LNG

July 26 (LNGJ) - Subsea 7, the Norwegian-listed contractor working on projects including the Sakarya gas field in the Black Sea, Turkey’s largest ever discovery that will reduce LNG needs, said it expected a rise in revenues as “pricing and contract terms showed continued positive momentum” during the second quarter.

   The company reported an 11 percent rise in earnings to $162 million from $134M in the same quarter of 2022. Quarterly revenues jumped to $1.51 billion from $1.24Bln. “The backlog is $10.4 billion, of which $3.0Bln is to be executed in 2023 and $4.3Bln in 2024,” it said. Subsea 7 added that contracts included “notable awards” such as the Sakarya Phase 2A integrated subsea development project in Turkey.

The leading Western subsea oil and gas field services companies Schlumberger, Aker Solutions and Subsea 7 plan to join forces to form a separate joint venture to deliver a step change in subsea production economics as energy exploration and production is set to gather pace amid the supply crisis.

The three companies propose to help customers unlock reserves, reduce time to first oil and lower development costs while simultaneously delivering on their decarbonization objectives.

The proposed joint venture will comprise the subsea businesses of Schlumberger and Aker Solutions, with Subsea 7 purchasing 10 percent of the joint venture for $306.5 million.

“This combination brings together deep reservoir domain and engineering design expertise, an extensive field-proven subsea production and processing technology portfolio, world-class manufacturing scale and capabilities, and a comprehensive suite of life-of-field solutions to customers all over the world,” said a statement.

It added that the transaction was subject to regulatory approvals as well as other customary closing conditions and is expected to close during the second half of 2023.

Following completion of the transaction, Schlumberger will own 70 percent of the joint venture, with Aker and Subsea 7 owning 20 percent and 10 percent respectively.

Transaction details

The Board of Directors of the joint venture will consist of three representatives from Schlumberger, two from Aker and one from Subsea 7.

The new joint venture will form part of the Subsea Integration Alliance, currently an unincorporated alliance between Schlumberger and Subsea 7.

The alliance will be extended by 10 years from the transaction completion date.

“This joint venture will bring together world-class businesses that are uniquely positioned to provide subsea technologies to help our customers improve recovery and reduce overall subsea development costs,” said Olivier Le Peuch, Chief Executive of Schlumberger, whose main offices are in Paris and Houston.

“Customers will benefit from enhanced services that leverage digital and technology innovation to drive improved performance while increasing energy efficiency and reducing CO2 emissions,” added Le Peuch.

Schlumberger CEO Peuch had forecast in January 2022 that a super-cycle may be underway for natural gas and oil markets.

Kjetel Digre, CEO of Norway-based Aker Solutions, said that by combining strong and complimentary competence and technologies, this compelling combination will deliver an industry step-change that will benefit all involved and the customers.

Economics case

“The offshore market activity is increasing, and this joint venture will drive enhanced offerings both in terms of subsea production economic,” added Digre.

John Evans, CEO of Subsea 7, said he was excited to build on the highly successful alliance with Schlumberger and partnership with Aker Solutions.

“This new joint venture is a critical step as we collaborate on the integrated subsea projects that drive maximum value for our customers,” added Evans for Subsea 7, headquartered in London and domiciled in Luxembourg.

Other transaction details show that Aker will receive $306.5M from Schlumberger which will be settled in the form of shares in Schlumberger.

The shares will be settled based on the volume-weighted average trading price of Schlumberger shares in the 10 business days preceding the closing of the transaction and are subject to a lock-up period of a minimum of 180 days.

Subsea 7 will purchase a 10 percent interest in the joint venture from Aker Solutions for $306.5M, which will be settled in cash.

Of this, 50 percent will be settled upon closing of the transaction and the remainder will be settled, with interest, by June 30, 2024.

Aker will receive $87.5M in proceeds from a vendor note from the joint venture. Of this, at least 50 percent will be paid, with interest, one year after the transaction closes and the remainder within two years.

European offshore engineering and projects company Subsea 7 SA has been awarded a sizeable project by BP for the TOPR project located offshore Trinidad and Tobago in water depths of up to 280 feet and aimed at boosting natural gas supplies and LNG production.

BP Trinidad and Tobago (BPTT) runs the Trinidad compression (TROC) project as part of plans to deliver more feed gas.

Subsea 7, the Oslo-listed company headquartered in Luxembourg, said the latest part of the project covers the installation of a 96 kilometres of 12-inch pipeline, associated shore approach and diver tie-in spools.

Front-end engineering and design (FEED) is underway and the EPC and installation scope is scheduled to begin this month.

Subsea 7 said that project management and engineering would take place in Subsea 7’s office in Houston in Texas.

“We are honoured to have been selected for the fast-track delivery of the TOPR project and we look forward to continuing our collaborative relationship with BP,” said Craig Broussard, Vice President for Subsea 7 in the US.

Subsea 7 noted that its defines a sizeable contract as being between $50 million and $150M

Low-pressure wells

The latest facilities are expected to improve production capacity by increasing output from low-pressure wells in BPTT’s existing acreage.

The TROC project is viewed by BP as a clear example of BPTT, the government and many key players in the oil and gas industry cooperating to improve production capacity, which will benefit both the petrochemical plants and Atlantic LNG.

Production at the Atlantic LNG plant dropped by more than 38 percent in 2021 to 6.20 million tonnes compared with just over 10MT in the previous year.

Atlantic LNG Train 1 has been idle since November 2020 because of a feed-gas shortage and was closed indefinitely in mid-2021.

In January 2022 a heads of agreement was signed between BP, Shell and the National Gas Company of Trinidad and Tobago and the Government to consolidate Atlantic LNG Trains under the framework of a single ownership structure.

Shell, the major Atlantic LNG shareholder, had started production in July 2021 on Block 5C, known as the Barracuda project, a backfill gas production venture to supply feed gas to the Atlantic plant.

The decline in gas production has been the major reason for the shortages being experienced by the country and BPTT’s own Matapal natural gas project was also completed in 2021 and will be able to shore-up potential supplies.

Woodside Petroleum, the Australian oil and gas company and LNG operator, has received final approvals for the pipeline to shore and for the field development plan Scarborough Gas project to underpin the Pluto LNG expansion in Western Australia.

Australian LNG operator Woodside has awarded a European-US grouping comprising units of Europe’s Subsea 7 and Houston-based Schlumberger, a significant contract for the subsea development of the Scarborough gas field to provide feed gas for the Pluto LNG plant expansion.

The Scarborough field is located about 380-kilometres offshore northwest Australia and is one of just two such feed-gas projects under way in Australia, with the other being the Barossa field to extend the lifespan of Darwin LNG.

Subsea 7 said the project work scope covered the engineering, procurement, construction, and installation (EPCI) of subsea pipelines and production systems.

The development will include 45 kilometres of rigid flowlines, six flexible flowline risers, 42 kilometres of umbilicals and eight trees, as well as associated subsea equipment, in water depths of about 950 metres.

The Subsea Integration Alliance team established during the initial front-end engineering and design phase, awarded in January 2019, will now transition into the full EPCI phase.

Project management and engineering will take place in Perth, Australia, with support from Subsea 7’s Global Project Centre’s offices in Malaysia, UK and France and various OneSubsea offices.

Offshore activities are targeted to take place from 2023 to 2025 using Subsea 7's reel-lay and flex-lay vessels.

Joint effort

“This award is the result of a strong and collaborative early engagement process with Woodside, working with a high level of transparency and cooperation during the pre-tender and FEED phases,” said Olivier Blaringhem, Chief Executive of the Subsea Integration Alliance.

“It demonstrates the potential value of Subsea Integration Alliance and its optimised and integrated offering capacity. We look forward to working with Woodside to deliver the project successfully and safely while maximising the client’s production objectives,” stated Blaringhem.

David Bertin, Vice President for Subsea 7 Global Projects Centre and Asia Pacific, said the group was proud to be awarded this contract by Woodside.

“This builds on our long-standing relationship with the client and our successful track record of projects executed offshore Australia,” explained Bertin.

“Our local office in Perth will be supported by Subsea 7’s Global Projects Centre, underlining the strength and breadth of our project management capabilities and the capacity to deliver complex projects,” added Bertin.

Subsea noted that it defined a large contract as being between US$300 million and US$500M and the value range refers to Subsea 7’s share of the contract.

The Subsea Integration Alliance is a non-incorporated strategic global alliance between Subsea 7 and OneSubsea, the subsea technologies, production and processing systems division of oil and gas services company Schlumberger.

The alliance brings together field development planning, project delivery and total lifecycle solutions under an extensive technology and services portfolio.

Turkey, one of the largest LNG importers in the European region, has awarded a European-US consortium a significant contract for the subsea development of the nation’s largest-ever natural gas discovery, the Sakarya gas field in the Black Sea.

State energy company, Türkiye Petrolleri Anonim Ortaklığı (TPAO), has chosen the consortium of Houston-based Schlumberger and Europe’s Subsea 7 for the engineering, procurement, construction and installation (EPCI) at the Sakarya field.

The integrated project scope will cover subsurface solutions to onshore production, including well completions, subsea production systems (SPS), subsea umbilicals, risers, flowlines (SURF) and an early production facility.

Turkey has discovered between 400 billion cubic metres and 530 Bcm of natural gas in the Black Sea Sakarya field in assorted wells.

The project contract includes the provision and installation of infield flowlines, control umbilicals, tie-in connections, associated subsea equipment, 170 kilometres (105 miles) of gas export pipeline and an monoethylene glycol injection pipeline.

The government aims to get Black Sea gas flowing into the national grid in 2023, the centennial of the founding of modern Turkey, with sustained plateau production starting in 2027 or 2028.

Turkey plans to cover up to a quarter of its consumption from the discovery by 2027.

Natural Resources Minister Fatih Dönmez has said the country may be able to start with an initial annual production capacity of 3.5 Bcm in 2023.

Increases

The eventual aim would be to lift the Sakarya field capacity to around 15 Bcm per annum within four years of initial production.

Turkey itself currently consumes between 45 Bcm and 50 Bcm of natural gas each year.

Turkish LNG import terminals in 2020 handled 10.72 million tonnes of LNG with its four largest suppliers being Algeria with 3.96MT, Qatar with 2.26MT, the US supplying 2.22MT and a further 1.32MT coming from Nigeria.

The scope of work on the Sakarya field for Subsea 7-Schlumberger comprises the whole EPCI of the subsea pipelines and associated equipment to connect the gas wells at a depth of around 2,000 metres to the shore and gas grid. Turkey has already initiated the production of the pipes for this process.

Subsea 7 said it its statement on the contract that it defines a major contract as being one where its share of revenue is more than $750 million.

Schlumberger will deliver the well completions scope and the design, construction and commissioning of the early production facility capable of handling up to 350 million standard cubic feet per day of gas.

The SPS and SURF scope will be delivered by OneSubsea, the subsea technologies, production, and processing systems division of Schlumberger and Subsea 7.

“Subsea 7 looks forward to building a long-term relationship with Turkish Petroleum and to making a significant contribution to the development and growth of the Turkish energy industry,” said John Evans, Subsea 7 Chief Executive.

“Subsea 7 has a long track record of providing optimised solutions for deepwater developments and we are pleased to be working on this important project,” added Evans.

Australian LNG plant operator Santos has awarded contracts to European firms for the supply and installation of subsea infrastructure for the Barossa natural gas field that will provide future feed-gas for the Darwin LNG export plant in the Northern Territory.

Santos, operator of the Gladstone LNG plant in Queensland and with stakes in Darwin LNG and the Papua New Guinea plant, said these contract awards were the final commitment made prior to the final investment decision for the Barossa project.

The contract for the transport and installation of all the subsea umbilicals, risers, and flowlines, as well as the supply of the in-field flowlines, was awarded to European firm Subsea 7, while Aker Solutions of Norway will supply the umbilicals and National Oilwell Varco Denmark I/S will supply the flexible risers.

“These are the final major facilities contracts for Barossa as we get closer to pushing the button on the project’s development in the second quarter,” said Santos Chief Executive Kevin Gallagher.

“They follow the award of the floating production, storage and offloading  (FPSO) unit, subsea wells and subsea production system, and gas export pipeline tenders, with the contract for the drilling of the production wells to be awarded in the near future,” explained Gallagher.

“They represent the final stages of the front-end engineering design phase and give us greater certainty over cost and schedule for the Barossa development,” stated the CEO of the Adelaide-based company.

The Barossa project area encompasses petroleum permit NT-RL5 located in Commonwealth waters, 300 kilometres north of Darwin, offshore the Northern Territory.

The development concept consists of an FPSO, six subsea production wells, supporting in-field subsea infrastructure and a gas export pipeline tied into the existing Bayu-Undan-to-Darwin pipeline, supplying gas to Darwin LNG.

On 14th October 2019, Santos announced the acquisition of Australian assets from ConocoPhillips in northern Australia.

These included the Timor-Leste portfolio including its interests in Darwin LNG and the Bayu-Undan and Barossa gas fields. 

Completion of the transaction and the planned sell-down to SK E&S of South Korea will leave Santos with increased stakes in these assets amounting to 43.4 percent for Darwin LNG, 43.4 percent for Bayu-Undan and 62.5 percent of the Barossa field.

Santos has said it was prepared to sell down equity in Barossa to a target ownership of 40-50 percent to achieve increased partner alignment.