Crude 16 Cents Lower; Brent Climbs 1%

Global benchmark oil prices diverged sharply Monday, with North Sea Brent crude gaining on concerns over the shutdown of a U.S. pipeline in the key Gulf Coast refining region.

U.S. crude oil futures on the New York Mercantile Exchange settled 16 cents lower, at $97.07 a barrel, on profit taking after a 5.2% gain over the previous five sessions.

Traders, meantime, bid up the price of North Sea Brent crude oil futures on the belief that oil imports that compete with Brent will be strongly sought after by U.S. Gulf Coast refiners after the closure of Exxon Mobil's Pegasus Pipeline.

The 95,000 barrels a day pipeline that brings Canadian crude oil from Patoka, Ill. to Nederland, Texas was closed Friday after a leak on a section in Arkansas. The company hasn't given a likely date for restarting the line yet.

Analysts said the closure of the pipeline means that crude oil inventories will continue to build up at bottlenecks in the middle of the country, such as the Cushing, Okla. terminal that is the delivery point for the Nymex crude oil futures contract. Refiners have in recent week increased the volumes of oil that they move from Cushing, using shipments by rail and truck to augment stunted pipeline flows.

Expectations of a strong and steady draining of inventories at Cushing have brought strong pressure to bear on Brent prices in recent week and lifted the value of the Nymex benchmark contract. Greater moves of oil out of Cushing would make Gulf refiners less dependent on crude oil imports, which are priced against Brent, a global benchmark and would bolster U.S. crude oil prices. "Brent has dropped so much recently that we are seeing a turnaround in that now," said Gene McGillian, analyst and broker at Tradition Energy.

ICE North Sea Brent for May delivery was up $1.07, or 1%, at $111.09 a barrel late Monday. Brent posted a premium of $14.02 a barrel to the Nymex contract, the most since March 21. Brent ended March at $12.79 a barrel above the Nymex contract, down from a premium at the end of February of $19.33 a barrel.

Mr. McGillian said prices of U.S. oils were also undermined by indications of slower than expected growth in the manufacturing sectors in both the U.S. and China, the world's top two oil consumers.

Meantime, traders also are concerned about rising oil inventories in the U.S.

U.S. crude oil inventories rose 1.9 million barrels in the week ended March 29, according to early estimates from five analysts surveyed by Dow Jones Newswires. A rise of that size would put crude stocks at their highest level since July 1990 and at their highest end March level since 1931.

The closely watched government inventory data from the Energy Information Administration is due to be released at 10:30 a.m. EDT Wednesday. The American Petroleum Institute, a trade group, releases its data at 4:30 p.m. EDT on Tuesday.

Gasoline stocks are expected to drop by 300,000 barrels, while distillate stocks, comprising heating oil and diesel fuel, were expected to fall 400,000 barrels. Refiners, returning from maintenance work, are expected to boost capacity utilization by 0.4 percentage point to 86.1%.

Elsewhere, May heating oil settled up 2.17 cents, at $3.0687 a gallon, while May reformulated gasoline blendstock futures were 0.91 cent lower, at $3.1015 a gallon.

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

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ProSep Clinches Gulf of Mexico Contract

ProSep Inc. announced Tuesday it was awarded a contract for the supply of a produced water treatment system valued at approximately $1.3 million, for installation on a floating production storage and offloading (FPSO) vessel that will operate in a deep-water field in the Gulf of Mexico. The equipment is expected to be delivered during the first half of 2014.

"ProSep offers one of the industry's most advanced portfolio of solutions for the treatment of produced water. Our equipment is specifically designed to operate under the strictest operating and environmental standards, a key value proposition for oil and gas companies," said Jacques L. Drouin, president & CEO.

The solution provided consists of an induced gas flotation unit (IGFU) which recovers oil and reconditions produced water for overboard discharge or re-injection. ProSep's IGFU design delivers high efficiency removal of oil and solids with a separation efficiency of up to 98%, allowing the customer to meet stringent Gulf of Mexico specifications.

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Rhyl Field Start-Up Secures 400 UK Jobs

Centrica Energy reported Tuesday that it has delivered first production from the Rhyl gas field offshore UK. Bringing the field on stream will help secure the future of 400 jobs in northwest England.

The Rhyl field – located in the Irish Sea some 25 miles off the coast of northwest England – was first discovered in 2009 and is wholly-owned and operated by Centrica. Gas from the field is being produced from its existing North Morecambe platform and it is being processed at the firm's onshore complex at Barrow, UK.

Centrica noted that Rhyl is the first new field in the region to be brought on stream for 10 years, with the firm saying it represents "an important milestone" in extending the life of Centrica's Morecambe Bay operations and will take production well beyond 2020.

Mike Astell, Centrica Energy's regional director for the east Irish Sea, commented in a statement:

"This is incredibly exciting news for everyone involved because it marks another lease of life for the Morecambe Bay area, securing energy for the UK and jobs for the local area."

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DIPP Turns Down Oil Companies for Activities in India

Bharat Petroleum Corporation Limited, The Government of India has issued the following news release:

The commerce and industry ministry has rejected the demand of oil exploration firms to be given fiscal incentives such as subsidy for their activities in northeastern India. Oil companies such as ONGC, Oil India, Jubilant Energy and Assam Company urged the government to include exploration and production (E&P) business in the list of industries getting fiscal incentives under the North East Industrial and Investment Promotion policy (NEIIP).

The department of industrial policy and promotion (DIPP) has turned down the proposal saying oil and gas explorers do not manufacture products, government and industry officials said. DIPP said the government had decided not to expand the service sector under NEIIP since subsidies offered by the department was aligned to the national manufacturing policy to boost manufacturing. NEIIP provides subsidies to manufacturing and select service sector enterprises on condition that the beneficiary units should refund subsidies if they stop their activities within five years of commencing commercial production.

"Thus, the proposal to consider grant of subsidy for E&P units, which are not able to make successful discovery in the North East is not in harmony with the objectives of the scheme," the department said in a letter to the oil ministry. The subsidy policy was launched in 2007 to provide 10-year fiscal incentives that included 100% income tax and excise duty exemptions. The policy also provides capital investment and interest subsidies. Its benefits include reimbursement of insurance premium. But industries in the negative list are not eligible for these incentives.

"DIPP has asked the oil ministry to formulate its own scheme to incentivize exploration companies working in the north east," an oil ministry official said. But industry officials defended industry's position. "It is true that petroleum refineries are in the negative list of NEIIP, but refineries should not be confused with E&P," one official said. It appears that the intent of the policy was to exclude oil refinery from availing incentives, an industry official said. But due to the ambiguous language, it is being misinterpreted as to exclude crude oil and natural gas produced by upstream companies, the official said.

The northeastern region has huge hydrocarbons potential and an unambiguous fiscal incentive package would attract investments, executives of oil companies said. According to industry estimates, the region has about 5.75 billion barrels of oil reserves and more than 21 trillion cubic feet gas. The Assam-Arakan basin that covers an area of 116,000 square kilometers is highly prospective.

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Huntington Subsea Preps Complete

Norwegian Energy Company (Noreco) reported Tuesday that all subsea preparations have been completed an final commissioning activities are now taking place at the Huntington field development in the UK sector of the North Sea.

Noreco said that during recent weeks there had been some delays in the project due to weather conditions and technical work that had taken longer than planned. But the firm added that first oil is expected during the first half of April.

After a ramp-up period, the field is expected to produce approximately 6,000 barrels of oil equivalent per day net to Noreco, it added.

Noreco has a 20-percent interest in the Huntington field, which is operated by E.ON Exploration & Production.

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Maersk Extends North Sea Energy Enhancer Gig

Northern Offshore, Ltd. reported that its subsidiary, Northern Offshore U.K. Limited, has received a declaration from Maersk Olie og Gas AS exercising the first of three one-year options for the jackup Energy Enhancer (300' ILC). The commencement date of the option period is mid-July 2013, which commits the Energy Enhancer to Maersk for continued operation in the Danish Sector of the North Sea until June 2014. This option exercise adds approximately $48 million to the company's contracted revenue backlog.

"We are pleased with the opportunity to continue our relationship with Maersk and sincerely appreciate their commitment to Northern Offshore. The Energy Enhancer is performing very well and this contract extension provides a significant increase in revenue from this unit. There are two remaining one-year options and with the North Sea market continuing to strengthen, we remain optimistic about this sector for the foreseeable future," Gary W. Casswell, Northern Offshore's president and CEO, said.

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ExxonMobil: A Few Thousand Barrels of Oil Seen in Arkansas Spill Area

Exxon Mobil Corp. said Saturday that it is working to clean up thousands of barrels of oil that spilled from its pipeline into a Mayflower, Ark., residential neighborhood Friday afternoon.

The U.S. Environmental Protection Agency is categorizing the incident as a "major spill," the company said, which means that more than 250 barrels of oil have been released. Exxon said "a few thousand barrels of oil" have been observed in the area, but the company is staging a response worthy of a spill of more than 10,000 barrels "to be conservative."

Mayflower is in Faulkner County, about 25 miles outside of Little Rock, Ark. The city evacuated 22 homes Friday as oil flowed into yards and through the streets. Exxon said Saturday it had about 100 workers in the area and had deployed 2,000 feet of containment boom and had 15 vacuum trucks were at work cleaning up the oil Saturday afternoon. The company said it has recovered 4,500 barrels of oil and water.

On Saturday, Faulkner County Judge Allen Dodson said the U.S. EPA has estimated that as much as 2,000 barrels have been released into the neighborhood, but so far, responders have been able to stop that oil from flowing into Lake Conway, a nearby 6,700-acre freshwater lake. Mr. Dodson said it looks like the cleanup effort might take several weeks. On Saturday crews were working to keep the oil contained even as rain pelted the earthen dams put in place to hold the oil back, he said.

"We're dealing with added water flow from the rain," Mr. Dodson said.

If the early estimates prove to be correct, the spill could be larger than a 2011 pipeline leak into the Yellowstone River in Montana. On Monday U.S. pipeline regulators proposed a $1.7 million fine against Exxon for allegedly not doing enough to prevent that leak of about 1,500 barrels of crude into the river after the pipeline ruptured during severe flooding. The regulators also proposed that Exxon employees be required to put in place a training program to teach employees how to react to emergencies at the company's pipelines. Exxon said it was disappointed in the regulators' findings, and that it has applied lessons learned from the Montana spill to its remote control valve procedures and operator training.

In a filing with the National Response Center Friday, Exxon reported that the amount of oil released was unknown, but told regulators that the "incident may be a significant material release."

Exxon said Friday evening that the pipeline, which carries oil from a hub in Patoka, Ill. to the Texas Gulf Coast, was shut in. The pipeline delivers oil to the Sunoco Logistics terminal in Nederland, Texas, where it is then shipped to various Houston area refiners, according to the Exxon Pipeline Co.'s website.

Ben Lefebvre contributed to this article.

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

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Fifty-Three Percent of Oil, Gas Workers Would Quit over Training

More than half of the oil and gas industry's employees would consider leaving an employer due to a lack of training and development, according to a BP-sponsored study of 773 professionals who work in the sector across 24 countries.

Findings from the survey – which was conducted by the Society of Petroleum Engineers – found that 53 percent of respondents said a lack of training and development opportunities would lead them to consider leaving an employer. Seventy-five percent of respondents said that training and development was important in their choice of role, while 37 percent felt that a lack of training in previous roles has held them back in their career.

The survey also found that a quarter of respondents believe the current lack of training and development is detrimental to their career. Fifty-six percent of respondents believe that the employer should provide all or some training to new joiners, although only 11 percent expect their employer to provide all of their training.

The research also found that oil and gas professionals believe that future generations of oil and gas workers require more development during their university years. While universities equipped students either "quite well" or "very well" with industry knowledge and technical and computer skills, they came up short in developing soft-skills that are critical for a successful career in the oil and gas industry. Less than one-third of respondents believed that universities helped students properly develop soft skills such as initiative, flexibility and work ethic.

In November, Rigzone reported that BP had launched a new $7.2-million scholarship program for talented science, technology, engineering and mathematics students as part of the firm's plans to foster an interest in the oil and gas industry among undergraduates. The company also runs "Discovery Days" and internships for promising students.

BP Head of Learning and Development Don Shoultz commented in a statement Tuesday:

"These findings further underscore the challenge the industry faces; we've got an ever growing skills deficit. The industry's more experienced talent needs continually to transfer the knowledge and skills they have built up through mentoring programs. Separately, oil and gas companies, of all sizes, need to ensure they are consistently increasing their investment in formal training and development programs."

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Contractors Feast on Australian Projects

Australia's major resources services contractors targeting the local oil and gas sector are taking advantage of the rapid growth being experienced in the industry.

Major new developments around the country continue to provide a wide range of opportunities for contractors such as Monadelphous, Leighton Contractors, Clough Ltd. and Laing O'Rourke.

Chevron's Gorgon and Wheatstone LNG projects, the Woodside Petroleum Ltd.-operated North West Shelf project, the Browse LNG project joint venture and Royal Dutch Shell plc's Floating LNG project have created a surge in demand in Western Australia for high-scale contracting services.

In Queensland, developments include QGC Pty. Ltd.'s Curtis LNG project, Arrow Energy Ltd.'s LNG plant project, the Australian Pacific LNG joint venture and Santos Ltd.'s Gladstone LNG project, while in the Northern Territory, Inpex Corp. has started development on the Ichthys project.

Monadelphous has experienced a strong run of contract wins on both sides of Australia around these developments, helping the company deliver record revenue and profits.

The Perth-based company has already won almost $1.04 billion (AUD 1 billion) in new contracts or contract extensions this Australian financial year, with a large percentage of those awards in the oil and gas sector.

In particular, Monadelphous has added strength to its positioning as a leading maintenance services provider in the oil and gas market, where it has recently secured two significant LNG contracts.

"With the award of these new contracts Monadelphous is providing long-term maintenance services to all of Australia's existing on-shore LNG plants," Rob Velletri, Monadelphous managing director, said in a conference call.

"The new long-term maintenance and shut-down services contract with Woodside at the Karratha gas plant in WA, the largest onshore LNG plant in Australia, is a strategic milestone for the company.

"Monadelphous also entered into its first long-term LNG maintenance services contract with QGC for its new LNG plant."

In October 2012, the company was awarded the maintenance contract, worth about $156 million (AUD 150 million), at the Karratha gas plant.

The contract, which started in January for an initial term of three years with the option of two one-year extensions, involves the provision of maintenance and shutdown services.

Monadelphous's contract with coal seam gas company QGC at the Curtis LNG plant, worth $83 million (AUD 80 million), started in January for an initial 6.5-year term.

The company will provide multidisciplinary core maintenance and shutdown services to support the operations phase of the plant, currently under construction at Curtis Island.

Monadelphous has also consolidated its relationship with Chevron Australia after signing a one-year extension to its facilities management services contract at the Gorgon project.

Worth about $135 million (AUD 130 million), the contract is for the operation and maintenance of construction facilities and utilities on Barrow Island.

Leighton Contractors' involvement with Australia's major developments has grown through a series of related contracts won at INPEX's Ichthys project.

In January, Leighton, which holds an oil and gas contract portfolio worth in excess of $4.68 billion (AUD 4.5 billion), was awarded a $960 million (AUD 923 million) contract to undertake Ichthys' onshore LNG facilities main civil works.

The project involves delivering the main civil infrastructure required for the LNG facilities, including piling, foundations, trenching for pipes, cable, sewers and drainage, roads, paving, electrical and instrumentation cabling.

This win added to Leighton Contractors' services division being awarded a four-year, $291 million (AUD 280 million) operations and maintenance contract by JKC Australia for the Ichthys temporary site facilities.

In October 2012, Leighton Contractors was also awarded a $131-million (AUD 126-million) engineering, procurement and construction (EPC) contract by JKC for one of the building packages at Ichthys.

At the Chevron Corp.-operated Gorgon project, the value of Leighton Contractors' contract to deliver the civil and underground works package was increased by $1 billion (AUD 975 million) to an estimated value of $1.86 billion (AUD 1.789 billion).

Leighton said the new estimated value reflected an increased and amended scope of works to provide better flexibility to deliver the package in a more efficient and timely way.

Perth-based Clough has grown its portfolio of oil and gas contracts to more than 20 this financial year.

Clough's energy portfolio across Australia features Chevron's Gorgon and Wheatstone projects, INPEX's Ichthys, Santos' Gladstone and QGC's Curtis.

The company's contract wins include an extension worth more than $20.8 million (AUD 20 million) for its Clough AMEC joint venture for the provision of engineering services to Chevron's oil facilities off the north-west of Australia, and a contract for its joint venture with Transfield Services for construction work as part of QGC's Curtis project.

Kevin Gallagher, Clough chief executive officer and managing director, said the company's outlook had never been stronger with a record order book and strong tender pipeline.

He explained that Clough's oil and gas clients were searching for contractors that could provide enhanced productivity.

"Clough is responding with a number of productivity initiatives," Gallagher said in a conference call.

"Our aim is to set the benchmark for productivity - we aim to do this by establishing the metrics and systems to provide real-time reporting on productivity performance and enable early detection and intervention where we have productivity issues."

Laing O'Rourke, a Perth-based privately-own engineering company, secured a major structural engineering and civil works contract with Bechtel Corp. on the Chevron-operated Wheatstone project.

The company said it would provide more than $520 million (AUD 500 million) in civil structural engineering and construction with the contract.

Wheatstone, situated 7.5 miles (12 kilometers) west of Onslow in the Pilbara region, will consist of two LNG trains with a combined capacity of 8.9 million tonnes per annum and a domestic gas plant.

David Stewart, Laing O'Rourke chief executive officer, said the company was "engaged on almost every one of Australia's major oil and gas projects – and can provide self delivered, construction and engineering services at each link of the gas export chain".

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New UK Oil, Gas Strategy to Secure Thousands of Jobs

The UK government unveiled Thursday a new oil and gas strategy aimed at securing billions of pounds of future investment and thousands of jobs in the sector.

The government said that it has pledged to maintain the fiscal regime it has put in place to encourage investment and innovation. This will include guarantees on tax relief for decommissioning activities as announced in the recent UK Budget.

Plans include specific measures to address the skills gaps in the UK oil and gas sector. The government plans to help the industry find the additional 15,000 staff it will need over the next five years by establishing a national program to retrain ex-military personnel so they can be redeployed in the oil and gas industry. As part of this plan, $10.6 million (GBP 7 million) has been awarded to Newcastle University to establish a training establishment called the Neptune Centre that will carry out subsea and offshore engineering programs.

The government will also put measures in place to boost supply chains. The aim is to develop the oil and gas supply chain so that the sector's suppliers can build further on the $40.8 billion (GBP 27 billion) of revenues that they already generate in the UK. The government said that fabrication has been identified as one particular subsector that will be targeted to ensure the UK remains competitive in both domestic and international markets.

In addition, provision will be made for specialist support from government body UK Trade and Investment to look at how the UK supply chain can increase exports, building on the increased funding of $211 million (GBP 140 million) announced in the Treasury's Autumn Statement to help small and medium-sized businesses export abroad and exploit high-value opportunities in markets such as Brazil, Mexico, Saudi Arabia and Australia.

Ahead of the strategy launch Thursday, UK Business Secretary Vince Cable commented in a statement:

"The oil and gas industrial strategy is the start of a real plan of action owned by industry and government. It is a strategy that all sides are committed to, so that future decades of investment and growth can be maintained in the North Sea.

"An important part of this strategy is how we can develop the UK supply chain. I want us to consider what barriers are stopping British companies bidding for and winning work in the North Sea.

"This is an expanding industry. We can either help create more jobs and opportunities across the UK if we get this right. Or see work going overseas if not."

UK Energy Secretary Ed Davey added:

"The UK’s oil and gas industry is a vital strategic resource that helps fulfill our energy needs and insulates us from volatile global markets. By partnering with industry to support oil and gas investment offshore and onshore, the Coalition government aims to boost growth and enhance the UK’s energy security."

Meanwhile, trade body Oil & Gas UK welcomed the new strategy, describing it as "one more step in the right direction". Oil & Gas UK Chief Executive Malcolm Webb released a statement in which he said:

"Close engagement with the UK government and the resulting tax changes introduced last year to promote investment in the oil and gas sector are now bearing fruit. Record investment is forecast this year to search for and produce UK oil and gas reserves. This will be followed by an upturn in production from 2014, sustaining growth across the supply chain and reinforcing the industry's already significant contribution to the UK economy.

"The launch of the government’s strategy for the sector is one more step in the right direction and brings deserved recognition to the capabilities of our world class supply chain."

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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