Barnett Shale to Remain Major Contributor to US Gas Production

The Barnett shale play will continue to be a major contributor to U.S. natural gas production through 2030, despite a slow decline in production through 2030 and beyond, according to a new study from the University of Texas at Austin's Bureau of Economic Geology (BEG).

The study, which brought together the related research in engineering, geoscience and economics, examined on a well-by-well basis production data from over 16,000 individual wells in the Barnett play through mid-2011. The study results indicate significant recoverable resources remain in the Barnett play, with total recovery at greater than three times cumulative production to date.

The study's base case forecasts the Barnett, at a base price of $4 per thousand cubic feet of gas, will produce approximately 44 trillion cubic feet (Tcf) of gas through 2050 based on already drilled wells and well that will be drilled through 2030. In the base case, production will plateau from a current high of 2 Tcf per year and slowly decline to about 900 billion cubic feet per year by 2030.

The BEG team's calculations show 86 Tcf of technically recoverable free gas in 8,000 square miles that the play covers, of which 12 Tcf has been produced and 7 Tcf is proven. Of the 67 Tcf remaining, 45 Tcf is in drilled blocks and 22 Tcf is in undrilled acreage.

The 45 Tcf of technically recoverable free gas in 4,172 square miles of drilled areas exceeds the U.S. Energy Information Administration's July 2011 estimates of 23.81 Tcf for the 4,000 miles of active area. The 67 Tcf of remaining technically recoverable reserves across the full Barnett play also exceeds EIA's full estimate for the Barnett of 43.37 Tcf, which covered 6,500 square miles. It also exceeds the U.S. Geological Survey's 2003 assessment of 26 Tcf, which covered 5,000 square miles of the Barnett.

Other assessments of the Barnett have relied on aggregate views of average production, offering a "top down" view of production, said Scott Tinker, director of the BEG and co-principal investigator for the study, in a statement. Instead, the BEG study takes a "bottoms up" approach, starting with the production history of every well and then determining what areas remain to be drilled, which the study authors say creates a more accurate and comprehensive view of the basin.

The BEG team enhanced the view by identifying and assessing the potential in 10 production quality tiers and then using those tiers to more accurately forecast future production. The economic feasibility of production varies tremendously across the basin depending upon production quality tier.

The study's model centers around a base case of $4-gas, but it also allows for variations in price, volume drained by each well, economic limit of a well, advances in technology, gas plant processing incentives and many other factors to determine how much gas operators will be able to extract economically. This forecast falls in between some of the more optimistic and pessimistic predictions of production from the Barnett, the study authors noted.

While the BEG model shows the correlation between price and production, it suggests that price sensitivity is not overly dramatic, at least in the early phase of a formation's development.

"This is because there are still many locations to drill in the better rock, which is cost effective even at lower prices," Tinker commented.

While this drilling won't last forever, there are still a few more years of development remaining in the better rock quality areas.

The study was funded by the Alfred P. Sloan Foundation, a non-profit grant-making institution, and conducted a by team of 12 researchers from the University of Texas as well as Rice University. BEG will complete similar studies of the Marcellus, Haynesville and Fayetteville plays by year-end.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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Aker Wins Major Subsea Deal with Statoil

Norwegian oilfield services firm Aker Solutions reported Wednesday that it has been awarded a "major" frame agreement with Statoil to deliver subsea operation and services on the Norwegian continental shelf. The deal will see the expansion of Aker's Aagotnes facility on the west coast of Norway.

Aker said that it had booked some $1 billion of orders as a preliminary estimate of the work to be generated in the initial five-year period of the agreement, which has three additional three-year options for extension.

The subsea operations and services covered by the agreement include: subsea equipment, maintenance, upgrade and recertification of tools and installed equipment. The agreement includes workover activities and life extension of subsea wells.

"Aker Solutions has worked with Statoil for decades and we are very honoured by this major award. We are not only refurbishing subsea trees to guarantee an extended lifetime, but we are also upgrading to accommodate more functionality, enabling Statoil to increase production capacity from each well," said Alan Brunnen, head of Aker Solutions' subsea business division.

Aker Solutions' facility at Aagotnes, near Bergen on the west coast of Norway, will support the Statoil projects. As a result of the frame agreement, Aker expects to further develop its service base at the facility in 2013 and 2014 with new workshops, increased logistics capability and a new office block.

Aagotnes currently employs approximately 800 people.

The agreement will see Statoil immediately execute a subsea refurbishment project to be performed by Aker on the Troll field, located in the northern part of the North Sea approximately 40 miles west of Kollsnes in Norway.

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Petrobras Confirms Plans to Start Platform Work in China

RIO DE JANEIRO - Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, confirmed late Monday that it will start building four oil platforms in China instead of Brazil, but denied that the shift means the company will not meet strict requirements to use local goods and services.

Petrobras said that work to convert oil tankers into the P-67, P-75, P-76 and P-77 platforms would start in China, but that the work represented less than 3% of the value of the contracts to build the floating production, storage and offloading vessels, or FPSOs. The conversion, however, will be completed in Brazil, Petrobras said. The P-67 platform is part of an order for eight replicated FPSOs, while the other three platforms will be used to produce oil from areas transferred to the company from the government.

Earlier Monday, the local O Estado de S. Paulo newspaper had reported that Petrobras shifted construction of the FPSOs overseas amid concerns that local shipyards would not meet deadlines to complete construction and cause production delays. Petrobras is currently struggling with stagnant oil production because of maintenance shutdowns at aging offshore platforms and declining output at mature fields.

Concession contracts in Brazil require companies to use a certain percentage of local goods and services, part of a government strategy aimed at creating a robust oilfield-services sector to accompany development of recently discovered offshore oilfields. Petrobras plans to spend $237 billion through 2016 to develop the fields, where oil was discovered under a thick layer of salt miles under the seabed off Brazil's southeast coast.

"The index of contracted local content is immutable, and Petrobras is not trying to alter it," the company said.

Copyright (c) 2012 Dow Jones & Company, Inc.

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UK: Oil, Gas in Need of Skilled Engineers

The past couple of years have proven that several nations such as the UK are facing an engineering deficit, one that is poised to significantly hinder the engineering sector unless changes are made. This trend will have a ripple effect, greatly impacting the oil and gas industry – 66 percent of contractors and 62 percent of operations have difficulty recruiting skilled engineers in the oil and gas industry, according to a Labor Market Intelligence survey conducted by the Offshore Petroleum Industry Training Organization (OPITO).

Matchtech, an engineering and technology recruitment specialist, noticed the problem and called on the government for help.

"There is a growing sense of unease throughout the UK engineering industry," Matchtech Managing Director Keith Lewis recently told Rigzone. "A look at our Confidence Index [United Kingdom Consumer Confidence Index] points heavily towards a lack of confidence in the government's ability to support the industry."

Chancellor George Osborne took heed of this situation and addressed it at this year's budget hearing.

His measures include a $4 billion (EUR 3 billion) new field allowance for large and deep fields to open west of Shetland – fields that were once deemed uneconomic. This strategic move is posed to encourage billions of dollars of investment in the North Sea to revitalize production that has declined since 1999.

The tax allowances will lead to an extra $67 billion allocated to the industry, resulting in the recovery of an additional 1.7 billion barrels of oil and gas, according to Oil & Gas UK. This production estimate will bring additional jobs and opportunities, however the need for highly skilled engineers poses a problem, stated Osborne.

Research suggests that the main shortage in the industry exists in recruiting experienced workers.

"It is a reality that other sectors are competing for the same skills," Managing Director of OPITO UK Larraine Boorman told the Engineer publication. "There is big competition for skills from the nuclear and power sectors as well as decommissioning. As an industry, we need to make sure the potential talent sees us as an attractive career option."

Overall, engineering companies in the UK are projected to have 2.74 million job openings from 2010-2020, 1.86 million of which will need engineering skills, according to a report launched by EngineeringUK. Out of this number, about 87,000 engineers per year will require people with level 4+ degrees, including foundation, undergraduate and postgraduate qualifications.

There is a high demand for about 69,000 people qualified at advanced apprenticeship, or equivalent, each year, but only 27,000 UK apprentices a year qualify at the appropriate level, the report stated.

Furthermore, 100,000 science, technology, engineering and mathematics (STEM) graduates are needed a year just to maintain the status quo, according to a study by the Royal Academy. In the UK, about 23,000 engineers are graduating a year while India is producing eight times that number of engineers and China 20 times as many.

In order to meet this current demand, the country is recruiting experts from abroad.

"We've already started to see the impact of the skills shortage with certain prospects that previously could have been completed in the UK being moved to other European cities, such as Stavanger in Norway," said Lewis. "This is obviously a huge concern and shows just how vital it is for a plan to be put in place in order to attract new graduates, as well as encouraging the transition of those in other industries which have the necessary transferrable skills, in order to boost growth."

The "Engineering UK 2013: The State of Engineering" report also called on the government for assistance, noting that the engineering sector needs a joined-up action where government works in partnership across the engineering industry, professional bodies and third sector to achieve long-term impact at a national level.

"What the report makes clear is the need to lay the groundwork early," stated Paul Jackson, EngineeringUK chief executive in a Rigzone interview. "The government is recognizing that engineering is central to the UK economy and is funding technologies for growth as well as training. It is crucial, however, that government, business, professional bodies, education and the wider engineering community continue to work together to ensure that the UK has the talent pipeline ready to meet demand."

The UK is in an engineering crunch and is looking for youth to help fill the void, according to The State of Engineering report.

The main challenge for the engineering community is how to attract the youth and funnel them into an engineering career. The oil and gas industry and its attraction to recent grads are abundant. The rewards can be attractive for engineers that choose to work in the oil and gas sector.

"Oil and gas engineers are constantly inventing new technologies to extract oil from increasingly deeper levels beneath the Earth's surface," Boorman told the Engineer. "In order to achieve this, engineers are trained to be the best in their field and there are excellent opportunities for career progression."

"The government needs to prioritize investing in the future of the industry by focusing on the opportunities available to the younger generation," stated Matchtech's Lewis. "Funding for apprenticeships has started to increase over the last year, but the government really needs to commit itself to improving opportunities for those candidates who may not want to enter university but instead gain practical experience. Not only will this mean they enter the industry sooner, but they will also enter into it with the vital skills to succeed."

Programs geared to the youth are blossoming throughout the nation. One for instance launched in 2009, The Big Bang Fair, is touted as the largest celebration of STEM subjects for the UK's youth.

"The government recognizes that the industry has to appeal to our youth," stated EngineeringUK's Jackson. "The Big Bang Fair and school programs, such as Tomorrow's Engineers, are playing an important role in ensuring that the UK will have the future engineers needed to realize its ambition. Evidence shows that collaborative efforts of the engineering community are making a positive impact."

"In order to begin to rectify this, the government needs to start presenting engineering as 'an industry of choice', particularly at a time where the UK youth unemployment rate stands at 23 percent, in addition to this change must also come from those within the industry itself," added Lewis.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

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Norway Ups Oil, Gas Estimates in Artic Areas by 2.5 Billion Barrels

OSLO - Norwegian oil officials Wednesday boosted the nation's estimate of undiscovered oil and gas by about 2.5 billion barrels of oil equivalent, or 15%, most of it gas in an area formerly disputed with Russia.

The estimates were based on data gathered in the southeastern Barents Sea and around Jan Mayen, where Russia and Iceland have already awarded several licenses.

Norway expects to decide on the opening of the southeastern Barents Sea, as well as Jan Mayen for oil drilling by this summer. Norway hasn't opened any new acreage since 1994.

The Norwegian Petroleum Directorate said the Norwegian part of the formerly disputed southeastern Barents Sea likely held 1.9 billion barrels of oil equivalent, most of it gas and about 15% crude oil. This equals slightly more than a year of Norway's total oil and gas output.

The area of 44,000 square kilometers was delineated in a 2011 deal between Norway and neighboring Russia, after four decades of dispute. The directorate said there were potential oil and gas resources on the border between the two nations. A field crossing the border would have to be shared.

The directorate's minimum estimate for the southeastern Barents Sea was 345 million barrels of undiscovered resources. There was a 5% chance that it could hold as much as 3.6 billion barrels, it said.

The Jan Mayen area was estimated to hold 566 million barrels of oil equivalent, but with higher uncertainty, the directorate said. The estimated upside in this area was 2.9 billion barrels, but there was also a chance that it was completely void of oil and gas, it added.

Russian state oil company Rosneft was recently awarded three production licenses on the Russian side of the formerly disputed area of the Barents Sea.

Norwegian state oil company Petoro AS has a 25% stake in two recently awarded Icelandic production licenses in the Dreki area near Jan Mayen, operated by Faroe Petroleum PLC and Valiant Petroleum PLC.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Norway Ups Oil, Gas Estimates in Artic Areas by 2.5 Billion Barrels

OSLO - Norwegian oil officials Wednesday boosted the nation's estimate of undiscovered oil and gas by about 2.5 billion barrels of oil equivalent, or 15%, most of it gas in an area formerly disputed with Russia.

The estimates were based on data gathered in the southeastern Barents Sea and around Jan Mayen, where Russia and Iceland have already awarded several licenses.

Norway expects to decide on the opening of the southeastern Barents Sea, as well as Jan Mayen for oil drilling by this summer. Norway hasn't opened any new acreage since 1994.

The Norwegian Petroleum Directorate said the Norwegian part of the formerly disputed southeastern Barents Sea likely held 1.9 billion barrels of oil equivalent, most of it gas and about 15% crude oil. This equals slightly more than a year of Norway's total oil and gas output.

The area of 44,000 square kilometers was delineated in a 2011 deal between Norway and neighboring Russia, after four decades of dispute. The directorate said there were potential oil and gas resources on the border between the two nations. A field crossing the border would have to be shared.

The directorate's minimum estimate for the southeastern Barents Sea was 345 million barrels of undiscovered resources. There was a 5% chance that it could hold as much as 3.6 billion barrels, it said.

The Jan Mayen area was estimated to hold 566 million barrels of oil equivalent, but with higher uncertainty, the directorate said. The estimated upside in this area was 2.9 billion barrels, but there was also a chance that it was completely void of oil and gas, it added.

Russian state oil company Rosneft was recently awarded three production licenses on the Russian side of the formerly disputed area of the Barents Sea.

Norwegian state oil company Petoro AS has a 25% stake in two recently awarded Icelandic production licenses in the Dreki area near Jan Mayen, operated by Faroe Petroleum PLC and Valiant Petroleum PLC.

Copyright (c) 2012 Dow Jones & Company, Inc.

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GulfMark Offshore Ends 4Q on a High Note

GulfMark Offshore Inc. ended last year on a high note and is poised to be a strong player in vessel market conditions in 2013.

The company closed 2012 with a consolidated revenue of $95 million and the net loss for the same period was $4.9 million, or $.19 per diluted share, according to its fourth quarter and full year 2012 operating results. For the 12 months that ended Dec. 31, 2012, consolidated revenue was $389.2 million and net income was $19.3 million, or $.72 per diluted share.

"We have emphasized the cyclicality of our business and our belief that 2012 was a year where we positioned GulfMark to take advantage of the strong upside that appears to be developing," said Bruce Streeter, president and CEO of GulfMark Offshore, in a released statement. "Since 2009, we have seen year-over-year improvement in the global market for our vessels, and we continue to see an improving and expanding marketplace as we look ahead."

Barclays Capital believes that the company will be a key player of the strengthening vessel market conditions in the U.S. Gulf of Mexico (GOM) and the recent demand increase in the North Sea which will help expand its earnings power into 2014.

"Recent operational disruptions in Southeast Asia are likely transitory, in our view, and we expect utilization levels in that region to improve towards 2H13," the advisors stated in an equity report. "Offshore rig demand remains high, newbuild deliveries will likely tighten vessel markets globally throughout 2013 and GLF's high-spec fleet should drive margin improvement."

The GOM is developing into a very strong market, with utilization levels near 100 percent for several of the weeks thus far this year, Streeter said. The North Sea continues to be a strong market and current indications point to a meaningful increase in drilling activity for the 2013 season, Streeter added.

For 2013, the company has 11 vessels under construction, eight of which will be delivered during the year, with another three vessels undergoing renovations.

"Operating costs, driven largely by mariner labor costs, continue to put pressure on profitability, but we are pushing costs through to operators as contracts roll over and anticipate that these cost pressures will wane as the current backlog of new vessels are delivered in 2013 and 2014," Streeter said.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

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Court Reverses More Than $1 Billion In Damages Against Exxon Mobil

WASHINGTON - Exxon Mobil Corp. has won a legal victory in its effort to fight damages of about $1.5 billion stemming from a 2006 gasoline spill in Maryland.

In a decision released Tuesday, the Maryland Court of Appeals reversed more than $1 billion in punitive damages, awarded by a jury in 2011, and said residents and business who accused the energy giant of fraud hadn't sufficiently proven their case.

The court also reversed a large number of compensatory damages, which originally totaled about $500 million.

The case stems back to February 2006 when 26,000 gallons of gasoline leaked from underground storage tanks owned by Exxon Mobil at a fueling station in Jacksonville, Md. The gasoline moved into a water aquifer that supplied drinking water to many residents.

Dozens of residents and business owners filed suit and accused Exxon Mobil of fraud. They also said they suffered because of concerns over contracting cancer and losing value on their properties.

In 2011, a jury at the Circuit Court for Baltimore County awarded the residents and business owners about $500 million in compensatory damages and $1 billion in punitive damages.

Exxon said the company is reviewing the court's decision.

"The evidence showed that we acted appropriately after the accident and the court has agreed," the company said, adding that it has apologized to the Jacksonville community and remains "ready to compensate those who were truly damaged by this unfortunate incident."

Copyright (c) 2012 Dow Jones & Company, Inc.

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API Addresses Record-High Gasoline Prices

American Petroleum Institute (API) held a press conference Tuesday addressing high gasoline prices and noted that more crude oil production and efficient consumption of oil products are key to addressing higher gasoline prices, API's Chief Economist John Felmy told reporters.

"We have very large oil resources here in the United States and technologies that are making more of them accessible and economic to produce," he said. "Given reasonable regulations, expanded access to resources on federal lands and waters, and fair tax policy, we can bring several million more barrels per day of crude oil to market. It could create more than one million new jobs, reduce our dependence on foreign energy, and increase revenue to the government by billions of dollars a year."

API reported that as of last week, the average U.S. retail price for regular gasoline was $3.78, about 56 cents per gallon higher than two months ago. Crude oil prices are largely set on international exchanges which are determined by global supply and demand. Crude oil prices increased $12 a barrel, or 29 cents per gallon, between December and February, stated API. During that same period, the price of gasoline increased.

Due to a strong demand for world supplies, crude oil prices have increased. There's more optimism about the global economy, which is growing faster and demanding more oil, according to the Energy Information Administration's short-term outlook. However, crude supplies fail to keep up with the demand. In January, domestic crude oil production went above 7 million barrels of oil per day in the United States for the first time in more than 20 years but international production has been less robust, API stated.

"We have not done a good job of expanding opportunities for domestic oil and gas development in federal areas," he said. "The vast majority of the nation's offshore oil resources continue to be off limits."

The organization also stated that if the United States approves the Keystone XL pipeline, the increase in capacity for bringing Canadian oil into the United States would encourage more production into Canada's rich oil sands region. API also reiterated that if supply is increased, than demand is reduced.

"With gasoline prices already approaching $4.00 per gallon and projected to reach all-time record highs during the upcoming driving season, the economy continuing to struggle and unemployment rates refusing to come down, developing domestic energy resources is more important now than ever," said Michael Whatley, executive vice president of Consumer Energy Alliance, to Rigzone.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

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