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    Cheaper Gasoline Should Give Limited Boost to U.S. Fuel Consumption (Monday, 26 June 2017)

    26 Jun 2017, 11:00 pm

    Cheaper gasoline prices should spur an increase in driving in the United States and provide a limited boost for gasoline consumption over the summer, after a slow start to the year.

    Gasoline consumption depends on the volume of traffic (vehicle-miles traveled) and the average fuel-economy of the cars on the road.

    Traffic volume in turn depends on demographic and economic factors (population, household formation, car ownership, urbanization, average incomes and employment) and to a more limited extent gasoline prices at the pump.

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    Gasoline prices influence fuel consumption primarily through consumer choices about fuel-economy when purchasing new vehicles and choices about the amount of discretionary driving.

    Rising gasoline prices tend to be associated with slower growth in traffic volumes and slower growth in gasoline consumption (as measured by the volume of gasoline supplied to domestic U.S. customers).

    Experience shows that prices have a relatively small impact on traffic and gasoline consumption (although the precise relationship remains fiercely controversial among researchers).

    As a rough approximation, changes in traffic volume and fuel consumption are an order of magnitude smaller than price changes.

    The slump in gasoline prices between the middle of 2014 and early 2016 coincided with a marked acceleration in the growth of both vehicle-miles traveled and fuel consumption (tmsnrt.rs/2sxRvli).

    But gasoline prices troughed early last year and have been rising month-on-month since March 2016, and year-on-year since November 2016, according to the U.S. Energy Information Administration.

    The rate of growth in both miles-driven and gasoline consumption slowed during the second half of 2016 and the first two months in 2017.

    More recently, however, gasoline prices have stabilized and even fallen, which should remove one of the factors inhibiting gasoline consumption growth.

    Pump prices have fallen nearly 5 percent since the end of April, according to data from the Energy Information Administration.

    Cheaper gasoline prices should spur an increase in driving in the United States and provide a limited boost for gasoline consumption over the summer, after a slow start to the year.

    Gasoline consumption depends on the volume of traffic (vehicle-miles traveled) and the average fuel-economy of the cars on the road.

    Traffic volume in turn depends on demographic and economic factors (population, household formation, car ownership, urbanization, average incomes and employment) and to a more limited extent gasoline prices at the pump.

    Gasoline prices influence fuel consumption primarily through consumer choices about fuel-economy when purchasing new vehicles and choices about the amount of discretionary driving.

    Rising gasoline prices tend to be associated with slower growth in traffic volumes and slower growth in gasoline consumption (as measured by the volume of gasoline supplied to domestic U.S. customers).

    Experience shows that prices have a relatively small impact on traffic and gasoline consumption (although the precise relationship remains fiercely controversial among researchers).

    As a rough approximation, changes in traffic volume and fuel consumption are an order of magnitude smaller than price changes.

    The slump in gasoline prices between the middle of 2014 and early 2016 coincided with a marked acceleration in the growth of both vehicle-miles traveled and fuel consumption (tmsnrt.rs/2sxRvli).

    But gasoline prices troughed early last year and have been rising month-on-month since March 2016, and year-on-year since November 2016, according to the U.S. Energy Information Administration.

    The rate of growth in both miles-driven and gasoline consumption slowed during the second half of 2016 and the first two months in 2017.

    More recently, however, gasoline prices have stabilized and even fallen, which should remove one of the factors inhibiting gasoline consumption growth.

    Pump prices have fallen nearly 5 percent since the end of April, according to data from the Energy Information Administration.

    Gasoline consumption has been relatively strong since the start of March, running at or near record levels set in 2016.

    Gasoline supplied hit record levels in two of the last four weeks, according to the snapshot provided in the EIA's "Weekly Petroleum Status Report" (WPSR).

    Most analysts prefer the more comprehensive but less timely data on gasoline supplied contained in the EIA's "Petroleum Supply Monthly" (PSM).

    But PSM also showed relatively strong gasoline consumption in March after a weak start to the year in January and February.

    If the fall in gasoline prices is sustained, it will likely spur more driving and the purchase of larger, more powerful vehicles, resulting in faster growth in U.S. fuel consumption in the months ahead, at least compared with the previous trend.Source: www.reuters.com

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    Big Oil Turns to Big Data to Save Big Money on Drilling (Monday, 26 June 2017)

    26 Jun 2017, 10:00 pm

    In today's U.S. shale fields, tiny sensors attached to production gear harvest data on everything from pumping pressure to the heat and rotational speed of drill bits boring into the rocky earth.

    The sensors are leading Big Oil's mining of so-called big data, with some firms envisioning billions of dollars in savings over time by avoiding outages, managing supplies and identifying safety hazards.

    The industry has long used sophisticated technologies to find oil and gas. But only recently have oil firms pooled data from across the company for wider operating efficiencies - one of many cost-cutting efforts spurred by the two-year downturn in crude oil CLc1 prices.

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    ConocoPhillips (COP.N) says that sensors scattered across its well fields helped it halve the time it once took to drill new wells in Eagle Ford shale basin of South Texas.

    By comparing data from hundreds of sensors, its program automatically adjusts the weight placed on a drill bit and its speed, accelerating the extraction of oil, said Matt Fox, ConocoPhillips' executive vice president for strategy, exploration and technology.

    It is just one application, but if applied to the more than 3,000 wells ConocoPhillips hopes to drill in the Texas basin, those small sensors could lead to "billions and billions of dollars" in savings, Fox said in an interview.

    "We started using data analytics in our Eagle Ford business," he said. "And everywhere we look there are applications for this."

    The cost and complexity of such systems vary widely. Oil giants such as ConocoPhillips buy a mix of off-the-shelf and custom programs, along with data repositories. The Houston-based producer's employees use Tibco Software Inc's Spotfire data visualization package to analyze information from well sites.

    Tibco declined to discuss its pricing.

    Services firms including Schlumberger NV (SLB.N) and General Electric Co (GE.N) oil and gas unit sell sensor-equipped gear, data repositories and software to improve producers' decision-making.

    Back when oil traded at more than $100 a barrel - before the price crash in 2014 - data analysis was an "afterthought" for most oil firms, said Binu Mathew, who oversees digital products at GE Oil & Gas.

    Now - with prices at about $43 a barrel after recovering from a low of about $26 in early 2016 - "the efficiency aspect is far, far more important," Mathew said.

    FINDING HIDDEN VALUE

    A survey by Ernst & Young last year examined 75 large oil and gas companies and found that 68 percent of them had invested more than $100 million each in data analytics during the past two years. Nearly three quarters of those firms planned to allocate between 6 and 10 percent of their capital budgets to digital technology, the survey found.

    Effectively mining large data sets could lead to supplanting workers with artificial intelligence and machine learning systems, according to firms selling and buying data-driven technology.

    Simple sensors already increase safety and savings by eliminating the need to send workers to rigs or production facilities to gather data. Automating drilling decisions can produce more consistent results by cutting out human errors, said Duane Cuku, vice president of sales for rig technology at Precision Drilling Corp (PD.TO).

    "The driller is now able to focus his attention on the well - and the performance and safety of his crews - as opposed to the manual manipulation of controls," Cuku said.

    Occidental Petroleum Corp (OXY.N) also uses an analytical tool to find the best design for hydraulic fracturing wells. A new version of the software analyzes data on well completions and geology to recommend whether injecting steam or water would produce more oil.

    Abhishek Gaurav, a petroleum engineer for closely-held Texas Standard Oil, said he uses big-data analytics to help his company choose which properties to explore.

    Using Spotfire, the same program utilized by Conoco, Standard applies a combination of data science and petroleum engineering to rank asking prices for land based on a variety of completion, production and geological variables - such as the amount of sand that likely would be required to complete a well in a given formation.

    The technique, Gaurav said, has reduced the time needed for evaluating land parcels from weeks to hours - and resulted in better decisions.

    "We found value in properties when many other teams did not," he said.

    RECRUITING IN CALIFORNIA Some of the information craved by oil firms isn't so easy to gather or analyze.

    Surveys and maps that companies use to acquire acreage for drilling, for instance, are often not digitized. Older company data on wells may be unstructured or spread among suppliers using different storage formats, making integration and analysis a challenge.

    General Electric and its oil-and-gas unit are moving aggressively into the business of digitizing industrial equipment for other firms, and have invested in large data processing centers for energy clients.

    GE sees huge potential for market growth: A company study estimated that only 3 percent to 5 percent of oil and gas equipment is connected digitally, and less than one percent of the data collected gets used for decision-making, the study found.

    Getting the industry more fully connected will take time.

    "There is a huge amount of data prep, data sanitization and data extraction needed for big data to be totally disruptive," said Kate Richard, chief executive at private equity investor Warwick Energy.

    She projects a major payoff from the technology is still five or ten years away.

    Oklahoma City-based Warwick - which manages interests in thousands of wells across Oklahoma and Texas - is preparing for that payoff by hiring people from tech hubs in California, Richard said.

    "They all have computer programming and data science backgrounds," she said.

    Source: www.reuters.com

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    Obama's Energy Chief Returns, Citing Leadership Void Under Trump (Monday, 26 June 2017)

    26 Jun 2017, 8:00 pm

    While President Donald Trump’s Energy Department is studying how to save coal plants, veterans from the administration of President Barack Obama’s Energy Department announced a new effort to figure out how to curtail carbon in the U.S. energy system.

    Ernest Moniz, who was Obama’s Energy secretary, said Wednesday that there is a “leadership void” under Trump, and his new group would pursue much of the research and analysis that was begun in the federal government under his tenure. Given Trump’s budget proposal to cut energy spending by $3.2 billion, Moniz said this nonprofit, called the Energy Futures Initiative, is necessary.

    The budget "just across the board doesn’t do the job," Moniz said at the National Press Club. "There is not a credible way to say the budget supports the kind of activities that we were pursuing."

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    Moniz, a nuclear physicist who has taught at the Massachusetts Institute of Technology, already began a study of the U.S. electrical grid that could rival a similar one initiated by his successor, Rick Perry, at the Energy Department. Perry’s review drew criticism from environmentalists and renewable energy advocates because he emphasized the importance of saving struggling coal plants.

    Perry has questioned the science behind climate change, saying this week that ocean currents and the environment may be responsible for it rather than carbon emissions. Moniz, on the other hand, is aiming at figuring out what policies are necessary to achieve “deep decarbonization.”

    In assembling this research group, Moniz has gathered a number of former Energy Department employees, including Joseph Hezir, its former CFO, and Melanie Kenderdine, his energy counselor who also served as director of the department’s Office of Energy Policy and Systems Analysis.

    In addition to the group’s study of the grid -- expected out later this year -- Moniz said the venture will focus on areas such as energy security like the Strategic Petroleum Reserve, global gas markets, nuclear power and technological breakthroughs. Much of that is work the Energy Department was doing under Obama, work that Moniz said would likely grind to a halt under Trump’s budget proposal.

    Still, Moniz said no private effort can replace the role of the government.

    “Public-private partnerships are important, but the idea that they’re going to fill this gap, I just don’t see,” he said.

    Source: www.worldoil.com

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    World's No. 3 Oil Reserves Tested by Rout as Shell Decamps (Monday, 26 June 2017)

    26 Jun 2017, 6:00 pm

    When Royal Dutch Shell decided to pull out of the Canadian oil sands, the local producers doubled down with more investment. Crude’s bear market is testing their resolve.

    Trailing only Saudi Arabia and Venezuela in proved reserves, the sticky deposits of sand, water, clay and hydrocarbons in the remote boreal forests of Canada are some of the hardest and most expensive to extract. But producers like Cenovus Energy Inc. have vowed to deliver profits at lower prices after spending billions of dollars to buy assets from foreign majors. Now they get a chance to prove it.

    “These are large-scale projects that can’t be turned on and off on a dime,” said Dennis Fong, an analyst at Canaccord Genuity Group “Most would just continue producing even to the point in which we hit the high $20s.”

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    While U.S. prices haven’t hit near that level yet, they have plunged more than 20% from this year’s peak, meeting the common definition of a bear market. On Wednesday, WTI fell below $43/bbl. Canadian producers say the deep cost cuts they made during the downturn that sent oil plummeting from more than $100 in 2014 provide some resilience to this month’s rout.

    In March, Cenovus agreed to buy out ConocoPhillips’ 50% stake in the Foster Creek and Christina Lake joint ventures, as well as some other assets, for about $13.2 billion. The acquisition doubled the Calgary-based company’s reserves and production. Canadian Natural Resources spent about $9.4 billion this year to buy oil-sands assets from Shell and Marathon Oil.

    Oil-sands producers aren’t able to just cut output and wait for prices to recover, as some low-cost drillers have done in U.S. shale plays. Not only do they need to keep producing to pay off large upfront investments, but the deposits also require constant injections of steam to keep the tar-like form of crude they hold fluid enough to flow up to the surface.

    The Cenovus deal weakened its balance sheet, prompting the company to tap a credit line, take out a bridge loan and sell shares. The company also said it will sell as much as C$5 billion ($3.8 billion) of assets to pay down the bridge loan. The shares have plunged almost 50% since the deal was announced

    The company has turned to hedging to help offset some of the risk of lower prices. In April, Cenovus had 87,500 bpd of production hedged at an average minimum of $49.20/bbl for the remainder of the year, and 50,000 at $49.74 for the first half of 2018. Now the board has approved a plan to hedge as much as 75% of output this year and next.

    Cenovus has continued to work on cutting costs and says it can cover its dividend and spending with WTI crude at $41. The company expects to get that figure below $40 next year.

    More Hedging

    Canadian Natural said it has built a “large, diversified asset base” with long-life, low-decline reserves that make it resilient in periods of lower prices. President Steve Laut said last month the company had 67,000 bpd of production hedged, but looks at hedging every week and may add more.

    The producer also could dial back short-cycle capital spending, tap debt markets, sell royalties or dispose of other assets, such as stakes in Inter Pipeline and PrairieSky Royalty, if oil prices took a prolonged downturn, Canaccord’s Fong said.

    Suncor Energy, Husky Energy and Imperial Oil, which is 69%-owned by Exxon Mobil, have strong financial positions that could help them weather lower prices, Fong said. Plus they have refineries and gas stations that act as a natural hedge against a drop in crude, he said.

    Suncor can cover its dividend and its sustaining capital at $40 oil, spokeswoman Sneh Seetal said. The company generated about C$6 billion in cash flow in 2016, when oil averaged just over $40, she noted.

    Suncor and its peers have spent the years since crude prices crashed working to drive costs out of their systems and operate more efficiently. Canadian Natural has kept its dividend nearly flat in recent years to help conserve cash during the downturn, and Cenovus trimmed its payout in 2015.

    Cenovus expects to continue reducing expenses by using new technology and becoming more efficient, Chief Executive Officer Brian Ferguson said during a presentation to investors Tuesday. The work it already has done to trim its cost structure has given it “flexibility” if oil prices stay low for a longer period, he told reporters afterward. “We’ve done a very good job of adapting to that and actually being ahead of it,” Ferguson said.

    Source: www.worldoil.com

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    PSA Launches Gjøa Probe (Monday, 26 June 2017)

    26 Jun 2017, 2:00 pm

    Norway’s Petroleum Safety Authority (PSA) has launched an investigation into a hydrocarbon leak on the Gjøa field on 21 June 2017.

    The incident happened during normal operations. According to the operator Engie E&P Norge, the leak occurred in a condensate pump. It is unclear how large the leak was.

    The condensate did not ignite and no-one was harmed by the incident.

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    The PSA has decided to investigate this incident.

    “Our investigation will focus in particular on discovering the underlying causes, both technical and operational, that may have contributed to the incident,” says the PSA.

    Source: www.oedigital.com

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    Maersk Invincible Becomes World's First Shore-powered Jack-up (Monday, 26 June 2017)

    26 Jun 2017, 12:00 pm

    On May 28, 2017, the Maersk Invincible became the world's first harsh environment jack-up drilling rig to operate entirely on shore-power. Reaching the Maersk Invincible through a 294-km cable from Lista, the rig is currently running on Norwegian hydropower on the Valhall Complex, where it will be operating for Aker BP until 2022.

    This was made possible because Maersk Invincible was built with this purpose in mind from its conception. The electrical power system was designed and prepared to be able to receive power from shore.

    "The testing and commissioning of the high-voltage, shore-power installation has been thorough," says Christian Adamsen, technical section leader onboard the rig. "Maersk Invincible is now a clean hydropower rig since Sunday, when we made the change to shore-power supply."

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    At 11,000 volts, the high voltage shore-power supply is capable of supplying up to 10 MW, corresponding to the consumption of up to 20,000 households. The innovation not only means reduced emissions, but also a cost saving for customer Aker BP in fuel and maintenance.

    It is Maersk Drilling’s ambition to conduct sustainable and environmentally responsible operations, and it is our belief that this ensures a sound and viable business for the future.

    "Maersk Drilling is pleased that we have been able to successfully implement this innovation with our client Aker BP and together become first movers in introducing shore power operation on jack-up drilling rigs," says Peder Norborg, head of the XL-E Newbuilding Project with Maersk Drilling.

    Another benefit of shore-power is a much quieter work environment for the crew, since the diesel engines were one of the main sources of noise.

    "This will reduce emissions from the rig,” says Christian Adamsen. “It will also reduce cost and time for maintenance on diesel engines and generators and give a better working environment in the engine rooms. Furthermore, the deck will be easier to keep clean since we won't have soot from the exhausts. This will all be eliminated by running on shore-power."

    Source: www.worldoil.com

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    Kvaerner Completes First Sverdrup Jacket (Monday, 26 June 2017)

    26 Jun 2017, 10:00 am

    Kvaerner has completed the Johan Sverdrup riser platform (RP), named Ægir, with delivery set for next month.

    The jacket is the first major structure for the Johan Sverdrup project to be completed. The gigantic 26,000-tonne jacket is the largest that has been constructed in Europe for the North Sea, and is completed according to schedule, says Kvaerner.

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    Kvaerner has been awarded the contract for three jackets and the utility and living quarters (ULQ) topside together with KBR for the Johan Sverdrup development, which is the largest Norwegian industry project of our time. At Kvaerner’s yard at Verdal, the work for the remaining two jackets is progressing as planned and at Kvaerner’s yard at Stord, the Johan Sverdrup ULQ topside is on schedule. Now, as the work on gigantic RP jacket is completed, the yard at Verdal prepares for the load out scheduled later this summer followed by the sail away to the field.

    "In the true spirit of Verdal, we deliver yet again a fantastic product with the right quality and to the agreed price. The giant named Ægir is number 43 in a line of jackets delivered from the yard here at Verdal and it will soon start the journey to the field,”says EVP Structural Solutions in Kvaerner, Sturla Magnus.

    Following the tradition of all major constructions from Kvaerner’s yard in Verdal, the jacket got a symbolic name based on historical Norwegian culture. Ægir is the ruler of the ocean in Norse mythology.

    Source: www.oedigital.com

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    Abrado Sets Double-string Section Milling Record on North Sea Well (Monday, 26 June 2017)

    26 Jun 2017, 8:00 am

    Abrado announced today that it has completed the first double-string section milled window in the North Sea utilizing the proprietary Medusa cutting technology.

    Abrado Wellbore Services was asked to remove 100 ft of old 7 5/8-in. expandable liner and 9 5/8-in. host casing in order to successfully abandon a lower zone for slot recovery on a North Sea Platform. Abrado engineers worked collaboratively with the customer to mitigate the risks and elected to use its proprietary Medusa VS Section Milling Tool dressed specifically to mill out both strings simultaneously and underream to 11 1/4-in. open hole.

    Despite the risks, Abrado Wellbore Services was able to successfully complete the task ahead of time in a single trip following the initial cut out run. Once confident that the 7 5/8-in. expandable liner would not rotate inside the 9 5/8-in. host casing, double string milling rates of up to 3.5 ft/hr were achieved.

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    “This was a challenging project that had never been attempted before, yet, Abrado was able to work the problem with the customer to get the desired result; in this case an available slot to sidetrack a new well from an existing platform” said John Donachie, Abrado International Business Development Director, based in Aberdeen.

    Abrado announced today that it has completed the first double-string section milled window in the North Sea utilizing the proprietary Medusa cutting technology.

    Abrado Wellbore Services was asked to remove 100 ft of old 7 5/8-in. expandable liner and 9 5/8-in. host casing in order to successfully abandon a lower zone for slot recovery on a North Sea Platform. Abrado engineers worked collaboratively with the customer to mitigate the risks and elected to use its proprietary Medusa VS Section Milling Tool dressed specifically to mill out both strings simultaneously and underream to 11 1/4-in. open hole.

    Despite the risks, Abrado Wellbore Services was able to successfully complete the task ahead of time in a single trip following the initial cut out run. Once confident that the 7 5/8-in. expandable liner would not rotate inside the 9 5/8-in. host casing, double string milling rates of up to 3.5 ft/hr were achieved.

    “This was a challenging project that had never been attempted before, yet, Abrado was able to work the problem with the customer to get the desired result; in this case an available slot to sidetrack a new well from an existing platform” said John Donachie, Abrado International Business Development Director, based in Aberdeen.

    Source: www.worldoil.com

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