After years of planned development, difficult and unsuccessful negotiations between partners and bad luck with global gas market dynamics, Gazprom’s flagship project, Shtokman, has finally been shelved. The main reason for the cancellation of the project is essentially the unfortunate reality that demand from Gazprom’s main intended market, namely the USA and Europe, evaporated somewhat with the onset of the shale bonanza in the US and the subsequent fall in the price of gas on the global market. The fate of Shtokman highlights that Gazprom just wasn’t able to react to market change in a way that could still turn it, and its partners, a viable profit. Aside from unprecedented changes in the global gas scene, the Shtokman project has been dogged with reports of feuding partners, with Gazprom, Statoil and Total simply unable to agree on terms that would allow them to work together in developing the vast resources in this challenging area of the Barents Sea. The field will surely be developed in time. The question remains as to how and by whom.
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However, it is not all doom and gloom for the exploration industry by any means. Energy consultants Douglas Westwood have suggested that US$ 77 billion will be spent on the operation of subsea vessels until 2016, which marks a 63% increase on the preceding five years. Their recent report says, “The deepwater ‘Golden Triangle’ of West Africa, Gulf of Mexico and Brazil is expected to account for 34% of global expenditure over the forecast period. Latin America is forecast to be the largest market with spend of US$ 14 billion during 2012 - 2016: an increase of 94% on the previous five year period.” The report predicts that North America has recovered sufficiently to make its market into the world’s second largest.
Oil and gas exploration is currently a hot potato in the US in the run up to the US Presidential elections in November. The American Petroleum Institute is targeting swing states with commercials that ask the public to vote for candidates that promote a more relaxed regulatory oil and gas framework. So far, the US oil and gas industry has donated 87% of its election contributions to Republicans. Critics of President Obama have suggested that his oil and gas strategy has stymied the industry. Mitt Romney has suggested that he would largely support the oil and gas industry’s agenda.
On the other side of the Atlantic, opportunities in exploration offshore the Mediterranean appear to be opening up at a positive rate. In the past few years over 35 trillion ft3 of gas has been found offshore Israel and Cyprus and Italy has recently relaxed the ban that it imposed on oil drilling around its coast. There seem to be many players vying to explore the waters of the Mediterranean, which, with its relatively low geopolitical risk rating, seems like an attractive place to operate.
I hope you enjoy this issue of Oilfield Technology. If you’re reading this issue of the magazine at the SPE ATCE in San Antonio, please feel free to come and say hello; the Oilfield Technology team are exhibiting at booth number 1235.