GENERAL INTEREST — Quick Takes
API: US support strong for more Canadian crude
A survey found 79% of 924 US registered voters support importing more crude oil from Canada, the American Petroleum Institute announced.
Harris Interactive, which conducted the survey for API Oct. 28-31, found 80% of respondents believe US government policies should support use of Canadian crude in the US.
API Executive Vice-Pres. Marty Durbin told reporters during a Nov. 3 conference call that the finding was "consistent with polling we've already done showing very broad support among the American public for increased oil and gas production here in North America."
When asked about Canadian oil sands, 65% of respondents said they were unfamiliar with oil sands or the proposed Keystone XL pipeline project to bring crude recovered from oil sands to US refiners.
They nevertheless strongly agreed pipelines would be the safest way to bring Canadian crude to the US.
API released the survey's results as national environmental organizations called their members to Washington for a Nov. 6 protest against possible approval by the administration of President Barack Obama of the Keystone XL pipeline project's permit application.
"It's not surprising that as we come closer to a decision, we are hearing more opposition," Durbin said. "But there also is strong approval among labor officials, state officials, and local officials along the pipeline route."
Durbin said he was optimistic that the pipeline might be approved by yearend.
Australia's upper house passes carbon tax bills
The 18 so-called clean energy bills making up the Australian Labor Government's controversial carbon tax scheme have been passed in the Australian Parliament's upper house with a vote of 36 to 32.
The Australian Greens voted with the government to push the legislation unamended through and mark the end of 5 years of mostly acrimonious debate.
The new laws will require Australia's top 500 polluting companies to pay a price on carbon emissions from the beginning of July 2012. They form the central plank of the government's commitment to cut carbon emissions by 5% of the 2000 levels by 2020.
The new regime will begin with a $23 (Aus.)/tonne price on carbon and will transform into an emissions trading scheme with a floating price in mid-2015.
Greens leader expressed his satisfaction with the result by calling the vote a "green-letter day."
Opposition MPs were less enthusiastic, saying the Labor Party had sold its policy soul to the Greens for the sake of staying in power. They added that a Liberal/National Party coalition government would axe the tax when it was elected.
Bridas cancels deal to buy BP's stake in PAE
BP PLC said Bridas Corp. has terminated its plans to buy BP's 60% interest in Pan American Energy LLC (PAE) for $7 billion because Bridas had not obtained Argentine antitrust approvals and Chinese regulatory approvals for the Argentina-based exploration company (OGJ Online, Nov. 29, 2010).
BP and Bridas are joint venture partners in PAE. Bridas already owns 40% of PAE, which explores, develops, and produces oil and gas in the Southern Cone region of South America. CNOOC Ltd. owns a stake in Bridas, which cited no specific reason for calling off the transaction.
PAE's main holdings are in Argentina. Argentina President Cristina Fernandez de Kirchner on Oct. 26 ordered oil and gas companies to repatriate all future export revenue. Kirchner said the intent was to strengthen central bank controls on dollar purchases.
As a result of Bridas dropping plans to buy BP's stake in PAE, BP will repay a $3.53 billion deposit received late last year. BP said it is no longer in discussion with Bridas about PAE.
"PAE is a strong business," BP said. "BP is happy to return to long-term ownership of these valuable assets, given the considerable improvement in its own financial strength and circumstances, as well as the improved external trading environment."
Since June 2010, excluding the PAE assets, BP has agreed to asset sales worth more than $19 billion. The sales came as BP paid expenses associated with the April 2010 Macondo well blowout and resulting oil spill in the Gulf of Mexico.
In October, BP announced plans to extend its divestment program to $45 billion by the end of 2013, saying the ongoing divestment program involves the sale of nonstrategic assets and is not driven by a requirement to raise cash.
Encana to sell Barnett shale assets for $975 million
Encana Corp. unit Encana Oil & Gas (USA) agreed to sell its Barnett shale natural gas assets in the Fort Worth basin to various partnerships managed by EnerVest Ltd. for $975 million as part of Encana's previously announced plans to divest up to $2 billion in noncore assets by yearend.
The properties produce 125 MMcfd equivalent of gas and include associated gathering pipelines on 50,000 net acres.
Encana said it wanted to sell the Barnett shale assets to take advantage of higher-value liquids plays (OGJ Online, Aug. 25, 2011).
The Barnett shale sale, expected to close yet this year, is subject to normal closing conditions and regulatory approvals. After closing of this transaction, Encana will have divested $1.7 billion worth of assets.
Encana said the Barnett shale, which it entered through a corporate acquisition in 2004, provided the company with foundational knowledge it has applied across its newer US and Canadian resource plays.
Linn to buy Granite Wash assets for $600 million
Linn Energy LLC agreed to acquire US Midcontinent oil and natural gas assets from Plains Exploration & Production Co. for $600 million. The acquisition will double Linn's inventory of Granite Wash horizontal drilling sites in Texas and Oklahoma to more than 400.
Separately, Plains also agreed to sell South Texas conventional gas properties to another party for $185 million. Plains did not identify the South Texas buyer. Previously, Plains sold some Gulf of Mexico assets in an ongoing strategy to reduce debt (OGJ Online, Sept. 20, 2010).
Linn Energy expects its acquisition from Plains to close yearend, subject to meeting certain conditions. The deal, which involves more than 200 low-risk infill drilling locations, covers 20,000 Granite Wash net acres and 75,000 net acres outside the Granite Wash.
Mark E. Ellis, Linn president and chief executive officer, said, "We expect to yield significant operational efficiencies in the Granite Wash as we leverage our pad drilling techniques, simultaneous-operations processes, and recently built gas gathering and water handling infrastructure."
Linn is acquiring net production of 80 MMcfd of gas equivalent and will boost its proved reserves significantly upon closing. Plains estimated proved reserves at Dec. 31, 2010, at 263 bcf equivalent of which 90% was gas.
Exploration & Development — Quick Takes
Repsol sees 927 million boe in Vaca Muerta so far
Repsol YPF said it has identified the existence of a recoverable 927 million bbl of oil equivalent, 80% oil, in Late Jurassic-Early Cretaceous Vaca Muerta shale on about 3.5% of its 12,000 sq km holdings in the Neuquen basin in Argentina.
The company derived its estimates from the results of 15 vertical wells completed in the unconventional formation on 428 sq km on the Loma La Lata Norte block. It said one other well is already producing from Vaca Muerta in a separate 502 sq km area in the basin.
Repsol termed the 927 million boe the company's largest oil discovery and said the volume is similar to the existing reserves of Argentina firm YPF, in which Repsol holds a 58% interest.
Repsol noted that the Vaca Muerta formation underlies 30,000 sq km in the Neuquen basin and that Wood Mackenzie consultants has identified the formation as "one of the world's best shale plays."
Wood Mackenzie's evaluation, completed earlier in 2011, was based on numerous factors including development of the hydrocarbons market, infrastructure, regulation, availability of water, fiscal terms, quality, comparative volume, potential for enhanced recovery, and organization of the supply chain, Repsol said.
Repsol said the 15 vertical wells at Loma La Lata Norte had initial flow rates of a combined 5,000 b/d of oil equivalent including 40-45° gravity oil.
Meanwhile, the single well in the 502 sq km area is producing 400 b/d of oil equivalent with 35° gravity oil. The 502 sq km area "has significant potential for large volumes to be developed in the future once the appropriate studies and preliminary work to determine resources is completed," the company said.
EPA announces final hydraulic frac research plan
The US Environmental Protection Agency announced its final hydraulic fracturing research plan. It will look at the full cycle of water in fracing, from its acquisition through its mixture with chemicals and actual fracing, to its postfracing stage, including management of flowback and produced water as well as its ultimate treatment and disposal, EPA said.
Initial research results and study findings will be released to the public in 2012, with the final report scheduled for delivery in 2014, EPA said. It noted that it announced locations earlier this year of five retrospective and two prospective case studies.
Oil and gas industry associations immediately responded to EPA's Nov. 3 announcement. The American Petroleum Institute said while it is still studying final details of the agency's final study plan, it is confident that a full examination of fracing will confirm that the process poses no significant risk to human health, drinking water resources, or the environment.
"The oil and gas industry has a key role to play in the future of American energy production," said Stephanie Meadows, API's upstream senior policy advisor. "The industry has taken the lead in working with state regulators to constantly improve operations, industry practices and guidelines, as well as improve communications with local communities."
Daniel Whitten, vice-president of strategic communications at America's Natural Gas Alliance, said ANGA and its member companies "continue to support the congressional mandate that the agency use 'a transparent, peer-reviewed process' that will 'ensure the validity and accuracy of the data.' This transparency is critical to providing the public with confidence about the methodology and assumptions employed in the study."
ANGA is committed to being an active and vocal participant throughout the study process, Whitten continued. "We remain confident that a scientific and data-driven examination will provide policymakers and the public with assurance of the safety of the hydraulic fracturing process," he said.
TNK-BP to join Brazil Solimoes basin exploration
The Brazilian subsidiary of TNK-BP of Russia will become a 45% partner with a unit of HRT Petroleum, Rio de Janeiro, in 21 exploratory blocks in the Solimoes basin in northwestern Brazil.
HRT will remain operator of the blocks. TNK-Brazil Exploration & Production Oil & Gas Natural Ltda. will acquire its interest after Brazil's National Petroleum Agency ANP approves transfer of the concession rights from Petra Energy SA.
Once the rights are transferred, HRT said it will receive $1 billion from TNK-Brazil over 2 years. TNK-Brazil will also reimburse HRT past costs and make future payments of as much as $5 billion for 10 years from the approval of the transfer by the ANP, HRT said. The blocks, on which several exploratory wells have encountered hydrocarbons, total 48,500 sq km (see map, OGJ, Mar. 7, 2011, p. 54).
TNK-Brazil will have the option, exercisable from 30 months from ANP's approval of the transfer, to acquire a further 10% interest in HRT's Solimoes concession rights at a consideration to be based on reserve and resource values.
Cretaceous light oil find off Liberia noncommercial
The Montserrado-1 exploratory well off Liberia is a noncommercial light oil discovery that established a working hydrocarbon system in the Liberian basin.
Operated by Anadarko Petroleum Corp., Montserrado went to 5,400 m in the LB-15 block and encountered good-quality, water-bearing sands in the main objective. It intersected 8 m of hydrocarbon pay in a deeper secondary objective and recovered a sample of light oil.
Anadarko will plug the well and move the drillship to Sierra Leone to drill the Mercury-2 appraisal well and the Jupiter exploratory well on Block SL-07B-11.
Liberia Block LB-15 interests are Anadarko 47.5%, Repsol 27.5%, and Tullow Oil PLC 25%.
Drilling & Production — Quick Takes
BP drills Itaipu-2 appraisal well off Brazil
BP PLC and its partners reported the successful drilling of the Itaipu-2 appraisal well on Block BM-C-32 in the presalt play offshore Brazil. The well was drilled to 16,000 ft total depth in 4,660 ft of water in the Campos basin and found a gross petroleum column of 58 net ft of presalt carbonate reservoir.
The appraisal well is an "aggressive step-out" from the Itaipu discovery well, which lies 4 miles to the northwest, said Bob Daniels, senior vice-president, worldwide exploration, Anadarko Petroleum Corp., which is a partner in the block (OGJ Online, Dec. 18, 2009). "The Itaipu-2 well established a fluid contact and appears to have successfully extended the accumulation 120 m downdip from the discovery. Accordingly, the appraisal well significantly increases the areal extent of the vast Itaipu field, and we believe incorporating the data from both the appraisal well and the original discovery well will increase our previous resource estimates for the field," Daniels said.
BP operates Block BM-C-32 with a 40% working interest. Anadarko, through a wholly owned subsidiary, holds a 33.3% interest, and Maersk Oil holds a 26.7% interest.
Flow starts from small gas field off India
State-owned Oil & Natural Gas Corp. of India has started production of natural gas from the BS-13 satellite field in its B-22 cluster project in Bassein oil and gas field in the Mumbai High area offshore western India.
The BS-13A-2H well began production at the rate of 200,000 standard cu m/day through a 32⁄64-in. choke. It's on a conventional, four-leg fixed jacket platform powered by a solar system and connected to the BPB process complex (OGJ Online, Jan. 24, 2011). The platform has four well slots.
ONGC estimates B-13 reserves at 1.7 billion cu m.
The B-22 cluster project combines development of marginal fields designated B-22, BS-12, BS-13, and B-149.
Niko signs deepwater drilling contract for Indonesia
Niko Resources Ltd., Calgary, signed a drilling contract to use Diamond Offshore Drilling Inc.'s Ocean Monarch semisubmersible, currently moored, offshore Indonesia. The contract covers 4 years and has a 1-year option.
The Ocean Monarch is capable of operating in 10,000 ft of water with a drilled depth of up to 35,000 ft. With the option year exercised, this contract is in excess of $700 million, Niko said.
Raymond James & Associates Inc. issued a Nov. 9 research note saying, "Such strong contract terms are further evidence that offshore markets (both floater and jack ups) continue to improve."
Niko said the contract is expected to commence sometime during June through August 2012 following completion of the semi's current contract and a routine 5-year hull inspection.
"This contract removes the risk of rig availability for the company's planned massive drilling campaign," Niko said Nov. 8, calling the agreement the "largest deepwater exploration contract in the history of Indonesia."
Niko is Indonesia's largest deepwater acreage holder with interest in 16 production-sharing contracts. Niko has exploration and production assets in India, Bangladesh, Indonesia, the Kurdistan region of Iraq, Trinidad, Pakistan, and Madagascar.
PROCESSING — Quick Takes
East Texas plant's expansion complete
Martin Midstream Partners LP, Kilgore, Tex., has announced that its unit, Waskom Gas Processing Co., has completed expanding gas processing capacity at its gas processing and NGL fractionation plant in Waskom, Tex.
The new nameplate gas processing capacity is 320 MMcfd, an increase of 35 MMcfd. The expansion was completed ahead of schedule and on its originally budgeted $13 million cost, the company said. In addition, Martin Midstream reported progress on the NGL rail car loading also being built by Waskom Gas Processing to move NGL produced at Waskom to end users. This project is to be placed into service in late December.
Waskom Gas Processing is a Texas general partnership equally owned by CenterPoint Energy Gas Processing Inc. and Prism Gas Systems I LP. CenterPoint Energy is a wholly owned subsidiary of CenterPoint Energy Inc.; Prism Gas operates the Waskom Gas plant and is an indirect, wholly owned unit of Martin Midstream.
Martin Midstream previously announced a project to construct crude oil tanks and a marine terminal at the Port of Corpus Christi, Tex. That project is "progressing according to plan," said its announcement, and will be able to accept trucked-in crude oil by yearend. The terminal will be fully functional by the end of first-quarter 2012.
And Martin Midstream is building a $23-million vacuum tower at its Cross Oil lubricant processing plant in Smackover, Ark. This project seeks to increase the plant's efficiency by reducing how much non-lubricant residual oil it produces. This project is to go on line in March 2012.
Wood River refinery expansion nearly complete
Cenovus Energy Inc., Calgary, says expansion of the 306,000 b/sd Wood River refinery at Roxana, Ill., is essentially finished as start-up of the expanded coker approaches by mid-November.
The $3.8 billion project will raise distillation capacity to 356,000 b/sd and gross coking capacity by 65,000 b/sd to 83,000 b/sd. When the project is complete, the refinery, owned by a 50-50 venture of Cenovus and ConocoPhillips, will be able to run about 240,000 b/sd of heavy crude oil.
Cenovus acquired its 50% interest in the Wood Refinery and a 50% interest in a refinery at Borger, Tex., with capacity to process 146,000 b/d of crude and 45,000 b/d of NGL from ConocoPhillips in exchange for 50% interests in its Foster Creek and Christina Lake steam-assisted gravity drainage heavy oil projects in Alberta. Cenovus is raising production capacity of both projects (OGJ Online, June 7, 2011).
Mongstad refinery's delayed coker due revamp
Mongstad Refining has let a $39.8 million fabrication and construction contract to Kvaerner for a revamp of the delayed coker at its 200,000-b/d refinery at Mongstad, Norway.
According to Oil & Gas Journal's Worldwide Refining Survey, the coker has a capacity of 24,800 b/cd.
Mongstad Refining is owned 79% by Statoil and 21% by Royal Dutch Shell PLC.
TRANSPORTATION — Quick Takes
Chesapeake signs as anchor shipper on EPP line
Chesapeake Energy Corp. has signed a long-term contract as anchor shipper on Enterprise Products Partners LP's proposed long-haul ethane pipeline from the Marcellus and Utica shale regions in Pennsylvania, West Virginia, and Ohio to the US Gulf Coast. The roughly 1,230-mile pipeline would have an initial capacity of 125,000 b/d and could be quickly expanded through a combination of additional pumping horsepower and pipeline looping.
Chesapeake committed to supply 75,000 b/d for the pipeline's 5-year ramp-up period and can secure additional capacity in the project. The company says it views this agreement as an important step toward obtaining premium transportation pricing for the volumes it will produce in the region.
The project will use a combination of new and existing systems (OGJ Online, Oct. 11, 2011). The binding open season for shippers to commit to the pipeline closed Nov. 10. The pipeline's committed shipper transportation rate would range 14.5-15.5¢/gal.
Through connections at EPP's NGL complex in Mont Belvieu, Tex., ethane production from the Marcellus and Utica shales would have access to every ethylene plant in the US. Enterprise anticipates the pipeline beginning commercial operations as early as first-quarter 2014.
DCP Midstream closes buy of Seaway Products
DCP Midstream has closed on its previously announced acquisition of the Seaway Products Pipeline Co. from ConocoPhillips.
DCP will convert the renamed Southern Hills Pipeline to NGL service, adding extensions to Mont Belvieu, Tex., and various US Midcontinent receipt points and associated gathering systems, creating new NGL transportation capacity from the Midcontinent to the Texas Gulf Coast. DCP Midstream will add a 130-mile extension from the pipeline's current northern terminus to Conway, Kan., the 30-mile extension to Mont Belvieu, and pump capacity and to the current 580-mile pipeline (OGJ Online, June 13, 2011).
The company anticipates Southern Hills having capacity to ship about 150,000 b/d of Y-grade NGL and expects it to enter service as early as mid-2013. DCP Midstream will operate Southern Hills as a common carrier pipeline, connected to several DCP Midstream processing plants and anticipated third-party NGL producers.
DCP reached a long-term anchor agreement with Targa Resource Partners LLC in May for capacity at Targa's 100,000 b/d fractionation expansion at Mont Belvieu (OGJ Online, May 10, 2011).
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com
