Daily Archives: June 21, 2017

Phase 1 will produce 450 MMBO

ExxonMobil (ticker: XOM), Hess (ticker: HES) and CNOOC today announced FID for Phase 1 development of the Liza field in offshore Guyana.

Initially discovered in May 2015, the Liza field is located about 120 miles offshore from Guyana, in about 5,700 feet of water. Liza is in the Stabroek Area, a large offshore lease block owned by the three partner companies. Hess reports that Stabroek is 6.6 million acres in size, or 1,150 times the size of a standard GOM block.

(Click to enlarge)

Source: Hess

120 MBOPD peak production planned

Phase 1 of development of the Liza field will involve a total of 17 wells, drilled from four drill centers. Eight wells will produce oil, while six will inject water into the reservoir and three will inject gas. A floating production, storage and offloading vessel will process production. ExxonMobil estimates Phase 1 will have peak production around 120 MBOPD. In total, the operation will recover about 450 MMBO. ExxonMobil reports that Phase 1 will cost just over $4.4 billion, including $1.2 billion for the FPSO.

Based on Hess reports of its share of development costs (not including the FPSO cost), the companies will spend about $370 million this year, $830 million in 2018 and $1.1 billion in 2019. The remaining $900 million will be spent in 2020 and 2021, but the timing is less certain. First oil is expected in 2020, less than five years after initial discovery.

Further discoveries support more development

Additional exploratory work is in progress, as the Stabroek block is large enough to hold many different plays. ExxonMobil reports that the recently-drilled Liza-4 well encountered nearly 200 feet of high-quality, oil-bearing sandstone reservoirs." While the area explored by Liza-4 will not be developed in Phase 1, the successful result will be a major factor in considering Phase 2. With the success of Liza-4, Hess estimates gross discovered recoverable resource for the Stabroek block is between 2 and 2.5 billion barrels.

ExxonMobil is the operator of the Stabroek block, and holds a 45 percent interest. Hess owns a 30 percent stake, while CNOOC owns 25 percent.

By Oil and Gas 360

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Exxon Moves Forward With Offshore Guyana Project | OilPrice.com - OilPrice.com

In two recent blogs, I have looked toward the impending inflection point in the offshore drilling cycle, first exploring an uptick in the number of offshore vessel support company bankruptcy filings as the industry enters the last stage of the downturn.

Last week, Hornbeck Offshore announced a new financing arrangement to improve the companys liquidity, removing at least temporarily the impending doom it faced from the upcoming maturity of its long-term debt. The news was positive for the companys shareholders, but it doesnt erase the problem of too many vessels chasingtoo few jobs, which confronts all offshore service vessel operators.

More recently, we highlighted the news that offshore drillers are starting to receive more inquiries and tenders for work, although the market remains as competitive as it has been for the last two years. The prospect of more offshore work on the horizon is good news, especially with oil companies figuring out how to reduce their well breakeven costs below $50 a barrel.

These trends and improvements were all underway before the recent retreat of global oil prices as OPECs production cut deal does not appear to be producing the desired results. Global inventories are falling much too slowly to encourage traders to bid up oil prices. Instead, prices have dropped.

The reality is that global oil inventories are falling, but itsbeen too slow for those investors seeking instant corrections.

Traders are now concerned that oil demand growth will slow and/or OPEC members will opt to cheat on their lower production quotas, thus preventing the oil market from improving to the point that it would support sharply higher prices.

The slow decline in inventories in the first half of this year has been caused somewhat by increased output from OPEC members Nigeria and Libya, who were exempt from the organizations production cuts. North American oil output is also growing in response to higher drilling activity in the U.S. and Canada.

Predicting cycle tops and bottoms is virtually impossible to do. They are only seen in hindsight. The current offshore fundamentals are consistent with a cycle bottom and an inflection point that will bring an improvement in business. The current weakness in global oil prices is influenced by extremely pessimistic near-term sentiment about industry fundamentals. That sentiment can just as quickly shift to the positive without an obvious event.

Waiting for that shift to occur is frustrating because its timing cannot be influenced. There are no signs that industry fundamentals are suddenly deteriorating. Rather, they continue to improve, albeit slowly. A year from now, the industry will look back and reflect on how the cycles inflection point was reached this summer, even though it is not currently evident. Hopefully, the offshore sectors recovery will be similar to that of the onshore sector where the U.S. rig count has risen for 22 consecutive weeks.

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The agony of waiting for an offshore rebound - WorkBoat (blog)

t was an 8-0 vote by the Virginia Beach city council to strike down offshore drilling off the coast and gas exploration, including seismic testing.

Chenue Her, WVEC 11:22 PM. EDT June 20, 2017

Oil drilling rig (Photo: Associated Press)

VIRGINIA BEACH, Va. (WVEC) -- It was an 8-0 vote by the Virginia Beach city council to strike down offshore drilling off the coast and gas exploration, including seismic testing.

Councilwomen Shannon Kane and Jessica Abbott weren't at the meeting, so neither voted. Councilman John Moss abstained from voting, citing a possible conflict of interest because he's employed by the Department of Defense.

This vote is crucial for those who oppose it, after they said the Trump administration has considered reversing a previous decision that makes Atlantic waters off limits to drilling.

"We're very proud of the city council for taking this stand. We've worked really hard in Virginia Beach to clean up our water ways, protect our beaches, and there's just too much at risk," said Karen Forget, Executive Director of Lynnhaven River NOW.

Forget says this decision is huge not just for the waters, but many other aspects of the city.

"We feel all around this isn't good for tourism, it's not good for the importance of the military in the area, our economy," she said.

"The seismic testing part of that, we know that kind of testing environment provides a great impact to marine mammals and a lot of other species as well," said Mark Swingle, the Director of Research and Conservation at the Virginia Aquarium and Science Center.

The city said the tourism industry brings about $1.4 billion in every year and opponents of drilling think any sort of disaster could cripple that.

Retired Navy Captain Joe Bouchard said potential mistakes could hurt the military as well.

"The training out there would be impacted. The test and evaluation of new weapons and tactics could be impacted. Huge safety concerns," he told 13News Now.

Any position the council makes will be a recommendation to President Trump.

He'll make the final decision.

In 2010, council adopted a resolution supporting offshore oil and gas exploration.

Five years later, oceanfront businesses urged council to change its position on drilling, so city council repealed the ordinance.

In 2016, the "Resort Advisory Commission" asked city council to go against seismic testing.

2017 WVEC-TV

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Va. Beach city council votes to oppose offshore drilling - WVEC-TV - 13newsnow.com

Virginia Republican Dave Brat is pushing to open up Virginias coast to offshore oil and gas drilling. Democrats, though, say that would be terrible for the commonwealths economy and they're trying to combat the effort.

Matt Laslo has more from Washington.

Congressman Dave Brat was one of about a dozen lawmakers standing behind President Trump when he recently signed an executive order intended to open the door for oil and gas drilling off the east coast.

Renewed offshore energy production will reduce the cost of energy, create countless good jobs, and make America more secure and far more energy independent," said the President at the signing."This action is another historic step toward future development... And I have to say thats a real future with greater prosperity and security for all Americans, which is what we want.

While the presidents order calls on the Interior Secretary to review a five year ban on offshore drillingput in placeby President Obama, Congressman Brat wants to go further. Hes introduced a bill to reverse Obamas executive order which protected millions of acres in the Outer Continental Shelf from oil and gas drilling.

Brat's proposal would also bar future presidents from trying to block offshore drilling. He says it just makes sense.

Its just part of energy independence, number one," Brat says. "And then the job creation is in the tens of thousands and the economic impact is in the billions. So why would you say no to that?

While environmentalists worry a spill off the coast could devastate the commonwealths robust tourism economy, Brat says he also wants to ensure oil and gas companies cant mess up the shore.

Its still got to live up to the highest environmental standards it always has. But theres been a lot of good reporting Ive seen in the last couple days on the pipes underground pipes offshore, I mean no one can even tell anymore.

Trump recently lifted the Obama-era ban on seismic testing off the east coast. Northern Virginia Democrat Don Beyer has a bill to block that, because he says its terrible for marine life.

You find whole populations fleeing the sound," Beyer says. "Its the underwater equivalent of the airport noise we have in Northern Virginia. And especially if you open it up for offshore drilling its not just one seismic company, there could be five or six or seven at the same time, so a lot of this is just trying to preserve our marine biology.

But Beyer isnt trying to hide the true intent of his bill: he says its meant to keep drilling rigs off Virginias coast.

In the larger context too, if you dont do the seismic testing its an obstacle to the offshore drilling. And I think we have plenty of offshore right now in the Gulf Coast and the North Sea, lets focus on what we already have," he says. "Were doing fine with natural gas. Were very close to total energy independence in the United States. We dont need to be upsetting the Atlantic coast.

Virginia Democratic Senator Tim Kaine says he was open to coastal drilling until the Pentagon warned lawmakers drilling rigs could hurt naval operations off the coast.

I was very open to this in 2007 at the start of the Obama administration, but when the Department of Defense weighed in with concerns in Hampton Roads, defense, I mean, its the biggest piece of the economy, says Kaine.

The senator points out that it's unclear how much money would come into Virginia if offshore drilling started, but he does know the states defense industry makes its economy churn.

I dont think you chase after a speculative industry and hurt the industry that is the biggest chunk of your economy, so I would have some concerns about it.

Still Republican Congressman Brat, the one sponsoring the bill on offshore drilling, says his effort is all about jobs.

Go talk to the 40-percent of college kids who are under employed right now and cant find meaningful high paying work," Brat says. "We need to get this economy growing again and this is just a no brainer.

As the Trump administration moves ahead with its efforts to open up the east coast to drilling, Democrats say theyre ready for the fight and plan to use every tool they have to block the move.

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Virginia Congressman Dave Brat Pushes for Offshore Drilling - WVTF