Injecting large amounts of offshore wind power into the U.S. electrical grid is manageable, will cut electricity costs, and will reduce pollution compared to current fossil fuel sources, according to researchers from the University of Delaware and Princeton University who have completed a first-of-its-kind simulation with the electric power industry.

The researchers consulted with PJM Interconnection -- a grid operator supplying electricity to more than 60 million people in 14 states -- to develop a computer model that simulates how the electric grid would respond to injections of wind power from offshore wind farms along the East Coast at five build-out levels, between 7 and 70 gigawatts of installed capacity. The two-part study is published in the journal Renewable Energy.

One hurdle grid operators face is how to integrate increasing amounts of naturally fluctuating offshore wind into a network that has to deliver reliable power to customers, 24-7. The UD and Princeton team showed conservatively that, with some upgrades to transmission lines but without any need for added storage, the PJM grid can handle over 35 gigawatts of offshore wind -- that's 35 billion watts -- enough to power an estimated 10 million homes. They also found that the PJM grid could in the future handle twice that amount, up to 70 gigawatts, as wind forecasting improves, allowing the power operator to better predict and harness more wind.

"Our goal was to replicate this very human-made energy system under all kinds of scenarios," said Cristina Archer, associate professor of physical ocean science and engineering at the University of Delaware. "What would you do as a grid operator if you thought it was going to be windy today and it isn't, or if the wind storm arrives earlier than expected? We simulated the entire PJM grid, with each power plant and each wind farm in it, old and new, every five minutes. As far as we know, this is the first model that does this."

From her office in UD's Harker Interdisciplinary Science and Engineering Laboratory, Archer led the team's efforts to generate realistic offshore wind forecasts based on real wind farm data from land-based systems, which colleagues at Princeton then incorporated into their model of the PJM electric power system. The team used stochastic modeling, running hundreds of forecasts with various tweaks in conditions, to realistically represent the fluctuating and sometimes unpredictable behavior of wind.

The model of PJM, called Smart-ISO, created at Princeton, is designed to handle both the variability and uncertainty of growing inputs of offshore wind energy, simulating what happens over an extensive power grid with more than 60,000 miles of transmission lines.

"The uncertainty of wind will require that we develop strategies to minimize the need for spinning reserve," said Warren Powell, professor and lead researcher at Princeton in charge of the SMART-ISO model, referring to electric generators that need to keep "spinning" and be ready for any electricity shortage. "Although we found that reserves were needed -- 21 percent of the 70 gigawatt wind capacity -- there are a number of strategies that could be investigated to better handle the variability as wind grows in the future."

The first U.S. offshore wind farm, consisting of five wind turbines at Block Island, Rhode Island, with a generating capacity of 30 megawatts, had not been built yet when the researchers began their study five years ago. The 70 gigawatts offshore modeled in this study would be almost equal to the total U.S. wind power capacity installed on land through the end of 2016.

Archer says that adding more offshore wind farms would lower consumers' electricity costs and reduce pollution by replacing coal and natural gas power plants.

"We saw up to a 50 percent reduction in carbon and sulfur dioxide and up to a 40 percent reduction in nitrogen oxides emissions at the highest build-out level, a 70-gigawatt set of wind farms. Plus, the costs of electricity would go down every month except in July when air conditioning is at a peak," Archer said. "Wind power is a very good idea -- for people's health and their wallets."

Story Source:

Materials provided by University of Delaware. Note: Content may be edited for style and length.

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US grid can handle more offshore wind power, cutting pollution and power costs - Science Daily

A little more than a month after seismic blast testing for oil and natural gas was stopped offshore of South Carolina, exploration companies are gearing up for a new try.

Conservation groups are gearing up to fight again. This time, the battle will focus on jobs and the economy, they say.

A dozen anti-drilling advocates met Tuesday in Charleston to discuss expanding the opposition. They may look inland for more support in the vein of the massive coastal protest that in 2016 helped derail plans for testing and drilling.

Frank Knapp, founder of the anti-drilling Business Alliance for Protecting the Atlantic Coast, said he has heard the exploration industry is planning to approach the federal Bureau of Ocean Energy Management about reversing a testing permit denial adopted during the last days of the Obama administration.

Asked about that, the pro-drilling exploration National Ocean Industries Association president Randall Luthi said, "Industry continues to have interest in updating grossly outdated offshore resource estimates so that future decisions are based on sound science rather than political hyperbole."

In seismic testing, powerfully loud air guns are fired underwater every 16 seconds to read echoes from the bottom geology. Conservationists oppose them because of the potential to disorient and injure marine animals. Business groups have joined the conservationists out of concern for the industry's impact on multi-million dollar coastal tourism revenue.

Luthi and other industry representatives say advances in drilling technology have made the operations safer, and that seismic surveys have taken place for a half-century with no direct evidence it harms sea animals, commercial fishing or tourism. They tout the economic benefit and potential job creation of the work.

Drill or don't drill cuts to the heart of coastal life, where interests are divided between exploring for potential economic benefit or restricting exploration to protect marine life and a billion-dollar tourism economy. Residents widely oppose both testing and drilling as a quality-of-life issue.

The conservation groups that met Tuesday came from Florida to New Jersey, and included local groups such as Stop Offshore Drilling in the Atlantic. They reflected an opposition that grew to include thousands of residents and nine of every 10 coastal municipalities in those states 23 in South Carolina alone.

Knapp's group represents more than 35,000 businesses and 500,000 commercial fishing families from Maine to Florida.

Former Gov. Nikki Haley was part of a coalition of governors who worked largely behind the scenes with industry lobbyists to urge federal officials to open the Southeast coast to oil and gas exploration. Gov. Henry McMaster has said he opposes it. State governors are given a say in BOEM decision-making.

The battle could be the first of any number the conservation groups expect as administration and congressional efforts are made to rescind laws and restrictions set by the Obama administration battles they expect will come down to legal challenges.

The groups "are more fired up than they were a year ago," said Samantha Siegel of Oceana.

"I think the business voice becomes even more important" in the current political environment in Washington, D.C., said Knapp, who did not take part in the Tuesday meeting but said the effort is valuable. "This is not something that you can say, 'We'll fight them next time.' There will be no 'next time.' "

Reach Bo Petersen Reporter at Facebook, @bopete on Twitter or 1-843-937-5744.

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Offshore drilling opponents re-gear for new round of battles | News ... - Charleston Post Courier

Hornbeck Offshore (NYSE:HOS) shares tanked following the company's recent quarterly report. The numbers themselves were not surprising given the horrible market environment - the company reported a net loss of $0.53 per share on revenues of $41.9 million.

To get a quick picture of how bad things are, revenues declined by 52.8% since the fourth quarter of 2015 and by 19.3% since the third quarter of 2016. As a result of poor market conditions, the company had to stack 25 more vessels.

As I stated above, the results themselves are not a surprise at all. Perhaps, seeing actual numbers was a pain for Hornbeck Offshore investors, and this partially caused the post-earnings sell-off.

Also, the stock was elevated after the post-OPEC deal rally, although the deal changed nothing yet for the offshore drilling industry as was highlighted many times during this earnings season (read here, here and here).

However, the most important factor for any company is the outlook, and the outlook presented by Hornbeck Offshore management was just horrific.

Here's what Hornbeck Offshore had to say:

"We project that even with the current depressed operating levels, cash generated from operations, together with cash on hand, should be sufficient to fund our operations and commitments at least through to our current guidance period ending December 31, 2018.

However, absent improved market conditions, we do not currently expect to have sufficient liquidity to repay our three tranches of funded unsecured debt outstanding that mature in fiscal years 2019, 2020 and 2021, respectively, as they come due, unless such debt is refinanced or restructured.

Refinancing in the current climate may not be achievable on terms that are in line with our historic cost of debt capital. We are fully aware of the challenges of current market conditions are presenting to all offshore oil and gas industry and continue to actively review our capital structure and assess our strategic options, as we consider plans to ensure the long-term viability of Hornbeck Offshore".

In the previous report, the company warned investors that it was going to assess strategic options, but the language was softer. Now Hornbeck Offshore presented the big picture to investors - the company will have no money to pay debt in 2019 and will have to restructure its debt.

I would like to highlight that it does not even matter for Hornbeck Offshore if the industry rebounds by 2019 or not. The rationale for this statement is that Hornbeck Offshore management believes that it will be necessary to address the capital structure long before 2019. As always, concessions from lenders mean big concessions from shareholders.

Judging by Hornbeck Offshore comments, the company will try to push maturities as far as possible as it does not see any recovery coming soon:

"Earlier in this cycle, the industry mantra was lower for longer. The message we have recently been hearing from our customers, almost uniformly, is that they now see oil prices as lower forever. They no longer view this as a U-shape recovery, but an L-shaped recovery, or so we're told []

Our customers are telling us, they're not going to FID or sanction projects in deepwater. I mean, this is what they're telling us, $40 a barrel. They're going to have to justify $40 a barrel, not $50, but $40".

Here's what we see from this and what the market has so far failed to appreciate in both OSV and OSD stocks.

No matter what the current oil price is, the breakeven bar for projects is set low because oil producers don't want to be trapped in capital-intensive endeavors if oil goes below $50.

Once again, I remind that it does not matter now if they are right or wrong in their evaluation, because they will act upon their views and this means little demand for OSD and OSV industries.

The year 2017 is going to be bad for the industry and for Hornbeck Offshore. The company will likely see its revolving credit line go from $200 million to $75 million as it plans to elect interest coverage holiday at some point during this year.

There is no cash crunch as the company had $217 million at the end of 2016, but this number will trend down as the year progresses.

The deal with creditors won't be easy to reach as highlighted by the problems of Hornbeck Offshore's peer, Tidewater (NYSE:TDW).

Tidewater's shareholders are already on the verge of a wipeout. The situation for Hornbeck Offshore shareholders is better, as the company did not ran into any covenant and does not depend on lenders' good will.

Anyway, proactive attempts to deal with debt mean nothing good for shareholders unless the company can suddenly gain access to capital markets.

At the end of 2016 - beginning of 2017, a group of offshore drillers, namely Transocean (NYSE:RIG), Rowan (NYSE:RDC), Noble Corp. (NYSE:NE), Ensco (NYSE:ESV) and Atwood Oceanics (NYSE:ATW) were able to raise money through debt and equity.

The window of opportunity was opened by the OPEC/non-OPEC deal, but I believe that it has already shut down as no tangible evidence of any improvements on the offshore drilling front materialized after the deal.

Also, players with financial problems like Seadrill (NYSE:SDRL) or Ocean Rig (NASDAQ:ORIG) were not able to raise money during this fortunate period. Yes, Seadrill is in restructuring negotiations right now, but even its founder is not willing to inject money via equity. So, for weaker industry players like Hornbeck Offshore or Tidewater the market was never really opened.

All in all, Hornbeck Offshore still has time to review its strategic options and I expect that the company will not hurry.

Any negotiations with creditors will take long as evidenced by Tidewater and Seadrill restructuring negotiations. Given the uncertainty, the stock will be highly volatile and present trading opportunities on both long and short sides.

However, the general direction will be to the downside as the OSV industry is the last one in the supply chain to benefit from rising oil prices, and current oil prices are not sufficient enough to bail out the OSD industry, the client of the OSV industry.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in HOS over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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Hornbeck Offshore Services: Too Many Problems Will Drag The Stock Further Down - Seeking Alpha

Published on February 21st, 2017 | by Joshua S Hill

February 21st, 2017 by Joshua S Hill

Spanish electric utility Iberdrola announced it has completed the installation of the first of 70 5-megawatt wind turbines at the 350 megawatt (MW) Wikinger offshore wind farm off the coast of Germany.

Iberdrola announced on Monday the completed installation of the first wind turbine, the first of 70 5-MW Adwen wind turbines known as WK16. The turbines are being installed by Fred OlsensBrave Tern, one of two self-elevating, self-propelled jack-up vessels dedicated to installing offshore wind turbines.

Upon completion, the Wikinger offshore wind farm will have benefited from investments totaling around 1.4 billion, and is expected to generate enough clean electricity to power more than 350,000 households.

We are delighted to reach yet another key stage of Wikingers construction programme which is testament to the hard work and dedication of the entire project team, said Jrgen Blume, Head of Iberdrola in Germany. Our Wikinger project is progressing well, and we are on target with our plans for full export at the site later this year.

While this is something of a small project, in the grander scheme of things, the involvement of theBrave Tern was enough to capture my interest. TheBrave Tern is one of two vessels (along with theBold Tern) that are able to elevate themselves off the surface of the water, stabilizing themselves off massive jacks from the ocean floor. The vessels are able to work in water depths ranging from 5.5 meters to more than 60 meters, and are able to manage a typical payload of up to 7,600 tonnes.

Buy a cool T-shirt or mug in the CleanTechnica store! Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech daily newsletter or weekly newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.

Tags: Brave Tern, Fred Olsen, Iberdrola, Wikinger, Wikinger offshore wind farm

Joshua S Hill I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.

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Iberdrola Completes Installation Of First Turbine At 350 Megawatt ... - CleanTechnica

Children detained on Nauru hold up signs in April 2016 protesting Australias offshore immigration detention system.

The royal commission into child sexual abuse is to hold limited public hearings on Australias immigration detention regime on Nauru and Manus Island.

The royal commission had initially declined to conduct investigations into Manus and Nauru because of jurisdictional concerns about the scope of the inquirys powers. Legal groups had urged the royal commission to examine Australias offshore immigration detention regime, outlining legal advice that Australias institutional response to allegations of abuse were within its power and terms of reference.

The commission appears to have partially adopted this approach, announcing the limited public hearing into the Australian governments response to report of a child protection panel convened by the immigration minister, Peter Dutton.

In a statement issued on Tuesday, the royal commission said its final scheduled public hearing in March would examine the Australian governments response to the report.

On 14 November 2016 the royal commission announced a series of public hearings to be held in Sydney to inquire into the current policies and procedures relating to child protection and child safety of various institutions, the statement said.

It said the hearings would include: The response of the commonwealth government to the recommendations of the child protection panel in its report dated 11 May 2016, Making Children Safer the wellbeing and protection of children in immigration detention and regional processing centres.

The child protection panel identified serious inadequacies in Australias child protection framework in the immigration detention system on Manus and Nauru. It found almost half of the responses to reported incidents of child abuse were inadequate and the immigration department was unsure of the number, nature and severity of incidents.

The panel made a series of recommendations including to improve categorisation of incidents, to require service providers to deliver accurate and complete incident reports, and to ensure inquiries were not finalised without all available facts and an effective response.

There has been renewed focus on the asylum seekers and refugees held on Nauru by Australia after the Guardians publication of the Nauru files, which detailed thousands of incident reports from the islands detention facility until October 2015.

A Senate inquiry is also under way into serious allegations of abuse and assault on Nauru and the department is facing increasing pressure to release information about incident reports, as well as healthcare information for asylum seekers and refugees on the island.

The royal commissions limited hearings will still not fully examine the detention regime on Manus Island and Nauru. They will occur as part of a set of hearings into other areas of government responses, including the defence department and the management of working with childrens checks.

The commission has made substantial inquiries into the onshore immigration detention regime, but declined to hold public hearings.

The hearings will begin in March.

Contact Paul Farrell at paul.farrell@theguardian.com or via the secure messaging app Signal on +61 457 262 172

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Child abuse inquiry to hold limited public hearings into offshore ... - The Guardian

BBC News

Offshore catering staff reject offer after phone ballot BBC News Offshore catering workers have rejected an offer of new terms and conditions from their trade body. The Unite and RMT unions said the latest proposals from the Catering Offshore Trade Association (Cota) would freeze pay at existing levels. More than 60 ...

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Offshore catering staff reject offer after phone ballot - BBC News

Published on February 20th, 2017 | by Joshua S Hill

February 20th, 2017 by Joshua S Hill

The 497 megawatt EnBW Hohe See offshore wind farm off the coast of Germany is set to proceed following Canadian energy infrastructure company Enbridges decision to invest in the project, and German engineering company Siemens committing for the first time to provide complete construction work.

German public utility company EnBW made a final construction and investment decision back at the end of 2016, and appointed Siemens to provide not just the wind turbines, but full construction work, including providing the foundations. This week, the project received its last green light, with Canadian energy infrastructure company Enbridge acquiring 49.9% of the shares in the Hohe See project.

The EnBW Hohe See offshore wind project is set to be constructed in the exclusive economic zone in the North Sea, off the coast of Germany. It will cover an area of approximately 42 square kilometers, and upon completion will have a total capacity of 497 megawatts (MW) thanks to 71 Siemens 7 MW wind turbines. The project is estimated to be able to provide electricity for around 560,000 average households.

With Enbridge at our side, we can realise our largest offshore wind farm to date and at the same time generate financial scope through this participation for the development of new projects, said EnBW CEO Frank Mastiaux. This is now the third successful participation model with which we are sharing the risk and represents another major step in the implementation of our EnBW 2020 strategy.

With an investment volume of around 1.8 billion euro, we have not only taken one of the largest investment decisions in the history of our company but despite the currently difficult economic conditions, we are continuing to rigorously invest in the implementation of our strategy and through EnBW Hohe See we are developing another cornerstone for safeguarding the future of EnBW. Following its commissioning in 2019, the wind farm will make a substantial contribution to our Group operating result.

Siemens will begin manufacturing the 71 SWT-7.0-154 wind turbines from its new nacelle plant in Cuxhaven beginning in the middle 2018, with delivery expected for early 2019. Siemens will also provide the large monopile foundations, measuring up to 80 meters and with a weight of 1,500 tonnes.

We are happy to apply our full scope of engineering services at EnBW Hohe See offshore wind project, said Michael Hannibal, Offshore CEO at Siemens Wind Power. The extended scope makes this 497-megawatt wind power plant one of the largest projects that we have ever executed. Our customer thereby benefits from the proven experience of a multinational company along the entire value chain of large offshore wind projects.

Buy a cool T-shirt or mug in the CleanTechnica store! Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech daily newsletter or weekly newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.

Tags: Enbridge, EnBW, EnBW Hohe See, Germany, Hohe See, siemens

Joshua S Hill I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.

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EnBW Hohe See 500 MW Offshore Wind Farm To Proceed With Siemens & Enbridge - CleanTechnica

Courtesy: Maersk Drilling.

Investment thesis:

A fierce debate is raging over which oil production sector should be chosen for investment first. The investing community is deeply divided about what to consider when it comes to evaluate the US shale versus Offshore drilling production in terms of real numbers and efficiency. Particularly when it comes to "oil service" and less relevant to the oil majors whose are often invested in both segments.

Some extreme views, frequently driven by inexperience and lack of understanding, are totally discounting offshore drilling as something obsolete and expensive, which is due to disappear into oblivion, as soon as tomorrow.

On the other hand, others think that the US Shale will become a white elephant after a few years of intensive drilling, atypical depletion and hidden costs.

In fact, both are merely wrong by touting one oil production sector against another. We need both and probably more if we look at the next 25 years. Therefore, if we need both oil sources of supply, we should invest in both as well. Simple logic, right?

It is interesting to see that US Shale (tight oil) production in the USA represents less than 50% of the US total oil production now or approximately 9 MBOEPD, and will be approximately 60% of the 10+ MBOEPD expected in 2040 according to EIA.

The recurring fundamental question is to adapt a trading strategy that can fit perfectly to each segment without using anachronism or caricature in the process of selection.

To use a very simple image to illustrate this futile misconception. How can one walk without the use of his two legs functioning adequately?

The concept of walking is based on the use of two legs, period. It is a basic principle -- one leg equal falling -- Same as the concept of smooth oil consumption which is based on a balanced worldwide production, wherever oil can be found and be delivered at a profit. Profit not limited to "operating profit" by the way, but "net profit" when all expenses have been subtracted.

What is the breakeven price really?

The charts below from Rystad Energy/WoodMcKenzie are a good indicator of the US Shale recent success and its limitation as well.

Another well-known research firm called WoodMcKenzie in the US is indicating the "point break" for both the onshore and offshore in the USA which shows how important a $60 per barrel can be for the all oil industry.

However, it can also be used to express how difficult it will be for oil prices to trade well above this significant level and at least for a long period of time.

We see that we have now a pretty similar value if we compare onshore and offshore in the USA. Furthermore, the offshore industry achieved significant reduction as the chart below is showing:

Commentary:

Today, I would like to share with you my thoughts about an article from Offshore Magazine published on February 17, 2017.

The article referred to Rystad Energy, which is a well-known independent oil and gas consulting services and business intelligence data firm offering global databases, strategy advisory and research.

Rystad Energy believes that after two years of cost cutting programs in the offshore service, 2016 and 2017 are showing "full competitiveness within these two sources of supply".

For every dollar that is invested into the North American shale market in 2017, the analyst firm says, a dollar is also earmarked for the development of new offshore resources. Both sources of future production, shale and offshore, will receive around $70 billion each of planned capex.

Audun Martinsen, VP Oilfield Research at Rystad Energy, said:

E&P and oilfield service companies have worked intensively on methods to reduce costs. However, these improvements are also a result of a portfolio effect. By focusing on the areas with the highest potential within their portfolios, E&P companies naturally gained the most from these newfound efficiencies by high-grading their undeveloped fields. Non-sanctioned offshore developments can expect an improvement of 15-30% in their breakeven prices.

As we can see, the CapEx repartition between the US Shale and offshore is nearly equal in value. Another chart from Rystad is also very telling:

Rystad Energy is arguing that the US Shale and the offshore drilling segment are difficult to differentiate in terms of breakeven price and in terms of capital expenditure.

One of the reasons for offshore projects starting to become competitive again is the strong deflation of unit prices which is actually higher for offshore than onshore. In 2016, unit prices for offshore developments have been reduced 27% from the peak in 2014 for awarded contracts.

One of the key segments, which have helped the offshore cost to come down, is related to the immense pressure on day rates for drilling rigs. Here, prices have come down more than 50%. For other segments, the cost is down more in the range of 20-30%, where subsea is on the upper end.

However, due to oil prices increase and a surge in activity overall, inflation will have a negative effect going forward. The process has already started with the US Shale (see breakeven price chart).

Rystad Energy says the time window of low service prices has started to shrink, whereas it will stay open longer for offshore activity due the longer contract durations and lead times. This will impact even more the 2018 volumes of activity and also benefit service companies on their top and bottom line.

Important note: Do not forget to follow me on the oil sector. Thank you for your support.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Read more here:

Rystad Energy Believes That Offshore Projects Are Becoming Competitive Again - Seeking Alpha

Image: Semisubmersible Songa Delta.

Investment thesis:

The recent oil prices increase that we have experienced since OPEC and non-OPEC nations decided to reduce production at the end of last year, is slowly trickling down from the oil majors, such as Statoil, to the depressed offshore industry, which is desperate to find work for an ever growing unused fleet rusting away, idle and silent, in the Scottish Cromarty Firth, north of Inverness, graveyard (See image below).

The Cromarty Firth, north of Inverness, is currently packed with more unused rigs than it has been at any point in the last decade.

I have been religiously reporting any new contract or possible drilling contract that could be beneficial for the offshore drillers for the past two years, and it is quite disheartening to see such a slowdown in exploration CapEx, when you know how active this segment was, not even three to four years ago..

Yes, of course, we know that the offshore industry, or rather the oil industry in general is highly cyclical and it will come a time when the industry will complain because it cannot keep up with the demand.

However, the offshore drilling industry is a particular breed, for one particular specific reason, at least, and it is called a debt overload. Offshore drillers are buried under a few billion dollars in debt and need to contract their costly fleet to survive and meet their tight debt covenants.

Regrettably, it is becoming increasingly difficult because of the lack of contract aggravated by a series of contract termination and reduced day rates to a breakeven level, which are inadequate to service the long term debt.

This basic principal reduces significantly the "apnea time" in which a driller can survive without breathing air (new contract). Already, many drillers have announced a restructuring under chapter 11 or worse a total liquidation. Hercules offshore is gone, liquidated almost totally now, and Paragon Offshore (OTCPK:PGNPQ) is on life support following the same potential fate.

Many others are about to announce a restructuring in 2017, such as Seadrill (NYSE:SDRL), Pacific Drilling (NYSE:PACD) and Ocean Rig UDW (NASDAQ:ORIG). These companies already announced that a "plan" will be unveiled soon.

Well, it doesn't mean that the industry will disappear, of course not, and many uninformed investors have made this wrong assumption repeatedly.

It means that the offshore industry is shedding away its "old skin" to become leaner (the debt will be gone, replaced by new equity) and smaller (many rigs will be scrapped in the process) for the next bullish phase. The only negative is that the actual shareholders will be left with the "old skin".

Investors and stockholders will have to follow closely this struggling industry based on the price of oil volatility and other factors such as potential contracts. The question is not to deny or embellish a situation, it is rather to adjust the right trading/investing strategy that fits an ever changing environment which requires an impartial examination.

Commentary:

On February 17, 2017, we learned from OffshoreEnergyToday the following:

Oil giant Statoil is currently looking for a drilling rig as it gears up to drill an exploration well on the Verbier prospect in the UK sector of the North Sea.

The Verbier prospect is located in Licence P.2170, Blocks 20/5b & 21/1d in the Central North Sea and is operated by Statoil's UK subsidiary, Statoil (U.K.) Limited, with 70% working interest.

The partners in the license are Jersey Oil & Gas and CIECO Exploration and Production with 18% and 12% interests, respectively.

Statoil, as the operator of the license, made a commitment to drill the exploration well in November last year.

According to Jersey's statement on Friday, Statoil is currently undertaking a tender process for a drilling rig and all related services to drill the Verbier well this summer. The rig contract is expected to be awarded in the near future, Jersey O&G added.

Jersey O&G also said that, in addition to Statoil's work, it is conducting further technical studies to improve and update the group's understanding of the Verbier prospect...

... Additionally, pursuant to the terms of the farm-out, Statoil is funding all costs up to $25 million in respect to the drilling of the first exploration well on the license.

In the same article, we learned also that another well will be drilled in another part.

Related to its other license in the North Sea, the Licence P.1989 Blocks 14/11, 12 & 16, Jersey O&G also said on Friday that Azinor Catalyst Limited has stated its intention to drill an exploration well the Partridge prospect, previously named Homer, later this year. Jersey has 20% working interest in the license...

Conclusion:

The offshore industry is walking a thin line right now, between "life and death". Yet, I believe strongly that it is a strategical mistake to look at the sector as a non-potential investment.

The only paramount question is how, not if. As an investor and trader you have the chance to get the best of any situation, as long as you are willing to understand it honestly, and without being blinded by pre-judgement. Offshore is not dead and it will rebound.

Companies like Transocean (NYSE:RIG), Ensco (NYSE:ESV), Noble (NYSE:NE), Diamond Offshore (NYSE:DO) and Rowan Companies (NYSE:RDC) are a few that can be considered as a long-term opportunity when the time will be right.

Rystad Energy is explaining clearly:

However, with two years of cost cutting programs in the offshore value chain, 2016 and 2017 are showing full competitiveness within these two sources of supply. This shows what the offshore industry has worked with during the downturn. In a time when many thought that offshore projects could not compete with shale, offshore operators managed to turn uncommercial projects into highly competitive projects with the help from service companies. Offshore projects that were uncommercial at $110/bbl in 2013 are now commercial at an oil price of $50/bbl.

Sometimes it is important to move through a reversal of fortune because, like the phoenix the industry will be rising again from its own ashes. Thus, be patient and vigilant for the early signs.

Inportant note: Do not forget to follow me on the offshore drilling industry. Thank you for your support.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I trade and own long positions in the offshore drilling segment.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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Offshore Drilling - 2 Floaters Needed In The Verbier Field And In The Partridge Prospect In UK North Sea - Seeking Alpha

Subsea power cables and umbilical manufacturer JDR has been selected by US Wind Inc., as the preferred cable partner for its first offshore wind project.

The project is the 750MW Maryland Development project. Expected to be the largest offshore wind farm to date in the USA, the Maryland Development project will include a maximum of 187 turbines in up to 30m water depth, and will be 24km (15mi) off the coast. The project is subject to offshore renewable energy credit in 2017 and final investment decision in 2018. JDR will supply and install both inter-array and export cables.

JDRs scope of supply for the Maryland Development Project includes project management, engineering and manufacture of 196km (122mi) of inter-array cable, 180km (112mi) of export cable (split into three lengths) and cable accessories. Cable installation for both inter-array, export cables and termination and testing of both cable types will also be provided by JDR. Cable manufacture is expected to commence in 2018 with delivery and installation in 2019 and 2020. Engineering works will begin in 2017. The contract is worth more than US$275 million.

The USA is a growing market opportunity and of strategic importance for the offshore renewable industry. This contract award demonstrates customer confidence in JDR as the leading cable partner of choice, says JDR CEO, David Currie.

To support the project, JDR will establish a storage and mobilization facility in Maryland. The company will also open a project management and engineering office base.

Paul Rich, Director of Project Development for US Wind Inc. says: US Wind is proud to be a local, Maryland-based company bringing a new industry to the state along with thousands of manufacturing jobs for generations, as we establish the hub for offshore wind manufacturing for the entire east coast of the US."

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JDR wins US offshore wind farm work - OE Digital

By Anshuman Daga | SINGAPORE

SINGAPORE Malaysian state-owned oil and gas firm Petronas is aiming to sell a large minority stake in a prized upstream local gas project for up to $1 billion as it seeks to raise cash and cut development costs, two sources familiar with the matter said.

Petroliam Nasional Bhd (Petronas) is looking to sell a stake of as much as 49 percent in the SK316 offshore gas block in Malaysia's Sarawak state, the sources told Reuters, a move that would be among its first major recent sales as it grapples with oil prices that have slumped by half over two-and-a-half years.

That slide has squeezed the cash flows of Petronas [PETR.UL], hurt its earnings and forced it a year ago to announce a 50 billion ringgit ($11.2 billion) cut in capital expenditure over four years.

Petronas, which accounts for a third of Malaysia's oil and gas revenue, has also cut its dividend. Sources had told Reuters in September it is considering selling its majority stake in a $27 billion Canadian liquefied natural gas (LNG) plant, although the company denied it.

It is now working with an investment bank on the SK316 gas block stake sale and kicked off the process this month, one of the sources said. Petronas did not respond to a request for comment.

Petronas is currently gauging interest from potential buyers, said the sources, who declined to be identified as they were not authorized to speak about the matter.

Gas from the NC3 field in the SK316 block feeds Malaysia's LNG export project, known as LNG 9, Petronas' joint venture with JX Nippon Oil & Energy Corp that started commercial production in January.

The sources said the stake is expected to include a combination of the producing NC3 gas field, the potential development of the Kasawari field in the same block and other exploration acreage in the block.

The funds raised could contribute to the future development of the Kasawari field, one of the largest non-associated gas fields in Malaysia, which has an estimated recoverable hydrocarbon resource of about three trillion standard cubic feet.

Petronas put on hold plans to develop the field in 2015 after oil and gas prices fell, according to media reports.

Prasanth Kakaraparthi, senior upstream research analyst at consultancy Wood Mackenzie said overall capital expenditure for the 316 block is estimated at around $4 billion, of which the upcoming phase of development accounts for nearly 50 to 60 percent.

"Given that the second phase of development will involve a significant amount of capital commitment, it's not completely out of the question to think that they might want to bring in some partners to sort of share some of that burden," he said.

The stake could appeal to firms such as Indonesia's state-owned Pertamina, Thailand's PTT Exploration and Production PCL and some Japanese companies, the sources said. They said it might also appeal to the Kuwait Foreign Petroleum Exploration Company, which snapped up Royal Dutch Shell's stake in Thailand's Bongkot gas field for $900 million last month.

A PTTEP official said the company is keen to invest in Southeast Asia but did not specify if it will invest in the SK316 block. Pertamina did not immediately provide a comment.

As huge production comes online in Australia and the United States, LNG markets are oversupplied, resulting in an almost 70 percent slump in Asian spot LNG prices since 2014.

Despite this, Malaysia's LNG assets are viewed as attractive thanks to comparatively low production costs and due to their proximity to North Asia's big consumption hubs of Japan, China, and South Korea.

($1 = 4.4560 ringgit)

(Reporting by Anshuman Daga; Additional reporting by Florence Tan and Henning Gloystein in SINGAPORE, Praveen Menon in KUALA LUMPUR, Manunphattr Dhanananphorn in BANGKOK and Wilda Asmarini in JAKARTA; Editing by Muralikumar Anantharaman)

NEW YORK Oil prices inched higher on Monday, as investor optimism over the effectiveness of producer cuts encouraged record bets on a sustained rally, although growing U.S. output and stubbornly high stockpiles kept price gains in check.

SINGAPORE/HOUSTON Chinese independent, or teapot, refiners are bringing in rare cargoes of North American heavy crude in a new long-distance flow that traders say has only been made possible by OPEC's output cuts and ample supplies in Canada and the United States.

SANTIAGO Striking workers at Chilean copper mine Escondida and mine owner BHP Billiton will go ahead with a meeting on Monday afternoon, the union told Reuters.

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Exclusive: Petronas considers $1 billion stake sale in offshore gas project - sources - Reuters

If I had to count the number of times I have heard that we need to lift Indigenous people out of poverty and make Indigenous people equal and productive partners in Canadas social and economic fabric, I just would not know where or when to begin. It seems I have been hearing similar sentiments going back more than 45 years.

We heard it from politicians dating back to the Supreme Courts decision in Calder in 1973.

We heard it from the Royal Commission on Aboriginal Peoples in 1996.

We heard it from Prime Minister Stephen Harper in the governments apology on residential schools on June 11, 2008.

We heard it during the Truth and Reconciliation Commission process and in the commissions calls to action in 2015.

And we are especially hearing it now in what appears to be the Liberal governments desire to open nation-to-nation relationships with Indigenous peoples and to implement the United Nations Declaration on the Rights of Indigenous Peoples.

This is just a smattering of what has, up to now, proven to be nothing more than lip service.

Indigenous people still lag behind the rest of the country in educational achievements. Many Indigenous people live in overcrowded homes in communities that lack the infrastructure to provide safe drinking water to their people. It is a well-known fact that the rate of incarceration of Indigenous persons in our prisons far exceeds that of the non-Indigenous population, as does the proportion of Indigenous children in foster homes.

It is time we recognized that poverty is at the root of the social malaise in which many of our Indigenous people find themselves. Most Indigenous people in this country are not as lucky as some of their western First Nations cousins, who are sitting on oil and gas reserves and have found themselves in a bargaining position that would be the envy of many. And more power to them. The result in places like Fort McKay First Nation in Alberta which is prospering from the oil sands service businesses it has built is perhaps what meaningful partnerships are supposed to look like looking at it from a distance.

It is time to take a new approach to how we create wealth in Indigenous communities. Despite the many efforts to roll out various government economic development programs, which support projects like building service stations and hotels, what we as a country need to do is turn our minds to how we attract new investment to Indigenous communities.

The federal government has a policy that deals with addressing past wrongs: cases where First Nations have lost land through, among other things, the unlawful surrender of reserve land. Many of the events that gave rise to todays land claims happened well over a century ago. The policy deals with the settlement of specific claims. In the Atlantic region of Canada, the process tends to take years, sometimes decades, to resolve and usually involves financial compensation determined by actuarial calculations. It also often involves the replacement of lost land by allowing the First Nations to acquire new land to add to their reserves.

Canadas offshore hydrocarbon resources hold huge potential for growth, which up to now has been the domain of the oil companies. Canadians should start thinking about the ownership of those lands and the benefits that flow from them in a different way, starting with the creation of a new deal for First Nations.

I can hear the arguments before a discussion like this even gets started. People will say that the offshore areas are not traditional Indian lands, nor have Indigenous people traditionally played a role in the development of offshore oil and gas. Lets look at it another way. The whole industry of offshore oil exploration and production is anything but traditional and is a new economic driver, particularly in eastern Canada. What long traditional history of activity does Canada or its provinces have in the offshore that entitles the government to control land leases and choose who has access to them? Canada was not involved in offshore oil and gas at the time of contact that is, when Euro-immigrants landed on the shores of North America, 500 years ago.

The place to start is to set aside lands in the offshore known to hold significant resources for willing Indigenous communities to control.

We need to consider how to involve more Indigenous communities in the benefits associated with oil exploration and production. The place to start is to set aside lands in the offshore known to hold significant resources for willing Indigenous communities to control so that they become the authorities negotiating with the oil companies for exploration and drilling rights. What could possibly be wrong with that idea?

Today the government tells First Nations that they are free to find land for economic development purposes, adjacent to their reserves. (Often that is difficult. Try finding high-potential land in New Brunswick that is not already controlled by a major entity!) Rather than that approach, lets see how the government can work with Indigenous communities to acquire land in the offshore so they can work with the oil companies to develop arrangements that will see revenue-sharing, employment and other benefits. This approach would create sustainable, lasting resources for their communities. It is a way to share the wealth.

In 1978, Minister of Fisheries and Oceans Romo LeBlanc reserved three deep-sea shrimp fishing licences for fishermens organizations in Labrador. Much of the newly discovered resource was off the Labrador coast. New entities were born in Labrador, owned and controlled by the fishermen, and the early days saw a plethora of foreign and domestic interests travelling to Labrador to meet with fishermen to make deals. And many deals were made. People new to this fishery became trained and employed on the vessels in the offshore fishery. Money began flowing to the companies that the fishermen owned, by way of licence fees, and that allowed the community-based companies to invest in other ventures in the community.

In southern Labrador, for example, new fish plants were built, new resources harvested and new jobs created. Additionally, as a result of those licence fees, the people created their own credit union, which has been highly successful. So with the stroke of a pen, and not insignificant vision, LeBlanc transformed many coastal communities by creating these new opportunities and diversifying an economy that benefited Indigenous people.

Yet there were those voices that said to Indigenous fishermen, You people have no place in this fishery. You have no tradition in it. You are babes in the woods. Leave this to the big boys! Well, Labrador fishermen were persistent and held onto LeBlancs vision. They continue to be players in this offshore fishery, whether the big boys like it or not.

To help lift Indigenous people out of poverty, Canada can do something similar with respect to the management of offshore oil lands and resources. All it takes is political guts, visionary leadership and an open mind, as Romo LeBlanc demonstrated in the late 1970s.

Photo:Verena Matthew/Shutterstock.com

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An offshore deal for Indigenous people? - Policy Options (registration)

PANAJI: The opposition Congress on Monday said it would not renew the liquor licences of offshore casinos after March 31 if voted to power on March 11, the day of counting of votes for the February 4 Assembly elections. "Once we form the government, I assure you we will not renew the excise licences of the offshore casino vessels once they expire on March 31," AICC secretary Girish Chodankar told reporters. Banning the offshore casinos in Mandovi river was one of the prominent promises made by the Congress in its election manifesto. "The Congress party will take appropriate legal remedies to insulate its decision to ban the sale of liquor on offshore casinos from any legal implications. We will have to make sure that the casino operators don't challenge our decision in the court," he said. As the casinos currently operating in Mandovi river are 800 metres away from national highway, they do not fall under the purview of a recent Supreme Court order under which the liquor outlets located within 500 metres of state or national highways will have to shut down.

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Congress says won't renew liquor licenses of offshore casinos in Goa - Times of India

Andrew Langer 10:50 p.m. ET Feb. 19, 2017

Indications are that President Donald Trump will take a more welcoming view of the economic benefits of increased U.S. oil and gas production, Langer writes.(Photo: MICHAEL STRAVATO / NYT)

Some parting gift: On his way out the White House door, President Barack Obama banned seismic surveying in the Atlantic Ocean from New England south to Virginia.

It was a fitting end to eight years of a presidential administration dedicated to frustrating the development of domestic energy resources at every turn. Fortunately, indications are that President Donald Trump will take a more welcoming view of the economic benefits of increased U.S. oil and gas production.

The federal Bureau of Ocean Energy Management handed down the ban in response to six separate applications to conduct seismic surveys in the Atlantic. These surveys are used to locate and create images of rock formations, a key step in the search for underground oil and gas reserves below the ocean floor.

In denying the applications, BOEM claimed that the surveys would be disruptive and could harm marine life a weak justification based on scanty evidence at best. This, too, is part of a pattern of flimsy excuse-making for decisions that are really all about politics.

Last year, after the federal government spent months contemplating opening up areas of the Atlantic Ocean to offshore oil and gas leasing, the Obama administration decided instead to block all exploration in these areas for five years. The Department of Interior cited local opposition and market dynamics as the reason for the moratorium.

In December, Obama announced a permanent ban on offshore drilling in federal waters along the Atlantic Coast and in the Arctic Ocean, nearly 118 million acres in total. This was done, characteristically, by executive order, itself justified by the dubious application of a law dating back to 1953.

Obama clearly hoped for a successor who would agree with his anti-energy policies, including the ban on seismic surveys. When he didnt get one, he moved to try to lock his preferences in past the expiration of his term.

His executive orders and agency rules banning drilling and surveying will require a pronounced effort to overturn, one likely to entail extensive litigation. The outgoing administration even boasted about how difficult if not impossible its anti-energy policies would be to undo.

But Trump has repeatedly expressed his intention to rev up American energy production. The effort to overturn the Obama restrictions is worth his time. Whats more, the new president will have the facts on his side.

First, the flimsy excuses: Contrary to the BOEMs claims, seismic surveys are not harmful to marine life. In fact, they have been safely conducted along the U.S. coast for years. Thats because such surveys, highly regulated by government agencies, proceed only after extensive studies to determine what impact, if any, they will have on animal life.

The BOEM itself has admitted there has been no documented scientific evidence of noise from air guns used in geological and geophysical seismic activities adversely affecting marine animal populations or coastal communities.

So, offshore development would do nothing to harm marine life. But it would unleash a wave of economic benefits. Currently, nearly 90 billion barrels of oil and 405 trillion cubic feet of gas are untapped. Leasing these areas for development would create 840,000 jobs, put $200 billion into the federal treasury, and ramp up domestic energy production by 3.5 billion barrels of oil a day.

Whats more, the need for new surveys is now acute. The last seismic survey conducted in the Atlantic Outer Continental shelf was three decades ago. Its findings constitute a baseline estimate of the amounts of oil in these waters.

Trump will have to end his predecessors war against fossil fuels and American energy production. A good place to start is to allow seismic surveys in potentially rich oil and gas areas off Americas coast.

Andrew Langer is president of the Institute for Liberty.

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Fuel the American economy with offshore energy - The Detroit News

By William Opalka

A federal judge on Wednesday rejected a request to halt a federal lease of waters off Long Island for an offshore wind site (16-cv-2409).

Nine commercial fishing organizations and businesses and coastal towns in New Jersey, Rhode Island and Massachusetts sought an injunction in December to halt the lease even before the U.S. Bureau of Ocean Energy Management awarded it to Norwegian company Statoil. The company won the rights to the 80,000-acre New York Wind Energy Area with a $42.5 million bid.

The fishing groups said the lease would cause irreparable harm to fishing areas that produce scallops and squid; the municipalities cited economic and natural resource interests in the site.

To meet the standard for irreparable harm, plaintiffs must present sufficient evidence that the purported injury is certain, great, actual, imminent, and beyond remediation. Plaintiffs have failed to do so, D.C. District Court Judge Tanya S. Chutkan wrote. Most significantly, plaintiffs have not shown that their purported injuries are imminent or certain.

BOEM conducted an environmental assessment of the lease area. The plaintiffs claim the bureau, part of the U.S. Department of the Interior, violated the National Environmental Policy Act and the Outer Continental Shelf Lands Act.

Plaintiffs only argument for why there is an imminent and irreparable harm, despite construction being years away if it happens at all, is that once the lease is issued, Statoil will have made a significant financial investment in the development of a wind facility and will have attained some property rights in the ocean area, meaning the balance of harms for whether to issue an injunction later in this case will have changed, the judge explained. In the courts view, this factor does not weigh strongly enough to create an imminent harm sufficient to warrant preliminary injunctive relief. The court maintains its authority to ultimately enjoin the lease in this litigation if necessary. Moreover, Statoils decision to invest in this lease is already made with full awareness that its proposals for a wind facility may be rejected and it may never construct or operate such a facility.

The lease is one of the linchpins of Gov. Andrew Cuomos plan to develop 2.400 MW of offshore wind facilities off Long Island by 2030. (See Cuomo Proposes 2,400 MW of Offshore Wind by 2030.) The Long Island Power Authority also signed a contract with developer Deepwater Wind to build a 90-MW facility off Montauk Point in the Rhode Island/Massachusetts Wind Energy Area. (See 90-MW Wind Farm OKd off Long Island.)

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Court Declines to Halt Long Island Offshore Wind Lease - RTO Insider

February 19th, 2017 Grant Rowles Asia, Offshore 0 comments

Emas Offshore, part of Singapores Ezra Holdings, has yet to close a previously announced deal with lenders to refinance its financial obligations over a period of five years.

Emas Offshore signed a term sheet with all its financial lenders in December 2016 with expectations to wrap up the deal within 60 days.

However, the company announced Friday that it is still in the process of finalising a definitive agreement and has requested a 60-day extension of negotiations.

Ezra Holdings announced last week that EMAS AMC, a subsidiary of its jv company Emas Chiyoda Subsea was served with a winding up application filed by logistics provider Necotrans Singapore.

Ezra itself is also facing a wind up petition from Forland Subsea as a guarantor ifEmas Chiyoda Subseadoes notsettle debts of around $3m from unpaid charter fees. Ezra recently said it might have to write off $170m from its investment in the subsea joint venture.

Grant Rowles

Grant spent nine years at Informa Group based in London, Sydney, Hong Kong and Singapore. He gained strong management experience in publishing, conferences and awards schemes in the shipping and legal areas, working on a number of titles including Lloyd's List. In 2009 Grant joined Seatrade responsible for the commercial development of Seatrades Asia products. In 2012, with Sam Chambers, he co-founded Asia Shipping Media.

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Emas Offshore refinancing deal delayed - Splash 247 - Splash 247

Expectations at the start of the year that 2016 would be a tough one for the oil industry, and in particular for offshore, were on the whole fulfilled. Overall upstream E&P spending globally fell for the second successive year, and was down by in the region of 27% year-on-year in 2016. Cost-cutting has been a key focus, whether that be through pressure on the supply chain, M&A activity, job cuts or other means.

Lower Spending

Offshore spending has been particularly reined back on exploration activity such as seismic survey and exploration drilling, although 2016 saw weakness spread further to areas such as the subsea or mobile production sectors which had initially shown some degree of protection from the downturn. This was not helped by a 32% year-on-year decline in sanctioned offshore project CAPEX in 2016, despite a small number of encouraging project FIDs, such as that for Mad Dog Phase 2 in the Gulf of Mexico in Q4.

Dayrate Weakness

Dayrates and asset values in those offshore sectors with liquid markets showed further signs of weakening in 2016. Clarksons Researchs index of global OSV termcharter rates declined by 27% in 2016, whilst that for drilling rigs was down by 25% year-on-year. Potential for further falls are, in general, limited, given that rates levels in many regions are close to operating expenses. Owners are doing what they can to control the supply side: just 81 offshore orders were recorded in 2016: for context, more than 1,000 offshore vessels were ordered at the height of the 2007 boom. Slippage has also remained evident, either due to mutually agreed delays with shipyards, or owing to owners cancelling orders. Offshore deliveries were 34% lower y-o-y in 2016.

Despite the severe industry downturn, the oil price actually firmed during the year. Brent crude began 2016 at $37/bbl, before briefly dipping below $30/bbl. However, the price ended 2016 at $55/bbl, helped by a slow firming in mid-year, and then more rapid gains after the 30th November announcement of a concerted oil production cut by OPEC countries.

This is clearly positive news for oil companies cashflow, and marks the abandoning of Saudi Arabias policy of targeting market share by accepting low prices as a means to hinder shale oil production in the US. However, US onshore companies were already feeling more comfortable with slightly improved prices in Q3 2016. Early surveys of intentions for E&P spending suggest that onshore spending in the US could increase by more than 20% in 2017. It is likely that offshore spending will decline further in 2017.

Some Way To Go

Nonetheless, it is important to stress that the offshore sector is far from dead. The expected multi-year downturn is occurring. However, important cost-control and consolidation has taken place. IOCs continue to consider strategic investments such as Coral FLNG or Bonga Lite. This shows that these companies are planning for better times. Decline at legacy fields will help to correct the supply/demand balance. Meanwhile, optimism is building in the renewables and decommissioning markets, with for example, announcements even in the first few days of 2017 that China is to make an RMB2.5 trillion investment in renewables over five years, whilst another North Sea decommissioning project plan has been submitted.

Nevertheless, the supply/demand imbalance in many offshore vessel sectors will take time to recalibrate. However, the weakness of 2016 also put in place many longer term trends which could lay the groundwork for an eventual change in market fortunes. Source: Clarksons

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The Offshore Markets: 2016 In Review - Hellenic Shipping News Worldwide

Location map, showing Somalia and the position of the Spectrum surveys.

Somalias offshore hydrocarbon systems have been slowly maturing since the Jurassic period. Now, after ten years of relative political peace, Somalia is set to emerge as the new hot-spot for the industry, offering not only vast reserves to match the Rovuma Basin of Mozambique, but also the most elusive of prizes in East Africa black oil.

SEISMIC FOLDOUT LINE: (see below)

This seismic line appeared as a double-page pull-out feature in our print magazine. If you want to get hold of our print version visit us at one of the many trade shows and conferences we attend annually (see Events).

Alternatively use the Print Subscription feature in the menu at the top of this page.

North-west to south-east seismic line from the northern Juba-Lamu Basin. Line length = 170km Somalias Exploration Journey Exploration in Somalia began onshore in 1956 with the drilling of the Sagaleh-1 well, followed by a number of wells drilled mostly in the north of the country. These clearly established the presence of a working Jurassic hydrocarbon system, as illustrated by the 1959 Daga Shabel-1 discovery well. Following successes within the Yemeni Jurassic basins during the 1980s, a great deal of renewed interest was shown in the country. Tragically, the collapse of the government in 1991 ushered in a period where Somalia remained inaccessible to exploration companies for 25 years. During this time, the majority of Somalias legacy geological and geophysical data were lost or destroyed.

However, since the inauguration of the Federal Government of Somalia in 2012, the country has made significant advances towards political stability. As a small illustration of this progress, the installation of the countrys first ATM in Mogadishu in 2015 suggests that the country is finding stability and security and developing a new degree of civil society determined to bring peace, progress and foreign direct investment to the region.

Recent positive efforts by the government to boost hydrocarbon exploration activity have been made through allowing seismic companies to acquire new 2D seismic data. An offshore 2D acquisition programme for Soma Oil and Gas commenced in February 2014, and concluded in June 2014 with over 20,500 km of seismic data acquired across a 122,000 km area, completed with no security or HSE incidents. Spectrum is to acquire a second offshore long offset 2D multi-client survey to complement and infill the existing Soma grid. The aim is to image to 15 seconds TWT to build up a complete understanding of the rifted margin, as the record length of the existing Soma data is more limited and only captures the top of the syn-rift section in the deep offshore area (see foldout above). Spectrums analysis of the existing and new seismic datasets, integrated with regional gravity, potential field and satellite seep data, provides the basis for the following overview of the tectonostratigraphic history of offshore Somalia, highlighting potential play concepts and prospects. Tectono-stratigraphic Evolution The initial Karoo rifting of the Gondwana super-continent began in the Late Carboniferous, and syn-tectonic deposition of the Karoo Supergroup continued until the Early Jurassic. This Karoo event signalled the fragmentation of Gondwana, firstly through the separation of East Antarctica from East India, synchronous with the development of an oblique rift valley between Somalia and the Madagascar- Seychelles-India (MSI) block. The Karoo is synonymous with the deposition of a worldclass source rock observed from Yemen to South Africa. Using existing well data, a moderate geothermal gradient is inferred for offshore Somalia, implying that some of the more deeply buried Karoo source rock is likely to be in the oil window.

The Jurassic commenced with the deposition of the Adigrat Formation, when further rifting and subsequent seafloor spreading between East Africa and the MSI block resulted in the separation of Somalia and Madagascar, which began to drift to the south-east. The Early Jurassic marine transgression from the north saw the regional deposition of syn-rift organic-rich marine sediments in a restricted embayment, where northerly transform faults may have created partial barriers to oceanic circulation.

Following the separation of East Africa and Madagascar, a period of uplift and erosion occurred during the Cretaceous as the Jurassic rift shoulders responded to unloading. Throughout the Cretaceous, Northern Somalia saw the deposition of a marly-mudstone sequence, distal to an aggradational carbonate platform, whilst the southerly basins saw increased coarse clastic input from the Jubba and Shabeelle Rivers in the Early Cretaceous, depositing a significant post-rift sequence. These Early Cretaceous pro-deltaic sediments provide a potential source rock interval in the south.

Cenozoic sediments on the north-east coast of Somalia are characterised by a thick aggradational passive margin carbonate platform sequence or pro-platform marly mudstones. To the south, a number of lignitic potential source rock intervals have been observed in onshore wells, including the Eocene Coriole and Scebeli Formations. In the south, the Palaeogene consists of predominantly deltaic clastics capped by thick marls, overlain by Miocene and younger deltaics and platform carbonates. Regional Geology Offshore Somalia, overlain by the current seismic grid, can be divided into three basins, each defined by their own individual structural regimes: Obbia Basin in the north, the central Coriole Basin, and the southerly Juba-Lamu Basin.

Obbia Basin: The post Early Cretaceous stratigraphy in this basin is primarily calcareous mudstone 1.5 to 3 km thick, which overlies very large Jurassic tilted fault block structures. In places these are crowned by carbonate build-ups, which may be comparable to the Sunbird discovery offshore Kenya. In the south, large antiformal Cretaceous to Early Cenozoic structures, interpreted as transpressional in origin, post-date dramatic Early Cretaceous gravitational slump structures, indicating that regional tectonics are significantly deforming the Cretaceous sequences. Karoo and Jurassic source rocks are a very likely source of oil for these potentially very large traps.

Coriole Basin: This basin is characterised by very large scale transpressional and transtensional flower structures, forming large anticlines related to the north-south strikeslip motion of transfer faults along the Davie Fracture Zone and southward movement and rotation of Madagascar. The Tertiary is represented by a thick siliciclastic section resulting from historic avulsion of the Shabeelle/Jubba/ Tana river deltas. Using a moderate geothermal gradient it is reasonable to assume that structural and stratigraphic traps at Cretaceous and Tertiary levels are likely to have access to oil-rich hydrocarbons generated from Jurassic and Cretaceous source rocks.

Juba-Lamu Basin: The Juba-Lamu Basin has the thickest post-rift stratigraphy of the three basins, up to 12 km. The deepwater post-rift stratigraphy is characterised by siliciclastic deltaic sediments, sourced by the Shabeelle/ Jubba/Tana river deltas. The Cenozoic section in the west is characterised by very large gravity slides on multiple dcollement surfaces, which may be coincident with early mature organic-rich mudstones. These are the same mudstones that were reported by Pan Continental and partners as the main source for the oil in the Sunbird discovery. Additionally, these slides have created large, stacked toe-thrust structures downdip, analogous to the areas of significant success in the Rovuma Basin, offshore Mozambique (see foldout above).

Beneath the dcollement surfaces, thick Cretaceous clastic-rich sequences of apparent basin floor turbidite fans are draped over tilted fault blocks and stacked postrift mass-transport system deposits. The similarity of this section to the outer regions of the Rovuma Basin east of the toe thrusts is striking. The main difference appears to be the lack of a Karimbas Graben equivalent down dip.

The potential for oil in this section will be critical to exploration interest. A significant observation from Spectrums preliminary satellite seep studies is the identification of an active oil seep located directly over the toe-thrust structures where some of these features come close to seabed. The correlation of active seeps to subsurface geology is considered key to risk reduction and therefore these studies are continuing as new data are acquired.

Gigantic Structures New seismic data from offshore Somalia are revealing extraordinary structures, in an oil-prone frontier province that has never been seen or explored before. The data correlate closely with the potential field results, and the most recent seismic is imaging gigantic structures that have never been mapped before.

Striking resemblance to the astonishingly successful plays in Kenya, Tanzania and Mozambique indicate that offshore Somalia is about to become the hottest area offshore East Africa, with not only the promise of huge hydrocarbon potential, but also a strong indication that this time the hunt is on for black oil.

Source: GeoExPro

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Offshore Somalia: East Africa's Oil Frontier - Midnimo Information Center

Fundamental Forecast for the Yuan:Neutral

The USD/CNH set a higher low this week than the previous two weeks. The onshore Yuan, on the other hand, remained within a tight range for the third consecutive week. The two Dollar/Yuan pairs have been driven by different themes of recent: The Dollars strength weighted more on the offshore pair, while the onshore Yuan eyed more on moves from Chinas Central Bank. As the spread between the offshore Yuan and the PBOCs guided level narrows, this segregation could be eased over the following periods.

In terms of the offshore pair, the odds and timing of the U.S. Federal Reserve raising rates, as well as expectations on U.S. President Trumps tax cuts plan have been primary drivers to its trend and this likely continue to be the case. Fed Chair Yellens two-day testimony added mixed moves to Dollar pairs, including the USD/CNH. Next week, the U.S. economic calendar is dotted with housing and labor gauges, which are expected to add volatility to Dollar pairs.

On Chinas side, event risks would be low amid a light calendar; the major focus will be on Chinas Central Bank. The top policymaker has been reducing excessive Yuan liquidity since the Lunar New Year, targeting at bring monetary policy back to normal from slightly loose. However, this tweaked credit strategy did not bring much impact to the offshore Yuan over the past few weeks. Normally, a tighter policy would send the countys currency higher. Lets take a look first at why it did not work, as this may help us find out when it will.

The PBOC has been using open market operations as well as lending facilities to withdraw excessive cash from the financial market. Suspending and resuming liquidity injections through reverse repos and increasing target lending rates aim to delicately adjust liquidity to desirable levels. These moves are different from a hike in reserve requirement ratio which will have a long-lasting effect to the economy and in turn a greater impact to the Yuan.

More importantly, the offshore Yuan was already stronger than the guided level set by the PBOC. Since early January, the offshore Yuan has been both above the onshore Yuan and the Yuan fix (except during the Lunar New Year) until this week. This means that from the regulator point of view, the offshore Yuan might have been already overvalued.

However, as the spread between the offshore Yuan and the Yuan fix narrows, this could be changed. The PBOC has strengthened the Yuan fix for four consecutive days this past week. On Wednesday, the offshore Yuan dipped below the PBOCs guided level, the first time in two weeks. As of 1:40pm EST, the reversed spread has expanded to 50 pips. Traders will want to keep a close eye on the PBOCs guidance next week. If the policymaker continues to recognize levels of the offshore Yuan, the link between the onshore and offshore markets could strengthen again, and onshore policies may weigh more on the offshore pair.

Read this article:

Offshore Yuan Exposed to Onshore Risks as Spread Narrows - DailyFX

Doug Fraser @dougfrasercct

CHATHAM This June, the state will solicit bids seeking offshore wind farms to produce 400 megawatts of electricity. Its the first of four phases of what state officials hope will be 1,600 megawatts of offshore power; 15 percent of what the state uses annually, enough power to replace what will eventually be lost when Pilgrim Nuclear Power Station shuts down.

Submitting a bid in June will be the first tangible step for a group of Marthas Vineyard residents who started the Vineyard Power energy cooperative six years ago in response to a lot of the things they didnt like about the nowdefunct Cape Wind project. It has 1,400 members and claims the cooperative represents 5,000 people on the island.

Richard Andre, president of Vineyard Power, said their prospects improved dramatically when Gov. Charlie Baker signed legislation in August that required that powerutilities solicit and contract for 1,600 megawatts of offshore wind power as part of their energy portfolio by 2027.

Then, we knew we would have a buyer for our power, Andre said.

Vineyard Power representatives came to the headquarters of the Cape CodCommercial Fishermens Alliance in Chatham on a stormy Wednesday to get feedback from fishermen.

Perhaps it was fitting that there werent many fishermen in the audience, because Andre said that unlike Cape Wind, which was sued by Vineyard fishermen and hotly contestedby many Cape fishermen, they havent received any negative feedback.

We identified our site in 2009 as an area with the least amount of fishery conflicts, Andre said.

The process was helped considerably by the federal government in 2009 when theBureau of Energy Management mapped out areas of the ocean with good wind and relatively few conflicting uses or environmental concerns. John Pappalardo, CEO of the Cape Cod Commercial Fishermens Alliance, was part of the team that helped to eliminate large areas that were valuable for fishing, shellfishing or for fish habitat.

This zone was much larger. We shaved a huge piece out of it primarily because of scallops, Pappalardo said.

At over 500 feet tall, the 40 to 70 turbines that would be constructed in the first phase would be spaced more than a half mile apart. Andre told the audience there would be no reduced speed or areas closed to navigation or fishing. It has not been determined yet whether there could be anything like a kelp or mussel farming operation using components of the turbine. There would be money available to reimburse fishermen displaced during construction work.

By locating them 12 miles offshore, Andre said the turbines would only be visible on extremely clear days and, even then, would be far off in the distance.

We wanted a different model than Cape Wind. We wanted there to be local benefit, local employment, and local input into the project, Andre told the audience. Weve met with over 20 fishing groups since March of 2016.

Vineyard Power partnered with Vineyard Wind, which holds the lease on the 260 square miles of ocean 12 miles south of the island. Vineyard Wind is a subsidiary of Copenhagen Infrastructure Partners, a Danish company that invests pension funds from NorthernEurope. It has $3.5 billion in assets, Andre said, and is primarily focused on renewable energy projects. CIP has managed and invested in over 1,000 megawatts of offshore wind turbines currently being built in Europe, according to its website.

Three companies, Deepwater Wind, another Danish company, Dong Energy, and Vineyard Power hold the three federal leases in federal waters south of the Vineyard that were designated as appropriate for offshore wind through an ocean zoning process. In September, the three companies signed letters of intent to use the state-run $113 million New Bedford Marine Commerce Terminal, which had been built in anticipation of the ill-fated Cape Wind offshore wind farm being constructed.

This December, Eversourceacquired 50 percent ownership of the offshore wind farm proposed by Dong Energy.

All three offshore wind companies could be submitting bids this summer, Andre said. Price is the primary consideration, and he anticipates the winning bid will be in the mid-teens per kilowatt hour as compared with Cape Winds prices, which were over 20 cents. Each subsequent bid phase is required to start at a lower price than the previous ones as improved technology and economies of scale reduce costs. Europe, where they have been producing such power for decades, has seen offshore wind drop to 10 cents, Andre said.

The area south of the Vineyard has been rated the best or second best on the East Coast for the strength and consistency of its wind, Andre toldthe audience.

Vineyard Wind ships were out on Nantucket Sound this summer and fall doing seismic and sonar testing on the sea bed to determine what type of foundation would be required for the turbines.

Environmental studies of impacts on birds and marine life, and permitting, will continue for another two years. Construction could start as early as 2020 and take two years. It will take about 2,000 construction workers for the first phase, and Andre said the plan is to employ a lot of local workers.

The company with the winning bid would also have to get state permits to run cables, which will be buried 6 feet deep in the sea bed, to the mainland.

Follow Doug Fraser on Twitter:@dougfrasercct

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Vineyard Power vying for offshore wind farm - Cape Cod Times (subscription)