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Subsea engineering, construction and services company Subsea 7 has agreed to substitute a vessel chartered from Solstad Offshore for its Pipelay Support Vessel (PLSV) in a day-rate contract with Petrobras, offshore Brazil.
Petrobras and Subsea 7 have agreed to substitute the owned PLSV Seven Mar for the chartered PLSV Normand Seven in the existing Normand Seven contract. The substitution will be made in late June.
The contract for Seven Mar, a 2001-built construction / flex-lay vessel, was recently terminated earlier than expected due to Brazilian maritime law which prioritizes Brazilian-flagged ships over international vessels of a similar specification. As a consequence, the operating license for Seven Mar expired.
There are no other significant changes to the contractual terms and conditions, the company noted on Thursday.
As a consequence of this substitution, Subsea 7 will return Normand Seven to its owner, Solstad Offshore, at the end of its fixed-term charter agreement. Subsea 7 used the first of a total of five yearly options for Solstad’s Normand Seven in March 2015 and the extension became effective in September 2015.
To remind, Subsea 7 informed on Wednesday that up to five vessels are scheduled to leave the current active fleet by early 2017, based on stacking owned vessels and returning chartered vessels when existing contracts expire.
The company also said it plans to resize its global workforce to approximately 8,000 by early 2017, down from the current level of 9,200.
The 130m long Normand Seven is a construction / flexlay (horizontal) vessel fitted with a flexible pipelay system capable of operating in water depths of up to 2,000m with a top tension capacity of 300t. The vessel was delivered in 2007 by Ulstein Verft in Norway.
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PwC, audit, assurance, tax and consulting services firm, commenting on the implications on the oil and gas business of the Britain’s decision to leave the EU, expects the industry to be less impacted by the referendum results.
Alison Baker, PwC’s UK and EMEA oil and gas leader, said: “The oil & gas industry is a global business and as a result should be less impacted by today’s EU referendum result. We’ve seen the industry, both here in the UK and further afield, demonstrate its resilience in dealing with volatility and uncertainty through the past and current oil price shocks – and we are convinced that they can do so again.”
However, Baker said there will be some hurdles on the road ahead. She said that any further downturn in the economy or volatility in the oil price could cause further distress in the sector and in particular further project sanction deferrals might have significant consequence for the service sector who also rely on mobility of employees around the world.
“It will be vital for Government, OGA and Industry to accelerate the level of collaboration over the coming weeks and months to ensure that together we can work through this additional layer of uncertainty,” Baker added.
Offshore Energy Today has contacted oil and gas majors Shell and BP seeking comment on the Brexit vote. You can read their comments here: http://bit.ly/28PGZe8
Oil & Gas UK, a body representing the oil and gas companies in the UK, said it respects the democratic decision of the UK people and is ready to move forward. The organization has asked that the UK Government to clearly outline the process which will follow “to minimize any potential period of uncertainty.”
Steve Jennings, power and utilities leader at PwC, said: “Many will applaud the opportunity to remove perceived European “red tape”. However, this is likely to take considerable effort at a time when the industry has other pressing issues to address, namely achieving a secure supply, decarbonising our energy industry and delivering electricity and gas at affordable prices.
“Tackling the energy trilemma will undoubtedly be more challenging without the support of a European-wide energy system with ready access to European sources of capital and talent.”
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Following the EU Referendum outcome on Friday, Oil & Gas UK, a representative organization for the UK offshore oil and gas industry, has urged the UK Government to outline the process which will follow the exit vote to minimize any potential period of uncertainty.
To remind, oil prices slumped by more than 6 percent on Friday after results of a landmark referendum showed Britain had voted to leave the European Union.
Following the exit vote, UK Prime Minister David Cameron has announced his resignation saying there should be a new PM in October.
Commenting on the EU Referendum outcome, the oil and gas organization said: “Oil & Gas UK respects the democratic decision of the UK people and we are ready to move forward.
“Throughout the referendum campaign Oil & Gas UK has maintained its political neutrality – we are a trade association with a broad range of members who will undoubtedly have their own views on EU membership.
“As ever, our role is to represent our members throughout the transition ahead.
“We hope that all those involved will now come together and work constructively to make this transition as smooth as possible and we ask that the UK Government clearly outlines the process which will follow to minimise any potential period of uncertainty.”
UK oil & gas industry at critical juncture
Oil & Gas UK continued: “The UK oil and gas industry is at a critical juncture and we need to ensure the UK Continental Shelf continues to attract investment and be seen as a great place to do business. We will be consulting closely with our members in the coming weeks and look forward to engaging with all governments to play our part in this process.”
Offshore Energy Today has reached out to European oil companies seeking their comments on the exit vote.
Royal Dutch Shell said that although the company was in favour of the UK remaining in the EU, it would work with the UK government and European institutions on any implications for the company.
British oil major BP told Offshore Energy Today it is far too early to understand the detailed implications of this decision.
“However, we do not currently expect it to have a significant impact on BP’s business or investments in the UK and Continental Europe, nor on the location of our HQ or our staff,” BP added.
Offshore Energy Today also contacted Oil and Gas Authority (OGA), the UK government’s agency responsible for regulating offshore and onshore oil and gas operations, seeking the organization’s comment on the Brexit vote.
However, OGA was not willing to comment directing all queries to No. 10, a colloquial expression in the United Kingdom for the Prime Minister’s office in 10 Downing Street.
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Oil major BP (BP.L) said on Friday its headquarters would remain in the United Kingdom, despite Britain voting to leave the European Union.
"It is far too early to understand the detailed implications of this decision and uncertainty is never helpful for a business such as ours," BP said.
"However, we do not currently expect it to have a significant impact on BP's business or investments in the UK and Continental Europe, nor on the location of our headquarters or our staff," it added.
Here are some early reactions from industry so far:
Neil Thomson, Managing Director of The Visa Team commented: “After the seemingly limitless media exposure and enormous campaign expenditure, it came as a surprise to many this morning that the UK has decided its future, by leaving the EU. Nonetheless, it will take time to really see what affects this will have on individuals and businesses and what additional red tape will be introduced.
“The question we are being asked is, will UK citizens require visas to travel within Europe? Travel in Europe is not governed by the EU Treaty but by other agreements such as the Schengen Agreement. The UK is not part of Schengen but has agreed a visa-free regime with the Schengen countries. Not all European countries are part of Schengen, so it is at least theoretically possible that some of these countries might one day decide to require visas.”
Ian Armstrong, Divisional Director of Brewin Dolphin said: "We think that the impact on the UK Oil and Gas sector from the Brexit vote is very modest. The oil and gas industry primarily operates in US dollars but the proportion of earnings from the UK in the oil majors BP and Royal Dutch is relatively low. Ironically, it could make the North Sea a more attractive place for investment. The dividends at the two majors are paid in US dollars and therefore, UK shareholders should benefit from a translational effect.
"In terms of the oil price and oil demand, a stronger dollar is usually unhelpful and we think that the uncertainty caused by the vote will impact growth in Europe. However, oil product demand in the European Union is only 13.3% of global demand and is smaller than in the US (20.4%) and considerably smaller than in the Asia Pacific which accounts for 33% of global demand.
"Demand in the latter two areas is growing much faster than in EU and this increase demand combined with the fall in non-OPEC production will move the oil market closer to balance. In our view this is the main driver of steadily rising oil prices and unless there is a major economic downturn the Brexit vote will not change this."
Scott Lehmann, VP Product Management & Product Marketing, Petrotechnics said: “The UK's decision to leave the EU brings a new period of uncertainty for the UK oil and gas sector - the full effects of which may not be realised for some time. As an international industry, success depends on our ability to attract highly skilled talent to our shores and leaving the EU may limit the mobility of people both in and out of the UK. However, as a mature oil and gas region, the low oil price environment is likely to have by far the biggest impact on the future prosperity of the UK North Sea.”
While Peter Searle, CEO of global workforce solutions provider Airswift commented: “The poll we conducted prior to the vote revealed that only 32 per cent of energy sector workers would have voted to remain. That said, this result could create uncertainty for North Sea operators, particularly around the need to source talent for projects in and around the EU. However, leaving the EU could ultimately signal a more prosperous future for the UK North Sea. Norway, a key player in the energy industry, already exists successfully outside of the EU and now it’s the UK’s time to carve out its own future.”
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Energy has played virtually no role in the referendum debate but the result of the vote to leave means that the investment climate regarding development of a substantial proportion of the North Sea's remaining reserves will immediately be in doubt.
The vote to leave the EU has already triggered a dramatic collapse in Britain's national currency, with the pound sterling losing more than 10% of its value and falling to its lowest level against the dollar in more than thirty years.
Now the question is whether longer-term consequences will include a fall in inward investment and capital flight or, more positively, trigger inward investment as a result of currency weakening.
On 17 May, Total CEO Patrick Pouyanne, opening a new gas terminal in Shetland, declared: "There is a future for the North Sea, no doubt about it." But it is pretty safe to say that at that stage he was not expecting Brexit.
Pouyanne said that operating costs would have to come down so that companies could weather the storm of lower oil and gas prices. Costs may indeed come down, if they are measured in euros and dollars while wages remain fixed in pounds.
But the overall climate will be uncertain, for two main reasons. The immediate cause is that the broader economic consequences of the Leave campaign's triumph will not be clear for some time. Stock markets took a tumble on the result, and it is unforeseeable when a new economic equilibrium is established in Britain.
The second reason is that much of the UK's offshore oil and gas fields may well change hands. While Britain as a whole voted by 52% to 48% to leave the EU, Scotland voted 62% to 38% to stay in. This prompted Scotland's First Minister, Nicola Sturgeon of the Scottish National Party (SNP), to declare that it is clear that "the people of Scotland see their future as part of the European Union."
She will not necessarily move to hold a second referendum on Scottish independence immediately, but almost certainly she will start to prepare the ground for such a referendum, since independence is the very raison d'etre of her party's existence. And although Scotland voted 55% to 45% to stay in the UK in the previous Scottish referendum in 2014, the result of yesterday's Brexit vote will certainly increase the number of Scots willing to vote for independence and, in all probability, will tip the scales for independence.
Independence would certainly result in Scotland securing the lion's share of UK offshore reserves – but the problem is that these are massively diminished compared with the glory days of the 1980s. According to the latest (June 2016) BP Statistical Review of World Energy, the UK currently has just 0.2 trillion cubic metres (7.3 trillion cubic feet) of recoverable gas and 2.8bn barrels of recoverable oil reserves.
In terms of fields, almost all the oilfields and well over three-quarters of the gas fields would fall on the Scottish side of any likely maritime boundary line between an independent Scotland and the remnant UK.
It could well prove a jaded inheritance. The UK's oil and gas industry is not in the best of health. Declining opportunities prompted a 15% reduction in the workforce in 2015 and, a month before the Brexit referendum, the Fraser of Allender Institute's 24 annual oil and gas survey anticipated a further 17% job reduction in 2016.
At present, just about the only growth sector in the UK offshore industry is decommissioning facilities, commonly dubbed the funeral industry.
In 2014, when independence was last on the agenda, a survey of firms involved in developing the UK's offshore oil and gas resources found that although 45% of the 700 companies surveyed considered that the very act of holding a referendum was impacting on their investment plans and proposals, the issue of independence itself was of less importance. 38% of the companies surveyed thought independence would make no difference; 18% thought it would be positive while 12% thought it would be negative.
Source: Natural Gas Europehello
Such a body blow to global confidence could well prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all the major central banks.
Risk assets were scorched as investors fled to the traditional safe-harbors of top-rated government debt, Japanese yen and gold.
Billions were wiped from share values as FTSE futures fell 7 percent FFIc1, EMINI S&P 500 futures ESc1 5 percent and Japan's Nikkei .N225 7.6 percent. European stock markets were set to open more than 10 percent lower STXEc1.
The British pound collapsed no less than 18 U.S. cents, easily the biggest fall in living memory, to hit its lowest since 1985. The euro in turn slid 3.2 percent to $1.1012 EUR= as investors feared for its very future.
Nearly complete results showed a 51.8/48.2 percent split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War Two.
Sterling sank a staggering 10.1 percent at one point and was slumped at $1.3582 GBP=, having carved out a range of $1.3228 to $1.5022. The fall was even larger than during the global financial crisis and the currency was moving two or three cents in the blink of an eye.
"It's an extraordinary move for financial markets and also for democracy," said co-head of portfolio investments of London-based currency specialist Millennium Global Richard Benson.
"The market is pricing interest rate cuts from the big central banks and we assume there will be a global liquidity add from them in the next few hours," he added.
The shockwaves affected all asset classes and regions.
The safe-haven yen sprang higher to stand at 102.15 per dollar JPY=, having been as low as 106.81 at one stage. The dollar decline of 4 percent was the largest since 1998.
That prompted warnings from Japanese officials that excessive forex moves were undesirable. Indeed, traders were wary in case global central banks chose to step in to calm the volatility.
One source told Reuters the Bank of England was in touch with other major central banks ahead of the market open there and the Bank of Japan Governor Haruhiko Kuroda it was ready to provide liquidity if needed to ensure market stability.
Other currencies across Asia and in eastern Europe as it woke up suffered badly on worries that alarmed investors could pull funds out of emerging markets. Poland, where many of the eastern Europeans in Britain come from, saw its zloty PLN= slump 7 percent.
Europe's natural safety play, the 10-year German government bond, surged to send its yields tumbling back into negative territory and a new record low. [EUR/GVD]
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slid almost 5 percent, while Shanghai stocks .SSEC lost 1.1 percent.
Financial markets have been gripped for months by worries about what Brexit, or a British exit from the European Union, would mean for Europe's stability.
"Obviously, there will be a large spill-over effects across all global economies if the "Leave" vote wins. Not only will the UK go into recession, Europe will follow suit," was the gloomy prediction of Matt Sherwood, head of investment strategy at fund manager Perpetual in Sydney.
Investors duly stampeded to sovereign bonds, with U.S. 10-year Treasury futures TYc1 jumping over 2 points in an extremely rare move for Asian hours.
Yields on the cash note US10YT=RR fell 24 basis points to 1.49 percent, the steepest one-day drop since 2009 and the lowest yield since 2012.
The rally did not extend to UK bonds, however, as ratings agency Standard and Poor's has warned it would likely downgrade the country's triple A rating if it left the EU.
Yields on 10-year gilts were indicated up 20 basis points at around 1.57 percent GB10YT=TWEB, meaning higher borrowing costs for a UK government already struggling with a large budget deficit. Standard and Poor's has said it will strip the UK of its triple A credit rating.
Across the Atlantic, investors were pricing in even less chance of another hike in U.S. interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.
"It adds weight to the camp that the Fed would be on hold. A July (hike) is definitely off the table," Mike Baele, managing director with the private client reserve group at U.S. Bank in Portland, Oregon.
Fed funds futures were even toying with the chance that the next move could be a cut in U.S. rates.
Commodities likewise swung lower as a Brexit would be seen as a major threat to global growth. U.S. crude CLc1 shed $3.00 to $47.11 a barrel in erratic trade while Brent LCOc1 fell as much as 6 percent to $47.83 before clawing back to $48.18.
Industrial metal copper CMCU3 sank 3 percent but gold XAU= galloped more than 6 percent higher thanks to its perceived safe haven status. [GOL/]hello
A total of 22 jobs in danger at CHC and another 15 are threatened at Bristow, all based in Aberdeen.
CHC recently decided to stop flying Super Puma helicopters in the wake of a fatal crash in Norway.
A spokeswoman for the British Airline Pilots Association (Balpa) said: "This announcement by Bristow to make pilots redundant comes as a further devastating blow to the professional pilot community in Aberdeen.
"Balpa reps are working tirelessly to try and protect as many jobs as possible and ensure safety remains a priority.
"We have already had an initial meeting with the company and our urgent talks are on-going."
A CHC spokeswoman said: "We are focussed on conducting a thorough and fair consultation, working with employees and unions and supporting those who are affected.
"The offshore industry continues to face challenging conditions and we, like many other businesses, are having to respond to the current environment.
"Difficult decisions must be made but our customers can be assured that safety remains our top priority."hello