Oil, Gas and Shipping Magazine

ISSUE 89 www.ogsmag.com

ExxonMobil: Energy lives here

With familiar brand names across upstream and downstream operations, ExxonMobil Corporation is the largest publicly traded international oil and gas company.

HARD WORKING ENGINEERS We have turned things around before.

No matter what the oil price is: The world needs energy.

It is at times like these new technology and new processes see the light of day. Together we have turned things around before – by innovating, reducing costs, and working in a smarter way. We are all adjusting once again, to make sure we can succeed in the new market reality.

And we know we can do what it takes.

Now is the time to get together and prepare for the future. ONS 2016 provides you with the latest insights, the new technology – and future business opportunities.

This is the place to be. Welcome to the leading energy meeting place.

www.ons.no New conference feature: Build your competence at our new Technical Sessions!

The Editor

Keep calm and carry on . . .

Business as usual after Brexit

Editor

The

Martin Ashcroft

I

n the immediate aftermath of the UK’s vote to leave the European Union, I am reminded of one of Benjamin Franklin’s most frequently quoted sayings. “In this world nothing can be said to be certain, except death and taxes.”

The British exit from Europe is a momentous decision, but I wonder if the British people really knew what they were doing and whether, if we did it all over again tomorrow, the result would be the same. We’ll never know, but in the months leading up to the referendum, uncertainty ruled. On every radio phone-in and TV audience discussion, undecided voters clamoured for information. Nobody’s telling us the facts, they screamed, which was sweet music to the campaigners.

If you want facts, you could see them thinking, we’ll give you facts. And boy, did they give us some! Well, not facts, exactly, because there were no facts, but that didn’t stop them giving us statistics. How many checked whether the alleged statistics had any foundation?

It is appallingly easy in the “information age” to promulgate misinformation as if it were truth. (Don’t let me start on climate change). Having said that, it takes a brave campaigner to advocate uncertainty, and they were in short supply during the European debate. But how dull life would be if we could predict it.

No-one knows what might have happened if another scenario had played out. It’s all guesswork. Some people are better at calculated guesswork than others, however, and this is what makes them good bankers, businessmen or politicians.

Britain faces a period of uncertainty, but this will bring fresh opportunities for the best people to grasp and exploit. There have been early ripples in the stock exchange and currency markets, but it’s far too early to say “I told you so.” It will be months, if not years, before any lasting conclusions can be drawn.

Until then, life is uncertain, folks. Get on with it.

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Contents Page 6

ExxonMobil Energy lives here

3

The Editor: Business after Brexit

33

Services: RINA acquires Edif / Rigmar in Abu Dhabi

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ExxonMobil: Energy lives here

35

Services: Omnix adopts Aveva software

16

Expander Systems: Global leader in pivot engineering

37

Services: Actemium / KBR in Liberia / Platts & RigData

20

Panama Canal Expansion opens for business

38

Natural gas: Outlook for the industry in Israel

23

News in Brief / Forgemasters creates pipeline repair clamp

44

Interview: Kitack Lim, Secretary General of the IMO

25

LNG: Growth in liquefaction and regasification

48

Subsea projects: A standardized approach

27

LNG: DNV GL wins Grain terminal business

52

North Sea: A sea change required, says PwC report

29

Shipping: ISO hull standard / Petronas chooses Jotun

56

Container shipping as a commodity?

31

Shipping: d’Amico Vietnam / Damen multi-role UV

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Maersk Group: Performance and value

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Subsea projects and documentaition

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Oil, Gas and Shipping Magazine 2016

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Sea change: North Sea oil & gas survival

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ExxonMobil energy lives here

With familiar brand names across upstream and downstream operations, ExxonMobil Corporation is the largest publicly traded international oil and gas company. With an industry-leading inventory of resources, it is also one of the world’s largest integrated refiners, marketers of petroleum products and chemical manufacturers. •

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E

xxonMobil - a name synonymous with energy supply - had its origins in Titusville, Pennsylvania over 150 years ago, as a regional marketer of kerosene in the United States. Today it is the largest publicly traded petroleum and petrochemical enterprise in the world and operates in most of the world’s countries.

ExxonMobil is best known by its familiar brand names: Exxon, Esso and Mobil and across its upstream, downstream and chemical operations it makes the products that drive modern transportation, power cities, lubricate industry and provide petrochemical building blocks that lead to thousands of consumer goods.

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UPSTREAM OPERATIONS

The strength and breadth of ExxonMobil’s global organization allows it to explore for and capture all resource types, across all geological and geographical environments, using industryleading technology and capabilities. It employs unique geoscience capabilities and understanding of the global hydrocarbon endowment to identify and prioritize all quality resources.

ExxonMobil’s portfolio of diverse opportunities includes conventional, heavy oil, tight gas, shale gas, deepwater, liquefied natural gas (LNG), Arctic and sour gas projects. With experience and applied technology, it can capture more oil and gas reserves at both new and mature fields. Advances in seismic imaging, reservoir simulation, drilling and facility design allow it to reach deposits that were previously unidentified or unreachable.

• ExxonMobil

Julia Oilfield

“Over the past decade, ExxonMobil has drilled 187 deepwater wells worldwide in water ranging from 2,100 feet to 8,700 feet”

One of ExxonMobil’s major discoveries in recent years is the Gulf of Mexico deepwater find and subsequent development of the Julia Oilfield. In April this year oil production started under budget and ahead of schedule. The Julia development is located approximately 265 miles southwest of New Orleans in water depths of more than 7,000 feet. The initial development phase uses subsea tie-backs to the Chevron-operated Jack/ St. Malo production facility, reducing the need for additional infrastructure and enhancing capital efficiency. Technology has also played a key role in the Julia development including the use of subsea pumps that have one of the deepest applications and highest design pressures in the industry to date.

“Successful deepwater developments like Julia, located more than 30,000 feet below the ocean’s surface, benefit from ExxonMobil’s disciplined project execution capabilities and commitment to developing quality resources using advanced technology,” said Neil W. Duffin, president of ExxonMobil Development Company.

The Maersk Viking drillship is currently drilling a third well, which is expected to come online in early 2017. Production results will assist in the evaluation of additional wells included in the initial development phase, which has a design capacity of 34,000 barrels per day of oil. “This initial production will provide ExxonMobil with insight into the potential future development of the reservoir,” said Duffin.

Discovered in 2007, the Julia field comprises five leases in the ultra-deepwater Walker Ridge area of the Gulf of Mexico.

ExxonMobil, the operator, and Statoil Gulf of Mexico LLC each hold a 50 per cent interest in the Julia unit. Over the past decade, ExxonMobil has drilled 187 deepwater wells worldwide in water ranging from 2,100 feet to 8,700 feet.

The Maersk Viking drillship

Canadian oil sands

“Discovered in 2007, the Julia field comprises five leases in the ultradeepwater Walker Ridge area of the Gulf of Mexico”

In Canada ExxonMobil works with its Canadian affiliate Imperial Oil. Its latest project there is the Kearl oil sands project, which represents a next generation approach to oil sands development. At Kearl, ExxonMobil will deploy a new proprietary technology— paraffinic froth treatment— to remove fine clay particles and water from the bitumen and produce a product suitable for pipeline transportation to market, eliminating the need for an on-site upgrader.

Processing bitumen once, rather than twice (in an upgrader and at a refinery), reduces life cycle GHG emissions.

ExxonMobil has also developed a new technology called LASER (liquid addition to steam to enhance recovery) to improve in situ oil sands recovery. The LASER technology allows for more energy-efficient and higher recovery of bitumen and will reduce the GHG intensity of this process by •

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about 25 per cent. Its cyclic solvent process, currently under development, is a nonthermal method for recovering heavy oil that could potentially reduce the GHG intensity of heavy oil production by about 90 per cent.

Using cogeneration in oil sands production reduces energy requirements and provides an efficient means for producing electricity and steam at the same time. Cogeneration planned for Kearl will reduce CO2 emissions by 500,000 metric tons a year, compared to purchasing electricity for the first phase of the project. Cogeneration facilities at ExxonMobil’s Cold Lake in situ operation reduced CO2 emissions by 40 per cent compared with generating electricity from coal-fired plants and processing steam from conventional boilers.

Another important concern surrounding oil sands development in Canada is the impact of water withdrawal on the Athabasca River in Alberta. About 3 per cent of the 12

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“The Kearl oil sands project represents a next generation approach to oil sands development”

• ExxonMobil Angola

“Using cogeneration in oil sands production reduces energy requirements and provides an efficient means for producing electricity and steam at the same time”

ExxonMobil, its coventurers and Angola’s national oil company Sonangol have announced 44 discoveries in Angola, representing a recoverable resource potential of about 12.4 billion barrels, making Angola an important resource for the company. With a workforce of more than 750, Angolanization is a priority. Since the beginning of business operations in 1994, Esso Angola has been committed to promoting national content to support the company’s operations and contributing to the economic and social development of Angola. The company believes that national content can add positive results to the business, workforce, suppliers and contractors by supporting economic growth and improving quality of life.

The national workforce in Angola represents nearly 78 per cent of the total number of workers.

Kizomba field is ExxonMobil’s primary operation in Angola and lies in Block 15, offshore of Angola, marking one of the first tranches of deepwater acreage offered by the Angolan Government. Upon discovery more than 2,500 square kilometres of high-quality 3D seismic data was acquired and this was followed during 1997-99 by the first wildcat drilling programme to take place in 1,000-1,400m of water, which resulted in six discoveries. Four of the discoveries (Hungo, Chocalho, Kissanje and Dikanza) announced in 1998 make up the giant Kizomba field complex. Block 15 was allotted to ExxonMobil in 1994, with first production commencing in 2003 from the Xikomba field. Productions from Kizomba A, Kizomba B and Kizomba C began in 2004, 2005 and 2008 respectively. The first production from Phase I of the Kizomba satellites project was achieved in July 2012.

Kizomba has recoverable reserves approaching two billion oil-equivalent barrels. The plan is to tie other nearby fields into the Kizomba infrastructure. In 1999, the Chocalho and Xikomba fields were discovered or reappraised. In July 2000, Esso Exploration Angola discovered another oilfield named Mondo, 370km west of Luanda. The discovery well drilled in 740m of water and encountered an oil-bearing interval, which flowed at a test rate of 4,200bpd. The well was drilled in 2,400ft of water, down to a total depth of 8,200ft.

Malaysia

average natural flow of the Athabasca is allocated to the oil industry, half of which is used. At its Kearl oil sands project, ExxonMobil is constructing a water storage system to reduce water withdrawal from the Athabasca River during low-flow periods. Kearl will also use advanced technologies to recycle water and reduce water demand. Water extracted from the Athabasca River will be re-used about 18 times. The Cold Lake facility uses half a barrel of fresh water for each recovered barrel of bitumen. To significantly reduce water consumption, approximately 95 per cent of the water recovered from oil production is treated, recycled, and re-injected as steam.

ExxonMobil and Imperial Oil are also progressing promising research on nonaqueous extraction. This emerging technology has the potential to virtually eliminate the need for water and thus revolutionize bitumen extraction recovery for oil sands mining operations.

ExxonMobil is one of the major crude oil producers and suppliers of natural gas in Malaysia. It operates under four production-sharing contracts (PSCs) with the Malaysian national oil company, PETRONAS, producing about one-fifth of the nation’s oil production and about one-half of natural gas supplies to Peninsular Malaysia.

The Tapis Enhanced Oil Recovery (EOR) project is Malaysia’s first large-scale enhanced oil recovery project and uses the immiscible water-alternating-gas process to recover remaining oil reserves from the Tapis field. It does this by gradually sweeping remaining oil to the producing wells, increasing the overall recovery of the field. Tapis is one of the largest offshore EOR projects in Southeast Asia, representing an RM8 billion investment by ExxonMobil and its joint-venture partner Petronas Carigali Sdn Bhd (PCSB) to help ensure reliable and sustainable energy supplies for Malaysia. Fully designed and constructed in Malaysia by local contractors, fabrication activities for the Tapis EOR project began in November 2011. The combined topsides and jacket, which were installed in May 2014, weigh about 23,500 metric tonnes, making it the heaviest platform constructed in Malaysia by the company.

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DOWNSTREAM OPERATIONS

As the largest global refiner, the majority of ExxonMobil’s refining capacity is integrated with its lubes and/or chemical businesses. Downstream operations refine and distribute products derived from crude oil and other feedstocks and ExxonMobil’s global network of manufacturing plants, transportation systems, and distribution centres provides fuels, lubricants and other high-value products to customers.

As the world’s number one supplier of lube basestocks and the largest global marketer of finished lubricants, ExxonMobil is supported by a highly trained field force, a strong distributor network and a robust supply chain. ExxonMobil delivers highquality products and application expertise to customers around the world, marketing its fuels products to millions of customers worldwide through its retail service stations and three global 14

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business-to-business segments — Industrial Wholesale Fuels, Aviation Fuels & Lubricants, and Marine Fuels & Lubricants.

Fawley Refinery, UK

The Esso refinery at Fawley, near Southampton, is the largest in the UK and one of the most complex in Europe. Situated on Southampton Water, it has a mile-long marine terminal that handles around 2,000 ship movements and 22 million tonnes of crude oil and other products every year. The refinery processes around 270,000 barrels of crude oil a day and provides 20 per cent of UK refinery capacity. Refining is a complex operation that depends upon the skills of operators, engineers and planners in combination with cutting edge technology to produce products that meet the demands of an intensely competitive market.

Some of the greatest challenges for the refinery in recent

• ExxonMobil

process and breaks them down into smaller ones. These smaller, more useful and therefore more valuable molecules are used for manufacturing petrol and provide feedstocks for the chemical plant.

Refining processes use substantial amounts of energy and there has been considerable investment to make the refinery more energy efficient. A £60 million combined heat and power (CHP) generating plant was installed in 1999, reducing energy costs by more than £2 million per year. Using less energy brings the additional environmental benefit of reducing emissions of gases such as sulphur dioxide, carbon dioxide and nitrogen oxides.

ExxonMobil continues to improve its environmental performance at this operation. The site’s emissions to atmosphere have been falling steadily. This reduction has been achieved in part by the installation of a £60 million cogeneration unit. This highly energy efficient combined heat and power (CHP) unit burns fuel at an efficiency of 75 per cent, twice the efficiency of a conventional power station.

Energy efficiency improvements over recent years have led to significant reductions in emissions. ExxonMobil’s record on releases of oil in water used by the refinery is also excellent. The site draws over 300,000 tonnes of seawater from Southampton Water every day, mostly for cooling purposes. When it is returned to the sea after purification it is often cleaner than when it was extracted.

CHEMICAL OPERATIONS

“The Esso refinery at Fawley, near Southampton, has a milelong marine terminal that handles around 2,000 ship movements and 22 million tonnes of crude oil and other products every year”

years have been changes to the specification of transportation fuels. The switch from leaded to unleaded petrol, the reduction of sulphur levels in diesel and petrol and, more recently, the increased use of biofuels in diesel and petrol, have all required major investment in new units and upgrades to existing refinery units.

At its simplest, oil refining is the separation of crude oil by distillation into different fractions. But many other complex processes are necessary to produce a full range of products, including propane and butane (LPG), petrol, jet fuel, diesel, marine fuels, heating oil, lubricant basestocks and fuel oil.

The refinery at Fawley also supplies feedstock to the adjacent ExxonMobil Chemical plant.

The catalytic cracking unit, known as the cat cracker, is one of the most important plants on the refinery. The cat cracker takes the heavier, less valuable molecules from the distillation

ExxonMobil Chemical is a global leader in the petrochemicals industry, applying breakthrough proprietary technology to create products that improve the quality of life for people around the world. Today, its global network of manufacturing facilities, technology centres and businesses has enabled the company to become the market leader in some of the largestvolume and highest-growth petrochemical markets. As part of ExxonMobil Corporation, the Chemical Company is integrated with the Corporation’s other programs, giving it an unparalleled ability to share technologies and best practices.

ExxonMobil Chemical focuses on sustainable solutions based on time-tested business practices. The core elements of its business strategy include: • Olefins • Aromatics • Fluids • Synthetic rubber • Polyethylene • Polypropylene • Plasticizers • Synthetic lubricant basestocks • Additives for fuels and lubricants • Zeolite catalysts While the uses for these products span a variety of markets, most can be grouped into four major areas, these being automotive, packaging, construction and industrial, and personal care.

In conclusion, Exxon Mobil Corporation is committed to being the world’s premier petroleum and petrochemical company. To that end, it works to continuously achieve superior financial and operating results while simultaneously adhering to high ethical standards.

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Expander Systems The global leader in pivot engineering CADEX 5 is the heart of the Expander Global Group Proprietary Global IT-Platform. It can create customized pivot solutions that eliminate both costly downtime and repairs – in minutes.

All machines experience wear with use, especially the pivot points. Over time, the bores of the lug ears become oval, affecting stability and safety. Once the wear begins to appear, it rapidly increases due to the accelerating nature of the wear process. Repairs are expensive, time-consuming and are necessary multiple times over the life of a machine when using the traditional repair method of welding and line boring. The Expander Assemblies install directly into worn mounting lugs without welding and line boring, even if holes are worn slightly oval.

Over the course of 30 years, Expander Global has developed a catalog of more than 60,000 assemblies for a wide range of equipment. As an expert in pivot technology, Expander has developed advanced engineering software that automates the design process, providing results in minutes. Customers can print a pivot dimension sheet from the Expander®System website and use it in the field to record measurements. Next, they input the information into the online version, and the Expander®System engineering department reviews it immediately to ensure accuracy. If there are any questions, an engineer on staff will contact the customer for clarification. As with all Expander®System assemblies, custom assemblies are backed by a 10,000-hour/10-year function warranty.

“Chances are when a customer visits our online catalog (www.expandersystem.com) or calls us directly with a pin part number, machine make, model or position, we already have what they need in stock,” President Roger Svensson said.

“However, there is no standard in the world when it comes 16

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• Expander Systems

Expander®System has an extensive catalog of more than 60,000 Expander Assemblies to fit a multitude of machines. Expander also makes custom pins to fit specific needs.

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• Expander Systems

The Expander®System CADEX 5 System allows Expander to custom design and manufacture Expander Assemblies with fast turnaround times. “We can usually have the Expander Assembly to the customer within a few days,” said President Roger Svensson. “If it’s an emergency, and a machine is down, we will expedite the order.”

“Expander has developed advanced engineering software that automates the design process, providing results in minutes” to pivot pins. We receive requests for new designs all the time. Fortunately, our proprietary CADEX 5 engineering system allows us to customize a design and manufacture a new Expander® assembly with quick turnaround.”

Expander®System assemblies provide a permanent, cost-effective solution. That’s why more and more companies, from various markets including: construction, mining, oil and gas, and offshore, process industry and forestry have turned to the Expander®System to replace conventional straight pins. CADEX 5 technology continues to move Expander® Global to the forefront of pivot technology.

“The new custom Expander®System Assembly is designed, manufactured and shipped within a few days,” said Svensson. “If it’s an emergency, and a machine is down, we can expedite an order. We encourage anyone who wants a permanent solution for pivot wear to contact us.”

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Using its propriety CADEX 5 Global IT Platform, Expander®System manufactures custom-designed pin bodies and components within minutes of receiving a customer’s specifications. New Expander Assemblies are usually received within a few days.

No More Line Boring

®

The Expander®System installs directly into worn pivots without the need for costly welding and line boring – even if holes are worn oval. Each assembly is designed to fit your specific machine make, model and position. The assembly pin-body is tapered at both ends, and when the fasteners are tightened, the tension washers force the expansion sleeves into the worn lug holes. The sleeves conform with the wear pattern to permanently eliminate the wear problem, so you get a perfect fit every time.

Stop endlessly replacing pins, and opt for a long-term solution that will expand your bottom line – The Expander®System.

See how it works

Contact Expander today to find the perfect-size pins for your oil, gas and drilling equipment.

www.ExpanderSystem.com The Global Leader in Pivot Engineering

Sweden: Expander System Sweden AB +46-(0)120-299 00

Germany: Expander Deutschland GmbH +49(0)611-97445707

USA: Expander Americas Inc. +1-888-935-3884

info@ExpanderSystem.com www.ExpanderSystem.com

News and Features

PANAMA CANAL EXPANSION OPENS FOR BUSINESs

Opened in 1914, the Panama Canal has undergone a major expansion program to accommodate the increasing size of vessels and the growth in international trade over the last hundred years

A

lavish inauguration ceremony was held in Panama City on 26 June to officially announce the opening of the Panama Canal Expansion. Panamanian President Juan Carlos Varela and Panama Canal Administrator and CEO Jorge L Quijano spoke to a crowd of more than 25,000 jubilant Panamanians, Canal employees, dignitaries from around the world and nearly 1,000 journalists.

The first vessel to pass through the expanded canal was the NeoPanamax COSCO Shipping Panama. Originally named Andronikos, it was renamed to honour and pay respect to the country of Panama and the Canal. The vessel embarked on 11 June from the Greek port of Piraeus, carrying 9,472 TEUs, passing first through the Agua Clara Locks on the Atlantic side of the country and then the Cocoli Locks on the Pacific side, en route to Asia.

The $5.25 billion Panama Canal Expansion Project is the largest project in the canal’s 100 year history. When it was 20

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opened in 1914, the Panama Canal offered a cost saving alternative for shipping to avoid the lengthy route around Cape Horn, and a much safer trip than could be expected through the Strait of Magellan.

In the century since it opened, however, global maritime traffic has multiplied several fold, and the size of vessels has grown well beyond the capacity of the original canal.

It’s a testament to the importance of the Panama Canal to world trade, however, that it has lent its name to the modern definition of ship size—Panamax, post-Panamax, and now NeoPanamax.

The original sets of locks, which raised ships 88 feet (27 meters) above sea level, define the Panamax standard, which limits the size of container vessels to a maximum of 5,000 TEU (twenty-foot equivalent units). To accommodate the transit of post-Panamax vessels up to 13,000 TEU, and guarantee the future of the Panama Canal as the natural route for

• News

“The Panama Canal has lent its name to the modern definition of ship size”

international trade, it became clear several years ago that a major expansion program would be required.

The Panama Canal Authority (Autoridad del Canal de Panama - ACP), came into being after the United States finally granted ownership of the canal to Panama on 31 December 1999. In 2006, a national referendum was held in which over 76 per cent of the population voted in favour of the expansion of the canal.

The expansion plan included the construction of a new set of locks on the Atlantic and Pacific sides of the waterway and the excavation of more than 150 million cubic meters of material, creating a second lane of traffic and doubling the cargo capacity of the waterway. While the Expansion’s locks are 70 feet wider and 18 feet deeper than those in the original canal, they use less water due to water-saving basins that recycle 60 per cent of the water used per transit.

At the inauguration ceremony Jorge L Quijano commented: “We are thrilled that we currently have 170 reservations for NeoPanamax ships, commitments of two new liner services to the expanded canal, and a reservation for the first LNG vessel, which will transit in late July. Our customers care that their supply chain is reliable and that they have a diversity of shipping options. The canal has always been reliable; today, we offer the world new shipping options and trade routes.”

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Have a news story or press release you would like to be considered for publication in the next Oil, Gas & Shipping Magazine?

Please contact Martin Ashcroft at martin@ogsmag.com

www.ogsmag.com

• News

news in brief MOL Group has announced a new oil and gas discovery in the MOL operated TAL Block, Pakistan, marking the 8th discovery in the block and MOL’s 12th in the country.

The Makori-Deep-1 exploration well reached its target depth of 5,067 meters on 17 April 2016. During testing, the well flowed oil and gas in Lockhart-1 formation at a rate of 2,020 bopd and 900 boepd (5.4 mmscf/d), respectively.

MOL has a well-established track record of over 17 years in Pakistan and holds equity stakes in five blocks in the country. * * *

LPG shipping freight rates are

forecast to deteriorate further through 2016 as a result of the fast rising fleet of Very Large Gas Carriers (VLGCs) which has already started to impact earnings of smaller vessel classes, according to the latest edition of the LPG Forecaster, published by global shipping consultancy Drewry.

VLGC freight rates have been in freefall since August 2015 as fleet growth has continued to outpace demand. Over this period as many as 41 VLGCs have been delivered and as a result, spot rates for these vessels touched a six-year low of $25 per tonne in April on the benchmark AG-Japan route.

In line with falling spot rates, time charter rates for VLGCs have also come under pressure, averaging $800,000 per month in April, 55 per cent down on the same period last year. * * *

The US Energy Information Administration’s International Energy

Outlook 2016 projects that world energy consumption will grow by 48% between 2012 and 2040. Most of this growth will come from countries that are not in the Organization for Economic Cooperation and Development (OECD), including countries where demand is driven by strong economic growth, particularly in Asia.

Non-OECD Asia, including China and India, accounts for more than half of the world’s total increase in energy consumption over the projection period.

Forgemasters creates emergency gas pipeline repair clamp

S

heffield Forgemasters International Ltd (SFIL) has produced the largest ever forged sub-sea emergency repair clamp bodies for use on the world’s longest sub-sea gas pipeline.

Designed by Oil States Industries in Houston, the hydro-clamp is designed to provide risk mitigation in the event of a breach in a sub-sea pipeline. The specialised unit takes subsea engineering design to a new level of expertise.

Sheffield Forgemasters delivered two clamp bodies to form a crucial emergency repair back-up for the 1,224 km Nord Stream pipeline which runs along the Baltic Sea floor from Vyborg in Russia to Lubmin in Germany.

“The Nord Stream clamps are hydraulically operated repair mechanisms, designed to reinforce the Nord Stream Pipeline at any required point along the Baltic Sea floor,” said George Brown, group projects director at SFIL. “The size of the forging exceeded the known parameters for the designated material selection and required a new engineering solution to make it possible.

“The clamp comprises two matched halves which can be locked around the pipeline in order to stop any leakage. In order to provide the matched pairs of half clamps the forging was produced as a single piece before being cut longitudinally to produce the two halves. We worked close to the limits of capable production; starting with a 120 inch diameter ingot, a singular form for the whole clamp was forged, rough machined and heat treated. This provided a safe envelope for the finished shape which was then cut along its 22 foot length to produce two forgings which could be independently machined to the tight tolerances required before being finally reassembled and pressure tested.

“With a forged weight of over 200 tonnes, no sub-sea clamp of this size has ever been produced before and if required, can restore full structural and pressure integrity to the Nord Stream pipeline in the event of a leak or identified weakness. The unique capability we have at Sheffield Forgemasters to go from creation of the material to completion of the finish machined pieces, was fundamental to the successful outcome of the clamp manufacture.”

The clamps are currently in the testing phase at Oil States in Houston, Texas, before being shipped to the Nord Stream project where they will be reserved for emergency back-up use. Nord Stream is the longest sub-sea pipeline in the world and uses twin pipes which take 27.5 billion cubic metres of natural gas a year from the Russian continent to the European grid for use in European domestic and business markets.

The pipeline is owned and operated by Nord Stream AG, a conglomerate of Gazprom (51%), Wintershall (15.5%), E.ON Ruhrgas (15.5%), N.V. Nederlandse Gasunie (9%) and GDF Suez (9%).

•

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• LNG

North America and Asia lead growth in liquefaction and regasification capacity

S

ignificant liquefaction and regasification capacity growth in North America and Asia will drive the global liquefied natural gas (LNG) industry over the next four years, according to research and consulting firm GlobalData.

The company’s latest report* reveals that North America leads the world in planned liquefaction capacity additions. Out of 75 planned liquefaction terminals expected to come online worldwide by 2020, 42 are in North America.

A total of 13 LNG regasification projects were added since GlobalData’s LNG capacity report in November 2015. The terminals added include Iran Floating, Damerjog in Djibouti, and Gorskaya Floating in Russia.

Demand for natural gas in Asia is continuing to drive regasification capacity growth, with India and China expected to have the highest capital expenditure of all countries to bring planned regasification terminals online. Indeed, it is expected that an estimated US$17.1 billion will be spent between 2016 and 2020 to increase regasification capacity by 7.4 trillion cubic feet in the two countries.

In terms of regasification capacity, Korea Gas Corporation

S&P Global Platts has launched the Platts LNG Gulf Coast Marker (GCM), a price assessment reflecting the daily export value of liquefied natural gas (LNG) traded free on board (FOB) from the US Gulf Coast, in the international spot market.

The natural gas infrastructure that intersects the United States, Mexico

has the highest in the world and will remain the global leader for the next four years. Companies such as Kuwait Petroleum Corporation, China Petrochemical Corporation and Excelerate Energy LP will lead the construction of regasification terminals in the world.

Presently, Qatar Petroleum leads the world in terms of liquefaction capacity and will remain the global leader for the next four years. North American companies such as Cheniere Energy, United LNG and Orca LNG are leading planned liquefaction capacity additions.

Cancellations of planned liquefaction facilities have led to a 7% decrease of planned global capacity, from 800.3 million tons per annum (mtpa) six months ago to 743.3 mtpa. LNG liquefaction terminals cancelled during the period include Shtokman, Equatorial Guinea Train II, Pilbara Scarborough and Pacific Rubiales Floating. *H1 2016 Global Capacity and Capital Expenditure Outlook for LNG Terminals – Asia Leads in Planned Regasification Projects Announcements the Asia LNG benchmark Platts JKM, the world’s first independent daily LNG price assessment.

S&P Global Platts’ LNG price references are published in Platts LNG Daily, the first daily independent news publication for the global LNG industry, and LNG Navigator, a fully customizable analysis and data platform.

and Canada is the world’s largest and most integrated natural gas market and by 2020, the Americas is expected to be the world’s third largest producer of LNG, behind Australia and Qatar.

The launch of this new price reference follows months of consultation with the LNG industry, market participants and other stakeholders and it complements •

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25

• LNG

DNV GL granted framework

agreement for Grain LNG terminal “We are working to ensure that Grain remains the European port of choice for LNG shippers”

D

NV GL has been awarded a framework agreement for the provision of design and engineering technical services to the Grain LNG terminal.

The scope of the three-year agreement covers feasibility studies, conceptual design studies, specialist engineering and risk management services up to and including front-end engineering and design (FEED).

Grain LNG is integral to the UK energy infrastructure and security of supply. It is the largest terminal in Europe and eighth largest in the world by tank capacity, with a site that spans over 600 acres in total.

Liquefied natural gas (LNG) is developed by chilling gas to -161 degrees centigrade so that it occupies 600 times less space than in its gaseous form. It is easily stored in large volumes assisting in security of supply in times of great need such as winter cold spells. Over time, as indigenous supplies from the UK Continental Shelf diminish, LNG could make up a significant percentage of the UK’s gas supply and demand

The largest LNG liquefaction

contract in the first quarter of 2016 was signed by Pakistan, according to research and consulting firm GlobalData.

Pakistan State Oil Company Limited’s deal with Qatargas will see the import of 3.8 million tons per annum (mtpa) of LNG, and has a total value of US$16 billion over 15 years. The LNG will come from the Qatargas II (Train 5) liquefaction terminal.

requirement.

National Grid is determined to develop Grain LNG as a world leader. “Grain recently celebrated ten exceptional years of progress and now we are looking to the future, increasing the services we offer to our customers and working to ensure that Grain remains the European port of choice for LNG shippers,” said Nicola Duffin, commercial manager, National Grid.

Hari Vamadevan, DNV GL regional manager UK & West Africa, added: “This is a significant contract for DNV GL. The importance of LNG in the fuel mix is crucial to the UK, and the EU is supporting it as a clean fuel for road transportation.

It is estimated that by 2020, 70% of the UK’s gas will need to be imported and, more importantly, stored.

National Grid is leading the way in its plans for Grain LNG and DNV GL is delighted to be involved in delivering success, on behalf of National Grid, to secure a better future for the provision of gas to homes and businesses throughout the UK.”

The second largest contract signed during Q1 2016 was between Veresen Inc and JERA Co, Inc. This will last for 20 years, and involves Veresen supplying 1.5 mtpa of LNG from the Jordan Cove terminal in the US to Japan. LNG deliveries are expected to begin in 2021 and end in 2041.

Two contracts signed between Chevron and ENN Group, and Origin Energy and ENN Group jointly constitute the third largest contracts signed by volume in Q1

2016. Each contract will supply 0.5 mtpa of LNG to the ENN Group. The contract between Chevron and ENN Group will last for 10 years, from 2018 to 2028, while the contract between Origin Energy and ENN Group will last for five, from 2018 to 2023. Another large contract was signed between the US and Japan which will allow Tokyo Gas to import 0.2 mtpa of LNG during 2020 to 2039 from the Cameron II liquefaction terminal in Louisiana.

•

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27

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• Shipping

Petronas

ISO

chooses Jotun antifouling coatings

hull and propeller performance standard passes final hurdle

I

n a move that has the potential to save the shipping industry as much as US$30 billion in annual fuel costs, ISO 19030 is finally nearing publication.

The standard prescribes practical methods for measuring changes in shipspecific hull and propeller performance.

It has now been approved by the ISO’s Draft International Standard (DIS) ballot and is expected to be publically available at the end of Q3 2016.

Geir Axel Oftedahl, business

“Poor hull and propeller performance is estimated to account for around 10 per cent of the world fleet’s energy costs” development director of Jotun’s Hull Performance Solutions, managed the project on behalf of the International Organization for Standardization (ISO) and is clear about its importance.

“Poor hull and propeller performance is estimated to account for around 10 per cent of the world fleet’s energy costs (US$30 billion),” he notes.

“There are very effective solutions for improving performance but, until now, no globally recognised and standardised way for measuring this and providing return on investment for ship owners.

ISO 19030 satisfies that demand, prescribing measurement methodology and defining performance indicators for

P

etronas has selected Jotun’s Hull Performance Solutions (HPS) antifouling system for two LNG vessels chartered from MISC. Advanced antifouling coatings and a full suite of performance measurement sensors will now be applied to Seri Amanah and Puteri Zamrud to increase vessel efficiency, cut fuel costs and reduce CO2 emissions by 10 per cent.

Jotun’s antifouling coatings limit the growth of organisms on hulls and HPS provides measurable hydrodynamic performance gain. “HPS’ combination of silyl methacrylate coating technology and a ISO 19030 compliant measurement system delivers significant, and proven, emission and cost savings,” says Morten Sten Johansen, Jotun’s regional sales director, HPS. “We, and a growing number of ship operators, see this as ‘low hanging fruit’ for increasing vessel efficiency and safeguarding the environment.”

hull and propeller maintenance, repair and retrofit activities.

“We believe this will provide much needed transparency for both buyers and sellers of fuel saving technologies and solutions, and, in doing so, enable the industry to operate with genuinely enhanced efficiency and environmental performance.”

Oftedahl has, since 2013, managed a project involving 53 experts in an ISO working group convened by Svend Søyland of Nordic Energy Research in a bid to develop a standard that is comprehensive, accurate and workable worldwide. This wide-ranging group encompasses ship owners, ship builders, class societies, paint manufacturers, performance monitoring companies and research institutions.

With the standard now on the cusp of final approval, Jotun is moving to ensure that its HPS offering is fully compliant.

“The standard gives customers peace of mind and we’re acknowledging that by refining our HPS High Performance guarantee,” Oftedahl comments.

“Previously we used our own methodology as the basis for the guarantee, promising to refund customers the cost of the HPS upgrade if their vessel hulls failed to meet performance targets,” he explains.

“However, now that a universal standard is so close to publication, we will use it as the foundation for the guarantee, effectively leading the industry with the first ISO/DIS 19030 compliant performance promise.”

HPS, which launched to the market in 2011, has proved its efficacy in delivering long-term efficiency and performance gains. In March Jotun released data for the first ever five year dry-docking of a vessel treated with the solution - Gearbulk’s Penguin Arrow – showing that it recorded a fuel saving of US$1.5 million, cutting CO2 emissions by some 12,055 tonnes, across the 60-month period.

Petroliam Nasional Berhad (Petronas) has operations in over 50 countries around the world and is a fully integrated oil and gas company responsible for Malaysia’s national oil and gas resources. The firm is committed to applying the latest technological solutions to improve performance as it moves towards achieving a sustainable energy future.

•

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29

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• Shipping

Damen

d’Amico launches two

unveils new compact multirole Utility Vessel 2410

eco-ships in Vietnam

W

d

’Amico International Shipping S.A., a privately owned international marine transportation company operating in the product tanker market, has launched two new eco-ships at the Hyundai Vinashin Shipyard Co in Vietnam in the presence of the Consul General of Italy in Ho Chi Minh City.

“Today’s launch and the ambitious plans of d’Amico International Shipping

ork is due to start shortly on the first of a new class of Damen utility vessel UV2410. This multi-role platform is the result of extensive consultation with customers active in the aquaculture industry in the UK and Norway. For these customers it was important that the rule length of the new vessel be no more than 24-metres and, for UK customers in particular, that it fits within the 200 gross tonnage limit. Feedback indicated that within that length maximum possible protected deck space and good sea-keeping were top priorities, along with ample accommodation.

“With the wide beam of 9.5 metres and minimal superstructure this vessel provides 120 m² of unobstructed deck space, yet still has comfortable accommodation for up to six crew,” said Lodewijk van Os, product director, workboats. “The design is optimised for a wide range of roles including maintenance support, oil recovery, diving support, buoy handling, safety stand-by, ROV support, surveying and much more.

“It is also ideal for aquaculture, with easy access to the waterline amidships via steps and a three-metre opening in the bulwark, and the capability of mounting dedicated equipment including up to two cranes. In fact, the deck is pretty much ready for anything; A-frames, winches, davits for rescue boats, task-specific containers and many other types of equipment can be quickly added and removed as the vessel receives new assignments.”

As well as for aquaculture companies, Damen envisages that the 2410 will be very attractive to port authorities, governmental organisations, marine contractors and anyone involved in varied, water-based maintenance operations.

strategic partner that confirms our fifteen-year presence in Southeast Asia”, said Paolo d’Amico, President of d’Amico International Shipping.

“In this context, Hyundai Vinashin shipyard represents a fixed point of reference, synonymous of high quality, environmental awareness and energy savings. The proximity and participation of Italian institutions and the presence of leading representatives from Asian

“Vietnam is a strategic partner that confirms our fifteen-year presence in Southeast Asia” here in Vietnam are a further concrete expression of the vitality of the partnership between our two countries and the bilateral cooperation in the economic sector that is proceeding full steam ahead now more than ever,” said the Consul General, Carlotta Colli. “As sponsor, I am honoured to witness the quality and innovation that characterise these eco-ships and that have always made d’Amico International Shipping stand out on a global scale.”

“For our company, Vietnam is a

businesses at this event makes us proud to fly the Italian flag around the world.”

Cielo di Capri and Cielo di Hanoi are both 39,000 dwt handysize product tankers, 184 metres long and 27.4 metres wide. H.O. Park, wife of the President and CEO of Hyundai Vinashin Shipyard, Mr Song, is sponsor of Cielo di Capri, while Consul General Colli “christened” Cielo di Hanoi, in a symbolic exchange representing the fruitful cooperation and friendship between Vietnam and Italy.

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31

• Services

Italian engineering Rigmar group RINA Group acquires Edif Group

announces new office in Abu Dhabi

R

T

igmar Group continues to expand its presence around the globe with the opening of a new office in Abu Dhabi. Rigmar Middle East Oil Field Services LLC offers the full range of asset integrity, fabric maintenance and marine services available from Rigmar Group.

“The opening of the Abu Dhabi office represents an important step forward for the group’s expansion into key areas worldwide, allowing us to respond to the local market and deliver competitive services to customers in Abu Dhabi,” said Keith Nelson, Rigmar Group’s Chief Executive Officer.

Rigmar Group is headquartered in Aberdeen, UK and comprises Rigmar Services Limited, Interocean Marine Services, Interocean Marine Services (Canada) Inc. and Rigmar Middle East Oil Field Services LLC. Rigmar Services is a single source provider of support services to clients throughout the asset life cycle, with engineering and design, inspection, coatings, specialist access, fabrication, construction and accommodation divisions providing asset integrity and maintenance to the offshore oil and gas, offshore renewables, drilling, marine and civils sectors.

Interocean Marine Services offers a complete range of specialist marine services to support marine, offshore drilling and production operations including marine consultancy, project management, naval architecture and engineering, survey and positioning and mooring equipment rental for rig moves, FPSO mooring and hook-up, wave energy convertor deployment and wind turbine installation.

Together, Rigmar and Interocean provide an integrated solution from installation and operational maintenance, all the way to decommissioning.

Ugo Salerno CEO RINA S.p.a. (right) and Tim Dunn, Partner Phoenix Equity Partners (left) sign the contract for RINA’s acquisition of the Edif Group

he multi-national testing, inspection, certification and consulting engineering group Rina S.p.A, based in Genoa, Italy, has increased its profile in the oil and gas industry with the acquisition of the Edif Group. The acquisition includes the ERA engineering consultancy and the NDE testing, inspection and certification business, resulting in an expanded international geographic footprint for RINA, particularly in the US and UK. The deal is part of a long term growth plan and serves to enhance the company’s services through both its certification and consulting engineering businesses. The business potential in

integration will be straightforward, resulting in a wider geographical footprint and immediate business gains.

RINA wishes to expand its business in the oil and gas industry, and with the addition of Edif expertise, I believe that we can offer enhanced value to our customers through an expanded skill base, both in our engineering consultancy and our testing, inspection and certification business.”

Edif and RINA have much in common, both providing a diverse range of testing, inspection, certification and consulting engineering (TIC-CE) services to reduce risk, optimise performance and enhance the capability of their clients’ assets. As a result of the

“This acquisition is strategic and fits very well due to Edif ’s profile in the oil and gas industry” the US and UK oil and gas industries is significant and the deal will give RINA fast track access to those markets. In the US market, where existing Edif (ERA) and RINA (QIC) businesses operate, the combination of expertise will provide a particularly strong platform for further expansion.

“This acquisition is strategic and fits very well with RINA due to Edif ’s profile in the oil and gas industry,” said Ugo Salerno, CEO at RINA. “Due to the complementary nature of the business,

deal RINA will employ approximately 3,000 staff and 1,500 associates in over 80 offices in 163 countries.

RINA was established in Italy (Genoa) in 1861 as a classification society to meet the needs of the shipping world. The company has since diversified and today is a multinational provider of testing, inspection, certification and engineering consultancy services to organisations in the energy, marine, business assurance and transport & infrastructure markets.

•

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33

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• Services

Omnix International

adopts AVEVA software solutions

O

mnix International, a provider of technology enabled solutions to the Middle East, has announced a formal business partnership with engineering software provider AVEVA, to address the increasingly complex needs of the oil and gas industry in the KSA, Kuwait and Qatar region.

Omnix, with over 25 years’ experience in the region, will offer AVEVA’s software solutions to its customers and is now building a dedicated team of

“Technology has a critical role to play in improving performance, and this prompted us to evaluate our portfolio to ensure we continued to offer the worldclass solutions for which Omnix is known in the region. Having reviewed the market carefully, it became clear that AVEVA’s solutions for the oil and gas sector would help our customers become more agile, efficient and effective amid such turbulence. We also wanted a partner that would remain relevant in the future. AVEVA’s history

infrastructure, as they are complex and dynamic, and are experiencing the same shortage of skilled resources affecting the rest of the GCC. In such situations, it is vital to have a strong local presence of highly skilled, highly experienced technical resources to provide the maximum level of direct customer assistance. Omnix has an impeccable track record of expertise and excellence across the region as a whole, and so we are honoured that it has chosen to partner with AVEVA and to add

of innovation, from the creation of the object-centric 3D design category with PDMS through to its ground-breaking information management and decision support solutions built to run on the largest touchscreens really impressed us.”

Louis Khoury, SVP of Operations MEA, AVEVA said: “AVEVA has considerable success in UAE and Oman where we have direct relationships with end users. However, we also recognise that the markets in KSA, Qatar and Kuwait deserve specialist support and

AVEVA technology into its portfolio.

“When we were evaluating the viability of this partnership,” Khoury continues, “Omnix made it clear that it took this commitment very seriously.

I am confident that, as a result, project directors, engineering directors and design managers within oil and gas EPCs and owner operators will get levels of support and choice that the region has never previously enjoyed. We can now provide EPCs and OOs with direct expertise and access to a wide range of AVEVA products and services.”

“Energy demand in the Middle East and North African region is growing at more than three times the global average” AVEVA specialists who will combine local knowledge with AVEVA certified technical expertise.

“Energy demand in the Middle East and North African region is growing at more than three times the global average,” said Jayant Deshpande, Director, Omnix. “Despite the oil price pressures, our region’s oil & gas sector still has active projects totalling approximately half a trillion dollars.

According to MEED Projects, Kuwait alone is expected to award nearly $35 billion of contracts before the year-end.

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35

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• Services

Actemium wins

KBR awarded

bankable feasibility study for Liberian refinery

BP Angola FPSO contract

T

he Oil and Gas division of Actemium, the VINCI Energies brand dedicated to industrial processes, has been awarded a new contract with BP Angola. The ‘two-asset’ agreement, the first of its kind for BP’s Angolan operations, will see Actemium become the key topsides maintenance provider for BP’s two Floating Production Storage and Offloading Units in Angola: Greater Plutonio (Block 18) and PSVM (Block 31).

KBR Inc. has been awarded a bankable feasibility study contract by ECOWAS Refinery Liberia Limited (ERLL) for the development of a 100kbbl/day refinery located in Buchanan, Liberia.

KBR will provide a market study, refinery configuration development and environmental, social and health impact assessment (ESHIA) study.

The work is expected to be performed over five months with KBR configuring the optimal refinery configuration and developing the financial model including capital and operational cost estimates supported by China Huanqiu Contracting and Engineering Corporation (HQC), a subsidiary of China National Petroleum Corporation (CNPC). HQC are advising in tailoring the BFS product for potential future phase Chinese investment.

“KBR is delighted to be able to assist ERLL in the formative stages of this project, bringing together the knowledge and capabilities of the One KBR approach,” said Jan Egil Braendeland, executive vice president of global sales.

Chief Tony Izubundu Chinyere, executive vice chairman & founder of ERLL said: “This is an important milestone to progress the development of the refinery project for Liberia. With the engagement of KBR for the bankable feasibility study, a solid basis for the project will be established.”

The project is the first for the company with BP in Africa, although Actemium has experience in providing services for other world class FPSOs in the region such as Exxon Mobil’s USAN FPSO in Nigeria and Total’s Girassol FPSO in Angola. The company has strong African expertise with offices in Cameroon, Nigeria, Algeria and the Democratic Republic of Congo.

“Actemium is already a strong player in Africa, especially in Angola, where we

“Actemium will deliver onshore and offshore maintenance support services” Under the five-year contract, Actemium will deliver onshore and offshore maintenance support services to the two assets, with scope for additional ad-hoc services to support the operations. The work will be executed through Actemium’s Angolan offices and the Paris located Maintenance Center of Expertise.

have been present for nearly 16 years,” commented Jimmy Neron, commercial director for Vinci Energies Oil and Gas. “However, our new agreement with BP represents an important milestone for Actemium in Africa. We look forward to working closely with BP as we combine our leading capabilities, know-how and experience.”

S&P Global Platts, the leading

offering. Financial terms were not disclosed.

Founded in 1986, RigData provides over 5,500 customers in North America with daily electronic reports on drilling permits, activity and rig locations in the United States, the Gulf of Mexico and Canada. Customers use the information to identify new sales opportunities, assess market share, identify exploration trends, find available rigs, identify new production and monitor market activity.

independent provider of information and benchmark prices for the commodities and energy markets, has acquired RigData, a provider of daily information on rig activity for the natural gas and oil markets across North America.

The purchase extends S&P Global Platts’ energy analytical capabilities by strengthening its position in natural gas and enhancing the company’s oil

•

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37

israeli natural gas industry: where do we go now?

A

fter years of deliberations, negotiations and amendments, the Israeli government recently adopted its final framework for the regulation of the burgeoning natural gas sector. This exciting development is a reflection of the country’s vibrant democracy, strong rule of law, and climate of regulatory certainty; it will hopefully foster geopolitical stability in the eastern Mediterranean basin, and will potentially promote economic codevelopment projects and unprecedented investment opportunities in the region.

Israeli law firm partners Shiri Shaham and Simon Weintraub share their analysis of the natural gas industry in Israel and its potential for direct foreign investment.

38

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• Natural gas The Israeli Gas Framework Background and process

I

srael has historically been a natural resource-poor country and is more widely known for its innovation and high tech industry.

Over the course of the last seven years, however, several major natural gas reservoirs have been discovered in the country’s Exclusive Economic Zone (“EEZ”) placing Israel on the map for the first time with respect to natural resource opportunities.

Israel’s four largest natural gas fields have largely been held by two parties – Noble Energy and the Delek Group, while the exploration efforts of other rights holders have mostly proved unsuccessful. As of June 2016, Delek and Noble together control 85% of the Leviathan field, 67.25% of the Tamar field, and 100% of both the Karish and Tanin fields. The Tamar field, estimated at containing 10 trillion cubic feet (tcf) of gas, was first discovered in 2009 and became operational in April 2013. It now generates more than half of Israel’s domestic electricity production. The Leviathan field (estimated at 22 tcf) was discovered in 2010 and production has not yet commenced. Tanin and Karish are much smaller fields which similarly have not yet been developed to production stage.

In December 2014, Israel’s then Antitrust Commissioner

“Over the course of the last seven years, several major natural gas reservoirs have been discovered in the country’s Exclusive Economic Zone (EEZ)” announced his decision to break up the Noble-Delek dominant position in this sector by cancelling a previous arrangement proposed by the Commissioner that would have allowed such parties to retain their respective stakes in Leviathan and Tamar on the condition that they sell their shares in the smaller Tanin and Karish fields. This decision resulted in an immediate halt in the development of Leviathan and triggered an intense deliberation process by the Israeli government, involving negotiations with Noble and Delek. The aim of such negotiations was to adopt a long term comprehensive arrangement which would enable the development of Israeli gas reservoirs on the one hand, while affording solutions to the natural concerns of exploitation of a monopolistic position. This process took place during the entire year 2015 and involved public and parliamentary hearings and heated debate among the Israeli public. Finally on 17 December 2015, the Israeli Government approved the Natural Gas Framework, which constitutes a comprehensive regulation of this issue (the “Framework”).

The main principles of the Framework are:

•

•

Mandatory sale: Noble and Delek must sell all their rights in the small fields Tanin and Karish within a specified 14 month timeframe. Delek Group must sell all of its rights in the Tamar field and Noble Energy must sell at least 11% of its rights (limiting its maximum holdings in Tamar to 25%) by December 2021. The buyers of the above mentioned holdings must be unrelated third parties, who shall be approved by the Petroleum Commissioner in consultation with the Antitrust Commissioner.

Development and local purchase commitments:

The Leviathan leaseholders must purchase at least US$1.5 billion in services and equipment for the Leviathan field’s •

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development by the end of 2017 and the Tamar and Leviathan leaseholders must invest at least US$500 million over eight years in pertinent Israeli goods and services, R&D, personnel and professional training.

Protections to customers: The Antitrust Commissioner conditioned his approval of a series of nine long term agreements for the sale of gas from the Tamar field upon the granting of a two-year “window of opportunity” (anticipated during 2020-22 but subject to change) for customers to reduce the quantities which are committed to be purchased under the current “take or pay” purchase agreements by up to 50%. In addition, with respect to these long term agreements as well as nine additional short term agreements, customers will be permitted to re-sell 15% of their contractually purchased quantity in secondary sales without pricing restrictions. Future purchasers will enjoy additional protections relating to pricing.

Export and tax: The Framework reinstates, with some modifications, a former government resolution regarding export restrictions which determines that a certain predetermined quantity of gas should be reserved for the local market. It also clarifies various points relating to the special taxation regime applicable for the sale of natural resources.

Stability clause: This integral provision requires the government to guarantee regulatory stability for ten years.

This clause in its original version in the December 2015 Framework precluded the government from initiating new legislation that would change the main parameters of the Framework and current regulations and required the government to oppose similar private legislation.

These undertakings are conditional upon compliance by the leaseholders with their respective Framework commitments.

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The judicial process

Fueled by heated public discourse questioning the government’s policy considerations, a number of interested and political groups challenged the Framework before the Supreme Court of Israel in its capacity as the High Court of Justice. The appeal hinged on the legality of the government’s adoption of this type of legislative-like agenda, rather than by primary legislation of the Knesset (Israeli parliament).

The five Supreme Court judges methodically reviewed and comprehensively analyzed each issue, with each judge expressing slightly different opinions on the various issues. The majority opinion, issued on 27 March 2016, determined that the Framework in its current form was not adopted properly, primarily on account of the legal status of its Stability Clause.

The government was granted one year to resolve this issue.

The revised stability clause

The government promptly addressed the Court’s concerns and on 22 May 2016, announced its amended Framework with a more lenient stability clause. While the new clause still refers to a 10-year long regulatory climate in the natural gas sector which is intended to attract investment, it no longer guarantees nor does it mandate that the government will abstain from and oppose the enactment of any material changes.

Rather, the new clause provides that the government will carefully consider future regulatory changes which relate to the “government take” from the leaseholders’ profits and other matters dealt with in the Framework when such changes could have a material adverse effect (in the eyes of a reasonable investor) on the leaseholders.

In the event of a material change of this kind, the government will undergo an evaluation process which will explore and form solutions in order to sustain the economic viability of the projects. Such evaluation process must be

• Natural gas

concluded during a fixed and relatively short time table and will take into account, inter alia, conformity with OECD and other worldwide standards, amounts already invested in the projects as well as the existence of approved export agreements. As in the previous version of the clause, these governmental undertakings are conditional upon compliance by the leaseholders with the provisions of the Framework.

This improved Framework has thus far gone unchallenged although it cannot be ruled out that additional petitions will be submitted to the Court.

Going forward and conclusions

In our opinion recent events in Israel’s natural gas sector are an encouraging reality for foreign investment in Israel. The recent deliberations and legal proceedings surrounding the Framework have showcased Israel’s vibrant democracy and strong rule of law. The High Court of Justice’s opinion outlines a clear separation of powers between Israel’s executive and legislative branches, effectuating political, legal and regulatory certainty – imperative for direct foreign investment.

From an investment perspective, it is the hope that the Framework will serve as a stimulus in expediting the development of Israel’s natural gas reserves and for promoting trade agreements with neighbouring eastern Mediterranean countries. Such trade agreements can hopefully serve to foster geopolitical stability in the region. By way of example, it was reported that Leviathan partners and British Gas were close to signing a US$30 billion deal to supply 105 BCM of gas over 15 years to British Gas’s liquefaction facility in Idku, Egypt.

It has also been reported in the media that Israel and Turkey are coming closer to a gas deal, including the possibility of a pipeline through Turkey. While relations between the two states have been shaky as of late, a trade agreement would advance the rapprochement that interests both sides.

Additionally, in February 2016, it was reported that the Tamar partners signed a letter of intent with private customers in Jordan to supply 1.8 BCM over 10 years. Lastly, in April 2016 it was announced that the Palestinian Investment Fund received a provisional permit and would soon publish tenders for building a US$600 million power station to be supplied with natural gas from the Leviathan field. The power station is intended to provide 450 megawatts of electricity to West Bank residents.

The Framework is already spawning a boom in discussions on foreign investment and M&A activity in Israel. Under the Framework, the Leviathan field will need to be developed rapidly requiring the infusion of billions of dollars, most of which will likely be funded by sources from outside of Israel.

Moreover, it was announced recently by the Israeli government that there will be a new round of exploratory permits (likely in the fall) to be granted by the Israeli government as the country’s EEZ continues to prove fertile. For example, this past January, it was reported that the partners in the Daniel gas field off the coast of Ashdod and near the Gaza Strip, have a geological report estimating such field to hold 8.9 trillion cubic feet of natural gas.

We are optimistic that the major regulatory hurdles have now been overcome so that Israel can finally find its place as a global energy provider as well as a home base for safe investment opportunities.

The authors Shiri Shaham and Simon Weintraub are partners in the Israeli law firm of Yigal Arnon & Co. specializing in banking and oil & gas. Most recently, Shiri and Simon represented JP Morgan, CitiGroup and HSBC, as the lead underwriters in the Delek Group $2 billion bond offering in connection with the development of the Tamar lease.

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Interview

KITACK LIM:

SECRETARY-GENERAL OF THE INTERNATIONAL MARITIME ORGANIZATION (IMO) Kitack Lim was elected Secretary-General of the International Maritime Organization by the 114th session of the IMO Council in June 2015, for a four-year period beginning 1 January 2016.

Kitack Lim (Republic of Korea) is the eighth elected SecretaryGeneral of the International Maritime Organization.

What are the IMO’s main objectives for 2016?

The main objectives this year include the smooth implementation of the mandatory IMO Member State Audit Scheme; further efforts to address greenhouse gas emissions from international shipping; the next steps in the application of goal-based standards for construction of oil tankers and bulk carriers; continued work on passenger ship safety and the implementation of the Ballast Water Management Convention.

Other matters on the regulatory side include the review of the Global Maritime Distress and Safety System, pushing ahead with the e-navigation strategy and managing cyber security threats.

For me personally, the effective implementation of international conventions and regulations is a key priority. I have talked about a “voyage together”, in which my vision is one of strengthened partnerships – between developing and developed countries, between governments and industry, between IMO member states and regions.

Another personal objective is to strengthen communication between the maritime industry and the general public and I see IMO acting as a bridge between all these stakeholders. I am keen to raise our visibility not just among those who already know us, but also among those who do not. I want to raise awareness among officials, ministers and decision-makers outside of our regular community, in the interests of joined-up thinking, joined-up planning and collaboration.

How important are new technologies in improving vessel efficiency?

New technologies and innovation are very important tools and can significantly enhance ships’ energy efficiency.

IMO has set non-prescriptive regulations for the mandatory Energy Efficiency Design Index (EEDI) for new ships, so that ship designers are free to use imagination, blue-sky thinking and innovative technology to meet the requirements and also achieve the most cost-efficient solutions.

Two major IMO projects are supporting the increased uptake and implementation of energy-efficiency measures for shipping. The first is the GloMEEP project, formally designated Transforming the global maritime transport industry towards a low carbon future through improved energy efficiency. IMO is executing this Global Environment Facility (GEF)-funded 44

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GloMEEP project in partnership with the United Nations Development Programme (UNDP), following the signing of an agreement between IMO, the GEF and UNDP to allocate US$2.0 million to this two-year partnership project. A number of national workshops involving lead pilot countries have already been held under the project.

The second exciting project is the European Union-funded IMO project to establish a global network of Maritime Technology Cooperation Centres (MTCCs) in developing countries. The aim is to help beneficiary countries limit and reduce greenhouse gas emissions from their shipping sectors through technical assistance and capacity building.

It will encourage the uptake of innovative energy-efficiency technologies among a large number of users through the widespread dissemination of technical information and knowhow and thereby heighten the impact of technology transfer.

Both these projects will provide opportunities to evaluate existing as well as new and emerging technologies. So we might be looking at advanced hull coatings to prevent fouling, novel propulsion and powering systems, “smart ships” incorporating advanced communications and sensor technology into their operation, and so on.

It is an exciting time for shipping, as we look towards building capacity to implement technical and operational measures in developing countries, where shipping is increasingly concentrated. We should strive towards promoting a lowcarbon maritime sector, to minimize the adverse impacts of shipping emissions on climate change, ocean acidification and local air quality.

How does the IMO counter piracy?

IMO has responded to maritime security threats, encompassing terrorism as well as criminal and illicit activity such as piracy and armed robbery against ships, in two ways: by adopting and approving regulations and guidance and through capacity building.

Chapter XI-2 of the SOLAS Convention makes mandatory the International Ship and Port Facility Security Code (ISPS Code) and forms the cornerstone of regulatory measures to address maritime security. Ships and port facilities both have to have in place approved security plans which address identified threats.

• Executive interview

IMO has been addressing piracy (defined in the United Nations Convention on the Law of the Sea as an illegal act committed against a ship on the high seas) for several decades.

Regional capacity-building has helped address and suppress piracy and armed robbery against ships in the Straits of Malacca and Singapore and more recently off the coast of Somalia, in the Gulf of Aden and in the wider Indian Ocean. Thanks to regional capacity-building efforts by IMO to counter piracy - including the Djibouti Code of Conduct for the western Indian Ocean, efforts by coastal States, navies and the shipping industry through implementing “best management practices” - we have seen a decline in acts of piracy off Somalia. No successful hijack was recorded there in 2015.

However, the alarming increase in acts of murder, kidnapping, hostage-taking and robbery by pirates in the Gulf

of Guinea has now become a serious concern, and I welcomed the Presidential Statement issued by the UN Security Council at the beginning of May addressing this subject. IMO is currently implementing a strategy for enhancing maritime security in west and central Africa, in line with the region’s maritime security agreements.

The focus is on providing assistance to IMO Member States seeking to develop their own national or regional measures to address the threat of piracy, armed robbery against ships and other illicit maritime activities. IMO is working with States in the region and regional organizations to help develop the maritime sector and the blue economy, underpinned by good maritime security. In addition to countering piracy and armed robbery against ships, States in the region are being encouraged and assisted to develop holistic maritime security •

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“An LNG-fuelled ship reduces the emissions of NOx by 85% to 90% , and SOx and particles by close to 100% compared to conventional fuel oil” strategies that address a range of issues, including search and rescue, marine environment protection, energy-supply security, maritime terrorism, unsafe mixed migration by sea as well as other illicit activities, such as trafficking drugs, weapons and people by sea and illegal fishing.

What are the current and future challenges for international shipping?

Market conditions dictate the global economy but the historical trajectory of shipping suggests that trade by ship will continue to rise, in the long term. According to the United Nations Conference on Trade and Development (UNCTAD), around 80 per cent of global trade by volume and over 70 per cent of global trade by value are carried by sea and are handled by ports worldwide. These shares are even higher in the case of 46

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most developing countries. Without shipping the import and export of goods on the scale necessary to sustain the modern world would not be possible.

From IMO’s perspective, I think the challenges for international shipping are to ensure that it remains sustainable for the future, to ensure ships are as safe as possible and with minimal impact on the environment, particularly when it comes to air pollution and reducing greenhouse gas emissions.

Current challenges arising from the regulatory side will include implementing amendments to regulatory instruments that have been adopted to improve the safety of shipping, such as the SOLAS requirements for the verified gross mass of containers entering into force on 1 July 2016.

On the environmental side, the Ballast Water Management Convention will require investment and implementation from

• Executive interview

At the moment, the number of LNG-fuelled ships is relatively small. An IMO-commissioned study identified some 40 LNGfuelled merchant ships in operation with a further 40 under construction or undertaking conversion.

The same study notes that the use of LNG is considered to have significant environmental advantages. An LNG-fuelled ship reduces the emissions of NOx by 85% to 90% (using a gasonly engine), and SOx and particles by close to 100% compared to conventional fuel oil. In addition, LNG-fuelled ships may result in a net reduction of GHG emissions.

Recognizing the increasing number of gas-fuelled ships, IMO has developed and adopted the International Code of Safety for Ships using Gases or other Low-flashpoint Fuels (IGF Code), which contains mandatory provisions for the arrangement, installation, control and monitoring of machinery, equipment and systems using low-flashpoint fuels, focusing initially on LNG. It becomes mandatory under amendments to the SOLAS Convention which will enter into force on 1 January 2017.

IMO has also adopted amendments to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW), and STCW Code, to include new mandatory minimum requirements for the training and qualifications of masters, officers, ratings and other personnel on ships subject to the IGF Code. These amendments will enter into force on 1 January 2017.

How important are training and development in the shipping sector?

the shipping industry, while shipping will need to comply with stricter limits on sulphur emissions globally in the coming years.

We cannot predict the future but I feel certain that international shipping will be ready to face any forthcoming challenges, alongside the IMO membership.

What is the IMO’s view on LNG as the “energy of the future”?

As an organization, IMO has not adopted a view on LNG specifically but has responded to changes in the industry by ensuring the development of appropriate global standards for new fuels or for alternative methods in order to meet compliance.

As environmental regulations strengthen, such as the air pollution regulations under MARPOL Annex VI, the market will decide how to respond. It will be up to ship operators to decide on which fuel to use or whether to use alternative, equivalent methods (such as scrubbers), so long as these are approved by the flag state as meeting the air pollutant requirements.

Effective standards of training are the bedrock of a safe and secure shipping industry and it is clear that without a quality labour force, motivated, trained and skilled to the appropriate international standards, shipping cannot thrive.

Moreover, personnel within the industry must have sufficient, quality training if they are to be able to implement the many advances that have been made, in terms of safety and environmental impact.

Shipping is highly technical, demanding considerable skill, knowledge and expertise from those who work in it and not everything can be learned on the job. So it is vital that shipping has a global network of specialist education and training establishments to ensure a continuing stream of high-calibre recruits.

And this is not just about seafarers. Maritime education needs broad coverage. Naval architecture, marine engineering, maritime law and many other fields all require specialist training.

IMO’s long and wide-ranging involvement in the human element of shipping includes the adoption of the 1978 International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, which has set the international benchmark for seafarer training and education. Compliance with its standards is essential for serving on board ships.

Paul González-Morgan Editor, Gibraltar Shipping Email: shippinggib@gmail.com Twitter: @ShippingGib Web: www.gibraltar-shipping.com

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SUBSEA PROJECTS: THE BENEFITS OF A STANDARDIZED APPROACH TO TECHNICAL DOCUMENTATION A cross-industry project led by DNV GL to halt the boom in subsea documentation shows that implementing a standardized approach can significantly reduce engineering hours.

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Bente Helén Leinum, project manager, DNV GL – Oil & Gas.

• Subsea standard

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two-year collaboration led by DNV GL has concluded in a publicly available Recommended Practice which can reduce the amount of subsea documentation and enable documentation reuse in a typical subsea field development project.

DNVGL-RP-O101 Technical documentation for subsea projects details a required minimum set of documentation transferred between E&P companies, operators and contractors for the construction, procurement and operation of a field. The outcome will reduce the volume and variety of documentation exchanged between the parties in a project, thereby making project execution more cost effective.

According to a contractor in the JIP, subsea documentation increased by a factor of four between 2012 and 2015. Previously, a contractor in a typical subsea project would deliver around 10,000 documents, with each one averaging three revisions, resulting in up to 30,000 transactions between two actors. Today, projects can deliver 40,000 documents, with three revisions resulting in 120,000 transactions. Handling time has also doubled per revision.

A big project may require a contractor to have 25 people just on document control.

“We like solid documentation in DNV GL, but this massive explosion in paper hasn’t tangibly improved performance, safety or environmental impact – it’s just escalated costs without adding value,” says Bente Helén Leinum, project manager, DNV GL – Oil & Gas. “A benchmarking exercise by one JIP participant showed that

“A big project may require a contractor to have 25 people just on document control” adoption of the RP could deliver a 42% potential reduction in engineering hours. The savings come from reduced reviews by reusing documents, having more standardized documents and avoiding unnecessary reviews of non-critical documents. Another supplier estimates that the potential cut in documentation can be as high as 75-80% through increased use of standardized documents,” continues Leinum.

Jan Ragnvald Torsvik, lead engineer of Life Cycle Information at Statoil and co-chairman of the project, comments: “All JIP partners have invested considerable time and the outcome is a fantastic achievement that will dramatically cut waste in the handling of technical information in projects. We have already learned that this standard’s approach in utilizing package-specific requirements has a positive impact on standardization and efficiency. We are already seeing the benefits of implementing a draft version of the RP in Statoil’s Johan Sverdrup project last year,” he continues.

“The RP encourages more reuse of subsea documentation and will deliver more predictability throughout the value chain. It provides clear expectations for all parties involved, and duplications, misunderstandings and unnecessary work can be avoided,” says Tommy Lien, Senior LCI Process Coordinator, Aker Solutions.

JIP partners were Aker Solutions, Brightport, Centrica Energi, DEA Norge, Det norske oljeselskap, DNV GL, ENI Norge, GCE Subsea, FMC Technologies, GDF SUEZ E&P Norge, Kongsberg Oil & Gas Technologies, Lundin Norway, Oceaneering, OneSubsea, Statoil, Subsea 7, Subsea Valley and SUNCOR Energy Norge.

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SEA CHANGE: WHAT IT WILL TAKE FOR THE NORTH SEA OIL & GAS INDUSTRY TO THRIVE

The North Sea basin has a two year transformation window in which to ensure its future, according to senior oil and gas executives interviewed for PwC’s latest report, A Sea Change 52

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• North Sea

W

hile much progress has been made to date in tackling issues such as cost efficiency and implementing recommendations from the 2014 Wood Review, the PWC report believes that any inertia at this pivotal moment could lead to decline at an exponential rate.

The industry interviews reveal significant levels of optimism that with the right leadership, innovative strategies, intervention and co-operation between operators, oil field service sectors and government, the North Sea can continue to provide a few more decades of production.

But in order to achieve this, a robust roadmap is needed to transform the basin, meet short term energy needs and bridge the gap to a lower carbon future – and this will need drive and direction from Government, the Oil and Gas Authority (OGA) and industry as Alison Baker, PwC’s UK and EMEA oil and gas leader, explained: “During our interviews we picked up a real sense of urgency to create one last cycle of success that will retain and generate jobs, stimulate growth and ensure security of energy supply. But this was matched by a level of frustration at the fundamental issues that need tackling to avert the risk of rapid and premature decline.

“Part of the solution is for government agendas across Treasury, DECC and the OGA to be much better aligned to the needs of the whole industry, from super majors to smaller oil field services firms. The majority of respondents also want government to take a lesson from Norway and Saudi Arabia and be bold in setting out their blueprint for the future. This must incorporate onshore activity as well as defining how the North Sea basin will evolve in the short to medium term and, crucially, how the end game - and subsequent transition to a

“The majority of respondents want government to take a lesson from Norway and Saudi Arabia and be bold in setting out their blueprint for the future” low carbon landscape - will be managed.”

New leaders must step up

Historically, large operators have exported their best talent to frontier basins, leaving solid and stable leaders to man the helm across mature assets - a move that has potentially stifled innovation. The growth of independents, bringing new expertise and investment, has also fostered fragmentation across the basin.

PWC’s respondents recognised that a change of guard at the top is essential if the industry is to successfully disrupt its ‘we’ve always done it this way’ mentality and become a force for innovation and re-invention while demonstrating entrepreneurial and forward-thinking leadership.

And while the OGA was lauded by many for helping draft the MER UK strategy, securing £40 million of government funding to shoot new seismic surveys over frontier areas that can now be viewed, the industry is keen for the regulator to lead from the front. There is an expectation from industry that the regulator not only sets a holistic framework for the basin, but is more assertive to change behaviours.

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• North Sea

Innovative solutions and building connections

While it’s clear that the drive for transformation must come from the industry, based on survey responses the report identifies a number of innovative solutions that could help create the seismic shift needed to break any residual inertia and re-invigorate the basin. These include: • Creating a super joint venture vehicle, consolidating smaller and fragmented assets under one sole operator. This investment vehicle could drive greater cost-efficiencies, boost bargaining power with suppliers, and enable a more co-ordinated approach to decommissioning of the asset pool.

• Consortium financing with collective counterparty risk, focusing on area based outcomes rather than asset based ones. With many reflecting that traditional providers of capital had retreated as oil prices plummeted, creating inertia in funding new projects and deals, this could break the gridlock.

• A Government backed decommissioning fund or equity-backed guarantee scheme to help smaller companies cover their letter of credit requirements.

With Government assuming a degree of risk with the majors, independents can focus on squeezing the last drops of oil and gas from the basin.

Different issues for different countries

Respondents in all three countries identified technology and innovation, alongside collaboration and government, as major focus areas. And while retaining skills and talent was a common challenge, it was also noted that a change to offshore shift arrangements in Norway was long overdue: the current rotation model and high wage levels means the average employee cost is currently 85% higher than the UK equivalent.

For UK respondents, access to capital and technology and innovation were judged to be significant issues.

The biggest divergence was from the Dutch: with a focus on gas extraction and recognition that low gas prices are now accelerating the demise of the basin, the industry is anticipating and planning for a move towards decommissioning within the next 5 – 15 years. The consensus view was that the next wave of investment in the basin would come from renewable markets such as tidal energy and offshore wind.

Kevin Reynard, PwC Office Senior Partner in Aberdeen, concluded: “The North Sea still has a strong couple of decades ahead of it but the decisions to sustain it in that period need to be taken quickly. It’s vital that governments and industry come together and agree a blueprint for action. No one company standing alone can weather this but if all interested parties join forces to address the issues then there is hope for the North Sea. “It’s clear that with the right momentum the industry can secure a sustainable future and successfully manage the transition to a lower carbon economy in the years ahead, which can benefit not just the North East of Scotland but the wider North Sea basin.”

A Sea Change – the transformation of North Sea oil & gas is based on interviews with 37 senior executives in the UK, Holland and Norway working across industry, academia and Government.

A copy can be downloaded at: www.pwc.co.uk/seachange •

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CONTAINER SHIPPING AS A COMMODITY? Patrik Berglund, CEO of Xeneta, proposes transforming the container shipping market with ‘commodity’ status

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ith ultra-low container rates, multiple operators teetering on the brink of bankruptcy, and adversarial relationships developing between those shipping goods and the carriers, Xeneta believes the entire container industry must evolve. The Oslo-based benchmarking and market intelligence platform for containerized ocean freight is proposing a radical solution it says would benefit both shippers and carriers – the introduction of ‘commodity’ status.

Container rates have collapsed over the course of the last eighteen months. According to Xeneta, which tracks data across 60,000 global trade routes, short-term market average rates for the Shanghai to Rotterdam trade are typical. Here, the market average price for transporting a 40-foot container has fallen by 51% since 1 July 2014, currently standing at US$1294.

Some Qingdao – Rotterdam boxes have been obtained for as little as $100 during the last year.

This is unsustainable, says Xeneta CEO Patrik Berglund.

“These rates are obviously positive for hard-nosed negotiators wanting to ship freight, but not for the industry, and not for anyone in the long-term,” he says. “Only a handful of carriers managed to make a profit last year and some of the biggest players, like HMM and Hanjin, are close to bankruptcy, while UASC lost a reported $500 million in 2015.

“The low rates that are causing this will, naturally enough, skyrocket if the industry loses a few significant players, or sees 56

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widespread consolidation of power into fewer hands. This will hit not only shippers hard, but also consumers, as all those Asian-sourced retail and wholesale items on which the western world, Africa, and Latin America relies will become more

“Only a handful of carriers managed to make a profit last year and some of the biggest players are close to bankruptcy” expensive. So, regaining a sense of stability wouldn’t just be a good thing for the containership vessel operators, but for all stakeholders, right through the entire chain.”

Berglund, and the team working on the Xeneta platform, see the commoditisation of containerized freight as a solution.

Commodities are traded on highly regulated exchanges with transparent pricing. Importantly, traded items can be hedged, buying or selling forward to manage exposure to risk. For example, in the case of aluminium, traded on the London

• Container shipping

Metal Exchange (LME), it is possible to buy or sell forwards by up to 123 months.

“At the moment shippers and carriers are at loggerheads, fighting to get the best prices in an unstable market,” Berglund explains. “However, by trading the transport as a commodity, at a transparent price, both parties achieve security and get the option of buying or selling forward when they feel the price is favourable to their interests.

“For example, imagine how healthy a carrier would be if they’d sold forward three, five or seven years when ChinaEurope rates were in the $1,500-2,000 range. On the other hand, imagine a shipper who bought freight contracts now for two, three or five years ahead, protecting themselves against future rate hikes when carriers go bankrupt, or when the Chinese economy recovers even by just 1% or 2%.”

Berglund says that big shippers, such as Walmart or Carrefour, could forward buy the appropriate number of TEUs for their needs and lock in product pricing and profit.

Meanwhile, carriers, such as Maersk could sell forward capacity on newbuilds at the point of ordering to ensure their future profitability, rather than risking huge investments in uncertain markets.

He concedes that there are risks involved, however, explaining that, for example, shippers who locked in the aforementioned rates of $1,500 – 2,000 two years ago would be “hurting now.”

“But that element of risk is the price to pay for both parties to gain predictability and transparency,” Berglund states. “There are many things to consider, but with the transparent data that is now available it’s easier to make truly informed decisions. It has the power to transform this industry.”

The Xeneta CEO says he understands that his suggestion may seem radical, but points out: “Carriers and airlines already hedge fuel; so what’s the difference?”

He concludes: “We track more than 60,000 shipping lanes with real-time, actual rates, while our indexes are comprised of over 12 million contracted rates. We know the market inside out, giving shippers and freight forwarders the data they need to get the right price for their cargoes. That same data could be used to set prices on an exchange, providing transparency, fair agreements and stability for a sector that is undergoing huge upheaval.

“This industry needs to change. Both the carriers and the shippers need each other to succeed, so it’s time they start working together in a way where they both can. An exchange would be the perfect platform for that. Containerized freight is a commodity that the world can’t do without.”

Xeneta is a privately held company headquartered in Oslo, Norway. www.xeneta.com.

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maersk group Performance and values From shipping to logistics to oil and gas, the diversity of the Maersk Group has been a source of strength and success for more than a century

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ounded in Svendborg, Denmark in 1904, Maersk Group is now a global conglomerate operating in the shipping and energy industries. Maersk Group has a leading role to play in the arena of sustainable business development. Its shipping companies provide comprehensive coverage of the world’s need for cargo, oil and gas transport, terminal services and on-land logistics. The energy-related business units include drilling and platform service companies, as well as one of the world’s leading independent oil and gas firms. The diversity of the group has been a source of strength and success for more than a century. Maersk operates in accordance with a set of official corporate values. They are the same principles that its founders Arnold Peter Møller and Mærsk Mc-Kinney Møller relied on as they guided their family business through a century of success – innovation, sustainability and a commitment to partnerships.

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• Maersk Group normally scheduled route from Bremerhaven in Germany to Pipava in India, delivering cargo to the usual ports along the way. But it does so with a difference. As a supplement to traditional bunker fuel, Maersk Line has tested using fuel derived from algae to power the ship’s electronics along the route. Looking ahead, biofuel derived from algea could one day be used to power vessels. For Maersk Line, biofuels are part of a broader strategy for reducing CO2 and SOx emissions and for diversifying fuel supply.

Sustainable ship recycling in India

Shipping is a huge part of Maersk’s operational portfolio and with more vessels to recycle in the future the current cost of ship recycling is not sustainable. The Maersk Group is working to use its leverage to create more responsible recycling options and has recently announced a commitment to help selected ship recycling yards in Alang, India to upgrade facilities and practices to comply with the company’s standards. Now an agreement has been reached for the landing of the first two vessels. The Maersk Wyoming and the Maersk Georgia, two Maersk Line container vessels, are expected in Alang late May 2016. The vessels will be recycled at the Shree Ram yard in Alang, which is certified to the standards of the Hong Kong Convention.

The market for ship recycling is dominated by practices unchanged for decades. Out of the total 768 ships recycled globally in 2015, 469 – representing 74% of the total gross tonnage scrapped - were sold to facilities on beaches in India,

“Two Maersk Line container vessels are on their way to India for recycling at the Shree Ram yard in Alang” Innovation

Maersk invests heavily in innovation at all levels of its organisation – whether designing the world’s largest and most eco-friendly container ships, developing sophisticated software to improve logistics in growth markets, or inventing technologies that enable reliable, safe drilling in the world’s harshest environments. Innovation is a highly focused discipline that aims to deliver better service, protect employees and the environment, create new business opportunities and ensure cost-effectiveness.

One example of innovation is Maersk Oil’s TriGen power generator that uses technology derived from the space industry.

About the size of a shipping container, TriGen burns gas with pure oxygen to produce clean power, pure water and “reservoir ready” carbon dioxide that is captured and transported to oil and gas fields for enhanced oil or gas recovery. Because the CO2 is captured, the power produced is emissions-free.

Another example of Maersk innovation is the Maersk Kalmar.

This 300-metre-long Maersk Line container ship sails its

Pakistan and Bangladesh with challenges to workers and the environment. “The Maersk Group’s policy is to only recycle ships responsibly,” says Annette Stube, head of sustainability in Maersk Group. “There has, however, been no change in practices in this area and today, responsible recycling is only feasible in a limited number of yards in China and Turkey.”

Currently, the estimated extra cost for Maersk Group of responsible recycling at existing yards is US$1-2 million for each vessel. Steady improvements of conditions have been witnessed in ship recycling yards in Alang in the last couple of years and today a total of four yards in Alang are certified to the standards of the International Maritime Organisation and Hong Kong Convention. Following several visits at upgraded beaching facilities in Alang in 2015, the Maersk Group concluded that responsible recycling can be accelerated in the area, if the engagement is made now.

“We want to play a role in ensuring that responsible recycling becomes a reality in Alang, India,” says Annette Stube. “To find sustainable solutions, we are working on building a

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“The acquisition of Barcelona-based Grup Maritim TCB added 11 terminals in Colombia, Brazil, Mexico, Guatemala, Turkey and Spain to APM Terminals’ portfolio”

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• Maersk Group broader coalition with other ship owners and have initiated engagement with a number of carefully selected yards in Alang.

This includes improving local waste facilities and hospitals and upgrading the housing conditions for the migrant workers in Alang.”

The Maersk Group is engaging in the development of sustainable ship recycling for the long term and will in the coming years work directly with selected certified yards in Alang to further upgrade their facilities and practices to comply with the company’s standards.

Areas of operation MAERSK LINE

With 25,000 employees Maersk Line can offer customers access to a global network of feeder vessels and onshore logistics services. One of the key goals at Maersk Line is to transform the customer experience in the container shipping industry.

Working closely with customers, Maersk Line has launched several major initiatives over the last few years, for example, the revolutionary Daily Maersk service. With 70 dedicated ships and port calls throughout the week, Daily Maersk provides unmatched flexibility and absolute reliability to customers in Asia and Northern Europe.

Reliability is a top priority for Maersk Line and the company is frequently ranked by independent third parties as the most reliable carrier among the world’s largest shipping lines. In addition, Maersk Line is also a leader in eco-efficiency, which is fast becoming a major differentiator in the container shipping industry. Being considerably more efficient than the industry average this enables customers to reduce the environmental footprint (including CO2) of their logistics solutions and supply chains.

DAMCO

“Maersk Line is frequently ranked by independent third parties as the most reliable carrier among the world’s largest shipping lines”

With offices in more than 90 countries, Damco is a global player that keeps things moving for more than 10,000 businesses worldwide. Damco creates value by simplifying complex supply chains, enabling businesses to cut their inventories, reduce their operating costs, and achieve shortterm savings that improve long-term competitiveness. In 2011 Damco completed more than 300 supply chain projects that identified over US$130 million in potential savings for its customers.

Damco offers market-leading capabilities in key origin markets, and is a leading operator in emerging markets such as China, South East Asia, India, Africa, the Middle East and Latin America. Damco’s greatest successes have always come from working closely with customers to understand their business and deliver the solutions they need. This probably explains why Damco’s key customer retention rate regularly exceeds 97%, one of the highest customer retention rates in the industry.

APM TERMINALS

This business unit is an independent operator with a global port, terminal and inland services network spanning five continents. Its assets include interests in 62 port facilities and over 150 inland service locations, providing a growing business presence in 63 countries. As the world’s leading port and terminal operating company, APM Terminals plays a critical role in facilitating world trade, which is a primary

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• Maersk Group

“Maersk Drilling operates the world’s largest and most advanced ultra harsh environment jack-up rigs in the North Sea at water depths up to 150 metres” 66

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driver of global economic growth. Over 90% of world trade is transported by ship, and total container volumes at the world’s ports surpassed 600 million TEUs in 2012.

With APM Terminals’ purchase of a majority stake in the leading Spanish container terminal operator, the Maersk Group executes on its strategy to invest in growth through the business cycle. The acquisition of Barcelona-based Grup Maritim TCB adds 11 terminals in Colombia, Brazil, Mexico, Guatemala, Turkey and Spain to APM Terminals’ portfolio.

“With its robust financial performance and balance sheet, the Group is in a strong position to make investments of this kind in volatile markets and pursue growth opportunities— both organically and by acquisition,” says Nils S. Andersen, Maersk Group CEO. With this deal the APM Terminals global terminal network grows from 63 to 74 terminals in 40 countries across five continents. The 11 acquired terminals add 4.3 million TEU in capacity and 3.5 million TEU in estimated annual container volumes to the APM Terminals’ portfolio. “The 68

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acquisition supports our growth plans and value proposition towards APM Terminals’ wide range of customers in Europe and Latin America,” says Andersen.

Latin America has been a strategic focus of the Maersk Group for some time and it has many investments in the region.

The most recent example is the joint-venture multi-purpose terminal in Cartegena, Colombia.

Winning new business in an increasingly competitive global market requires not only a successful strategy for portfolio management and investment, but also a commitment to innovation and sustainable business practices. APM Terminals is an industry leader in innovation, with major projects including the productivity-doubling FastNet crane system and its announced portfolio-wide conversion to electrified rubbertire gantry cranes (RTGs) from diesel power.

MAERSK OIL

With 3,200 employees, turning marginal and challenging fields into commercial successes has been the cornerstone of

• Maersk Group potential development of two further wells based on field performance.

The Flyndre well is expected to peak at around 10,000 barrels of oil per day (gross production), with Cawdor expected to peak at around 5,000 barrels per day (gross production) with production there beginning in 2017. Total recoverable resources are expected to be approximately 30 MMboe for the initial development phase, with further upside depending on performance and further development phases. Maersk Oil UK Limited’s investment in the field developments is expected to be approximately £300 million.

CULZEAN: The Culzean project has taken a significant step forward. Maersk Oil UK and its co-venturers JX Nippon Exploration and Production (UK) Limited and Britoil (BP) have chosen a new standalone facility to develop the discovery: a complex of bridge linked platforms comprising a 12 slot wellhead platform (WHP), a central processing facility and utilities/living quarters. The total investment for the project is expected to be in excess of £3bn (US$4.7bn).

The development plan of the gas field received approval from the UK Oil & Gas Authority in September 2015. The drilling rig for Culzean will be designed to operate in water depths of up to 400ft and drill at depths of up to 30,000ft. The project will implement a high-specification, harsh-environment (HSHE) self-elevating drilling rig, which will be based on the Friede & Goldman JU-2000E design but with certain improvements. The rig will possess a static hook loading capacity of two million

“The total investment in the Culzean project is expected to be in excess of £3 billion (US$4.7bn)” Maersk Oil’s business since the company was founded in 1962.

Maersk Oil developed groundbreaking technologies while working with tight chalk reservoirs in the Danish North Sea and enabled Denmark to become an oil and gas producing country. Later, the company deployed these technologies abroad and became an international player in the upstream business. Today, Maersk Oil produces some 625,000 barrels of oil equivalent per day, with production in Denmark, the UK, Qatar, Algeria, Brazil and Kazakhstan. Exploration activities are ongoing in Angola, Norway, Greenland, Kurdistan, the US Gulf of Mexico and in the producing countries.

FLYNDRE AND CAWDOR FIELDS: The Flyndre field was discovered in 1974 and straddles the UK/Norway median line. Cawdor was discovered in 2008. The fields will be codeveloped as a subsea tie-back to the Clyde platform operated

by Talisman Sinopec Energy UK Limited. Flyndre will be developed with a single production well. The Cawdor field will be developed initially with a single production well, with

pounds and a cantilever reach of 75ft. It will enable off-line pipe handling and feature 15,000 pounds per square inch (psi) blowout preventer systems and accommodation for up to 150 personnel. If successfully developed, the Culzean field could provide around 5% of the UK’s total gas consumption by 2020/21. First gas from the project is currently expected in 2019.

MAERSK OIL PARTNERSHIPS: Maersk Oil’s strong technical capabilities and pioneering mindset allow it to move very quickly from the point of discovery to first oil – making Maersk Oil a valuable partner for host countries. It has a proven track record of diligent project execution, completing large, complex projects on time and on budget. The development of the Al Shaheen field in Qatar is an example of this. Maersk Oil took over the abandoned field in 1992 and produced the first oil in 1994. In 2011, it finalised a US$6 billion development of the field – including the installation of 15 new platforms and 160 production and water injection wells.

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MAERSK TANKERS

A vital part of the Maersk Group, Maersk Tankers owns and operates a large, modern fleet of crude oil, product, and gas tankers, all built and operated in accordance with the group’s high standards for quality and reliability. Tankers form a vital link in the global energy industry, as well as playing a key role in ensuring that the industry operates safely, efficiently and with a minimal environmental impact. Maersk Tankers has been transporting oil since 1928, and today has one of the largest and most diversified independent fleets in the world.

Maersk Tankers aims to be the industry leader by offering customers unmatched service, scale and flexibility. One example of its strength is the 2012 founding of the Nova Tankers VLCC pool, which is the market leader in this segment. Maersk Tanker’s three product tanker brands also enjoy a commanding market position. The LR2 Pool operates double-hull coated Aframaxes, primarily carrying naptha and gasoil from the Arabian Gulf to East Asia.

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Handytankers is one of the world’s largest pool managers of vessels between 25,000 and 51,000 dwt. Broström, acquired in 2009, is a leading tanker company specialising in vessels below 25,000 dwt. Finally, Maersk Tankers has a strong presence in the handy-size and VLGC gas segments under its own name.

MAERSK FPSOs

This unit develops, builds, owns and operates floating production, storage and offloading (FPSO) vessels that are tailor-made for oil and gas production in demanding environments. FPSOs are some of the world’s most complex vessels. They are designed to receive reservoir fluids from nearby platforms, separate the oil, gas and water, and process and store the oil or gas until it can be offloaded onto a tanker or transported through a pipeline.

FPSO’s are especially effective in remote and deepwater locations where other solutions are not technically feasible.

Maersk FPSOs is a contractor to some of the world’s leading energy companies. Its produc

• Maersk Group Brunei, Egypt, the Gulf of Mexico, Australia, the Caspian Sea and Venezuela – applying efficient, high-performance equipment to break new ground in the global energy business.

Maersk Drilling is a leader in the North Sea, where it operates the world’s largest and most advanced ultra harsh environment jack-up rigs at water depths up to 150 metres. These highly automated rigs provide safe working conditions for its crews and an unsurpassed drilling efficiency for its customers.

The fleet also includes three highly sophisticated deepwater development semi-submersibles that are capable of operating at depths up to 3,000 metres.

Maersk Drilling continues to lead the way in the technological advancements of ultra harsh environment drilling. With its XLE Rigs, it will deliver the most advanced jack-up drilling rigs in existence. All of them will be customized to handle demanding and complex well drilling operations in the North Sea. The four XL Enhanced harsh environment jack-up rigs are based on the design of the MÆRSK INNOVATOR and the MÆRSK INSPIRER, currently the world’s largest and most advanced jack-up drilling rigs.

Significant operations in other regions of the world include the Egyptian drilling company (EDC), a joint venture formed with the Egyptian General Petroleum Corporation. This venture owns and operates a fleet of more than 60 land rigs and five jack-up rigs in the Middle East.

Maersk Drilling relies heavily on advanced engineering. It has its own in-house engineering department that develops newbuildings and modifies existing rigs to deliver exactly what

“Maersk Drilling has its own in-house engineering department that develops newbuildings and modifies existing rigs” tion units ensure safe and reliable exploitation of offshore oil and gas fields, and meet the highest standards in some of the world’s most strictly regulated and harshest offshore environments.

The Maersk Peregrino is the newest FPSO in the fleet. This state-of-the-art vessel is the Maersk Group’s most expensive unit, and is able to produce up to 100,000 barrels of heavy oil per day from the Campos Basin off the coast of Rio de Janeiro.

Maersk FSPOs’ purpose-built Maersk Curlew and North Sea Producer vessels have operated off the coast of Aberdeen since the late 1990s, while the NKOSSA II LPG storage ship operates off the coast of DR Congo, and the Volve production module is mounted on the Maersk Inspirer, currently operating off the coast of Norway.

MAERSK DRILLING

With 3,300 employees, Maersk Drilling has been an expert in drilling since it started operating in 1972. Maersk Drilling is currently drilling in the North Sea, West Africa, Malaysia,

customers want. Maersk Drilling also applies its technical know-how to the critical work of improving sustainability.

It has adopted an ISO 14001-certified environmental management system, and is involved in a number of sustainability initiatives, including the optimisation of newbuilding designs to reduce its environmental footprint by 10 per cent.

MAERSK SUPPLY SERVICE

This business area supports the oil, gas and renewable energy industries around the world with a large fleet of modern, advanced vessels. Maersk Supply Service has the technology and know-how to meet almost any customer’s need. Its diverse and highly sophisticated fleet includes powerful anchor handlers, platform supply vessels and advanced subsea support vessels. This fleet is continuously renewed, whether through newbuilding projects, modifications to existing vessels or divestment of older tonnage.

Maersk Supply Service capabilities cover all areas of offshore

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supply services, from rig moving, installation work, anchor handling and pipeline ploughing to supply services, iceberg management, subsea support, offshore fire-fighting and pollution control. It can move and install virtually any kind of rig or offshore installation, and has particular expertise in deepwater operations. Maersk Supply Service operates worldwide and in all major offshore areas, from Brazil and East Coast Canada to Africa, Asia and Australia.

The operations performed involve difficult work with complex, heavy equipment in very harsh environments, making safety a critical issue. Maersk Supply Service works constantly to improve its safety performance through training, risk assessment and strictly enforced procedures.

SVITZER

Svitzer is the global market leader in towage and emergency response. Its towage arm provides harbour, terminal and ocean towage services, as well as pilotage, firefighting, pollution response and escort assistance. It provides crew training in advanced tug simulators that replicate real-life port situations.

Simulator training also prepares crews to navigate around terminals even before they are built.

Svitzer’s rescue and recovery specialists and fleet of tugs and emergency response and rescue ships are always on standby to respond to an incident, whether to refloat a grounded ship, save a vessel or installation from sinking, or take part in an oil recovery and clean-up operation.

The Maersk Group is diverse in every sense of the word— commercially, geographically and in terms of the people who work there. Ask any Maersk employee and they will tell you that the culture at Maersk is international and dynamic. The focus is always on long-term, sustainable performance, which is why all decisions are guided by shared ethical values. The secret of the company’s success can therefore be summed up in two words: performance and values.

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