Amec Foster Wheeler to Create 300 Jobs in Brunei After 'Major' Contract Win
Amec Foster Wheeler revealed Friday that it has secured a ‘major’ contract with Brunei Shell Petroleum Sdn Bhd (BSP) for the rejuvenation of assets in Brunei, which will see the company create over 300 local jobs.
As part of the contract, significant local development is planned, with the local supply chain anticipated to develop skills and capabilities through the lifetime of the project.
The work includes concept, Front End Engineering Design (FEED), detailed design, construction, completions and commissioning, marine management, fabrication management, procurement, and project management. Scheduled to run for five years from March 2017, with two one-year options to extend, the contract focuses on Brunei Shell Petroleum's oil and gas assets in the South China Sea.
“I'm delighted that Amec Foster Wheeler has been selected to deliver such an important contract for Brunei Shell Petroleum,” Amec Foster Wheeler President of Oil, Gas & Chemicals John Pearson said.
“We are bringing together Amec Foster Wheeler's unique combination of brownfield expertise, 'More 4 Less' methodology, global capabilities, and long-term customer relationships to maximize the value of Brunei Shell Petroleum's assets in Brunei,” he added.
Amec Foster Wheeler's 'More 4 Less' lean engineering methodology, originally developed to meet the challenges of the mature North Sea oil and gas industry, will play an important role in the contract with Brunei Shell Petroleum, the company said in a statement.
“Efficiencies from 'More 4 Less' have delivered Amec Foster Wheeler's customers savings of up to 60 percent in time and cost, compared to traditional approaches,” an Amec Foster Wheeler representative said.
Russia's Gazprom Says Launch Of Baltic LNG Postponed Until 2022-2023
MOSCOW, March 10 (Reuters) - Russian gas giant Gazprom has postponed the launch of its Baltic liquefied natural gas (LNG) plant in the Leningrad region until 2022-2023, it said in a prospectus for a Eurobond issue, a copy of which was obtained by Reuters on Friday.
The company may revise the commissioning date after the project documentation is complete, Gazprom said.
In June 2016, it signed a memorandum of understanding on the project with oil major Royal Dutch Shell, according to which Gazprom said it planned to build the plant by the end of 2021.
Repsol Makes 'Largest US Onshore Discovery in 30 Years'
Repsol and partner Armstrong Energy stated that they have made the largest U.S. onshore conventional hydrocarbons discovery in 30 years.
The Horseshoe-1 and 1A wells drilled during the 2016-2017 winter campaign confirm the Nanushuk play as a significant emerging play in Alaska’s North Slope, Repsol said in a company statement.
Contingent resources identified with the existing data in Repsol and Armstrong Energy’s blocks in the Nanushuk play in Alaska could amount to approximately 1.2 billion barrels of recoverable light oil, Repsol revealed.
The Madrid-based energy company has been actively exploring Alaska since 2008, and since 2011 the company has drilled multiple consecutive discoveries on the North Slope along with partner Armstrong.
“The successive campaigns in the area have added significant new potential to what was previously viewed as a mature basin,” a Repsol representative said in a company statement.
“Additionally Alaska has significant infrastructure which allows new resources to be developed more efficiently,” the representative added.
Repsol holds a 25 percent working interest in the Horseshoe discovery and a 49 percent working interest in the Pikka Unit. Armstrong holds the remaining working interest and is currently the operator.
The Horseshoe discovery extends the Nanushuk play more than 20 miles south of the existing discoveries achieved by Repsol and Armstrong in the same interval within the Pikka Unit during 2014 and 2015, where permitting for development activities are underway.
Preliminary development concepts for Pikka anticipate first production there from 2021, with a potential rate approaching 120,000 barrels of oil per day.
The Horseshoe-1 discovery well was drilled to a total depth of 6,000 feet and encountered more than 150 feet of net oil pay in several reservoir zones in the Nanushuk section. The Horseshoe-1A sidetrack was drilled to a total depth of 8,215 feet and encountered more than 100 feet of net oil pay in the Nanushuk interval as well.
Wood Group Buys Amec Foster For $2.7B To Target Oil Upturn Benefits
March 13 (Reuters) - Oil services company Wood Group has agreed to buy rival Amec Foster Wheeler for 2.2 billion pounds ($2.7 billion), seeking rewards from the fast-growing U.S. shale energy sector.
Wood Group, a 35-year old company based in the Scottish city of Aberdeen, grew out of helping companies in the now declining North Sea oil basin. It said the deal would enable it to expand in areas best placed to benefit from an upturn in commodity prices, notably the U.S. onshore shale oil and gas sector.
"We think we have positions in those parts of the oil and gas markets that will see growth first," Wood Group Chief Executive Robin Watson told analysts.
Oil companies have had to adjust to lower prices after crude prices tumbled from a peak of over $100 a barrel in 2014 but a recent uptick above $50 a barrel has spurred output especially in the U.S. where production costs are low.
Amec, which counts major oil companies such as BP, Shell and Exxon Mobil among its clients, had been planning to announce a 500 million pound rights issue next week and to suspend dividend payments to cut costs and boost cashflow. The rights issue has been called off.
Watson said the acquisition would dilute its oil and gas unit to 60 percent of the business, down from 85 percent now and 95 percent before the oil price collapse. The weighting will instead increase for new businesses, such as engineering design services to power plant projects or consultancy services to mining companies.
"We're in a part of the cycle where having 60 percent oil and gas is a good place to be," Watson said.
Cost Cuts
Amec Foster Wheeler, itself the product of an expensive merger in 2014 just before the oil market downturn, has been struggling with high debt. A year ago it removed its long-serving Chief Executive Samir Brikho who led Amec's $3 billion acquisition of engineer Foster Wheeler.
The paper deal valued Amec Foster Wheeler shares at 5.64 pounds each and they traded just below that level at 1330 GMT. Wood Group shares also responded positively, gaining 3 percent to 7.75 pounds.
Amec Foster Wheeler investors will receive 0.75 new Wood Group shares for each share held, the company said. They will own 44 percent of the merger group but Wood Group executives will take the top jobs.
Chief Executive Watson and Chief Financial Officer David Kemp will continue with their current jobs in the new group. Wood Group Chairman Ian Marchant will also retain his role.
Wood Group said it expected annual cost savings to reach at least 110 million pounds, while the one-off costs would be around 190 million pounds.
Savings include "corporate and administrative efficiencies", the companies said, hinting at job cuts in places where there is overlap. The merged company will employ 64,000 people.
"While materially above our AMFW valuation, we can see WG consolidating its market-leading UK North Sea business, expanding product lines in the US and possibly increasing the scope for asset sales," Jefferies analyst Mark Wilson said.
Gazprom Gives Russians the Lowest Tariffs in 14 Years
The Federal Antimonopoly Service of Russia (FAS) has decided that, from July, household gas is to rise in price by 3.9 percent. It sounds a lot, but if you "divide" this throughout the whole year, it turns out that the growth of the tariff will be lower - 1.8 percent.
Whatever the grannies say in their entrance-hall gossip sessions, Russians have not seen such a low price growth in at least the last 14 years. According to the Gazprom data, the last time wholesale prices for gas were so raised was in 2002 - by 1.6 percent.
In December, monopoly supplier came out with predictions for the next few years: “tariffs will grow by 3-3.5 percent per year,” Andrei Kruglov, Gazprom's Deputy Chairman of the Board, told journalists. The company's recent calculations confirm this and the documents they submitted are already being approved by the Ministry of Economic Development. In 2018, the cost of "blue fuel" will increase by 4 percent, and in 2019 - by 3.3 percent. For industrial consumers, including large gas thermal power plants, the increase in the cost of gas will be identical, says Gazprom.
That said, the calculations prescribed by Gazprom are still too early to be sure: by law, the FAS and its territorial associations are engaged in establishing tariffs for housing and communal services. Therefore, the size of the value must be coordinated with them accordingly. The service itself, however, has always been on the consumer’s side, guided by the rule "inflation minus". In all likelihood, the growth of tariffs will be lower or equal to the proposal of Gazprom.
The growth of the wholesale price for gas is planned to be slightly higher - by 3.4 percent in 2018 and by 3.1 percent in 2019.
If Gazprom’s proposals are approved, gas will rise in price more slowly than other goods and services - according to forecasts of the Ministry of Economic Development of the Russian Federation, the future will see inflation drops of 4.5 percent (2018 ) and 4 percent (2019). Other basic utilities, such as heating, water supply and electricity, will grow at the level of inflation - in 2017 by 4.9 percent, in 2018 - by 4.4 percent, and in 2019 - by 4.1 percent.
“Last autumn, Gazprom had a long polemic with the government and demanded a tariff increase above inflation. The fact that the company itself is offering a tariff lower than inflation is a victory for the FAS in the hardware battle with the largest of the resource holders,” notes director of the Energy Development Fund, Sergey Pikin.
It is unlikely that such a generous offer can be associated with difficult times in the economy - they have always been difficult. Since the middle of 2015, when it began functioning as a tariff regulator, the FAS has been struggling with the issue of tariffs, “as such the victory over Gazprom was, of course, was very important [for them],” Pikin said.
“In Europe, as in Russia, there has been a tendency to lower gas prices,” notes leading analyst at Gas Infrastructure Europe, Bradley Barron. “However, the reasons for this are different - the fall on gas prices following oil [gas prices react to oil quotas with a delay of 6-9 months] reduces the cost of gas for the population by 10-20 percent”.
In future, though, prices are still expected to grow: the share of imports is growing, as are oil prices, so it must be expected that over time, gas prices for EU residents will go up. “This happens not of importers’ will, or that of the primary gas suppliers; it happens because of the EU authorities - about 60 percent of the price of gas is taxed,” Barron says.
Russia, however, will unlikely face such growth - the Federal Antimonopoly Service (FAS) looks at tariffs more strictly than the more flexible Federal Tariff Service (FTS). “It is hardly worth expecting that not only in the next three years, but in general in the foreseeable future, we will return to the same furious rise in gas prices,” Pikin concludes.
The OPEC Deal Is Facing Its Biggest Test
OPEC’s strategy to balance the oil market and bolster prices is facing its biggest test.
The producer group is aiming to revamp the market by eroding a crude inventory surplus that’s depressed prices since 2014. A deal to cut output announced at the end of November, intended as a catalyst for trimming global stockpiles, had the side-effect of triggering a surge in U.S. production and a jump in the nation’s inventories to an all-time high. That’s prompted crude to give up a chunk of its post-deal gains.
With the focus now shifting to what the Organization of Petroleum Exporting Countries will do next, here are six charts indicating which way the oil market could be starting to turn.
1. $50 a Barrel Broken
WTI and Brent sank by the most in more than a year on Wednesday, with U.S. crude subsequently falling through $50 a barrel for the first time since December. “The market will be in limbo for a few days, the question is how low can it go,” said Richard Fullarton, founder of London-based commodity hedge fund, Matilda Capital Management. “There’s been so much effort by OPEC and non-OPEC to show high compliance, that it would be strange for it to fall apart now.”
2. Curve Crumbles
The aim of the supply cuts has been to turn the oil market upside down into a structure known as backwardation. That means prices in the short-term are at a premium to those further out, swelling OPEC revenues while limiting those of its competitors. However, the difference between WTI prices for this December and next has slumped back into contango, while the the nearest 9 Brent crude contracts are also now in that market structure. “Everything has been put in doubt,” Olivier Jakob, managing director of consultancy Petromatrix GmbH, said by phone. “It shows that the market is still very fragile.”
3. Options Bearish
Options markets are also turning increasingly bearish on future prices. The difference in the cost of bearish and bullish oil contracts, known at the skew, has moved sharply in favor of falling prices. That follows the second highest volume of options traded ever on Nymex’s WTI contract on Wednesday, as investors hunted out near-term protection against declining prices. A slump below last November’s price levels would be the last thing OPEC planned for when it agreed to cut supply. This week’s price drop represents “the first proper challenge to OPEC and its resolve to cut production,” said Ole Hansen, head of commodities strategy at Saxo Bank.
4. Sellers Return
The slump in prices may also be attracting more short sellers, a further dent in OPEC’s bid for higher prices. The number of WTI contracts outstanding rose back to near record levels as prices fell on Wednesday, often a sign of new bets on falling prices. “The production cuts story also isn’t biting as members of the agreement expected,” said Gerrit Zambo, trader at BayernLB. “For Brent, $50 a barrel should certainly be a good support. Maybe the next big mark is at $45 in WTI, but that’s quite a long way.”
5. Technical Trouble
And if all that doesn’t give OPEC enough to think about, there’s also the technical picture. Brent and WTI settled below their 50-day and 100-day moving averages on Wednesday, and fell further toward their 200-day markers on Thursday. “Maybe the herd is turning,” said Tamas Varga, analyst at PVM Oil Associates. “I think this is technical selling.”
6. Too Far, Too Soon?
While crude has been in free-fall through the major moving averages, gauges of momentum are starting to signal some respite. Both Brent and WTI closed below their lower Bollinger bands on Wednesday, and remained below those markers Thursday, a signal that the price slump may be overdone. WTI was close to oversold territory on the Relative Strength Index, with Brent also near that marker.
