GENERAL INTEREST — Quick Takes
ExxonMobil Canada to acquire Celtic Exploration
ExxonMobil Canada has agreed to acquire Celtic Exploration Ltd., Calgary, in a $3.1 billion (Can.) transaction involving large acreage positions in Canadian shale plays.
ExxonMobil will pay $24.50 for each Celtic share, a 35% premium over Celtic's recent share price. Celtic shareholders also will receive half a share in a new company to be led by current Celtic managers for each Celtic share.
Celtic assets include 545,000 net acres in the Montney shale play and 104,000 net acres in the Duvernay shale plays in Alberta. Other acreage in the deal is in the Inga area of British Columbia, the Grande Cache area in Alberta, and interests in oil and gas properties in Karr, Alta.
The interests to be acquired produce 72 MMcfd of natural gas and 4,000 b/d of crude, condensate, and natural gas liquids. Proved plus probable reserves are estimated at 128 million boe, 24% crude, condensate, and NGL and 76% natural gas.
Imperial Oil Ltd., an ExxonMobil Canadian affiliate, is not a party to the transaction but can participate for up to equal participation under an agreement with ExxonMobil Canada.
The new firm will be named 1705972 Alberta Ltd. (Spinco) and will have interests in a gas property at Grand Cache, a liquids-rich gas property at Inga, and an oil prospect at Karr. Production of the assets is 3,300 boe/d, 90% gas and 10% oil.
MSC issues practices for stray gas incidents
The Marcellus Shale Coalition (MSC) released its Recommended Practices for Responding to Stray Gas Incidents, the fourth in a series of guidance documents. Stray gas can originate from coal beds, oil and natural gas wells, landfills, pipelines, and naturally occurring methane and microbial gas.
A long, well-document history exists of stray gas incidents occurring in rural communities across the country, including many Appalachian areas, MSC said.
"Over the past several years, our industry has frequently identified the presence of stray gas during predrill baseline water surveys," MSC Pres. Kathryn Klaber said Oct. 16. "This document provides detailed steps that operators can take when stray gas is encountered—from developing proper plans of action, to notification of regulators as well as initial response actions and performing site reconnaissance surveys."
These steps help mitigate environmental concerns and maintain safety for oil and gas workers as well as the general public, she said.
Stray gas can be influenced by numerous factors, including changes in barometric pressure, soil and bedrock permeability, temperature contrasts, and other weather-related conditions, such as rain or snow.
Depending on the identified levels and location of the methane, oil and natural gas producers can take a number of steps based upon initial response and assessment.
When dissolved methane is detected in a water source servicing a structure, operators should consider providing an alternate water source until additional testing is completed to determine the source of the stray gas, the recommendations said.
House Republicans weigh in on EPA frac study board
US House Science, Space, and Technology Committee Republicans raised concerns about the US Environmental Protection Agency's selection process for a scientific advisory board reviewing the EPA's study of the potential impacts of hydraulic fracturing on drinking water prior to its release later this year.
Chairman Ralph M. Hall (Tex.) was joined by Andy Harris (Md.), who chairs the committee's Energy and Environment Subcommittee, and committee member Dana Rohrabacher (Calif.) in asking EPA Administrator Lisa P. Jackson to make certain the new SAB's members include nominees with hands-on or operational fracing experience.
A 2010 22-member panel reviewing the study's draft excluded persons with industry experience, the committee Republicans said in an Oct. 16 letter to Jackson. The earlier panel also suffered from meager state, local, and Indian tribal representation, they said. "Given the importance of this study and the potential implications it could have for oil and gas production in the US, we urge EPA to ensure selection of a balanced panel with relevant technical expertise, and one that does not unnecessarily exclude nominees with relevant (and in fact essential) industry experience," Hall, Harris, and Rohrabacher said.
Total adjusts upstream, supply-marketing
After restructuring its downstream business in a move it said showed commitment to an integrated company structure, Total has completed a reorganization of its upstream and supply-marketing segments.
Previously, Total's upstream segment included exploration and production of hydrocarbons plus gas and new energies. Supply-marketing included worldwide business of supplying and marketing petroleum products.
The supply-marketing segment was separated from manufacturing in Total's downstream reorganization a year ago (OGJ Online, Oct. 10, 2011).
Now, the company defines its upstream business as exploration and production of hydrocarbons plus the activities of gas and power units. It defines supply-marketing as before but has added new energies.
Indian Oil, Korea Gas eye collaboration
Indian Oil Corp. Ltd. and Korea Gas Corp. (Kogas), both state-owned, have signed a memorandum of understanding for joint exploration and production worldwide and development of gas infrastructure and LNG sourcing.
Kogas imports 33 million tonnes/year of LNG through three large LNG terminals that it developed, owns, and operates. It also operates a pipeline network in South Korea and has foreign investments in LNG liquefaction projects and 20 international exploration and production projects.
Indian Oil is a large refiner, marketer, and petrochemicals company with interests in pipelines, exploration and production, and gas marketing.
Exploration & Development — Quick Takes
Oil Search brings Total into Papua New Guinea
Long-time Papua New Guinea explorer Oil Search Ltd. has farmed out a 50% interest in five of its Papua New Guinea exploration permits to France's Total SA. It is the major's first entry into the country.
The value of the deal has not been disclosed, but Total will reimburse Oil Search for past licence costs and provide a partial carry through an initial offshore drilling program in the Gulf of Papua as well as for the acquisition of seismic data in several onshore permits.
Further payments will be made if the exploration program is successful.
The deal includes as many as seven exploration and appraisal wells in the offshore permits and as many as eight wells onshore. Oil Search has retained the operatorship.
The deal is a culmination of a lengthy selection process which involved Oil Search looking at a number of international, LNG-capable independent oil and gas companies.
The drilling program of two definite wells and two options will begin offshore during first-quarter 2013.
Total says the deal is part of a strategy to strengthen the company's presence in the region, particularly in gas and LNG.
Oil Search and Total have previously had a relationship, sharing exploration interests in the Middle East and an adjunct to the Papua New Guinea deal is an agreement for the two companies to form a strategic partnership to evaluate other licence prospects in the country—but excluding the highland region where Oil Search has a 29% of the Papua New Guinea-LNG project operated by ExxonMobil Corp.
Total says it is interested in carbonate plays and the most likely alliance with Oil Search will be Miocene-age carbonate prospects in the offshore Papuan Gulf where gas discoveries like Pandora and Pasca were made in the 1980s and onshore Gulf Province where Canadian company InterOil has had success with its Elk and Antelope gas discoveries.
Lundin finds Cretaceous oil northwest of Snorre
A group led by a unit of Lundin Petroleum AB has discovered Cretaceous oil in the northern North Sea 65 km northwest of Snorre field offshore Norway but said the thinness and uncertain distribution of the reservoir do not give basis for resource estimation at present.
Lundin Norway AS's 6201/11-3 exploratory well went to 2,975 m in 382 m of water on the Albert prospect in PL519. Its main objectives were to test Cretaceous and Triassic age sandstones of a multiple target structure.
The well encountered oil in thin Cretaceous reservoir sequence at the predicted level for the primary target. A minor column of movable hydrocarbons was found in a Palaeocene secondary target.
Further geophysical and geological studies are required to clarify the discovery's potential. The Triassic secondary reservoir was tight without movable hydrocarbons.
Lundin Petroleum Pres. and CEO Ashley Heppenstall said, "The existence of oil bearing Cretaceous reservoir in the Albert well is encouraging. In the event we can find thicker Cretaceous reservoir sections over this large structure there remains potential for commercial discoveries in this area."
Wintershall will take over the Bredford Dolphin semisubmersible to drill one well before it returns to drill an appraisal well on Lundin Petroleum's Johan Sverdrup discovery in PL501.
Lundin Petroleum is operator of PL519 with 40% interest. Bayerngas Norge AS, Norwegian Energy Co. ASA, and Spring Energy have 20% each.
Drilling & Production — Quick Takes
Pertamina: Acquisitions to lift production
Aiming for a sharp increase in oil and gas production by 2025, state-owned PT Pertamina (Pesoro) of Indonesia says it will lift oil output this year by 32,000 b/d through acquisitions of interests in Indonesia and elsewhere.
The company said it hopes to be producing 2.2 million boe/d of oil and gas in 2025. Through the first 7 months of this year, its production has averaged 869,000 b/d of crude oil and 8.4 bcfd of natural gas.
It said it aims to acquire four producing areas this year but didn't specify locations.
"Pertamina has been and will continue to negotiate with our partners to achieve the targets, which we expect to be realized by the end of the year," said Pertamina Pres. Director Karen Agustiawan.
She said Pertamina is on track to complete its acquisition of a 32% interest in Petrodelta SA of Venezuela from Harvest Energy Resources Inc. by March 2013. The companies signed a definitive agreement in June for an all-cash transaction with net proceeds to Harvest, after taxes and costs, of $525 million (OGJ Online, June 22, 2012).
Petrodelta's gross production is about 32,700 b/d.
Test flow starts in northern Yamal pilot
Test production has begun at a pilot project in Vostochno-Messoyakhskoe oil field in the northern part of Russia's Yamal region. Messoyakhaneftegaz, a joint venture of Gazprom Neft and TNK-BP, has drilled four exploration and appraisal wells and two clusters of pilot wells, having spent $140 million in 2012.
Next year, the venture plans to invest $240 million to continue exploration and appraisal activities, drill new pilot production wells, prepare design documents and construction sites, and begin development. Gazprom Neft, the project operator, is working with Halliburton to produce a conceptual framework for development of the Messoyakha group of fields.
Gazprom said full-scale development will start when construction is complete of the Zapolyarye-Purpe crude oil pipeline (OGJ Online, Oct. 25, 2012).
"A more accurate assessment of reservoirs and well flow rates will become available in 2014 upon completion of a series of production tests," Gazprom said.
Dana, Crescent Kurdish output at 340 MMcfd
Dana Gas and Crescent Petroleum are producing 340 MMcfd of natural gas and 15,000 b/d of condensate from their equally shared interests in the Kurdistan region of Iraq.
The companies said they have produced more than 279 bcf of gas and 13 million bbl of condensate since output began at Khor Mor field in October 2008 (OGJ Online, Oct. 6, 2008).
The gas fuels local generation of electric power.
Through September, the companies had spent $975 million on their Khor Mor and Chemchemal blocks in Kurdistan. Their projects include a 180-km gas pipeline.
STP-McKay bitumen production phase starts
Southern Pacific Resource Corp., Calgary, has begun converting the first of 12 well pairs at its STP-McKay thermal oil sands project west of Fort McMurray, Alta., from steam circulation to bitumen production.
Steaming at the steam-assisted gravity drainage project began in July after the company decided to expand first-phase design capacity of the development to 18,000 b/d of bitumen (OGJ Online, May 11, 2012).
A second phase will increase total capacity to 36,000 b/d.
Additional well pairs will be converted to production over the next several weeks, and steam injection volumes will increase. Each well pair is expected to take 12-18 months to reach peak production rates.
Hereema completes Andrew process module
Heerema Fabrication Group has completed the process module to be installed on BP PLC's Andrew platform in the central North Sea to accommodate production from Kinnoull oil and gas field to be developed subsea.
The 750-tonne process module is 18 m long, 13 m wide, and 28 m high. It set sail for the field Oct. 4. A bolt-on installation will attach the module to the side of the Andrew platform.
Kinnoull is the largest of three reservoirs in BP's Andrew area development project. Production from three subsea wells is to peak at 45,000 boe/d.
The development will extend Andrew area production beyond 2020. Andrew production is shut in during construction.
PROCESSING — Quick Takes
DOI approves tribal land trust application for refinery
The US Department of the Interior approved a land-into-trust application from three North Dakota Indian tribes, accepting 469 acres into trust for a proposed 13,000 b/d refinery on 190 acres and feed production on the remainder.
"By working with the Mandan, Hidatsa, and Arikara people to place this land into trust status, we are supporting infrastructure that will help bring American oil and gas to market while promoting tribal economic development and self-determination regarding land and resource use," said US Sec. of the Interior Ken Salazar in announcing the action on Oct. 10 at the Fort Berthold reservation in North Dakota.
DOI said that if all required approvals are obtained, the proposed MHA Nation Clean Fuels Refinery would be the first new refinery built in the US in more than 30 years. It said project developers estimate the refinery could create 800 to 1,000 construction jobs, up to 140 operations jobs, and millions of dollars in annual revenue to benefit the three tribes and surrounding rural communities.
The proposed facility would refine Bakken formation crude oil into diesel fuel, propane, and naphtha products, according to DOI, which manages nearly 2 million subsurface acres of mineral estate in active areas of the Bakken play in North Dakota.
It said that future federal permitting and oversight will be handled by the US Army Corps of Engineers, Environmental Protection Agency, and Occupational Safety and Health Administration.
EPA issued a National Pollution Discharge Elimination System permit for the refinery in August 2011, a step under the Clean Water Act that details required conditions and limitations for the proposed refinery's operations, DOI said.
Comments on the latest decision will be accepted for 30 days following its publication in the Federal Register, it indicated.
Alberta gas plant completes expansion
Birchcliff Energy Ltd., Calgary, has completed the third-phase expansion of its wholly owned and operated Pouce Coupe South Gas Plant and begun operations. The expansion began processing gas about 1 month ahead of schedule, the company reported.
Birchcliff noted that, as a result of the PCS gas plant being operational, record current production is about 25,500 boe/d. Birchcliff believes it will exceed its 2012 target production of 26,000 boe/d.
Jeff Tonken, Birchcliff president and chief executive officer, said, "The PCS gas plant [will] process our Montney/Doig natural gas for more than 30 years."
Birchcliff expects the gas plant to process about 100 MMcfd at yearend, leaving 50 MMcfd of expected processing capacity available for production growth.
Petronas, US firm to develop CO2 capture technology
Malaysia's state oil company Petronas has joined with Roselle, Ill.-based LanzaTech to develop means for capturing carbon dioxide and methane from, among other sources, refinery offgases and natural gas wells and produce acetic acid, a chemical with applications in the polymers and plastics markets, according to a LanzaTech announcement.
LanzaTech's fermentation process converts carbon monoxide in industrial waste gases, reformed natural gas, and gas derived from any biomass source into low-carbon fuels and chemicals. LanzaTech and Petronas will work to extend this technology to include CO2-containing gases.
The joint development agreement follows the investment earlier this year by Petronas Technology Ventures Sdn. Bhd., the venture arm of Petronas, in LanzaTech.
TNK-BP upgrading Ryazan refinery in Russia
TNK-BP said it will invest $537 million to add isomerization and cat-cracked gasoline hydrotreating capacity at its 340,000 b/d Ryazan refinery about 120 miles southeast of Moscow.
The upgrade will provide for total production of Euro-5 motor fuels. Currently, 49% of the refinery's fuels meet that standard.
TRANSPORTATION — Quick Takes
LNG seeing very slow growth so far in 2012
Data for the first 9 months of 2012, collected and published by Barclays Commodities Research, show the LNG market has grown very little year-on-year. Global LNG supply is less than 1% below last year's levels at 243 billion cu m.
Barclay's analysis attributes the slow growth to outages at several supply plants through the year and to delays in plants' sending out product. Train 1 of Woodside's Pluto, said Barclays, has largely performed to expectation, Angola has lagged expectations with first cargoes now expected in fourth quarter, and Algeria's liquefaction additions have yet to materialize.
The outages at some Australian plants, said the report, have meant that volumes are flat year-over-year, while reductions are larger at such exporters as Yemen, Egypt, and Algeria—all down between 1.4-1.7 billion cu m.
Qatar has been one of the few exporters actually to achieve year-over-year growth: Over the first 9 months, it saw total exports up by 3.7 billion cu m, although almost all of this growth was in first-half 2012. Over third quarter, Qatari exports actually fell by 0.5 billion cu m year-over-year, "owing largely to a slightly expanded maintenance program."
Nigeria also increased exports, by 1.5 billion cu m/year. Recent news about an explosion on the pipeline to the Bonny Nigeria LNG terminal has already led to force-majeure calls on cargoes. The likelihood, said Barclays, is that fourth-quarter LNG volumes will not record global growth at all in year-over-year terms over 2012.
While global LNG supply has not changed, Barclays said, Asian LNG demand has risen by 13% year-over-year, driven by strong growth in almost every major importer, including China (>21%), Thailand (>23%), Japan (>15%), and India (>13%).
The reorienting of the LNG market towards Asia has been much commented upon in the market, said Barclays, and how the market has balanced (Asian growth against stagnant supply) to move cargoes from Atlantic basin buyers and to Asia.
This is leading to a burgeoning market for gas not sold under long-term contract.
AGRI Project lets feasibility study to Penspen
AGRI LNG Project Co. SRL, the project company for the AGRI Project, has let a feasibility study to Penspen Ltd. for the Azerbaijan-Georgia-Romania-Hungary Natural Gas Interconnector Project (AGRI).
AGRI will transport and market Azerbaijani and other Caspian region natural gas to Romania, Hungary, and other Central European and EU gas markets through Georgia and the Black Sea via construction of new liquefaction and regasification terminals on the Black Sea coasts of Georgia and Romania respectively.
Penspen's feasibility study will include gas market and supply analysis, development of conceptual engineering for pipelines and LNG terminals, economic and financial analysis, and risk assessment and environmental aspects. Penspen expects to complete the feasibility study in November.
AGRI LNG Project Co. SRL shareholders comprise the national oil and gas companies from each of the four participating countries: Romanian National Natural Gas Co., State Oil Co. of Azerbaijan Republic, Georgian Oil & Gas Corp., and Hungarian Electricity Co. PLC.
On Apr. 13, 2010, officials from Azerbaijan, Romania, and Georgia signed a memorandum of understanding on cooperation in LNG and its transportation, laying the framework for the AGRI project and establishing AGRI LNG SRL, headquartered in Bucharest.
Hungary joined AGRI in February 2011.
