Oil Exploration Activity Will Pick Up in 2019

There will be a pick up in oil exploration activity next year, compared to 2018, according to a new report from Fitch Solutions Macro Research.

“On an annual average basis, revenues will be boosted by higher oil prices, while still compressed services costs will flatter margins and bolster cash flows. This will give companies greater flexibility to increase their CAPEX and assume more risk,” the report stated.

“Exploration largely dried up following the oil price collapse in 2014, as companies focused on conserving their cash, gearing their spending towards lower risk, lower cost and shorter cycle projects. However, there are signs that exploration activity is starting to recover,” the report added.

Exploration in frontier and deepwater plays “is showing signs of recovery,” according to the report, which also reveals that exploration appetite is returning in more prospective plays.

Fitch Solutions Macro Research’s report highlights, however, that companies face continued constrains on their exploration spending.

“Financial discipline continues to be a key concern for oil companies globally. Discipline will slacken as prices rise, but fears of peak demand and the longer-term health of the industry will likely keep margins more sharply in focus. This is not a bad thing and improved capital efficiency, and lower services cost, means companies can effectively do more with less,” the report said.

“Arguably a bigger issue is not the level of spending, but how capital is allocated. As the market has recovered, much of the additional cash has been funneled towards shareholders (through dividends and buybacks) rather than towards productive investments. This competition for capital is likely to persist in 2019, continuing to drag on exploration next year,” the report added.

Earlier this month, Rystad Energy announced that there was less appetite for exploration drilling.

“Of the 100,000 wells drilled globally in 2013, four percent were exploration or appraisal wells. In 2018, this share is expected to drop to only two percent of the 70,000 wells drilled,” Rystad said in a company statement published on its website Nov. 9.

“This trend can be observed across both the offshore and the onshore markets and across the globe,” Rystad added.

The company said a willingness to invest more in exploration in 2019 and beyond “is likely.”

Kenya seeks 20pc stake in Turkana crude oil pipeline

Kenya, which currently exports no crude, discovered commercial oil reserves in its Lokichar basin in 2012 and the 800-km (500-mile) pipeline is expected to be built before production is due to start in 2021/22.

Andrew Kamau, principal secretary at the Petroleum and Mining Ministry, said Kenya would seek a 20 per cent stake in the vehicle that will the pipeline who cost has been out at $1.1 billion (Sh113 billion).

“We will be interested in a 20 per cent stake through the Kenya Pipeline Company,” said Mr Kamau in a phone interview.

Tullow operates the Kenyan fields, while the other investors are Canada’s Africa Oil and France’s Total.

Tullow has said the Amosing and Ngamia fields in the basin have estimated contingent resources of about 560 million barrels, with production potentially reaching 100,000 barrels per day.

Besides the pipeline cost, a further $1.9 billion will be needed to build infrastructure linking the crude oil wells to the pipeline. A final investment decision on the upstream and pipeline plans is expected in 2019.

The cost of building the pipeline halved from Sh210 billion following changes in the design of the pipeline, including a reduction in the pipe’s diameter. The larger diameter factored in Ugandan oil.

Kenya opted to build the pipeline alone after Uganda, which had originally agreed to partner with Kenya, dropped the plan and went for an alternative line through Tanzania.

The deep cut in construction budget means taxpayers will carry a lighter debt load.

Turkana oil is classified as waxy and sticky, making it necessary to heat it during transportation, a quality that is expected to determine the design of the pipeline.

Kenya is, however, in the short-term gearing up for an early oil export plan meant to test the global supply logistics and determine the price-point for the Turkana oil.

It has been transporting crude oil from Turkana by road for storage at the defunct refinery in Mombasa in readiness for shipment abroad.

Tullow Oil says it expects the first crude shipments from its Kenyan oilfields in the first half of 2019 and is pricing the product for the market.

Source: Business Daily Africa

Author: Gerald Andae

Kenyatta University SPE Chapter Awards & Gala Dinner

The fourth and last day of SPE WEEK, is a two-event day, the first event being the Trivia competition, and the closing event will be the Gala Dinner and Awards

Definitely the cherry on top, the Awards and Gala Dinner will take place at La Maison Royal, The Terraces, Westlands starting from 6 pm.

The Key highlights of this event will be the two keynote speeches by the SPE Nairobi Section chair, Elizabeth Rogo and A senior government official whose identity we shall soon disclose.

For early registration and seat reservations, kindly use this link. See charges on poster. https://lnkd.in/dGfi5y9

This event promises to be a good event to network and catch up with various players in the industry, with the serene atmosphere, and plenty of food and drink.

Don’t be left out of this year ending spectacle, join us in closing the year at a high, as we look towards the future for better days.

Say Hello To Our New Intern!

It was difficult to say goodbye to John and Nelson at the end of their internship, as they have become part of the Tsavo Oilfield family.

As part of or corporate responsibility and capacity building program, Tsavo Oilfield Services has taken on another intern. We welcome Rose Getrude Atieno Odongo to Tsavo Oilfield Services.

Effect of Hurricane Harvey on Global Petroleum Prices

Hurricane Harvey’s eye recently made landfall west of Cameron, Louisiana, carrying on over a week-long trail of devastation. The hurricane seems to also be stirring a storm in the Oil industry. Over the past few days, the global crude oil prices have taken a dip, and this may partly have been fueled by Hurricane Harvey’s hard-hitting effects on Houston. In recent times the oil and gas cycle has made for a great reading, with productions cuts by OPEC, the increasing spread between Brent and WTI crude, and increased crude oil inventories around the world.

The disruption caused by Hurricane Harvey would have been expected to have exerted some pressure on the global crude prices. However, that has not been the case. This in part has been caused by the large oversupply and high levels of storage before the storm. One of the reasons why crude oil prices are falling could be the fact that about 3MM bpd of crude can’t be refined into gasoline and other petroleum products. This has been occasioned by the partial/total shut down of some of the largest refineries in the country, including the largest, Aramco’s Port Arthur Refinery. Implying, that about 16% the country’s refining capacity is now offline. The upstream sector is also feeling the heat, with about 75 exploration rigs drilling in the Eagle Ford Shale Play have been idled. Altogether, Oil and Gas companies have shut down nearly ¼ of production from the Gulf Coast, representing about 5% of the national output.

Gasoline prices look set to rise with the closure of the Colonial pipeline, which had been operational throughout the hurricane, putting the East coast at a precarious position. Colonial carries 2.5 million bpd of refined products or about an eighth of all the barrels consumed in the USA. This landscape has seen gasoline futures soar to a 25-month high, of keen interest however, will be the Department of Energy’s decision to authorize a release of crude oil from the strategic reserve in order to help Phillips 66 get its Lake Charles refinery up and running. It will be interesting to see if this gesture is extended to other refineries that have been forced to go offline and if this will be the catalyst that starts a decrease in the excessive crude inventories? We are likely to see an increase from the 2,205,000 annual bpd of hydrocarbon gas liquids, other liquids and finished petroleum products imported in 2016 from Europe and Asia to fill the gap in the short term.

Thankfully the storm is set to weaken in the days to come, leaving time for the industry to gradually heal. Hurricane Harvey has not had such a profound impact on world crude prices, and is unlikely to have a profound impact in the foreseeable future. The eventual hit to U.S. oil demand will ultimately be larger than the impact on supply, Goldman Sachs predicted, and that forces the price down, not up.

Meet Our Interns

We believe in career development and an important component of that is internship.
Internships are an important component of our Capacity Building program.
In conjunction with Kenyatta University in Nairobi, we have accepted two high potential 4th year Petroleum Engineering students, and active SPE-KU board members – (L-R) John Kililo (President) & Nelson Lutta (Vice-President) for a two month attachment from July 2017.

Read more “Meet Our Interns”

Kenya Local Content Exchange

Panelist (Podcast) - (L-R)
 
Dorival Bettencourt - DAI Energy & Resource Group
 
Anthony Paul - ACES
 
Elizabeth Rogo - Tsavo Oil Field Services
 
Dr. Melba Wasuna - Strathmore University
 
Eng. James Mwangi - Kurrent Technologies Ltd
 
Ken Kiumbe - National Oil Corporation of Kenya
 

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