Brent crude oil continues to rally, trading at US$65.03 for April contracts, with expectations of it rising to US$75 per barrel by Q3 2021, according to Goldman Sachs’ commodities team
The investment bankers are forecasting a deficit of 900,000 barrels per day in H1 2021. Saudi Arabia continued to cut production for February and March, while other OPEC+ members have pledged to keep their production output levels steady.
Global offshore drilling levels remained relatively stable for week eight 2021.
There were 324 offshore jack-up rigs active, down two units week-on-week. Meanwhile contracted floaters – semi-submersibles, drill ships and other rigs – jumped two units for the week to 108, reaching its highest level for the year according to Westwood Global Energy’s RigLogix. RigLogix tracks weekly global offshore drilling activity.
While jack-up activity and floater activity remained steady in the North Sea during the week, Stena Drilling recently reported it secured a firm one-well contract for 76 days from Petrofac for a campaign in the UK continental shelf. Under the contract, the semi-submersible Stena Don will begin operations from 1 to 31 July.
In the US Gulf of Mexico, 16 offshore rigs were actively drilling, down six year-on-year, according to Baker Hughes, which tracks the data on a weekly basis.
US Senator Dianne Feinstein (D-California) has filed legislation seeking to permanently ban offshore drilling off California, Oregon and Washington state. No new offshore drilling in federal waters in the Pacific has been allowed since 1984 and California banned new offshore drilling leases in state waters in 1994. The bill is currently with the Senate Natural Science and Resources Committee.
The legislation follows President Biden’s executive order placing a moratorium on new offshore and onshore oil and gas leasing on federal lands. The moratorium does not impact existing leases.
While the Biden Administration is pausing offshore drilling lease sales on federal acreage, other countries such as Malaysia are incentivising investors to undertake more extensive exploration activities.
Incentives will be attached to exploration at six discovered fields that will be among 13 offshore exploration blocks in Malaysian waters offered by state energy company Petronas at the upcoming live-streamed Malaysia Bid Round (MBR) 2021 launch on 26 February. Additionally, this year’s MBR offers four deepwater blocks adjacent to the coast of Sarawak and Sabah which saw prominent exploration discoveries in recent years.
Petronas reported last week that Block SB405, off the coast of Sabah in 100 m of water, was awarded to ConocoPhillips East Malaysia Limited, a subsidiary of ConocoPhillips and Petronas Carigali Sdn Bhd.
Commenting on MBR 2021, Petronas senior vice president of Malaysia Petroleum Management Mohamed Firouz Asnan said, "the event will offer larger block areas coupled with flexible bidding options and low entry costs. We will also be offering relatively new fiscal terms to be applied in the production sharing contracts, such as enhanced profitability for the shallow water blocks, the late life assets and small field assets which are designed to match the risk and rewards of the investments with the type of assets available.”
Mr Asnan said “These terms have been formulated based on the feedback from industry players, taking into account market conditions, further strengthening Malaysia’s position as the oil and gas hub in the growing and thriving market of southeast Asia. Besides improved fiscal terms, Malaysia offers good network connectivity by way of established world-class infrastructure which enables ease of monetisation,” he added.
Malaysia is looking to develop its stranded gas resources and evolve into an LNG hub in southeast Asia. First gas was recently produced from deep water at the Rotan and Buluh fields in Block H off Sabah, by operator PTTEP Sabah Oil Limited. Produced in 1,100 m of water, Malaysia’s first deepwater gas project has a target production capacity of 270M standard cubic feet per day.
The first gas from the project was received by Petronas’ second floating LNG vessel PFLNG Dua for liquefaction and export as LNG.