Home' Trinidad and Tobago Guardian : April 27th 2017 Contents BG8 | ENERGY
BUSINESS GUARDIAN guardian.co.tt APRIL 27 • 2017
Unsung Gulf of Mexico tracks
new crude oil production record
Far from the US$40,000 per
acre land rush for shale in the
Permian Basin, operators in
the Gulf of Mexico are toiling
offshore to outpace their own
In January, Gulf of Mexico (GOM) pro-
duction totaled 1.75 million barrels per day,
less than a percentage point away from the
previous record set in 2009, according to
Housley Carr, an analyst at RBN Energy.
Within the next month or so, the 2009 re-
cord is expected to fall.
By 2018, the US Energy Information
Administration (EIA) expects a total of 1.9
million barrels per day in 2018, Carr noted
in an April 24 report.
"Admittedly, that's an increase of only
(300,000 barrels per day) from 2016, which
might not be groundbreaking news, but it
sure puts the kibosh on any suggestion that
production off the coasts of Texas, Louisi-
ana, Mississippi and Alabama is dead in the
water," he said. "It's not---by a long shot."
The EIA has projected growth in the GOM
between 2016 and 2018 to be 300,000 barrels
per day (bpd), which will account for roughly
30 per cent of the total US production in-
Although no major projects have started
in the GOM through the downturn, offshore
exploration and production (E&P) compa-
nies have adapted during the downturn
-- similar to onshore E&Ps. In the GOM,
producers have benefited from lower cost
drilling and equipment, and also shifted to
sub-sea tie-backs, Carr said.
"We understand that, depending on how
much oil the new well can access, the break-
even cost for many subsea tie-back projects
can be US$30 per barrel or even lower, which
puts them on par with breakevens in some
of the best onshore shale plays," he said.
Greenfield projects, however, have break-
evens of up to US$60 per barrel; too high
given the current oil price environment.
In February, Royal Dutch Shell plc ap-
proved development of its Kaikias deepwater
field in the GOM -- the company's first pro-
ject there since 2015. Kaikias is intended to
be tied into the nearby Shell-operated Ursa
production hub, a key factor in making the
Shell said the Kaikias oil and gas project
will start production in 2019; it can gener-
ate profits even if oil prices are lower than
US$40 a barrel.
But beyond 2018, the GOM future is less
clear. Offshore rig counts are low, but the
economics of subsea tie-backs may allow
E&Ps to add smaller production findings
to their totals.
"Taken together, that may well be enough
to keep GOP production riding high into the
2020s," Carr said.
HSBC Holdings Plc has been formally mandated
as an adviser on the initial public offering of Saudi
Arabia's national oil giant Aramco, expected to be
the world's largest ever IPO, HSBC's chief executive
said on Monday.
Europe's biggest bank joins peers including JP-
Morgan Chase & Co and Morgan Stanley on the deal,
which is expected to raise some US$100 billion and is
the centrepiece of the Saudi government's ambitious
strategy to diversify away from oil.
HSBC's Chief Executive Stuart Gulliver announced
the bank's appointment on the deal at a shareholders'
meeting in Hong Kong, confirming a Reuters report in
February that the bank was close to being mandated
on the hottest investment banking ticket in the world.
Gulliver also said HSBC is confident it can maintain
dividend payouts in the foreseeable future and expects
to exceed risk-weighted asset and cost-saving targets.
Despite earnings pressure, HSBC has retained its
dividend payout ratio at a higher level in the last few
years, at a time when some of its peers, including
Standard Chartered, withheld dividend payments
The bank may have to move "some thousand roles"
from Britain to Paris depending on how the country's
Brexit negotiations with the European Union unfold,
chairman Douglas Flint added, reiterating the bank's
previous estimates of staff moves.
HSBC last month named AIA Group boss Mark
Tucker as the new chairman of its board, replacing
veteran Flint, whose departure will end one of the
longest-serving management partnerships at a major
CEO Gulliver is also due to leave in 2018, and one of
the main tasks facing Tucker immediately after taking
over the new role in October will be selecting a new
chief executive for Europe's biggest bank.
Oil prices could
tumble again on
US shale influx
Oil prices could fall again by the end of the year
due to a rapid increase in US shale production, the
chief executive of French oil and gas giant Total said
Crude has recovered from lows reached in January
2016 and has mostly hovered above US$50 a barrel
since the beginning of the year following an agree-
ment by the Organisation of the Petroleum Exporting
Countries to cut production.
"The price may fall again ... US producers who have
recovered quickly, will regenerate an influx of supply
by the end of the year and this could have a negative
impact on the markets," Patrick Pouyanne said during
a conference in Paris.
US shale oil producers are planning to expand pro-
duction following the rebound in prices.
"The OPEC agreement is in place and working very
well," Pouyanne said. "I think it (OPEC agreement)
will be extended, but in simple terms, the short-term
effect on the markets is not immediate because stocks
are extremely high."
Pouyanne said it will take another 18 to 24 months,
rather than six months, for demand to outstrip supply.
Oil prices regained some ground on Thursday af-
ter steep losses the previous day, as Kuwait said it
expected the OPEC-led effort to cut supplies would
be extended beyond the middle of the year. Reuters
Baker Hughes expects N America revenue to rise in 2Q
Baker Hughes Inc said on Tuesday it ex-
pects revenue from North America to rise
in the current quarter from the first as oil
producers drill more onshore wells, helping
the oilfield service provider make up for a
fall in demand in the Gulf of Mexico.
Oil producers are spending more on lu-
crative shale fields to take advantage of oil
prices stabilising at over US$50 per barrel,
while clamping down on expensive and
time-consuming offshore projects.
"Activity growth in the US onshore well
construction product lines is forecast to
more than offset the seasonal decline in
Canada and ongoing activity reductions in
the Gulf of Mexico," Chief Financial Officer
Kimberly Ross said in a post-earnings call.
Larger rival Halliburton Co said on Mon-
day oil producers were completing nearly as
many wells as they were drilling, leading to
revenue and margin growth in its completion
and production unit.
Market leader Schlumberger said on Friday
that it was redeploying service capacity and
technical support resources from the Gulf
of Mexico to other markets. Shares of Baker
Hughes, which reported a bigger-than-ex-
pected loss on Tuesday, fell as much as 4.3
per cent to US$56.15, before paring losses
to trade down marginally.
The company, which is being acquired by
General Electric Co, said quarterly revenue
fell 15.3 per cent to US$2.26 billion in the
first quarter ended March 31.
Analysts' on average had expected revenue
of US$2.27 billion, according to Thomson
In contrast, Schlumberger's first quarter
revenue rose 5.7 per cent and Halliburton's
1.9 per cent.
Baker Hughes is much more exposed than
Halliburton to international markets, where
activity and pricing for oilfield services has
remained persistently low.
About 31 per cent of Baker Hughes' total
revenue comes from North America, with
operations in the Gulf of Mexico account for
15 per cent of its revenue from the region.
Net loss attributable to Baker Hughes nar-
rowed to US$129 million, or 30 cents per
share, in the first quarter ended March 31,
from US$981 million, or US$2.22 per share,
a year earlier.
The company lost 24 cents per share, on
an adjusted basis. Analysts' on average had
estimated a loss of 21 cents.
GE said last week the merger of its oil and
gas business with Baker Hughes remained
on track to close in mid-2017.
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