Shell CEO Sees First Signs of Oil Price Recovery , by Reuters

Shell CEO

By Reuters

Oil markets are beginning to recover but the scale of global oversupply means prices may rise only slowly, the chief executive of Royal Dutch Shell Plc said on Tuesday.

“I see the first mixed signs for recovery of oil prices,” Ben van Beurden told an oil industry conference in London.

“But with U.S. shale oil being more resilient than we originally thought and a lot of oil still in stock, it will take some more time to rebalance demand and supply,” he added.

Oil prices have collapsed over the last year in the face of heavy oversupply, with benchmark Brent crude falling to below $50 a barrel from a high above $115 in June 2014.

The Organization of the Petroleum Exporting Countries led by Saudi Arabia has increased production in an attempt to build market share, leaving some other producers, including shale companies in North America, operating below break-even costs.

Van Beurden said many U.S. oil producers would struggle to refinance while prices remained so low, leading to lower output in the future: “Producers are now looking for new cash to survive and they will probably struggle to get it.”

Longer-term, there was a risk that low levels of global production could bring a spike in oil prices, he said.

If prices remained low for a long time and oil production outside OPEC and the United States declined due to cuts to capital expenditure, there was not likely to be any significant spare capacity left in the system, he said.

“This could cause prices to spike upwards, starting a new cycle of strong production growth in U.S. shale oil and subsequent volatility,” van Beurden said.

India Modernizing Shipping Sector, by Marex

India Ports

By MarEx 2015-10-07 11:41:55

Despite its 4,300-mile coastline, India’s coastal shipping sector is considered to be still be its infancy. Inida is now investing in modernizing its major ports and its shipping ministry unveiled a five-year $10.7 billion plan as part of the nation’s Sagar Mala project.

The program intends to modernize ports to increase connectivity for industrial and coastal development. The plan will develop the country’s waterways and ports.

India’s ports have struggled to increase trade because of the lack of port and terminal facilities, which often increase vessels port time calls and forcing them to wait for docks. As a short-term solution, the government will expedited berthing procedures move ships through faster.

The average wait time for vessels calling Indian ports can be as long as  four days compared to just an average of four hours in Singapore and other major ports in the world. India cannot accommodate large and mega-box ships either. And, in most cases, feeder ship services are required to move cargoes.

India wants to build its economy and intends to focus on expanding its transportation assets including roads, inland waterways and coastal routes.

Additionally, India’s Merchant Shipping Act requires Indian-flagged ships to be manned by Indian crews, and there is currently a shortage of trained personnel. In July, government announced plans to open a maritime training college in Bihar State.  

Second Norovirus Outbreak on Star Princess, by Marex

Virus

By MarEx

Sixty-one passengers on board the Star Princess cruise ship have fallen ill due to norovirus. The Princess Cruises-operated vessel completed a 15-day Hawaiian cruise on October 4 and is currently docked at its homeport in Vancouver.

Reports say that two passengers were transported from the dock to the hospital via an ambulance. Another norovirus-stricken passenger fell so ill he decided to fly home instead of re-boarding the ship in Hawaii.

Norovirus is generally not deadly, but causes vomiting, diarrhea and abdominal pain and is transmitted through contaminated food, water or by person-to-person contact.

Star Princess had 2,590 passengers on board at the time, and the crew tried to slow the spread of sickness by conducting a sanitation cleaning and campaign throughout the vessel. Passengers who contracted the virus were urged to remain in their staterooms until symptoms subsided. 

Any outbreak of norovirus exceeding three percent of passengers requires special protocol and disinfection of a vessel. Princess Cruises says the number of people on the Star Princess was fewer than three percent.

In May, a larger outbreak saw 135 passengers on board the Star Princess suffer with the virus.

Deepwater Horizon Settlement Finalized, by Marex

Deepwater 1

By MarEx

The U.S. Department of Justice (DOJ) has finalized a settlement of more than $20 billion with BP PLC arising from 2010’s Deepwater Horizon oil spill.  The settlement resolves all federal and state claims against BP for the accident. Louisiana, Mississippi, Alabama, Texas and Florida will be the settlement’s primary recipients and will use the funds for environmental remediation and economic development.   

The Deepwater disaster, the largest oil spill in U.S. waters, killed 11 crew members and leaked millions of barrels of crude into the gulf, coating hundreds of miles of shoreline with oil. DOJ announced tentative terms of the deal in July.

The $20.8 billion settlement comes in addition to the $44 billion BP has already incurred in legal fees and cleanup costs.

Deepwater Horizon exploded on April 20, 2010 after gas seeped into the well the rig was drilling. The leak caused an eruption on the deck and the rig sank soon after. Plugging the leak took several months.

BP’s payments will reportedly make payments of about $1.1 billion per year over the next 18 years.

In addition, BP has also committed to paying about $500 million over 10 years to support independent research through the Gulf of Mexico Research Initiative.

The Gulf of Mexico Research Initiative had awarded approximately $315 million in grants as at the end of 2014. Grant recipients are investigating topics including the fate of oil released, the ecological and human health impact of spills and the development of new technology for future spill response, mitigation and restoration.

The Gulf of Mexico Research Initiative was created following the spill through an agreement between BP and the Gulf of Mexico Alliance, a non-profit partnership formed by the states of Alabama, Florida, Louisiana, Mississippi and Texas.

Deepwater 2

Deepwater Horizon Gulf Restoration Plans Announced

NOAA and the other Deepwater Horizon Natural Resource Trustees have released a 15-year environmental ecosystem restoration plan for the Gulf of Mexico.

The Draft Deepwater Horizon Oil Spill Draft Programmatic Damage Assessment and Restoration Plan and Draft Programmatic Environmental Impact Statement allocates monies that are part of a comprehensive settlement agreement in principle  among BP and the U.S. Department of Justice on behalf of federal agencies and the five affected Gulf States announced on July 2, 2015. 

In the draft plan, the Trustees detail impacts from the Deepwater Horizon oil spill to wildlife, habitats and recreational potential. They determined that “overall, the ecological scope of impacts from the Deepwater Horizon spill was unprecedented, with injuries affecting a wide array of linked resources across the northern Gulf ecosystem.” 

The Trustees are proposing to accept a settlement, which includes, among other components, an amount to address natural resource damages of $8.1 billion for restoration and up to $700 million for addressing unknown impacts or for adaptive management. These amounts include the $1 billion in early restoration funds which BP has already committed. 

“NOAA scientists were on the scene from day one as the Deepwater spill and its impacts unfolded. NOAA and the Trustees have gathered thousands of samples and conducted millions of analyses to understand the impacts of this spill,” said Dr Kathryn D. Sullivan, undersecretary of commerce for oceans and atmosphere and NOAA administrator. “The scientific assessment concluded that there was grave injury to a wide range of natural resources and loss of the benefits they provide. Restoring the environment and compensating for the lost use of those resources is best achieved by a broad-based ecosystem approach to restore this vitally important part of our nation’s environmental, cultural and economic heritage.”

NOAA led the development of the 1,400 page draft damage assessment and restoration plan, with accompanying environmental impact statement, in coordination with all of the natural resource Trustees. Specific projects are not identified in this plan, but will be proposed in future project-specific restoration proposals. 

The draft plan has an array of restoration types that address a broad range of impacts at both regional and local scales. It allocates funds to meet five restoration goals, and 13 restoration types designed to meet these goals.

The 13 proposed restoration activities cover:

  •  Restoration of wetlands, coastal and nearshore habitats •    Habitat projects on federally managed lands •    Nutrient reduction •    Water quality •    Fish and water column invertebrates •    Sturgeon •    Submerged aquatic vegetation •    Oysters •    Sea turtles •    Marine mammals •    Birds •    Low-light and deep seafloor communities •    Provide and enhance recreational opportunities

The draft plan is available for 60 days of public comment. Public comments on the draft plan will be accepted at eight public meetings to be held between October 19 and November 18 in each of the impacted states and in Washington, DC.

Comments will also be accepted online and by mail sent to: U.S. Fish and Wildlife Service, P.O. Box 49567, Atlanta, GA 30345. The public comment period will end on December 4, 2015.

The plan is available here.

Timeline of Events

April 20, 2010, RIG EXPLODES: An explosion on the Deepwater Horizon oil rig at the Macondo exploration well kills 11 workers and releases millions of barrels of crude oil into the Gulf of Mexico. The well is capped in mid-July. BP ultimately sets aside $42 billion to pay for cleanup costs, damages and penalties.

November 2012, CRIMINAL CASE SETTLED: BP agrees to pay $4.5 billion in fines and other penalties and pleads guilty to 14 criminal charges. The U.S. government bans BP from new federal contracts, imperiling the company’s role as a top U.S. offshore oil producer and No. 1 military fuel supplier. Separately, the U.S. Department of Justice files criminal charges against three BP employees in connection with the accident.

December 2012, CLASS ACTION SETTLED: U.S. District Judge Carl Barbier gives final approval to BP’s settlement with individuals and businesses claiming to have lost money and property because of the spill. BP initially estimates it will pay $7.8 billion to settle more than 100,000 claims, but the dollar amount is not capped. The company later says the payout may grow substantially, in part because of payouts to many claimants who suffered no harm, and files numerous legal challenges to the agreement.

February 2013, CIVIL TRIAL BEGINS: Officials from the federal government and several U.S. states begin facing BP in court at a three-phase civil trial over how blame should be apportioned between BP, Transocean Ltd, which owned the drilling rig, and Halliburton Co, which did cement work. Government lawyers urge Barbier to find BP grossly negligent, which could roughly quadruple the amount of fines under the U.S. Clean Water Act.

September 30, 2013, SECOND PHASE OF TRIAL BEGINS: The second phase begins to determine how much oil was spilled.

September 4, 2014, JUDGE FINDS BP BEARS MOST OF THE BLAME: Barbier finds BP “grossly negligent” for its role in the oil spill. He assigns 67 percent of the fault to BP, 30 percent to Transocean and 3 percent to Halliburton. BP pledges to appeal.

January 15, 2015, SIZE RULING: Barbier determines that 3.19 million barrels of oil spilled. The amount would be used to calculate damages.

Feb. 24, 2015, SIZE APPEAL: BP appeals judge’s ruling on size of the oil spill.

July 2, 2015, SETTLEMENT REACHED: BP agreed to pay about $18.7 billion in damages for water pollution caused by the spill, settling claims with the U.S. government and Louisiana, Mississippi, Alabama, Texas and Florida.

Shell Begins Production Off Nigeria , by Marex

Shell Nigeria

By MarEx

Shell Nigeria Exploration and Production Company (SNEPCo) has started production at the Bonga Phase 3 project offshore Nigeria.

Bonga Phase 3 is an expansion of the Bonga Main development, with peak production expected to be about 50,000 barrels of oil equivalent per day (boepd). The oil will be transported through existing pipelines to the Bonga floating production storage and offloading facility, which has the capacity to produce more than 200,000 boepd and 150 million standard cubic feet of gas per day.

Production began at the Bonga field in 2005. The Bonga field was Nigeria’s first deepwater development, with a water depth of more than 1,000 meters.

The Bonga project is operated by SNEPCo as a contractor under a production sharing contract with the Nigerian National Petroleum Company, which holds the lease for OML 118, in which the Bonga field is located.

SNEPCo holds a 55 percent interest in OML 118. The other co-venturers are Esso Exploration & Production Nigeria Ltd (20 percent), Total E&P Nigeria Ltd (12.5 percent) and Nigerian Agip Exploration Ltd (12.5 percent).