GENERAL INTEREST — Quick Takes
Nexen, CNOOC form Gulf of Mexico joint venture
Nexen Inc. formed a joint venture with China's CNOOC Ltd. in the Gulf of Mexico, giving CNOOC a working interest in as many as six deepwater exploration wells.
Terms of the partnership were not discussed. CNOOC said Nexen is operator of the joint venture.
The partnership includes the Kakuna well, now being drilled, and the Angel Fire well, which is expected to spud in 2012.
CNOOC will obtain 20% working interest in Kakuna, Angel Fire, and Cypress. It may also participate in three additional exploration wells with a 10-25% working interest.
The venture does not include any interest in Nexen's Appomattox discovery or the related Norphlet formation prospects.
Marvin Romanow, Nexen's president and chief executive officer, said, "We are seeing a gradual return to normal activity in the gulf. Nexen's strategy in the Gulf of Mexico is to mature prospects at a high working interest, and then utilize joint venture agreements like this one to reduce our interest to our target level of 25-30%."
OMV eyes retail asset sales in two countries
OMV AG, Vienna, is considering the sale of its retail and commercial business in Croatia and Bosnia-Herzegovina as it shifts its strategy toward oil and gas exploration and electric power.
The company has had retail and commercial business in Croatia since 1992, operating as OMV Hrvatska with 63 service stations and a market share of about 13%. It has been in Bosnia-Herzegovina since 2001 through subsidiary OMV BH. There it has 28 service stations and a market share of about 8%.
In a statement, OMV said it is "gradually shifting the portfolio away from refining and marketing towards exploration and production and gas and power."
OMV said it "will continue focusing the retail and commercial business on markets with integrated supplies."
OMV operates refineries in Austria, Germany, and Romania and has interests in the Bayernoil refineries in Germany.
The company's Turkish subsidiary, OMV Petrol Ofisi, recently sold its 52% interest in a Cypriot retail company, Kibris Turk Petrolleri Ltd. Sirketi.
Shell assigns Niger Delta license stakes
Shell Petroleum Development Co. of Nigeria Ltd. (SPDC) has completed the assignments of 30% interests in two oil mining leases in the Niger Delta to separate buyers.
FHN26 Ltd., an affiliate of Afren PLC, London, acquires SPDC's interest in OML 26, covering 480 sq km, for $98 million. Two fields on the license produce about 6,000 b/d of oil gross.
Neconde Energy Ltd., a majority Nigerian-owned consortium, acquires SPDC's share of OML 42 for $390 million. The 814-sq-km area includes Batan, Egwa, Odidi, and Jones Creek oil fields and related facilities. Operations had been shut down by militant activity, but Batan field has resumed flow at about 15,000 b/d.
SPDC is operator of a joint venture of Nigerian National Petroleum Corp. (55%), Shell (30%), Total E&P Nigeria Ltd. (10%), and Nigerian Agip Oil Co. Ltd. (5%).
Shell said Total Nigeria and Nigerian Agip also have assigned their interests in the leases, giving buyers 45% interests.
Vedanta gets control of Cairn India
Vedanta Resources, London, has completed all conditions for its acquisition of a controlling interest in Cairn India Ltd., reports parent Cairn Energy PLC, Edinburgh, (OGJ Online, Oct. 20, 2011).
Cairn Energy retains a 22% interest in the Indian company. The acquisition value was estimated at $9.6 billion when Vedanta made the offer for as much as 60% of the company in 2010. Completion of the deal was delayed by a royalty dispute.
Exploration & Development — Quick Takes
ONGC to develop fields off western India
Production is expected to begin in May 2014 from a cluster of oil and gas fields in the Mumbai High area offshore western India to be developed by state-owned Oil & Natural Gas Corp.
The B-127 cluster, east of Mumbai High oil field, includes marginal fields B-127, B-157, and B-59. ONGC estimates reserves at 15.35 million tonnes of oil equivalent, with 24.6 million tonnes in place in the Eocene Bassein and Paleocene-Eocene Panna formations.
The company estimates total production of 1.836 million tonnes of oil and 2.093 billion cu m of natural gas over 10 years.
It also will extend development of B-55 field, northeast of Mumbai High and the B-127 cluster, on production since November 1999 and currently yielding about 2.05 million standard cu m/day from nine wells. The exploratory well B-55-5 produced gas from the Oligocene Mukta formation, warranting further development, ONGC said. The operator expects incremental production of 155,000 tonnes of oil and 2.583 billion cu m of natural gas over 13 years.
Also east of B-127, ONGC reported a discovery in the B-127E-1 well, which during drilling to 2,735 m encountered hydrocarbons in "various intervals" of the target Panna formation.
On a test of one of five intervals of interest, at 2,651.5-2,648.5 m, the well flowed 1,076 b/d of oil and 1.9 million cu m/day of gas through a ½-in. choke.
Total to challenge revocation of shale gas permit
Total SA plans to challenge the French government's decision to cancel its exploration permit for shale gas in the Montelimar region of southern France.
"We respected the law and we do not understand why this permit was withdrawn on legal grounds," Total Chief Executive Officer Christophe de Margerie told French newspaper Les Echos.
Although the region under exploration consists mainly of shale gas reserves, Total said it is not committed to not using any technique that is banned by law—specifically hydraulic fracturing.
De Margerie told Les Echoes that France risked being left behind and compromising on security of supply if the government continued to prevent exploration.
"Be careful, we are making the security of supply of France not easy if we decide not to think of how to produce shale gas in a cleaner way," he told the paper.
"De Margerie's strident tone perhaps belies a nervousness over the drift among European governments towards tighter regulation or outright banning of shale gas production," said analyst Kash Burchett of IHS Global Insight.
The French government canceled shale gas exploration permits in October after Total allegedly aimed to continue with plans to drill for the gas using fracing.
France's Energy Minister Eric Besson and Environmental Minister Nathalie Kosciusko-Morizet said the permit had been canceled after Total submitted a mandatory report maintaining plans to use fracing.
The revoked permit, which covers the Montelimar region, was awarded to Total in March 2010 and encompasses an area of 4,327 sq km extending southward from below Valence to the region around Montpellier.
Total has until Dec. 12 to determine whether to ask the Energy and Ecology ministries for a detailed explanation for the cancellation of the permit or simply to file an appeal with the French courts.
San Joaquin wildcat encounters multiple pay zones
Neon Energy Ltd., Perth, said it has discovered multiple hydrocarbon-bearing zones at the Paloma Deep prospect in the San Joaquin basin of California.
The well went to a total depth of 13,320 ft in the western part of giant Paloma oil and gas field in Kern County and is being prepared for production tests. Analysis of wireline log data confirms the presence of oil and-or gas in eight zones, including three unconventional shale oil zones, with a combined 1,000 ft of potential hydrocarbon pay.
The well had been projected to 15,500 ft (OGJ Online, Sept. 16, 2011). The well was drilled 310 ft into the Fruitvale shale, which exhibits characteristics of a producing oil shale and is interpreted to be 1,300 ft thick at this location. Due to the apparent success of this well and earlier drilling challenges, it was decided to cease drilling above the Round Mountain objective, which will likely be a target of future drilling.
Neon Energy said the potential pay intervals to be production-tested in this well or future wells includes the Paloma sands, Middle Stevens, Round Mountain, Lower Stevens, Fruitvale shale, Western Flank, Antelope shale, Lower Antelope shale, and Tulare sands.
"Most notably," the company said, "the Lower Stevens sand encountered a column of more than 200 ft of continuous potential oil pay, with a high reservoir net to gross ratio. It is hoped that the reservoir will have sufficient permeability to allow an economic flow rate, and the company believes that this potential pay zone could extend over at least 740 acres of Neon's gross 2,500 acre lease holding. If production testing confirms the economic producibility of the formation, the Lower Stevens alone could represent a significant resource.
"Also of note is the Lower Antelope shale, in which a combination of naturally fractured (brittle) shales coupled with a mature source rock make the 350+ ft section a prime candidate for unconventional production. A 34 ft sand within this interval produced one of the most marked oil shows encountered in the well."
Neon Energy is operator with 75% working interest, and Solimar Energy Ltd., Melbourne, has 25% and is paying a promoted share of the dry hole and completion-testing costs up to an agreed cost cap.
Drilling & Production — Quick Takes
Visund North development moves forward
Visund North partners will invest 3.1 billion kroner to develop an oil accumulation on Block 34/8 in production license 120 offshore Norway in the North Sea.
Operator Statoil expects production to start in fall 2013 and recover about 29 million boe over the life of the field. The development calls for installation in summer 2012 of an FMC standard seabed template with two wells in about 335 m of water.
Oil from Visund North will be transported 10 km to the Visund A semisubmersible drilling and production platform.
The acreage was previously produced through a template that was shut down in 2006. An exploration well east of the shut-in template in 2009 proved additional reserves in the area and led to the new development.
Statoil has already awarded all development contracts, except for the marine installations and platform modifications. The awarding of these contracts is planned by yearend.
Earlier this year, plans to develop Visund South (Pan and Pandora discoveries) were completed (OGJ Online, June 6, 2010). Visund South will tie back 10 km to the Gullfaks C platform.
Noble Bully I drillship arrives in gulf
The Noble Bully I dynamically positioned drillship arrived in the Gulf of Mexico from a shipyard in Singapore and will drill development wells for Shell's deepwater Mars B Olympus tension-leg platform in 900 m of water, after completing commissioning and acceptance testing during December.
The Noble Bully I is the first of two Bully rigs jointly designed by the Royal Dutch Shell and Noble Corp. Noble expects the second Bully rig to start drilling next year offshore Brazil.
Bully rigs can drill in up to 10,000 ft of water and feature a compact box-type drilling tower, known as a multipurpose tower, instead of a conventional derrick. Because of the tower, Bully rigs are much smaller vessels compared with other deepwater drillships with similar capacity, Noble said.
The tower allows for offline standbuilding and the racking of up to 950 tonnes (more than 48,000 ft) of drill pipe and casing on two carousel-type setbacks. The tower handles drill pipe and casing in 135-ft lengths.
Devon receives approval for Jackfish project
Devon Energy Corp. received regulatory approval from the Alberta Energy Resources Conservation Board and Alberta Environment and Water to move forward with the $1.3 billion (Can.) Jackfish 3 steam-assisted gravity drainage (SAGD) project, 15 km southeast of Conklin, Alta.
The company plans to start construction on its wholly owned Jackfish 3 project in January, with startup targeted for late 2014. Once fully operational, Devon expects Jackfish 3 to produce an average of 35,000 b/d of bitumen before royalties.
Like the Jackfish 1 and 2 SAGD projects, Jackfish 3 holds an estimated 300 million bbl of recoverable bitumen, Devon said.
Jackfish 1, in operation since 2007, continues to produce near facility capacity while Jackfish 2, which started up in June 2011, currently produces 13,000 b/d net, according to Devon.
Devon expects Jackfish 2 to reach full production capacity of 35,000 b/d in late 2012.
Devon notes that the Jackfish projects are specially designed to use saline water rather than fresh water thus minimizing environmental disturbance. Also Devon last year acquired 50% of BP PLC's interest in the Pike oil sands leases, adjacent to its Jackfish leases.
The company said the plan is to develop Pike in multiple phases similar to Jackfish, raising bitumen production from Jackfish and Pike to 150,000-175,000 b/d by 2020 from the current 44,000 b/d.
PROCESSING — Quick Takes
QP, Shell agree to develop petrochemical complex
Qatar Petroleum and Royal Dutch Shell PLC have signed a heads of agreement that "sets scope and commercial principles" to develop a petrochemicals complex in Ras Laffan Industrial City. The HOA follows the conclusion of a joint feasibility study by the two companies.
The agreement's scope includes a worldscale steam cracker, with feedstock from natural gas projects in Qatar; a monoethylene glycol plant with a capacity of up to 1.5 million tonnes/year that uses Shell's OMEGA technology; 300,000 tpy of linear alpha olefins using Shell's SHOP process; and another olefin derivative, QP and Shell jointly reported.
The complex will produce petrochemicals products to be marketed primarily in Asia. Ownership will be split QP 80% equity interest and Shell 20%.
QP and Shell delivered Pearl GTL and Qatargas 4 earlier this year also in Ras Laffan Industrial City (OGJ Online, June 14, 2011).
NPRA promotes two directors, hires counsel
Brendan Williams, National Petrochemical & Refiners Association senior director for advocacy, and David Friedman, senior director for regulatory affairs, have been named vice-presidents of the departments they lead.
NPRA hired Rich Moskowitz, previously vice-president and regulatory affairs counsel for the American Trucking Association, as general counsel.
Natural gas plant planned for Oklahoma
SemGroup Corp., Tulsa, and Exterran Holdings Inc., Houston, will develop a 60-MMcfd natural gas processing plant for SemGas LP. The plant and equipment are needed, the companies report, to meet the growing demand for midstream services in the Mississippi play.
SemGroup spokesperson Liz Barclay told OGJ the precise location for the plant has yet to be decided but it will be in the northern Oklahoma and southern Kansas.
Exterran will design and fabricate the plant that will "feature state-of-the-art cryogenic technology for natural gas liquid extraction and enhanced ethane recovery."
Plains to buy, scrap idle Virginia refinery
Western Refining Inc. agreed to sell its idle 70,000-b/d Yorktown refinery and working terminal in York County, Va., and part of a crude oil pipeline in southeastern New Mexico to units of Plains All American Pipeline LP for $220 million.
The refinery has been idle since September 2010, operating as a products terminal and storage facility (OGJ Online, Sept. 13, 2010). The buyers are Plains Marketing LP and Plains Pipeline LP. Plains All American said it will disassemble and sell surplus equipment at the site and "enhance connectivity and performance of the Yorktown terminal," which has storage capacity of 6.6 million bbl of crude oil, products, and LPG.
The company will acquire an 82-mile, 16-in. crude oil pipeline segment and related connections and tanks in New Mexico, adding as much as 100,000 b/d of delivery capacity to the Jal station on its Basin Pipeline system.
TRANSPORTATION — Quick Takes
Enbridge to expand Bakken shale crude rail terminal
Enbridge Energy Partners LP (EEP) will expand its Berthold rail terminal capacity in the Bakken shale by 80,000 b/d and include a rail car loading terminal to accommodate the additional volume. EEP has contractual commitments for 70% of the rail loading capacity and anticipates it will soon finalize agreements for the remaining capacity.
The Berthold Rail Project includes construction of a double-loop unit-train terminal, crude oil tankage, and other terminal facilities adjacent to its existing facilities near Berthold, ND. The project will have capacity to stage three unit-trains at Berthold at any given time. After an initial 10,000 b/d Phase I start-up in July 2012, the full 80,000 b/d of rail export capacity will enter service in early 2013.
EEP described the $145 million project as complementing its Bakken Expansion Program, integrating gathering pipeline capacity in western North Dakota and eastern Montana with increased North Dakota export capacity.
EEP expects Bakken Expansion, announced August 2010, to add 145,000 b/d of takeaway capacity from the Bakken and Three Forks formations in Montana, North Dakota, and southeast Saskatchewan, 25,000 b/d of which is already available (OGJ Online, Feb. 18, 2011). The company expects the remaining 120,000 b/d to enter service by early 2013, a slight delay from initial predictions of late 2012. The Bakken Expansion will cost roughly $370 million for the US projects and $190 million (Can.) for the Canadian projects.
EEP also announced the $90 million Bakken Access Program in October. Bakken Access involves increasing gathering pipeline capacities, construction of additional storage tanks, and addition of truck access facilities at multiple locations in western North Dakota to supply the Bakken Expansion.
Plains All American to buy BP NGL, LPG business
Plains All American Pipeline LP's wholly owned subsidiary Plains Midstream Canada ULC will buy BP PLC's Canadian NGL and LPG business. Assets include ownership interests of varying levels in and contractual rights relating to roughly 2,600 miles of pipeline, 20 million bbl of LPG storage, seven fractionation plants with about 232,000 b/d of capacity, multiple straddle plants, and two field gas processing plants with an aggregate capacity of 8 bcfd.
The purchase also included about 10 million bbl of long-term and seasonal NGL inventory as of Oct. 1.
The business includes various supply contracts at other field gas processing plants, shipping arrangements on third-party NGL pipelines, and long-term leases on 720 rail cars used to move product among various locations. The BP assets and activities collectively provide access to 140,000-150,000 b/d of NGL transported through a fully integrated network to fractionation facilities and markets in Western and Eastern Canada and the US Great Lakes region.
Barclays Capital served as financial advisor and Bennett Jones LLP as legal counsel to PAA in connection with the transaction, expected to close late first-quarter or early second-quarter 2012 for about $1.67 billion, subject to regulatory approval and customary closing conditions.
Plains announced expansion of its crude transportation capacity serving the Bone Spring play in West Texas' Delaware basin earlier this year (OGJ Online, June 17, 2011).
BP sees two pipeline choices from Shah Deniz
BP PLC said two alternative pipeline projects are under consideration for the transport of natural gas from its giant Shah Deniz field in the wake of recent agreements signed by Azerbaijan and Turkey.
"The agreements allow two alternative pipelines to be considered in parallel," said BP. One alternative consists of "an upgrade of the existing Turkish Petroleum Pipeline Corp., or BOTAS, pipeline network, while the other would entail construction of an entirely new standalone pipeline across Turkey."
The statement came after the boards of BP, BOTAS, and State Oil Co. of the Azerbaijan Republic (SOCAR) ratified 14 agreements reached last month by Turkey's Prime Minister Recep Tayyip Erdogan and Azerbaijan's President Ilham Aliyev on development of Shah Deniz field.
"The agreements provide a legal framework for the sale of Shah Deniz gas to Turkey and its transportation to the European markets through Turkey, starting in 2017," BP said.
It added that the agreements represent "a major step towards the opening of the so-called Southern Gas Corridor—bringing gas from the Caspian Sea to Europe for the very first time."
Four pipeline projects, including the European Union-backed Nabucco, are currently competing for gas from Shah Deniz. The others include the Trans-Adriatic Pipeline (TAP), IGI-Poseidon (ITGI), and the South-East European Pipeline (SEEP). The four proposed lines are now under consideration by the Shah Deniz consortium with a decision expected during first-quarter 2012.
According to analyst Andrew Neff of IHS Global Insight, BP's comments on the issue suggest that it is "not sold on Nabucco, nor TAP, or ITGI, but may instead be lobbying Azerbaijan to support its own recently unveiled proposal, the [SEEP system]."
BP operates Shah Deniz field and holds a 25.5% stake. Statoil also holds 25.5%, while SOCAR, Lukoil Holdings, Total, and National Iranian Oil Co. hold 10% each. TPAO holds 9%.
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