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Editorial comment

What’s on the horizon for offshore oil and gas?

The Gulf of Mexico has significant oil and gas reserves, found both onshore and offshore. However, despite being a major hub for energy reserves, over the last few years, crude prices have fallen, regulations have tightened and offshore operators have come face to face with a variety of technical challenges. As a result, this has stifled investment and, consequently, reduced production.

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Due to the current low oil production, operators have been venturing into deeper waters. Typically, offshore projects require a sizeable investment in advance, along with a larger breakeven price, and with deeper and more challenging waters, comes new technology and additional financial pressures. Thus, reluctance and uncertainty can be deemed a primary reason for the lack of offshore investments.

This is a recurring theme throughout the Gulf of Mexico. In order to adapt to these challenges, operators are having to continuously push the boundaries as a means of further developing deepwater oil and gas.

While the offshore industry has recently been experiencing some lows, all is not lost. The industry has already made headway since 2016 and, on 6 March, the Trump administration announced that 73 million acres of federal water in the Gulf will be sold for oil and gas exploration and development.

Ryan Zinke, US Secretary of the Interior, stated: “Opening more federal lands and waters to oil and gas drilling is a pillar of President Trump’s plan to make the US energy independent. The Gulf is a vital part of that strategy to spur economic opportunities for industry, states and local communities, to create jobs and home grown energy and to reduce our dependence on foreign oil.”

While cautiously optimistic, it seems that the offshore oil and gas industry is now on track for a slow incline. In particular, one area of the industry has been seemingly prosperous; pipelines. Though more global offshore projects are on hold for the abovementioned reasons, a number of subsea pipelines have been constructed during this turbulent market, while others are underway and on track for startup.

Some of the most recognised offshore pipelines are Nord Stream, Nord Stream 2 and TurkStream.

Construction first began on Nord Stream in April 2010. The offshore pipeline travels beneath the Baltic Sea to transport natural gas from Russia to Europe. The line is currently active and operating at a capacity of 16 billion m3/y.

Akin to the Nord Stream pipeline, Nord Stream 2 will also transport natural gas from Russia to Europe via the Baltic Sea. The project is of particular importance, especially now, as Europe is faced with a decline in domestic oil and gas production at a time when Europe’s gas demand is on the up. Nord Stream 2 is predicted to be in-service by 2019.

Recently, following an international tender process in late February, Allseas was awarded a contract for Nord Stream 2’s offshore pipelay works, pushing the project forward.

Unlike the previous two projects, TurkStream is both an onshore and offshore pipeline. It runs over 900 km beneath the Black Sea from Russia to Turkey, where its onshore string will transport natural gas to Turkey and onto European customers. Similarly to Nord Stream 2, in December 2016, Allseas and South Stream Transport B.V. signed a contract to construct the first and second string of TurkStream. For the project, Allseas will implement its Pioneering Spirit vessel to lay more than 900 km of pipes across the seabed. The company will begin building the pipeline’s first string in 2H17.

Venturing back to the Gulf of Mexico, the Sur de Texas-Tuxpan pipeline is progressing at a steady pace; a joint venture between TransCanada and IEnova that was announced in June 2016. This 700 km subsea natural gas pipeline will interconnect with the Nueces-Brownsville and Tuxpan-Tula lines, and has an in-service date of late 2018. Recently, a number of companies have been contracted for operational work on the project, such as Shawcor Ltd., Allseas and First Subsea, to name a few.

These projects tie in nicely with this month’s issue of World Pipelines. Each year, the April issue includes updates from oil and gas pipeline companies working offshore around the world. In addition to its general offshore focus, to coincide with the Offshore Technology Conference, the issue features a special Offshore Technology Review, which offers insights into global offshore pipeline activities. If you’re in attendance, feel free to drop by the World Pipelines booth #2776. We hope to see you there!

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