GENERAL INTEREST — Quick Takes
Investor group to acquire Samson Investment
An investor group led by Kohlberg Kravis Roberts & Co. LP will acquire Tulsa-based Samson Investment Co., one of the largest private US E&P companies, for $7.2 billion.
Besides KKR, the investor group consists of Natural Gas Partners, Crestview Partners, and Itochu Corp. It has committed that company headquarters remain in Tulsa.
The Schusterman family will continue to own Samson's Gulf Coast onshore and Gulf of Mexico deepwater assets. Closing is expected by yearend. The firm will be renamed Samson Resources. David Adams, chief operating officer, will be named chief executive officer.
Founded in 1971, Samson employs nearly 1,200 and owns interests in more than 10,000 wells, of which it operates over 4,000, in the US. The company has key positions in oil and liquids-rich plays such as the Bakken, Powder River, Green River, Granite Wash, Cana Woodford, and Cotton Valley as well as in the Haynesville and Bossier gas shales.
CNOOC completes acquisition of OPTI
A unit of CNOOC Ltd. completed its $2.1 billion acquisition of Canadian oil sands producer OPTI Canada Inc., Calgary (OGJ Online, July 20, 2011).
OPTI has a 35% working interest in Long Lake and three other oil sands project areas in the Athabasca region of northeastern Alberta. Now an indirect wholly owned subsidiary of CNOOC, OPTI will ask the TSX Venture Exchange to delist OPTI shares. Subject to approval by the exchange, the delisting of the OPTI shares is anticipated on Dec. 1.
The Long Lake project includes steam-assisted gravity drainage operation that began in 2008 and an upgrader that started up in 2009 (OGJ, Aug. 11, 2008, p. 43).
Nexen Inc., Calgary, operates Long Lake with 65% interest. The Long Lake SAGD project is expected to have throughput of 72,000 b/d of bitumen at full production. It is anticipated that the Long Lake upgrader ultimately will produce 58,500 b/d of products, mainly 39° gravity premium sweet crude.
OPTI's three other oil sands project areas are Kinosis, Leismer, and Cottonwood.
Macondo spill response coordinator to lead BSEE
US Sec. of the Interior Ken Salazar appointed US Coast Guard Rear Adm. James A. Watson IV as director of the US Bureau of Safety and Environmental Enforcement. Watson, who was federal on-scene coordinator for the government's response to the 2010 Macondo deepwater well incident, will succeed BSEE Interim Director Michael R. Bromwich on Dec. 1, Salazar said.
Watson was deputy commander of USCG's Atlantic Area Command when he was chosen to coordinate the federal response after the BP PLC well blew out on April 20, 2010, and the semisubmersible rig drilling it caught fire and exploded, killing 11 workers. The semi, Transocean Ltd.'s Deepwater Horizon, sank a day later, setting off a massive oil spill.
Watson, who currently serves as USCG's prevention policy director for marine safety, security, and stewardship, will take the helm of the Interior agency formed to enforce offshore oil and gas safety and environmental regulations following the Bureau of Ocean Energy Management, Regulation, and Enforcement's division into two separate units.
Bromwich, who became BOEMRE's director following its formation from the old US Minerals Management Service and remained to lead BSEE until a permanent director could be found, will stay at DOI as a counselor to the secretary through December to ensure a smooth transition, Salazar said.
Exploration & Development — Quick Takes
Petronas finds 227 million boe in place off Sabah
Malaysia's state Petronas estimated that it has discovered 227 million bbl of oil equivalent in place, with "expected upside potential," at an oil and gas discovery off Sabah, Malaysia.
The Wakid-1 exploratory well, second wildcat on Block 2G-2J awarded in October 2010, flowed a combined 8,200 b/d of oil from three reservoirs tested separately. Total depth is 3,330 m.
Petrohas Carigali is the sole equity holder of the PSC for the block, which lies 100 km northwest of Kota Kinabalu. The company will appraise the discovery soon.
The block's first well, Tambuku-1, drilled in early 2011, was a minor gas discovery, the company said.
Lundin makes oil find with Janglau well
Lundin Petroleum AB said it discovered oil with its Janglau-1 well, which was drilled to 3,820 m total depth on Block PM308A offshore Peninsular Malaysia.
Lundin said the well "had the objectives of Oligocene intrarift sands and the underlying fractured pre-Tertiary section."
It said during drilling below 3,153 m, oil was found in "multiple pay sand units in an intrarift sand/shale section that extended over a gross interval of approximately 300 m." Oil samples were recovered at surface during drilling.
The well was successfully logged and petrophysical analysis indicates 24 m of net oil pay. Pressure testing and fluid sampling were completed and oil samples recovered for laboratory analysis. A mini-DST test was successfully completed.
Following completion of the well further work will be undertaken on the data recovered to fully evaluate the discovery and its potential. Following completion of Janglau-1 the Offshore Courageous jack up rig will move to the Bertam-2 appraisal well location in the adjacent PM307 PSC area.
PetroQuest group has Louisiana Cris R Massive find
PetroQuest Energy Inc., Lafayette, La., is completing the Thibodeaux-1 well, a gas-condensate discovery in Vermilion Parish, La. (OGJ Online, July 19, 2011).
Yuma E&P Co. Inc., Houston, which generated the La Posada prospect, said the well went to a TD of 19,079 ft and logged 248 ft of pay in Cris R Massive sands. It said the well is expected to produce at 20-30 MMcfd of gas with 20 b/d of condensate and 36 b/d of natural gas liquids per million with reserves estimated to be greater than 100 bcfe.
Yuma is marketing the Tigre Lagoon prospect adjacent to La Posada targeting the same objectives with the same reserve size.
Partners in La Posada are PetroQuest, Stone Energy Corp., Walter Oil & Gas Corp., JGC Energy Development, Chalkley Exploration, Guardian Oil & Gas, and Gulf Coast-Mid-West.
Notice for OCS lease sale includes revised terms
The US Bureau of Ocean Energy Management issued a final notice for a Dec. 14 offshore oil and gas lease sale in New Orleans which includes revised terms and requirements. The sale in the western Gulf of Mexico will be the last under the current 5-year US Outer Continental Shelf program, US Department of the Interior officials reported.
It follows completion of a supplemental environmental impact statement analyzing effects of the oil spill into the gulf following the 2010 Macondo deepwater well incident, according to BOEM Director Tommy P. Boudreau. "The decision to hold this sale was made after careful analysis of the best scientific information available regarding the effects [of that spill]," he said.
BOEM said the sale will offer 3,913 unleased blocks covering more than 21 million acres nine to 250 miles off the Texas coast in water from 16 to more than 10,975 ft deep. It estimated that the lease sale could result in production of 222-423 million bbl of oil and 1.49-1.65 tcf of gas.
The notice included an increase in the minimum bid for blocks in water 1,312 ft or deeper to $100/acre from $37.50/acre. BOEM said that the change was made after an analysis of gulf lease sales in the last 15 years, adjusted for prices at the time of each sale, found that leases receiving bids which were less than $100/acre had virtually no exploration and development. The minimum bid for leases in shallower water remains $25/acre, it added.
Brazil Espirito Santo basin gets postsalt gas find
Petrobras and Repsol Sinopec Brazil reported a postsalt gas discovery in the Espirito Santo basin off Brazil.
The Malombe discovery found gas at 8,528 ft in 3,215 ft of water 135 km east-northeast of Vitoria and southeast of the 1997 Peroa dry gas discovery.
The companies will continue work on the BM-ES-21 concession and will present an evaluation plan to Brazil's National Petroleum Agency ANP.
Petrobras operates the block with 88.1% interest and Repsol Sinopec Brazil has 11.9%. Repsol Sinopec has interests in 14 blocks, seven of which it operates, in the Santos, Campos, and Espirito Santo basins.
Drilling & Production — Quick Takes
Chesapeake to ink Ohio Utica shale joint venture
An undisclosed international major energy company will form a joint venture with Chesapeake Energy Corp. and acquire a 25% interest in 650,000 net acres in the wet natural gas area of the Utica shale play in eastern Ohio.
Chesapeake owns 570,000 net acres and will operate and conduct all activities for the joint venture. Owning the other 80,000 net acres are EnerVest Ltd., Houston, and its affiliates. The leases cover all or parts of 10 counties in eastern Ohio.
Consideration for the transaction is $2.14 billion to Chesapeake and $300 million to EnerVest. Chesapeake will receive $640 million cash at closing and $1.5 billion as a drilling and completion cost carry to be fully received by the end of 2014.
A letter of intent provides that the international partner will have the option to obtain 25% of all further acreage acquired by Chesapeake and to participate for a 25% interest in midstream infrastructure related to production generated from the assets. Closing is intended by mid-December.
Separately, as a first step in a financial transaction led by EIG Global Energy Partners, Washington, DC, Chesapeake sold EIG $500 million of perpetual preferred shares of newly formed CHK Utica LLC. Chesapeake expects to sell as much as $750 million more of CHK Utica preferred shares to investors by Nov. 30.
Chesapeake Utica owns 700,000 net leasehold acres in an area of mutual interest in the Utica shale play in 13 eastern Ohio counties. Chesapeake has retained all the common interests in CHK Utica.
Chesapeake committed to drill at least 50 net wells/year through 2016 in the AMI for the benefit of CHK Utica. Chesapeake believes it will have considerable operating and financial flexibility in fulfilling the drilling commitment because the company's planned program involves a much higher rig count than the 10-rig count needed to fulfill the CHK Utica preferred shares investment.
Chesapeake said the deals will enable it to recover more than its total leasehold investment in the entire Utica shale play while selling 142,500 net acres of its 1.5 million net acres of Utica shale leasehold.
Talisman sharpens North American shales focus
Talisman Energy Inc., Calgary, said 80% of its $629 million of capital spending in the quarter ended Sept. 30 was related to shale activities in North America.
The company continued to focus on the development of high-quality shale plays in the Eagle Ford, Marcellus, and Montney formations and on liquids-rich opportunities in its Canadian conventional portfolio.
Shale production more than doubled year on year and will account for more than half of North American production volumes at the end of 2011, the company said. Talisman is operating 30 rigs, leading to expected shale production of 490 MMcfd of gas equivalent in 2011, up 125% from 2010.
The company brought 34 net Marcellus shale wells onstream in the quarter and will continue to operate with 11 rigs for the rest of the year. Talisman expects Marcellus production to average 400 MMcfd in 2011, the upper end of the target range set at the beginning of the year.
Talisman has 11 rigs actively drilling to the Montney in the Farrell Creek area and is on track to meet its full-year production guidance of 50-60 MMcfe/d there. It expanded the Farrell Creek facility to handle 180 MMcfd during the quarter.
Talisman will increase to 10 drilling rigs in the Eagle Ford in the fourth quarter and has two full-time frac crews operating. Well results are in line with expectations, and production is expected to average 30 MMcfe/d in 2011.
The company is drilling its first horizontal pilot well in the Duvernay shale in Canada.
Shale oil play emerges in Mackenzie Valley
A shale oil play is starting to emerge in the Mackenzie Plain and Franklin Mountains areas of the Central Mackenzie Valley in Canada's Northwest Territories.
Holding leases in the area are Husky Oil Operations Ltd., ConocoPhillips Canada Resources Corp., MGM Energy Corp., Shell Canada Resources Ltd., and Imperial Oil Resources Ventures Ltd. The leases lie generally from 60 km northwest to 180 km southeast of Norman Wells along the Enbridge pipeline that ships crude from giant Norman Wells oil field to Edson, Alta.
The drilling targets of the new play are the Canol-Hare Indian and Bluefish shales of Devonian age. MGM Energy said a geochemical review indicates that the shales are comparable to many of those being developed elsewhere in North America.
MGM Energy holds four parcels and has begun regulatory and operational planning for the drilling of a well in the 2012-13 winter targeting the shales.
MGM Energy said the Canol/Hare Indian is 30-170 m thick at 1,000-2,500 m and the Bluefish is 15-25 m thick at 1,000-2,700 m. Both are highly brittle with 70-80% quartz content and less than 5% clay. Total organic carbon is 4-25% in the Canol-Hare Indian and 2-9% in the Bluefish. The plays are expected to be liquids-dominant.
MGM Energy already held blocks in the area that it held at the time of its spinoff from Paramount Resources Corp., and it picked up three more parcels totaling 627,000 acres at a land sale last July.
Fayetteville shale gas output up as spending eases
Southwestern Energy Co., Houston, has drilled the backbone of its Fayetteville shale gas play in the eastern Arkoma basin and is phasing down capital spending in the play this year and in 2012, the company said.
Southwestern still calls the Fayetteville its "key project," in which it is drilling 130 wells/quarter and from which it produced 112 bcf in the quarter ended Sept. 30, up 21%. Net reserves are 4.3 tcf. The 2012 capital budget should be set in mid-December. The company has produced 320 bcf from the Fayetteville in the first 9 months of 2011 compared with 350 bcf in all of 2010.
The company placed 418 Fayetteville wells on production in the first 9 months, including 132 in the most recent quarter. It held 916,000 net acres at the end of 2010 across Conway, Van Buren, Faulkner, Cleburne, and White counties, Ark. Operated horizontal wells drilled in the third quarter averaged $2.8 million, 4,847 ft of lateral in the shale, 7.8 days of drilling time, and an initial rate of 3.4 MMcfd, up 14% from the second quarter. Southwestern has drilled 80 wells in 5 days or less so far.
The company has drilled on but not fully developed about 600,000 acres. On 160,000 acres of federal land it has drilled six wells and plans to drill five more in the next few months. It has cored but not tested the six wells. Another 150,000 acres in the established part of the play are held by production and can be drilled later.
Southwestern has 75% working interest and an inventory of 8,000 net (12,000 gross) locations left to drill on the 600,000 acres. The company assumes that gas prices will hold in the $4-5/Mcf range for the next few years and sees the bulk of the play as being commercial at its current profitability hurdle.
PROCESSING — Quick Takes
EPA seeks more time to develop GHG limits
The US Environmental Protection Agency does not anticipate meeting a mid-December deadline to issue proposed greenhouse gas emission limits for refineries. The agency expects to need more time and is working with litigants to develop a new schedule, a spokeswoman told OGJ by e-mail.
The American Petroleum Institute welcomed the news. "EPA is allowing itself more time to analyze industry data before proposing the unprecedented and enormously complex greenhouse gas rules for refineries," said Howard Feldman, API regulatory and scientific affairs director.
Feldman said refiners recently provided more than 5 million data entries regarding their operations, and have repeatedly asked EPA to issue an advanced notice of proposed rulemaking before proposing new refinery rules. This would ensure that such rules would be based on accurate assessments of refineries' actual emissions and risks, he explained.
"Of course, EPA's application of the Clean Air Act in a way that was never intended by Congress threatens to unnecessarily raise the cost of producing America's energy at a time when the administration should be focused on job creation and economic recovery," Feldman said.
National Petrochemical & Refiners Association Pres. Charles T. Drevna called EPA's delay good news for American consumers and refinery workers. "But our nation would be even better off if EPA went further and dropped plans to impose this unnecessary and counterproductive rule that will do nothing to improve our environment but could raise energy costs and threaten American jobs," he said.
Environmental and other organizations supporting EPA's effort to develop and implement GHG emissions limits for refineries did not immediately comment.
BP, Indian Oil eye Gujarat acetic acid plant
BP PLC and Indian Oil Corp. Ltd. (IOC) have signed a memorandum of understanding to consider a 50-50 joint venture to build a 1 million tonne/year acetic acid plant and associated gasification facilities for production of synthesis gas.
The plant, in Gujarat, would use BP's Cativa XL technology and petroleum coke feedstock from IOC. A feasibility study is in progress. The plant would have a targeted start date of 2015.
IOC operates a 300,000 b/d refinery and petrochemical plant in Gujarat, at Koyali south of Ahmadabad.
BP this year expanded its work in India by agreeing to acquire 30% of 23 blocks operated by Reliance Industries Ltd. for $7.2 billion. The government has approved acquisition of interests in 21 of the blocks (OGJ Online, July 22, 2011).
Indian Oil renews supply deal with Essar
State-owned Indian Oil Corp. Ltd. (IOC) renewed an agreement for supply of 2 million tonnes/year of diesel, gasoline, kerosine, and jet fuel from privately owned Essar Oil Ltd.
The products will come from Essar's 300,000 b/d Vadinar refinery, which is being expanded to 375,000 b/d by March 2012 and to 405,000 b/d by September 2012.
The agreement, covering 2012-15, entitles Essar to buy products from IOC and allows the firms to share distribution facilities.
It's Essar's largest fuel supply contract. The company has similar agreements with state-owned refiners Bharat Petroleum Corp. and Hindustan Petroleum Corp.
TRANSPORTATION — Quick Takes
Ryckman Creek lets contract for Opal storage
Ryckman Creek Resources LLC, a subsidiary of Peregrine Midstream Partners LLC, let a contract for the project management support of the 35-bcf Ryckman Creek gas storage facility to Foster Wheeler Upstream. The new facility will serve Opal Hub.
The storage field will lie 25 miles southwest of the hub in Uinta County, Wyo. Storage will occur in a partially depleted oil and gas field converted to high-deliverability, multicycle gas storage. Initial maximum injection capability will exceed 350 MMcfd, with maximum withdrawals of roughly 480 MMcfd.
The project will include drilling new horizontal wells, construction of new pipeline facilities, and upgrades to an existing compressor station, formerly known as Canyon Creek Compression Co. when operated by Kinder Morgan. Foster Wheeler expects to complete the project, which will have connections to five interstate pipelines, in third-quarter 2012.
Ryckman held an open season on the storage in late 2010, offering 15 bcf beginning in April 2012, and received market-priced bids requesting more than 50 bcf of capacity from 25 companies (OGJ Online, Nov. 4, 2010). Ryckman is considering a Phase II expansion to that capacity.
Qatargas signs EPC contract for LNG plant
Qatargas Operating Co. Ltd. signed an engineering, procurement, and construction agreement with a unit of Global Engineering & Construction Group and with the subsidiary's joint-venture partner Qatar Kentz WLL.
The framework agreement covers projects associated with the existing Qatargas LNG plant at Ras Laffan Industrial City, north of Doha, and will include both onshore and offshore work. The agreement will be for 3 years with an option to extend for a further 2 years, Qatargas said.
Qatargas plans to issue invitations to its framework contractors to bid for specific work packages, which may include prefront-end engineering design, FEED, and EPC services.
Petronet board OKs additional capacity at Kochi
Regasification capacity at Petronet LNG Ltd.'s Kochi LNG terminal has been approved for expansion to 5 million tonnes/year from the originally planned 2.5 million tpy.
The first 2.5 million tpy has been on track to open early next year. Mechanical completion of the entire capacity, says the company on its website, "is expected to be commissioned" by 2013. The terminal is under construction at Puthuvypu, north of Kochi, on India's southwest coastline.
Local media have said the project would supply LNG to Karnataka and Tamil Nadu states and downstream industries in Kerala such as NTPC power plant at Kayamkulam and FACT, Kalamassery.
GAIL is reported to be laying gas distribution pipelines to connect industrial consumers in Kerala and later in Bangalore and Mangalore.
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