The FPSO Maria Quitéria will be deployed offshore Brazil, in the Jubarte field in the Campos basin.
The oil and gas industry is prospering at the moment, with production and consumption in equilibrium. Paradoxically, the industry is currently very profitable yet it faces significant downsizing in the long term if climate goals are to be met. The industry faces two linked challenges: how to increase sustainability and how to manage the transition to greener types of energy.
By James Chater
Outlook
The price of oil peaked in early 2022 as the world market recovery from Covid 19 got into full swing and the Russia-Ukraine conflict escalated. It touched almost 120 dollars per barrel before descending in the second half of the year. It is now hovering around 80. This is moderately good for both consumers and suppliers; in other words, the market is perceived as well-balanced. OPEC is hopeful that demand will increase in late 20241 – although the IEA predicts a slowing of demand in the long term as greener energy forms emerge2.
The oil & gas sector is currently enjoying record profits, and therein lies a paradox and a dilemma. The paradox is that, despite these profits, the fossil fuel industry faces significant downsizing as the transition to greener energy gains momentum. The dilemma is that privately owned, publically quoted companies all have an obligation to their shareholders but also face extreme moral and legal pressure to act in ways that respect the reality of the climate emergency.
The short-term outlook hinges, as always, on geopolitical factors. Will the Middle East flare up again? Who will win the US presidential election? The two contenders’ attitude to the fossil-fuels industry were sharply opposed, with Donald Trump being more favourable than his opponent, Kamala Harris, who was likely to take a tougher approach.
The long-term outlook probably depends on states’ ability to grasp the nettle and create legal frameworks that help fossil fuel companies transition quickly enough to become providers of green energy, thereby preventing climate breakdown.
Decommissioning
A big headache lies ahead for the oil & gas industry: decommissioning. Already, some US states are battling the US federal government, which has required offshore companies to provide USD 7 million in financial assurances to meet decommissioning costs. Many platforms the world over are nearing the end of their life, with many between 25 and 30 years old; some have exceeded their design life. Old infrastructure can either be removed completely at enormous cost and effort or – perhaps more realistically – converted into artificial reefs for recreational use. This issue looks likely to generate much discussion and legislation in the years ahead.
Projects
Despite a finding from the IEA from 2021 that no new coal, oil or gas fields are required to meet the goal of zero emissions by 2050 (“Net Zero by 2050: A Roadmap for the Global Emissions”, p. 21, 51 etc.), in 2024 it looks very much like “business as usual”, to judge from the number of projects operating or under construction.
A crucial factor in the supply-demand balance is the recent upsurge of activity in South and Central America. After years of stagnation, Brazil’s Petrobras has been increasing its output significantly. And a new FPSO, the Maria Quitéria, is en route from China and should arrive at its destination offshore Brazil, in the Jubarte field in the Campos basin’s pre-salt layer, in the third quarter. In Guyana, another offshore hotspot, ExxonMobil is adding a further FPSO, Whiptail, built by SBM Offshore. ExxonMobil has also unveiled its seventh project, a 30-well drilling campaign named Hammerhead, in the Stabroek block, and enlisted Fulcrum LNG to develop the region’s natural gas resources. Mexico is developing its offshore Zama oilfield, for which the French company DORIS will supply two offshore platforms, 68 km of pipelines and cables, and a new onshore facility. In Argentina, TotalEnergies and Wintershall Dea have started drilling in the Fénix field offshore Tierra del Fuego and are planning three development wells. In North America, Shell made the Final Investment Decision to develop the Sparta deepwater gas field in the Gulf of Mexico. The semi-submersible FPU will be built by Seatrium.
Another region that is evolving rapidly is Africa. In Equatorial Guinea, a number of projects are under way, and Guinea Chevron signed a production-sharing deal with GEPetrol for two offshore blocks. TotalEnergies has green-lighted the Ubeta gas field onshore Nigeria, with start-up envisaged for 2027. Angola is attracting investment with a series of licensing rounds, the most recent of which offered 55 blocks for exploration and development. Among the investors are Chevron, TotalEnergies and ExxonMobil, as well as a local producer, Sonangol. In Senegal, Woodside has achieved first oil from its Sangomar field. Two relative newcomers are Morocco, which will see the development of the Loukos gas field, operated by Chariot, and Namibia, which is believed to possess abundant hydrocarbon resources yet to be explored. In 2022 TotalEnergies discovered the Venus-1 oilfield, the largest ever Sub-Saharan oil find. Shell has also discovered oil in the Orange basin, as has the Portuguese company Galp, while BP is among those exploring. But these recent discoveries are part of the above-mentioned dilemma: exploiting these undeveloped resources risks breaching climate accords3, but denying relatively poor countries these economic opportunities seems unfair.
In Europe, the big news is that Norway’s Equinor has approved 19 new oil and gas developments totalling a value of USD18.5 billion. These include Aker BP ASA’s Yggdrasil and Valhall PWP og Fenris in the North Sea and Equinor ASA’s Irpa in the Norwegian Sea.
In Asia, the news is led by Petronas’s numerous discoveries off the coast of Malaysia. As a result, the company has signed agreements to exploit two blocks off the coast of Sarawak. Further south, New Zealand has announced it will lift its ban on offshore exploration, citing the need to develop its economy by boosting gas production.
Sustainability
Fossil fuel companies are actively pursuing ways of decarbonising their activities and eliminating waste. These include investing in carbon capture and storage (CSS), green energy (including the powering of fossil fuel extraction), 3D printing, methane leak detection, and the use of hydrogen in refining. Here, we examine the first three.
CSS – still a young industry, already plays an important role in current projects. CO2 is already reinjected into existing wells to boost their productivity. Apart from separation of COsub>2 from fossil fuels, other technologies exist: carbon mineralisation, whereby the substance is stored in carbonite minerals, possibly to be recycled; and Direct Air Capture (DAC), which uses heated limestone to capture the carbon and bury it. Heirloom began operating North America’s first commercial DAC facility in Tracy, California and is building more facilities in Louisiana. In June, Denmark for the first time allowed companies to investigate carbon storage in Danish subsoil. Norway has likewise permitted six companies, including Equinor and Aker BP to store carbon on the Norwegian Continental Shelf.
Current technologies for reinjecting COsub>2 into the seabed are highly energy-intensive. However, TechnipFMC and Sulzer Flow Equipment have collaborated to develop a new high-pressure separation technology to separate COsub>2-rich natural gas from oil at the seabed. The technology promises to improve energy efficiency on FPSOs while reducing costs and emissions.
Green energy – Several companies are transitioning to greener types of energy production such as wind, solar, bio-energy and hydrogen. Among the heavyweights in this field are BP, Enbridge, TotalEnergies, Shell, Eni and Equinor. They have seen the writing on the wall and are positioning themselves to become providers of the energy of the future. However, according to Greenpeace, this process is not happening quickly enough, and companies’ green investments remain tiny in comparison to their investments in both fossil fuel and CSS; furthermore, earlier this year BP, TotalEnergies and Shell announced they were scaling back their green investments4. The whole transition process would be considerably sped up if subsidies and tax breaks for fossil-fuel production were to be phased out.
3D printing – already well established in aerospace, medicine and other industries, 3D-printing has yet to take hold in upstream oil and gas. Some components have been 3D-printed, but there is much more that can be done. The benefits of local 3D-printing of components on remote locations such as rigs are too great to ignore: they include reducing lead times and eliminating storage costs. The additive approach to manufacturing consumes less materials and generates far less waste than the traditional subtractive approach.
DNV has set up Global Additive Manufacturing Technology Centre of Excellence in Singapore and is active throughout the world in promoting the technology. Local initiatives have been undertaken by Jordan, the UAE, Saudi Arabia, Oman and Egypt. Examples of components that could be 3D printed are control-valve components, casings and pump manifolds. Exxonmobil, Chevron and TotalEnergies have all worked with 3D manufacturers.
Stainless steel
Oil & gas continues to be a very important market for stainless steel and CRAs. No doubt, this fact drove the decision by the tubular maker Corrosion Resistant Alloys to set up a facility in Brenham, Texas. Recent deals include Butting’s delivery of 290 kilometres of mechanically lined pipes for three offshore projects in Brazil (2023); Nippon Steel’s renewed contract for OCTGs for Equinor; Vallourec’s five-year contract for tubes and connections for Equinor’s Brazilian operations; Alleima’s umbilicals contract for a Brazilian offshore project; and Vallourec’s contracts to supply tubes and connections for Abu Dhabi’s ADNO. Alleima recently unveiled a new alloy for subea umbilicals. SAF™ 3007 duplex stainless steel is designed to offer superior strength, fatigue properties and corrosion resistance, all at reduced cost. The alloy’s lighter weight and thinner walls contribute to streamlined manufacturing processes, in line with the drive to greater sustainability. Specifically, the new tubular material is designed as an alternative to the standard grade to SAF™ 2507. Compared to the latter, the new grade features additional chromium (30%), reduced molybdenum (-1%) and introduces tungsten at 3.4%. The new grade will be rolled out at the end of 2024.
References
- https://gulf.omeclk.com/portal/wts/ug%5EcnDykzSaqFxyd894aB k8cDL48lpzDE%5BGrl9a
- https://worldoil.com/news/2024/6/12/slowing-demand-growth-and-surging-supply-put-world-oil-markets-on-course-for-major-surplus-iea-reports/?oly_enc_id=6911F5579689H1Z)
- https://www.zero.cam.ac.uk/who-we-are/blog/news/hundreds-uk-scientists-and-academics-urge-prime-minister-rishi-sunak-prevent
- https://balkangreenenergynews.com/greenpeace-oil-companies-investing-pocket-change-in-renewable-energy-sources/
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