Three Hotspots in North America Worth Watching

Three Hotspots in North America Worth Watching

The industry remains focused on moving forward with several key projects that will help America's quest to become energy sufficient. As the Gulf of Mexico (GOM) witnesses record spending to finalize deepwater projects coupled with today's high price of oil, new projects are coming online at a rate that is expected to see production from deepwater fields make up more than 13 percent of global liquids output by 2040.

These economics ring true for other projects that in years past were deemed costly. Alaska's LNG project, recently given the OK to move forward, is considered to be in an economically competitive position relative to others, according to a Wood Mackenzie study.

Three Hotspots in North America Worth Watching

"From an economic perspective, Alaskan LNG exports would be competitive and could generate between $220 and $419 billion in revenue."

As for America exporting liquefied natural gas, many in the industry see it as an opportunity to create jobs and economic prosperity. Low energy prices and increased natural gas liquid supplies have enabled the chemical and other industries to invest in new plants in the United States. The American Chemistry Council estimates that increased natural gas liquid supplies will create 412,000 jobs in and related to the chemical industry. 

The three hotspots listed below have gained momentum and will continue to see a flurry of activity in the coming years.

Projects in the Gulf of Mexico Slated to Come Online

Since the six-month drilling moratorium was lifted in Oct. 12, 2010 in the Gulf of Mexico after the Deepwater Horizon disaster, operators have resumed their daily operations. This sector of the energy industry continues to see an uptick and most operators with assets in this area are posed for a healthy return if oil prices stay at $100 a barrel.

Production in deepwater GOM increased to 1.39 million barrels per day from 1.31 million barrels per day during 2012, according to the U.S. Energy Information Administration. This increase was due to 13 new fields coming online, specifically the restart of the Mad Dog field and production from Tahiti Phase 2 redevelopment in 2012.

"This area has totally rebounded from the Macondo disaster and companies are marching full speed ahead," commented Ernst & Young Strategic Analyst for Oil & Gas Foster Mellen to Rigzone. "The GOM will always be an important play due to the sheer volume of resources that it holds."

Several fields are slated to come online in the near future further increasing production levels to new heights in 2014 with an average output of 1.45 million barrels per day expected by this time next year.

  • BP plc continues to progress its Na Kika Phase 3 project, which includes the drilling and completion of two new wells and subsea infrastructure tied-back to the existing Na Kika platform. Drilling operations are near completion and the field is slated to come online in early 2014.
  • Na Kika commenced production in November 2003 and during peak production, the Na Kika facility produced around 110,000 barrels of oil per day. To keep production levels up, BP has further developed the area, placing several satellite fields online to mitigate its declining production.
  • Chevron Corp.'s Jack/St. Malo field is expected to commence production in January 2014. This $7.5 billion project compromises three subsea centers tied-back to a facility with a production capacity of 170,000 bopd and 42.5 million cubic feet of natural gas per day. Together, the fields are expected to produce 100,000 barrels per day in August 2014.
  • The next big project expected to come online is Chevron's Big Foot project, discovered in January 2006, and considered to be one of the largest and deepest oil discoveries in the GOM. Situated on Walker Ridge Block 29 in 5,000 feet of water, the Big Foot oil and gas reservoir is estimated to contain more than 100 million barrels of oil equivalent (MMboe). Production is set to begin in June 2014 and estimated to reach a peak output of 50,000 barrels per day.
  • Situated on Mississippi Canyon Block 725, Hess Corp.'s Tubular Bells was discovered in October 2003. The field is being developed by three subsea production wells and two water injection wells connecting a third-party owned spar production facility. The field's annual gross production rate should peak in the range of 40-50,000 barrels of oil equivalent per day with total estimated recoverable resources estimated at more than 120 MMboe. Production is slated to commence in June 2014.
  • Lucius, located on Keathley Canyon Blocks 874, 875, 918, 919 in a water depth of 7,126 feet, was discovered in December 2009. The field is being developed by six production wells connecting to a 23,000 ton spar with a production capacity of 80,000 bopd and 450 MMcf/d of natural gas. First production is slated for September 2014 with peak production output of 70,000 barrels per day expected the following year. The project is operated by Anadarko Petroleum Corp.

Alaska Interested in Converting its Gas into LNG

ExxonMobil Corp., ConocoPhillips, BP and TransCanada Corp. have joined forces to commercialize the North Slope gas. This project, Alaska LNG, has aligned a structure and transparent approach with the aim to commercialize North Slope's natural gas.

In February 2013, the partners finalized a concept for the development which is expected to cost around $45 to $65 billion to tap into 35 trillion cubic feet of proven natural gas reserves. The gas would flow down an 800-mile long pipeline, get chilled into a liquid at a site in the Nikiski area on the Kenai Peninsula in south central Alaska and then be shipped to Asian markets.

The chosen site for the LNG plant was just announced last month after more than 20 locations were evaluated. The companies still need to resolve engineering, regulatory and other issues before the project can proceed, as stated in ExxonMobil’s Oct. 17 press release. While Nikiski is the lead site, the project team continues to consider other secondary locations, the companies stated.

The liquefaction plant would be built on a 400-acre to 600-acre site and be able to process 15 million to 18 million tons of gas a year. In addition to those facilities, a natural-gas treatment facility would be built on the North Slope, near Prudhoe Bay, near where the gas would be produced.

"Alaska is getting very busy and is quite an exciting area right now, so much so that we are looking into opening an office in that area next year," Dane Groeneveld, regional director of North America at NES Global Talent, told Rigzone. "This area will be in need of manpower as the project comes further along."

"From a conventional oil perspective, Alaska is in a terminal decline," added Mellen. "However, Alaska has a lot of gas and this project is worthwhile. It makes a lot of economic sense to export it."

America Exports LNG

Cheniere Energy Inc.'s Sabine Pass LNG project, the first liquefied natural gas project in North America given the OK to export, is slated to begin producing in late 2015. The project is on schedule with its first two processing units, the company announced in May 2013.

Cheniere also made a final investment decision for the development and construction of Trains 3 and 4 of the Sabine Pass Liquefaction project.

"We have completed all milestones to start construction on the first four liquefaction trains being developed by Sabine Liquefaction. Construction on Trains 1 and 2 commenced last August and is approximately 30 percent complete, and construction on Trains 3 and 4 will start immediately. First LNG is expected to be delivered by late 2015. Additionally, we expect to complete all of the required resource reports to file an application with the FERC by September 2013 for Trains 5 and 6," said Charif Souki, chairman and CEO, in a press release.

Cheniere was among a handful of companies that built LNG import terminals in the last decade, as the United States was expected to become a major natural-gas importer due to declining production. Once hydraulic fracturing became widespread, unlocking vast amounts of natural gas from shale formations in the United States, Cheniere swiftly turned its Sabine Pass LNG facility from an import terminal into an export facility. To date, the company has signed contracts to sell 16 million metric tons a year from four processing units at Sabine Pass.

The potential impacts of exporting liquefied natural gas remain to be seen, but average net growth in jobs is projected to range from 73,100 to 452,300 between 2016 and 2035, reported ICF International in its report “U.S. LNG Exports: Impacts on Energy Markets and the Economy”. 

Manufacturing job gains are estimated to average between 7,800 and 76,800 net jobs for 2016 to 2035, including 1,700-11,400 net job gains in specific manufacturing sectors such as refining, petrochemicals, and chemicals, according to the report.

"I think we are going to see an increase in hiring, about 200-300 engineering positions in the near future, and then big peaks in the workforce, up to the 3,000-7,000 range as these LNG projects try to come online," said Groeneveld. "This is huge and we are seeing a lot of our clients getting quite concerned. There are a number of LNG projects and several downstream projects that are in the works, causing a bottleneck that is less about the Great Crew Change and more about the demand side. It's really heating up in the Gulf Coast region," he added.


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