Oil & Gas
Enabling efficiency and decarbonization
Oil and gas activity started to pick up in 2018 as projects were redesigned for lower break-even points. To support efficient investment, DNV GL helped customers to retain their focus on cost-efficiency, safety and sustainability amid the energy transition.
Our research on the outlook for the oil and gas industry in 2018 reported a sharp increase in confidence for the sector compared with 2017. 63% of the senior oil and gas professionals surveyed were confident about growth in the industry, nearly double the 32% reported in 2017.
Oil prices remained stable until volatility increased late in 2018. Brent spot prices were between 50.6 USD per barrel (USD/bbl) and USD/bbl 86.1 in 2018, ending the year at USD/bbl 50.6. In 2017, the range was USD/bbl 44 to USD/bbl 67. Gas spot price averages for NBP and Henry Hub were respectively 19.1% and 1.1% higher last year than in 2017.
Unlike in previous upturns, customers continue to target efficiency to maintain reasonable margins at current oil prices. In our research, nearly two-thirds (62%) of the industry’s leaders said cost-efficiency measures introduced since 2014 are now permanent.
The in-depth analysis in DNV GL’s 2018 Energy Transition Outlook, our independent model of world energy supply and demand, reinforced why the industry must remain lean and agile. It needs to stay cost-competitive as the cost of producing renewables will likely continue to fall.
The Outlook forecast that while demand for oil will peak in 2023, and for gas in about 2034, new production capacity for both will be needed until at least the 2040s for oil, and to beyond 2050 for gas. The model predicted that gas will overtake oil to become the world’s largest source of energy in 2026, then continue to play a key role alongside renewables in meeting future, lower-carbon energy requirements through to at least the middle of the century.
In confirming that the energy transition is under way, the now widely-cited Outlook reflected our customers’ other key focus in 2018: decarbonization. The accelerating transition is influencing the entire oil and gas value chain, which is displaying not only a continued strong interest in building portfolios of gas, the least carbon-intensive fossil fuel, but also energy portfolios with reduced carbon intensity.
Malaysia’s Petronas became the latest oil and gas major to announce, in late 2018, that it will invest in building a strong presence in renewable energy. Norway’s Statoil rebranded itself as Equinor in line with its strategy to become a diversified energy company with a greater share of renewables and carbon capture and storage in its investment portfolio.
Oil and gas industry confidence rebounded sharply in 2018. Activity in our markets started rising as the go-ahead was given to development projects re-engineered to break even in the lower oil price era.
However, with operators focused on efficient investment to keep oil and gas relevant in a decarbonizing world of ever-cheaper renewable energy, the industry was keeping the lid on costs. Supply chain margins therefore remained under pressure.
We have responded by adjusting our strategy to focus on initiatives enhancing the efficiency of our project delivery and existing services, while also developing new digital competence and service offerings to help us remain relevant to customers.
For example, we began rolling out a new project management and production system (Teamcenter) across the Oil & Gas business area, to be fully implemented by the second half of 2019. Through this, we will deliver all projects except Inspection, redefining how we share knowledge, collaborate on projects and communicate with customers. We will use it to be more efficient in bids and projects, and strive to have immediate access to information on every proposal, project and asset we have worked on using a product lifecycle management approach.
We reinforced our ability to provide foresight and support successful operations through our technical assurance and advisory services, and introduced new and updated standards and best practice guidelines. Our goal remains to help oil and gas operations become faster, leaner and cleaner as companies embrace the energy transition.
We continued to develop digital innovations and services, helping customers to address challenges and facilitating collaboration to achieve cost efficiency.
Remote digital technology enabling live-streamed inspections and surveys can boost cost efficiency and flexibility in the oil and gas value chain. We successfully piloted it in 2018 with companies including contractor Saipem and manufacturer Cameron, a Schlumberger company.
This complements our new container certification service, an online tool that we launched to reduce design-approval turnaround times by up to 50% It addresses global requirements for companies to produce approved container designs in shorter timeframes while manufacturing approved and certified units more cost-efficiently.
We started discussions with major pipeline operators and international oil companies on piloting the digital models developed collaboratively with the industry for our Pipeline Evaluation Portal. The portal eases access to our proprietary data-based models covering threats, hazards and operational variables that can impact on risk.
With 3D printing promising efficiency, safety and sustainability benefits to our industry, we opened a Global Additive Manufacturing Centre of Excellence as an incubator and testbed for research and development. Our Singapore facility aims to become DNV GL’s global competence and service delivery centre for assurance and advisory services relating to 3D printing and allied technologies.
Amid increasing attention being paid to cyber risks in the oil and gas industry, we obtained ISO 27001 certification to prove that we can we can be trusted to keep customers’ data safe, and is directly linked to our strategic focus on digitalization and quality. We also achieved ISO 9001 certification in 2018, showing that we have a robust quality management system for our service delivery.
We continued to widen our involvement with the oil and gas transmission, refining, petrochemical and gas distribution sectors.
For example, we began providing assessments of remaining asset life with risk-based inspections and Synergi Plant risk-management software to Korea Western Power’s Taean integrated gasification combined cycle power plant, an eco-friendly technology.
We opened a dedicated centre in Groningen, the Netherlands, to test the composition of liquefied natural gas (LNG) super-rapidly and enable its safer and more efficient use. The composition of LNG varies by source, meaning downstream suppliers and users need to accurately measure the LNG’s energy content.
Collaborating with gas transmission system operator SoCalGas, we piloted MARVTM, our smarter data-driven approach to pipeline risk assessment, in the US. This showed that MARVTM could potentially help to direct data gathering, enable the better allocation of resources, and assist in quantifying benefits from pipeline investments.
Among 39 joint industry projects (JIP) under way in 2018, we launched phase two of a JIP aiming to determine pipeline concrete coating behaviour in order to save significant costs during installation and operation.
With our 2018 Energy Transition Outlook indicating the need for massive investment in new oil and gas production in coming decades, we maintained our mission to assist the upstream industry to remain sustainable in the energy transition. For instance, we provided offshore safety guidance to the Greek Regulator. Greece now has a world-class regulatory framework promoting safety in its offshore oil and gas industry and confidence for investors.
We commissioned the world’s largest industrial explosion chamber at our Spadeadam Research and Testing facility in the UK. This is already in use for a JIP aiming to safely reduce the complexity and over-design in current explosion-protection models and methodologies.
We also progressed a JIP examining the impact of phasecontamination on oil flow meters. The accurate measurement of production from oil fields can reduce financial risks when exploration and production companies are allocating resources;
Our recommended practices and standards continue to drive efficiencies and improve safety in the offshore oil and gas industry. In 2018, DNV GL Noble Denton marine services released a new online edition of ST-N001 Marine operations and marine warranty, the most comprehensive standard of its kind. We also published a Recommended Practice for wellhead fatigue analysis to improve its consistency in the industry.
Among a string of upstream business wins worldwide, we landed a cross-service contract to support Shell’s Penguins Field redevelopment offshore UK, a general regulatory compliance contract with Yinson Production, a Malaysian FPSO lease contractor, as well as a testing contract with the American Petroleum Institute aiming to improve fatigue assessments of critical bolted connections, particularly in subsea applications.