A sea-change in fossil fuels (natural gas and petroleum) production is under way in the U.S., and it is a harbinger of opportunities for IH readers. A quick look at what is happening gives encouragement to imaginative industry managers.
Historically, offshore gas has not been a focus for producers. Recently, however the “floating liquefied natural gas” (FLNG) means of production has skyrocketed. From 2008 through 2012, annual capital expenditure (capex) approximated $500 million worldwide. This year alone capex will approach $2 billion and is projected to total $47.4 billion from 2013-2019.
Approximately $28 billion will be spent on liquefaction and $19.1 billion on import terminals, with Asia getting 35% of total investments, Australasia 22%, Latin America 17%, the Mideast 6%, Western Europe 5% and North America 9%. Most of that money will be spent on floating liquefaction. Deepwater drilling and operation-related activities of all types in the Gulf of Mexico are expected to reach $167 billion from 2013-2016. This has been bolstered by increases in exploration drilling permits (78) and approval of developmental drilling permits (36) over the past seven months.
Further, there is an uptick in subsea and ultra-deepwater equipment demand. Capex on liquefaction vessels is expected to rise from $248 million (2008-2012) to $28.3 billion (2013 to 2019). While European sovereign debt crises could deter investments, this entire market area is forecasted to grow. Remember that the FLNG sector is in its infancy.
These explosive growth areas are highlighted by a current lack of qualified engineering talent. Over one-third of firms surveyed and associated with energy production (both producers and equipment suppliers) cite a shortage of skills as their biggest challenge. Engineers with more than 25 years of experience are seeing a significant rise in project demands.
The domestic supply of natural gas is now at an all-time high, and prices are the lowest in decades. The infrastructure that exists and is growing to support the distribution of gas supply includes 210 gas pipeline systems, 1,400 compressor stations, 11,000 delivery points, 5,000 receiving points, 1,400 interconnection points, 2,400 market center hubs, 400 underground storage facilities, 49 locations as export/import sites via pipeline and 8 LNG import facilities with two export facilities under construction.
New sources for natural gas (often called unconventional) are rapidly evolving, such as in deep ocean methane hydrates, coal-bed methane and gas locked in shale and released by “fracking” or strata fracturing deep underground. Conceptual work began on fracking in 1983. Coalbed methane extraction was in concurrent development in the early 1980s and rose from lower than 50 billion cubic feet annual output to today’s output of more than 1,800 billion cubic feet.
It is interesting how the energy sector developed after Edward Parker drilled the first oil well in Pennsylvania in 1859. The first gas extraction from Texas shale using fracking was done in 1990, performed by Mitchell Energy and Development Corp. with cooperation and assistance from the Gas Technology Institute (GTI). In 1990, all unconventional gas accounted for less than 10% of supply. Today, it accounts for 60% of production. Gas from shale amounts to one-third of North American production and will reach 49% of U.S. production by 2035.
There are numerous projects under way and scheduled in gas and oil production, storage and transport that can bring new business opportunities to reader’s companies. All it takes is some imaginative exploration (what folks call market research) to identify and qualify a scope of what is possible and what can result in new business. Here are a few examples to follow up on.
• TravelCenters of America has agreed with Shell Oil to add liquefied natural gas fuel lanes to 100 of its 230 U.S. truck-stop filling stations. This is important in that 15% of all oil consumption is by 18-wheelers transporting goods countrywide.
• ExxonMobil is developing the Hebron field offshore of Newfoundland and Labrador. It will be completed by 2017 with daily production of 150,000 barrels. It is a gravity-based structure (GBS) for undersea storage of 1.2 million barrels of crude production that can withstand sea ice, icebergs and all types of meteorologic and oceanographic conditions.
• Statoil and partners will build a floating production unit in the Barent Sea to come on-stream in 2018. The semi-submersible unit will be located in 1,215 feet of water, with oil fed through a 280-kilometer pipeline to Veidnes (near Honningsvag in Norway), where 200,000 barrels per day will be stored in two mountain caverns before tanker transport.
• McDermott International will turnkey build and install a $230 million production platform for PEMEX, an eight-legged, 1,800-ton jacket, 4,500-ton topside, with 2,000 tons of tripods, bridges and piles.
What else can we say? There’s lots of work to be done. IH