an investor in the companies that have licences to search the frigid waters of the South Atlantic.
Argentina and the Oil
Many of our colleagues work in areas that are fraught with political wrangling and downright dangerous conflicts. Where the production sites in the Falkland Islands sit is not as day to day threatening as many places we work but it has had a volatile past. The uncertainty about future oil and gas exploration here is more to do with the global political considerations about the island’s sovereignty than in local pressure.
The islands were first charted by a British captain in 1690. They are inhabited by an independent people who claim British connections. They were given the opportunity to vote away from the UK and overwhelmingly voted to remain yet that doesn’t stop nearby Argentina from claiming rights to not only the islands but the people who live on them.
International law requires that in order for a country to absorb another, the people living there have to agree or at least the majority of them do. This process was most recently observed in the Scottish referendum. You didn’t have to be Scottish to vote, you had to be a resident of Scotland.
The alternative is to establish that the Falklands are a ‘stolen’ territory. In order to do that Argentina would have to show their prior claim and right in history. This claim is at best ambiguous and I will not go into the claims and counter claims, but the future of the islands is unlikely to see an Argentine flag flying over it.
In 1982 Argentina attempted to force the issue and this led to British military being deployed to oust them. Ever since force of arms has been a back seat option to political pressure and Argentina’s attempts to gain control have been relentless.
This effort has come in many forms, the most often used has been to block any major development of the islands, that includes oil. Significantly the Argentine government has got previous form for nationalising foreign oil assets based in their country. This is probably the reason that those daring to develop production 130 miles off the shores of the islands bring almost everything they need across the sea from Aberdeen.
In addition, it could well be why the operators are smaller than the norm. The big outfits could lose big if Argentina decided, through its courts, that oil exploration was illegal. The rule seems to be if you want to isolate yourself from Argentine action don’t put anything on the mainland you cannot afford to lose.
It also should be said that Argentina is not unsupported in their claim on the islands. Russia shows them sympathy as on occasions have other nations including the USA. The sticking point was and is the will of the people. In the late 1960s and again a decade after that the UK government was happy enough to walk if not run towards handing over the islands. This was never because they supported the Argentine claim more because the cost of servicing islands so far away was a heavy burden.
An Argentine airstrip was built in the 1970s and that prompted the islanders to strongly petition London not to negotiate a change in sovereignty.
The Upside, Tax Breaks
Some advantages do exist. For a start the tax is not levied by the UK but by the government in the island’s capital Port Stanley. We have seen this before in many parts of the world. The islands have some literally home grown revenue but if the oil pays off their financial and even sovereign future could be assured so they want to encourage exploration. The overall tax paid on a barrel that does come out of the area is likely to be 34% lower than one that comes out of the North Sea.
Another plus is that though the neighbour might be annoyed the islands are not small. They can support increased onshore facilities and because of the history they have a very large British military presence to keep many of the threats that exist elsewhere at bay. The local economy and transport has come a long way since before the war and is a good base for future development. Finally, unlike Nigeria and many places in the Middle-East, there is one government to deal with and no local rival factions to placate.
The Future of Falklands Oil
The reserves at 1 billion barrels are but a small amount when compared to to the North Sea’s 16 billion but it is an area worth a watch. Conditions are similar to those closer to home. The day to day obstacles have been closely likened to the North Sea albeit the geology is different. So if you hear that operators like Britain’s Rockhopper have begun production and work is scarce elsewhere – a long bus man’s holiday in the South Atlantic could be a reasonable consideration.
The conflict in the Niger Delta continues with groups not acknowledging the supposed truce. Reuters are reporting a pipeline has been attacked in Lasukugbene, Bayelsa state.
No-one has claimed responsibility for the action so far however the usual suspects, the Niger Delta Avengers, have the most recent history of such action. Some substance can be attributed to this as their spokespeople have said they cannot recall the truce that was arranged in late June.
Operators Nigerian Agip Oil Company, a subsidiary of the Italian Eni corporation have made no comment. Oil production is now down to a 30 year low in the region because of the ongoing dispute between oil companies, Nigerian government and the ethnic people of the Delta.