Home | Contact ST  

Follow ST

Offshore Oil & Ocean Engineering


October 2013 Issue

Oil Companies Put Arctic Drilling Plans on Hold
U.S. Interior Secretary Sally Jewell, who visited Alaska and met with the oil industry, said that oil companies seemed to be in no hurry to continue exploring Arctic waters in 2014, Reuters reported. "I have not heard from any companies an urgency to go forward until they're ready and they are confident they can do it in a safe and responsible way," she said.

Shell (The Hague, Netherlands) has had a troubling time attempting to drill in the frigid waters offshore Alaska. It has spent about $5 billion so far on its efforts in the region. Shell's problems include the drillship Kulluk being grounded in a storm, which led to the Interior Department beginning to establish standards for Arctic drilling in U.S. waters in the Beaufort and Chukchi seas and transit areas between drill sites. These standards are expected to be established by year's end. "That would give companies an opportunity to determine whether they want to do anything next summer," Jewell said.

Shell's plans for drilling in Alaska remain up in the air. "Future exploration plans for offshore Alaska will depend on a number of factors, including the readiness of our rigs and our confidence that lessons learned from our 2012 drilling program have been fully incorporated," Shell said. Meanwhile, the company has conducted marine surveys in the Chukchi this summer.

Other companies with expressed interest in the Arctic are also putting their drilling plans on hold. ConocoPhillips (Houston, Texas) has abandoned its drilling plans in the Chukchi for 2014 and is reevaluating. Statoil (Stavanger, Norway), Eni (Rome, Italy) and Repsol (Madrid, Spain) also have Arctic offshore leases, but no formal plans for exploration.

BOURBON Bareboat Charter Period Begins for Nine Vessels
Following the transfer of ownership of the first nine vessels to the ICBC Financial Leasing Co. Ltd. (Binhai, China) as part of a 51-vessel sale and bareboat commitment and the payment of $144 million, the 10-year bareboat charter period of those nine vessels by BOURBON began in September.

The transfer of the remaining 15 vessels currently under operation is expected to be completed within two months, and the transfer of the 27 vessels under construction within 10 months.

On April 9, the terms of the first phase of the "Transforming for Beyond" action plan were signed with ICBCL for a 10-year fixed rate (10.66 percent) bareboat charter of up to 51 supply vessels either in operation (24 on that date) or under construction (27, with delivery expected before June 2014) for a total of up to $1.5 billion.

Slow Start For Megaport in Kenya
If Kenya secures regional commitment for the $25.5 billion Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) project, it could have a megaport by 2030, including a pipeline, according to Reuters. Commercial oil discoveries in the country and in Uganda bode well for the project, but more money is needed to realize the vision of an export hub for east African oil.

East African oil's potential is big: Exports could hit 500,000 barrels per day from Kenya and Uganda. While work on the port has begun, Kenya faces tough competition from a port in Tanzania being supported financially by China.

"The big obstacle is really a political one and making sure all the discussions that need to happen, happen" between the countries and groups involved, said Clare Allenson of the Eurasia Group.

The current plan includes 32 berths at the port, which will cost an estimated $5.5 billion. More money will be needed to make the port a solid export hub, which means building roads and rails linking south Sudan and Ethiopia. But Kenya is facing a budget deficit and has allocated only $48 million to the project this year.

"A lot of the elaborate elements of the project are not going to reach fruition," Patrick Smith, editor of the Africa Confidential newsletter, said. But he added, "On the core oil terminals, I think they'll struggle, but I think they'll get the money for it."

Kenya needs to convince potential investors of the case for building the megaport as opposed to expanding and upgrading Mombasa.

"I don't see how container shipment through Lamu port can be the business case for the port," said Steve Felder, east Africa managing director of A.P. Moller-Maersk (Copenhagen, Denmark).

In addition to financial hurdles, there is government concern that the development will disturb coastal and marine wildlife.

$102 Million in Bids for Western Gulf Sale 233
The U.S. Department of the Interior's Bureau of Ocean Energy Management held Western Gulf of Mexico Lease Sale 233, which offered 20.7 million acres and attracted $102,351,712 in high bids for 53 tracts covering 301,006 acres on the U.S. Outer Continental Shelf (OCS) offshore Texas. A total of 12 offshore energy companies submitted 61 bids.

The Western Gulf of Mexico Lease Sale builds on the first two auctions in the Outer Continental Shelf Oil and Gas Leasing Program for 2012 to 2017, a 39-million-acre Central Gulf offering held in March, which netted almost $1.2 billion high bids, and a 20-million-acre Western Gulf offering held last November that netted nearly $134 million.

Western Gulf of Mexico Lease Sale 233 offered all unleased and nonprotected areas in the Western Gulf of Mexico planning area, including 3,864 tracts from nine to more than 250 miles off the coast, in depths ranging from 16 to more than 10,975 feet. BOEM estimates the lease sale could result in the production of 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas.

The sale's highest bid on a single tract was $30,583,560 submitted by ConocoPhillips (Houston, Texas) for Alaminos Canyon Block 475. ConocoPhilips also submitted the highest total amount in bonus bids, totaling $50,323,180 on 29 tracts.

BOEM received at least one bid within the 3 statute mile boundary area north of the continental shelf boundary between the United States and Mexico.


-back to top-

Sea Technology is read worldwide in more than 110 countries by management, engineers, scientists and technical personnel working in industry, government and educational research institutions. Readers are involved with oceanographic research, fisheries management, offshore oil and gas exploration and production, undersea defense including antisubmarine warfare, ocean mining and commercial diving.