DEPARTMENTS • DRILLING AHEAD
Volatility besets global economy, oil
and gas markets amid Russia’s war
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6 BY LINDA HSIEH, EDITOR & PUBLISHER
If we were hoping that 2022 was going to
lead to more “normalcy” in the world and
more stability in the oil and gas markets,
well... it looks like that’s not going to hap-
pen. In the wake of Russia’s invasion of
Ukraine in late February, volatility reigns
again. As this issue of the magazine was going
to press in early March, many countries
had already announced multiple sanctions
against Russia. This included freezing
Russian assets and limiting the ability of
some Russian banks to operate as part of
the international financial system. Canada
has also banned the import of Russian oil.
Within the oil and gas industry, we
saw BP announcing on 27 February that it
would cut its ties with Rosneft, exiting its
19.75% shareholding in the state oil com-
pany. Equinor, Shell and ExxonMobil all
followed suit, announcing their intentions
to exit their own joint ventures in Russia.
“There will be lasting implications for
commodities, energy policy and the ener-
gy transition,” Wood Mackenzie said in an
analysis released on 25 February. It noted
that “the world’s dependence on Russia for
certain commodities cannot be overstated
– from gas, oil, iron, ore, aluminum, plati-
num group metals and zinc to copper, lead,
petrochemicals and fertilizers.”
On the other hand, Russia is also a
large consumer of oilfield services. Rystad
Energy estimates Russia was responsible
for approximately 9% of global service pur-
chases between 2015 to 2021. In the same
period, the country also accounted for $175
billion in wells, drilling and seismic activi-
ties, along with $88 billion in both subsea
and engineering, procurement, construc-
tion and installation (EPCI) purchases.
Further, delays and additional costs in
the travel of essential oil and gas work-
ers are likely unavoidable. Ukraine’s air
space is already closed, impacting all
flight routes that cross this space. Many
countries – including the entire European
Union (EU) – have also banned Russian
flights from their airspace.
“Hour by hour, further airlines are pull-
ing their flights from Russian territory,”
said Murray Burnett of Munro’s Travel,
a company that manages the movement
of oil and gas and marine workers. “The
logistics of arranging for a crew – which
can comprise dozens of workers all based
in different countries – to arrive for a crew
change at the same time is challenging at
the best of time.” Now, adding war on top
of existing COVID-19 restrictions will only
lead to additional risks and complications.
Impact on natural gas and oil
markets Russia’s invasion is doubtlessly adding
pressure to Europe’s gas market, which
was already going through its worst crisis
on record, according to WoodMac. The
firm’s analysis shows that Russian pipe-
line imports of natural gas account for
a very considerable 38% of EU demand.
Therefore, sanctions on that flow would
not be pragmatic, and “business as usual”
is still the most likely outcome.
However, even if the flow of Russian
gas is not halted, WoodMac believes this
conflict will push the EU to rethink the
role of natural gas in its decarbonization
strategy. “Higher gas prices make a stron-
ger case for renewables, as well as alterna-
tive gases such as bio-methane and green
hydrogen,” its analysis stated.
When it comes to oil, there have already
been slowdowns in Russian crude pur-
chases. WoodMac says it expects further
tightening in the supply and demand bal-
ance “until payment terms are clarified.”
However, they believe the recent upward
trend in oil prices (WTI had hit a high of
$112 at press time) is likely to ease up soon,
unless the world sees a real sustained
slowdown in Russia’s crude exports.
Volatility is no good for business, and
war is no good for the world. Here’s to hop-
ing for a more peaceful 2022. DC
Linda Hsieh can be reached at linda.hsieh
@iadc.org. M A R C H/A P R I L 202 2 • D R I L L I N G C O N T R AC T O R
DRILLING & COMPLETION NEWS • DEPARTMENTS
Contract wins for Valaris
semi in US GOM, Mexico
Valaris has been awarded two one-well
contracts with subsidiaries of Murphy Oil
for the VALARIS DPS-5 semisubmersible.
The first contract is in the US Gulf of
Mexico and is expected to commence in
Q3 2022 with a minimum duration of 30
days. This contract has a one-well option
with an estimated duration of 90 days.
The second contract, offshore Mexico, will
commence in direct continuation of the
first contract and has an estimated dura-
tion of 60 days.
Graff-1 well finds oil
in deepwater Namibia
The National Petroleum Corp of
Namibia (NAMCOR), the Namibian state-
owned oil company, and its partners
– Shell Namibia Upstream and Qatar
Energy – have announced that the Graff-1
deepwater exploration well made a dis-
covery of light oil in both primary and
secondary targets.
The well was drilled in the Orange Basin ,
270 km from the town of Oranjemund.
Drilling operations commenced in early
December 2021 and were safely com-
pleted in early February 2022.
In the coming months, extensive labo-
ratory analyses will be performed to gain
a better understanding of the reservoir
quality and potential flow rates achiev-
able. NAMCOR said it anticipates further
exploration activity, including a second
exploration well, will be required to deter-
mine the size and recoverable potential of
the identified hydrocarbons.
Appraisal well delineates
Winterfell potential in GOM
Kosmos Energy announced it has fin-
ished drilling the Winterfell-2 appraisal
well on Block 943 in the Green Canyon
area of the US Gulf of Mexico (GOM). The
well was drilled to evaluate the adjacent
fault block to the northwest of the original
Winterfell discovery and was designed to
test two horizons that were oil bearing in
the Winterfell-1 well, with an exploration
tail into a deeper horizon. The well dis-
covered approximately 40 m of net oil pay
in the first and second horizons .
Equinor’s Kvitebjørn is among fi ve platforms for which KCA Deutag received
contract extensions to provide drilling operations, maintenance services and
engineering support. Photo courtesy of Equinor/Harald Pettersen.
KCA Deutag wins contract extensions in Europe,
10-year contract to provide 4 new rigs in Oman
KCA Deutag has been awarded a two-
year drilling contract extension on five
of Equinor’s fixed platforms operating
in the Norwegian North Sea: Osberg B,
Osberg South, Osberg East, Osberg C and
Kvitebjørn. The contract – worth $140
million – is for the provision of drilling
operations, maintenance services and
engineering support and will now run to
September 2024 .
KCA Deutag was originally awarded
the contract in October 2018 for a period
of four years, with an option to extend by
three further periods of two years each .
In separate news, KCA Deutag
announced it was receiving a 10-year
contract from Petroleum Development
Oman for the provision of drilling ser-
vices with four new highly automated
rigs that will be built in Oman .
The contract comes with options to
extend for a further two years and, with
those options included, has a total value
of around $550 million.
The rigs will be constructed by
International Drilling Technology Co
(IDTEC) in Oman. IDTEC, majority-owned
by the KCA Deutag Group, is the group’s
local rig manufacturing and servicing
company . The rigs will be the first of
their kind to be constructed in Oman,
marking a step change in the rig-build-
ing capabilities in the country.
KCA Deutag will invest approximately
$100 million to build the new rigs and
expects to commence operations in the
second half of 2023. Around 40% of this
value will be spent with Omani suppli-
ers, including local small and medium
enterprise companies.
The project has high in-country value ,
including the establishment of IDTEC
as an API-licensed manufacturer for rig
structures in Oman , and the training and
upskilling of Omani personnel during the
construction phase .
In addition to training its own employ-
ees in operating the rigs, KCA Deutag will
extend the opportunity to partake in the
training, knowledge transfer and rig con-
struction to personnel from other drilling
companies . Further, it will offer summer
internships to 16 undergraduates from
Omani universities to be involved in the
design, construction and commissioning
of the rigs. KCA Deutag will then offer
employment to at least four of these
undergraduates upon course completion.
The rig design and all key components
will be provided by KCA Deutag’s new
business unit, Kenera, through its Bentec
engineering and manufacturing center.
The rigs will be highly automated, fast-
moving units and will benefit from the
latest technologies from KCA Deutag’s
Well of Innovation.
D R I L L I N G C O N T R AC T O R • M A R C H/A P R I L 202 2
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