OSV owners are being cheered by the encouraging signs of increased offshore drilling activity and capital expenditure coming out of Southeast Asia
Increased drilling activity in Southeast Asia will see two additional jackup rigs and one floater come online in 2019, according to M3 Marine chief executive Capt Mike Meade, speaking at the Annual Offshore Support Journal Conference in February this year. This is in addition to the current active fleet of 83 drilling rigs, with 47 jackup rigs, two mid-water floaters, four deepwater floaters, 12 ultra-deepwater floaters and 18 tender rigs.
Other signs of recovery highlighted by Mr Meade involved the reactivation of two cold-stacked rigs in the region and floater utilisation rates jumping up by 61% after years in the doldrums. There are also 12 idle drilling rigs that have contracts in hand and due to start work in Q1 and Q2 of 2019.
Still, utilisation rates for anchor-handling tug supply (AHTS) and platform supply vessels (PSVs) were weak in the region, driven by chronic oversupply. There are about 400 OSVs cold stacked in Asia that have been laid up for more than two months. As of December 2018, the total utilisation of AHTS vessels was about 54%, with PSVs at 48%, according to M3 Marine data.
Day rates for high-spec AHTS vessels with 12,000 bhp outputs edged up slightly towards the end of last year, hitting about US$9,000/day in November 2018, matching the year’s previous high in January.
Day rates for large PSVs with clear decks of 1,000-1,200 m3 in November 2018 actually slipped below the year’s high of US$7,500/day in January.
Growth in Malaysia and Indonesia
US-based McDermott International, Inc., which has a strong presence in Southeast Asia, has been awarded two separate contracts to provide the transportation and installation of offshore structures, pipelines and pre-commissioning work for Pan Malaysia field development offshore Sarawek, Malaysia.
One of the contracts is with Sarawak Shell Berhad for the transportation and installation of jackets, topsides and pipelines for the Gorek gas field. The other contract is with Sapura Exploration and Production (SEP) for the transportation and installation of jackets, topsides and pipelines for the Larak and Bakong gas fields. McDermott will also fabricate risers and spools for SSB and SEP.
“One roadblock for local OSV owners is that their vessels are locked into long-term, loss-making contracts, some of which are for work that has not yet commenced”
“These two contracts give McDermott the opportunity to strengthen our long-standing relationship with Sarawak Shell Berhad and develop a new relationship with Sapura Exploration and Production,” said McDermott senior vice president for Asia Pacific Ian Prescott.
McDermott’s Derrick Barge 30 will be used to support the Pan Malaysia project (source: McDermott)
McDermott’s heavy-lift installation vessel Derrick Barge 30 will support the work with its pipelay equipment, boom crane, with a main hook capacity of 2,794 tonnes, two deck cranes and construction equipment. Derrick Barge 30 also has accommodation for 302, with a medical clinic, galley, mess room, conference room and customer offices.
McDermott’s project management team will be based in Kuala Lumpur in order to maximise the use of its Malaysian workforce to meet the local content requirements. Fabrication of the risers and spools will be performed at McDermott's global execution centre in Batam, Indonesia. The offshore campaign is expected to begin in Q2 2019.
“We are extremely pleased to secure the Pan Malaysia field development work, which enables us to support the growth of the Malaysian oil and gas sector and the country," said Mr Prescott.
Mr Meade noted that shallow-water drilling and increased IMR, repair and subsea activities by Malaysia oil and gas company Petronas should push up demand for OSVs.
One roadblock for local OSV owners is that their vessels are locked into long-term, loss-making contracts, some of which are for work that has not yet commenced. This is preventing them from bidding on other projects. Other owners lack the capital to reactivate their laid-up vessels, said Mr Meade.
In Indonesia, Italy’s Eni has drilled and tested the Merakes East prospect in the East Sepinggan block. The well was drilled to a depth of 3,400 m in 1,592 m of water depth and recorded an excellent gas deliverability of the reservoir. Eni plans to submit a field development plan for the commercial exploitation of this new discovery. The well is expected to deliver 70 MMscf/d of gas and 1,000 b/d of associated condensates.
“We continue to see recovery in the market, driven by an increase of capital expenditures”
The prospect is 33 km southeast of the Eni-operated Jangkrik field and 3 km east of the Merakes field.
The proximity of this new discovery to the Merakes field is in line with the company’s near field exploration, which will allow it to maximise the synergies among the subsea infrastructures as well as to reduce costs and time for the execution of the future subsea development.
Due to cabotage laws in Indonesia, foreign-flagged vessels of greater than 12,000 bhp and IMR-type vessels are more likely to get work, Mr Meade pointed out. He said OSV owners had good spot utilisation in 2018 and should continue to enjoy 70-80% utilisation this year.
Apart from Pan Malaysia, McDermott International is currently executing the ONGC’s 98/2 project, together with its consortium partners BHGE and L&T Hydrocarbon Engineering in India. Working with BHGE, McDermott is also delivering an engineering, procurement, construction, installation and commissioning (EPCIC) project for POSCO Daewoo’s Shwe project in Myanmar. “In India, we have started the offshore campaign for Reliance’s KG-D6 project, which is going according to plans,” said a McDermott spokesperson.
PV Drilling rebounds in Vietnam
M3 Marine’s Mr Meade said there were five jackup rig awards either confirmed or pending final approvals for the region. Two of the contracts went to regional contractors, with the other three won by Vietnam’s Petrovietnam Drilling and Well Services Corporation (PV Drilling). Since the start of the year, PV Drilling has secured five drilling contracts, which is welcome news for the company following the prosecution of its former president and chief executive Do Van Khanh by Vietnam’s Ministry of Public Security last year.
According to a statement by the company, the investigation focused on a five-year period from August 2010 to November 2015 during Mr Khanh’s leadership at PV Drilling. Mr Khanh resigned from the company on 31 November 2018. The prosecution is completely unaffected to PV Drilling’s current business activities during the time Mr Khanh worked at PV Drilling as chairman, from December 2015 to 30 November 2018.
“At PV Drilling, Mr Khanh has always accomplished all the tasks assigned, significantly contributed to corporate governance and restructured PV Drilling in responding to the oil price slump, thereby, reducing the negative impacts on PV Drilling's business performance. His contributions are highly appreciated by PV Drilling's management and staff.”
Thailand needs gas
Thailand produces about 60% of its power generation from natural gas. The country’s Department of Mineral Fuels is required to meet the country’s domestic gas demand through the management of its offshore gas fields or LNG imports. One crucial element of the plan is to prepare the bidding round for concessions for the Erawan and Bongkot group, which are due to expire in 2022-2023. The two groups are the crown jewels among Thailand’s gas fields, accounting for a combined 75% of the Gulf fields’ outputs of natural gas.
In 2018, Thailand produced 52.67 mmbbl/y of crude oil, 35.5 8 mmbbl/y of condensate and 1,062.53 Bcf/y of natural gas.
Thailand’s PTTEP has plans to invest US$16Bn domestically and internationally over the next five years.
Chevron, which is leading Indonesia’s first ultra-deepwater development in the Kutei Basin, is the top oil and gas producer in Thailand, supplying about 35% of the country’s natural gas demand.
Myanmar has drafted a new petroleum law to attract foreign investment and exploration interest. Its current law mandates high taxes on profits, heavy royalty obligations and takes 77% of revenues generated. Drilling in the Shwe, Shwe Phyu and Mya gas fields in Blocks A-1 and A-3 is expected to begin in the latter part of 2019.
Australia, LNG leader
Australia is the world’s largest exporter of LNG, surpassing Qatar back in November 2018. A big part of that stems from Shell’s floating LNG vessel Prelude. Moored approximately 475 km north-north east of Broome in Western Australia, Prelude will produce 3.6 mta of LNG for the next 20 to 25 years.
McDermott’s lay vessel 108 at the Ichthys gas field in the Timor Sea, off of the northwestern coast of Australia (source: McDermott)
Another key gas project in Australia is the Ichthys project. “We are in the final delivery phase for one of the world’s largest subsea field developments, INPEX’s Ichthys project, which is a US$2Bn project that we won in January 2012,” said a McDermott spokesperson. “Apart from that, we have a tank storage project for Puma Energy and two separate FEED studies for Western Gas’s Equus Gas project and Woodside Energy’s Scarborough Floating Production Unit; both have the potential to progress into full EPCI scope.”
McDermott Australia Pty Ltd has been awarded a contract to undertake engineering studies for the floating production unit, which includes the option to progress to an engineering, procurement and construction contract for execute phase activities.
Australia’s Woodside Energy also awarded three other contracts for front-end engineering design activities for the proposed Scarborough project.
Subsea Integration Alliance, a consortium between OneSubsea Australia Pty Ltd and Subsea 7 Australia Contracting Pty Ltd, has been awarded a contract to undertake engineering studies for the subsea umbilical risers and flowlines, with the option to progress to an engineering, procurement, construction and installation contract for execute phase activities. Saipem Australia Pty Ltd has been awarded a contract to provide export trunkline engineering support service,s with an option to execute line pipe coating and installation activities. Intecsea Pty Ltd has been awarded a contract for export trunkline engineering. A FID is expected on the Scarborough project in 2020.
Singapore independent oil company Jadestone Energy Inc. has signed a rig contract for infill drilling on the Stag oilfield, located offshore Australia. Ensco Australia Pty Limited has agreed to provide the Ensco 107 jackup drilling rig to Jadestone, after completion of its current operation in Dampier, Western Australia. Jadestone intends to drill the Stag-49H well from the Stag wellhead platform, targeting approximately 1.2 mmbbl of incremental oil reserves from the field.
Jadestone is planning to spud the Stag-49H well in early March 2019 and drilling operations are expected to take approximately 34 days. Future Australia projects include the Caldita/Barossa, which is due for FID this year, with production starting in 2023, and Browse, due for FID in 2021 with production starting in 2026.