GENERAL INTEREST — Quick Takes
Petrobank, PetroBakken agree to reorganize
Petrobank Energy & Resources Ltd. and PetroBakken Energy Ltd., in which Petrobank has held a 57% interest, have agreed to reorganize into two independent companies.
A new Alberta corporation, New Petrobank, will acquire existing assets and liabilities of Petrobank, which include oil sands leases in Alberta and a proprietary fireflood technology, except for Petrobank's ownership interest in PetroBakken shares. Existing shareholders of Petrobank will receive one share of New Petrobank for each Petrobank share held.
The effect will be to distribute Petrobank's heavy oil business to New Petrobank.
After that distribution, Petrobank and PetroBakken will combine and work under the name PetroBakken Energy Ltd. Existing PetroBakken shareholders will receive one share of this new company for every share of PetroBakken held previously. Petrobank shareholders will receive in aggregate a number of the new PetroBakken shares equal to the number of old PetroBakken shares held by Petrobank immediately before the reorganization.
PetroBakken's operations include light-oil Bakken (Saskatchewan) and Cardium (Alberta) resource plays and conventional light-oil assets in Saskatchewan.
New Petrobank will focus on commercializing its THAI fireflood technology, developing heavy oil properties with cold and thermal production methods, expanding its land inventory, and seeking technology licensing opportunities.
API asks SEC to delay disclosure rule implementation
The American Petroleum Institute and other business groups asked the US Securities and Exchange Commission on Oct. 26 to delay its scheduled Nov. 13 implementation of a new foreign disclosure rule for US extraction industries until their legal challenge of it can be resolved.
API, the Independent Petroleum Association of America, US Chamber of Commerce, and National Foreign Trade Council sued SEC over the regulation in US District Court for the District of Columbia on Oct. 10.
As they argued in their lawsuit, the groups said in their request for the SEC to stay the regulation's implementation that the rule would give foreign competitors an unfair advantage by requiring disclosure of information beyond what other countries require.
Such matters should be resolved in a court which appears better qualified to rule on them, they told the SEC. "With a stay in place, petitioners will join the commission in seeking expedited judicial review," their letter said.
Chevron buys 50% stake in Lithuanian company
Chevron Corp. bought a 50% interest in LL Investicijos, a Lithuanian oil and gas company that is expected to start exploration activities in coming months.
"We are looking forward to the joint effort and to conducting these activities safely and in an environmentally conscientious manner," Chevron said in an e-mail to OGJ on Oct. 26.
Separately, Lithuanian Prime Minister Andrius Kubilius told reporters at the Baltic Investor Forum in Vilnius, Lithuania, on Oct. 25 that Chevron was interested in shale gas. Lithuania has an estimated 120 billion cu m of recoverable shale gas reserves. Chevron already holds interest in shale assets in Poland.
Poland has granted more than 100 shale exploration licenses to numerous companies, including Chevron, ConocoPhillips, and Marathon Oil Corp. Poland has three shale basins (see map, OGJ, Nov. 7, 2011, p. 36).
Queensland starts tender of cash bids for CSG blocks
Queensland's state government has begun its controversial program of cash bidding for coal seam gas blocks with the first two permits up for bids. Expressions of interest for competitive cash bidding tenders are scheduled to close Feb. 14, 2013.
Both blocks are in the Surat basin, one 8 km west of Miles and the other, 8 km southeast of Condamine.
Both areas are surrounded by existing petroleum exploration and production licenses and associated systems. The government believes the two blocks potentially contain some of the highest quality gas reserves in Queensland.
Preferred tenders will be recommended by an evaluation panel of senior officers from the state's Department of Natural Resources and Mines, Projects Queensland and the Department of State Development, Infrastructure, and Planning.
Despite the move to cash bidding there will still be noncash land releases in greenfield and underexplored areas in the state.
Industry groups oppose the cash bidding system saying it will simply reduce the pool of funds that companies can devote to exploration. They add that it also is unclear how the various bids will be assessed and says it is important for there to be a high degree of transparency to obtain any bidder confidence in the process.
Exploration & Development — Quick Takes
UK offers 167 offshore licenses in 27th round
The UK government has offered 167 production licenses covering 330 offshore blocks in its 27th oil and gas license round and is conducting further studies of 61 blocks near environmentally sensitive areas for which it received offers.
The record 224 applications received for UK Continental Shelf licenses covering 418 blocks has been welcomed as a restoration of oil and gas industry confidence, which was shattered early last year when the government increased the rate of a supplemental tax on income from oil and gas production.
Since then, the government has added tax incentives to encourage development of challenging oil and gas fields and offered assurances about the recoverability of costs associated with decommissioning offshore platforms.
The number of applications received in the 27th license round exceeded the previous record by 37, which was set in the 26th round held in 2010.
A further sign of restored confidence came recently in a preview of a university study predicting a rebound in UKCS production (OGJ Online, Oct. 24, 2012).
Welcoming the new licensing results, Mike Tholen, Oil & Gas UK economics and commercial director, pointed out that last year's exploration offshore the UK fell to its lowest rate "for many decades."
He said, "While the measure announced by the government in the summer to improve the economics of small fields should help, it is only one of the factors influencing exploration."
He said Oil & Gas UK is working with the Department of Energy and Climate Change to consider "the levers that could be pulled to boost new drilling."
Lukoil hikes Caspian field oil reserves
Lukoil has increased its estimate of recoverable reserves for Yuri Korchagin oil field in the Caspian Sea offshore Russia by about 50% to 360 million bbl.
It attributed the increase to "geological exploration" conducted this year.
Lukoil said it drilled four wells in the field this year with horizontal borehole lengths of 2-5 km and initial flow rates of 4,000-10,000 b/d. It expects to drill four horizontal wells in the field next year, with maximum horizontal displacement possibly exceeding 6 km.
Yuri Korchagin went online in 2010 and produced nearly 2.5 million bbl of crude oil last year.
Talisman defers investing in Quebec's shale gas
Talisman Energy Inc. has decided against committing any more near-term investment for shale gas exploration in Quebec, the Calgary-based company said in comments about its quarterly financial statement.
The Quebec government imposed a partial drilling moratorium that remains effective pending completion of an environmental study to evaluate hydraulic fracturing (OGJ Online, Oct. 11, 2010).
The study is not expected to be completed before 2014. In Quebec, Talisman has acreage along the Lowlands of the Saint-Lawrence River.
"During the 3-month period ended Sept. 30, 2012, the company determined that it would not commit capital in the foreseeable future to exploration and evaluation activities in Quebec, where the prohibition regarding hydraulic fracturing for shale gas development has been reaffirmed," Talisman said, adding it will book impairment costs for Quebec of $109 million before taxes or $82 million after taxes.
Drilling & Production — Quick Takes
RWE to use semi for N. Sea Titan appraisal well
RWE Dea Norge AS signed a contract with Dolphin Drilling AS to use the Bredford Dolphin rig to drill an appraisal well for the Titan discovery in the North Sea off Norway during 2013.
The Bredford Dolphin semisubmserible drilling rig will be used to confirm the size of the Titan discovery. Titan is in production license 420 some 96 km northwest of Mongstad and 16 km west of Gjoa oil and gas field, where production began Nov. 7, 2010.
Dolpin Drilling negotiated the latest rig contract through an agreement involving Lundin Oil, Norwegian Energy Co. ASA, and Repsol SA. The contract calls for eight wells to be drilled during 570 days, with an extension option for a minimum of five more wells.
The Bredford Dolphin semi drilled the Titan discovery well to 3,664 m in Upper Triassic rocks in 370 m of water (OGJ Online, Dec. 8, 2010).
Gjoa field serves as a hub for production from the nearby Vega fields and is likely to host production from other fields during its expected 30-year life (see map, OGJ, Oct. 4, 2010, p. 59).
Titan was the first well on PL420, and RWE believes the license has further exploration potential.
RWE operates PL420 and holds 30% interest. Partners are Statoil with 40% interest and Idemitsu 30% interest.
Statoil closing Glitne field offshore Norway
Statoil is shutting in the seven wells in Glitne oil field offshore Norway and closing the field.
Glitne, in 110 m of water on North Sea Blocks 15/5 and 15/6 about 40 km northwest of Sleipner East oil field, produced 55 million bbl of oil, more than double the original estimate.
When the field went onstream in 2001, it was expected to produce for 26 months. It produced from several overlapping sand lobes deposited as deep marine fans in the upper Paleocene Heimdal formation through the Petrojarl 1 production and storage vessel owned by Teekay Petrojarl Production ASA.
Drilling of the seventh well in 2007 was expected to extend the field life through 2009.
Statoil, operator, holds a 58.9% interest. Other interests are Total E&P Norge 21.8%, Det norske oljeselskap 10%, and Faroe Petroleum Norge 9.3%.
Okoro extension offshore Nigeria starts flow
Afren PLC and Amni International Petroleum Development Co. Ltd. have started production from an extension of Okoro oil field offshore southeastern Nigeria at a stabilized rate of 5,000 b/d of 38º gravity oil (OGJ Online, Mar. 7, 2012).
They drilled the Okoro-14 well development well from the main field wellhead platform on Okoro field to establish early production from a horst block structure deeper than the main Okoro reservoir about 2 km to the east. Production from the extension well flows through a floating production, storage, and offloading vessel on the field.
Afren said the new well is the Okoro area's most productive. It boosts the area's total production to 21,500 b/d.
Before drilling the Okoro-14 well, Afren and Amni sidetracked the Okoro-5 production well in the main field seeking oil in a previously unswept part of the reservoir. The sidetrack went to 9,800 ft TMD and encountered pay in the target reservoir. The companies brought a 2,500-ft lateral drainage section in the zone onstream at a stabilized rate of 2,000 b/d of oil.
The Transocean Adriatic IX jack up, which drilled the extension well, has been moved back to Ebok oil field for drilling to include a development well for early production from the Ebok North Fault Block discovery. There, Afren and partner Oriental Energy Resources in May logged 370 ft true vertical thickness of net oil pay in the same Tertiary reservoir sands as the main field on a separate fault block at 4,320 ft TVD.
Suncor lets contract for MacKay River work
Suncor Energy Inc. has let a contract to Fluor Corp. for front-end project management and engineering services for second-phase development of its MacKay River in situ oil sands project in the northern Athabasca region of Alberta.
The operator has applied for steam-assisted gravity drainage development with production capacity of 40,000 b/d of bitumen. The first phase, with design capacity of 33,000 b/d, began production in 2002.
Fluor said its design will provide for offsite fabrication of modules.
PROCESSING — Quick Takes
Hurricane Sandy prompts refinery shutdowns
At least two US East Coast refineries were closed or were preparing to close as Hurricane Sandy made landfall near the New Jersey-Delaware border late Oct. 29, the US Department of Energy Office of Electricity Delivery & Energy Reliability reported.
Phillips 66 closed its 238,000 b/d refinery in Linden, NJ, and Hess Corp. expected to complete the shutdown of its 70,000 b/d refinery in Port Reading, NJ, DOE said. The Port Reading refinery does not process crude oil but processes gas oil.
PBF Energy Inc. was operating its 182,200 b/d refinery in Delaware City, Del., and its 160,000 b/d refinery in Paulsboro, NJ, at reduced rates. Monroe Energy was running its 185,000 b/d Trainer, Pa., refinery at reduced runs. Philadelphia Energy Solutions (Sunoco) operated its 335,000 b/d Philadelphia refinery at reduced runs.
Regarding pipelines, DOE said Colonial Pipeline was continuing operations with contingency plans being made for shutting down its mainline operations in the Northeast.
Dow lets FEED contract for Texas ethylene plant
Dow Chemical Co., Houston, has awarded Technip the front-end engineering and design (FEED) contract and cracking furnaces engineering and procurement services for an ethylene production plant at Dow's operations in Freeport, Tex., which it announced earlier this year (OGJ, Apr. 30, 2012, p. 26).
The 1.5-million tonne/year plant will be based on low-cost ethane feedstock. Its products will be used by Dow's downstream plants along the Texas and Louisiana Gulf Coast.
Technip said it will complete its FEED in mid-2013. Dow said in its April announcement that it expected plant start-up to be in 2017.
BP axes Florida cellulosic ethanol plant
BP PLC has canceled plans to build a commercial-scale plant in Highlands County, Fla., that was to have made fuel ethanol from cellulose.
The company said it will refocus its US biofuels strategy on research and development and on licensing biofuels technology.
Announced in 2008, the plant was to have converted cellulose from energy crops into 36 million gal/year of ethanol.
TRANSPORTATION — Quick Takes
TransCanada to build crude-diluent system
TransCanada Corp. has agreed with Phoenix Energy Holdings Ltd. to develop the Grand Rapids Pipeline project in Northern Alberta. TransCanada and Phoenix will each own 50% of the proposed $3-billion pipeline, which will transport 900,000 b/d of oil and 330,000 b/d of diluent roughly 500 km between northwest of Fort McMurray and the Edmonton-Heartland region.
TransCanada expects the Grand Rapids Pipeline system enter service early-2017, subject to regulatory approvals. TransCanada will operate the system and Phoenix has entered a long-term commitment to ship crude oil and diluent on it.
Phoenix described the project as part of relieving transportation bottlenecks in the Athabasca region as it develops its Dover and MacKay River oil sands assets through multiple phases. Phoenix is an affiliate of PetroChina Investment (Hong Kong) Ltd. PetroChina became 100% owner of what was formerly Athabasca Oil Sands Corp.'s MacKay River project earlier this year, buying the 40% stake it did not already own (OGJ Online, Jan. 5, 2012).
TransCanada said the Grand Rapids Pipeline system would expand its liquids transportation capabilities in the region. The company recently announced the Northern Courier Pipeline project, a 90-km system to transport bitumen and diluent between the Fort Hills mine site and the Voyageur Upgrader north of Fort McMurray, Alta. (OGJ Online, Aug. 1, 2012).
TransCanada expects to apply for regulatory approval for the project in 2013. Grand Rapids will be constructed, owned, and operated by Grand Rapids Pipeline LP, jointly owned by Phoenix and a wholly-owned subsidiary of TransCanada.
Western Australia moves on southwest gas line
The Western Australian government has called for tenders to design and construct a major natural gas trunkline to extend from the end of the Dampier-Bunbury line some 350 km southeast to reach Albany in the state's far south.
The line will pass close to key regional towns including Manjimup, Donnybrook, Bridgetown, and Mt. Barker.
The pipeline will be designed, built, and operated by a private-sector entity, but state-owned Verve Energy will have an interest in the project.
The successful tenderer will be responsible for selecting the precise route through a 50-m wide corridor as well as for negotiating land access agreements through this corridor.
The cost and scale of the new line has yet to be quantified, but the government has estimated the project cost to be near $135 million (Aus.).
The line will carry an expected 12 terajoules/day of gas and give investment incentives to local viticulture, agriculture, mineral processing, and timber industries in the state's southern regions.
The preferred owner and operator will be announced by mid-2013.
BG to sell Queensland Curtis LNG stake to CNOOC
BG Group has signed a heads of agreement to sell interests in the Queensland Curtis LNG project in Australia to China National Offshore Oil Corp. for $1.93 billion and the sale of LNG.
The interests include a stake in upstream assets and in the first of two planned liquefaction trains, which are to produce LNG at an initial rate of 8.5 million tonnes/year (tpy) from gas produced from Surat basin coal seams in southern Queensland (OGJ Online, Apr. 11, 2011). The deal excludes any interest in the second LNG train, transmission pipeline, and common facilities.
The companies have agreed that BG will supply CNOOC with 5 million tpy of LNG for 20 years beginning in 2015 from its global assets. In March 2010, BG signed an agreement to supply CNOOC 3.6 million tpy of LNG.
Under the new agreement, CNOOC will acquire a 40% equity interest in the first Queensland Curtis LNG train, in which it already holds 10%. It also will acquire a 20% equity interest in BG holdings in the Walloons Fairway region of the Surat basin, in which it now holds 5%. The Chinese company also will acquire a 25% working interest in BG upstream assets in the Bowen basin of Queensland.
BG and CNOOC further agreed to jointly invest in the construction of two LNG vessels in China. The companies committed to construction of two other LNG ships in their 2010 agreement.
CNOOC, under the new agreement, will receive the option to participate as a 25% partner in the first of any expansion trains at the Queensland Curtis LNG project.
BG's QGC Pty Ltd. remains operator and majority owner of the LNG project.
BG retains about 74% of its original interest in the upstream resource and related infrastructure, 100% of the common facilities on Curtis Island, such as LNG tanks and the jetty, and a 540-km gas pipeline network linking gas fields with Curtis Island.
BG said the common facilities and pipeline represent about 30% of estimated spending between 2011 and when LNG production is projected to start in 2014.
Bonaparte FLNG project gets environment nod
The Bonaparte floating LNG (FLNG) project in the Bonaparte Gulf off northern Australia—as proposed by a joint venture of GDF Suez and Santos Ltd.—has received environmental approval from the federal government. The nod paves the way for the front-end engineering and design process to begin in 2013.
The project involves a 2 million tonne/year of LNG development some 250 km west of Darwin to be fed with gas from the Petrel, Tern, and Frigate gas fields, which lie across the offshore boundary of Northern Territory and Western Australia.
The fields will host a total of 22 production wells hooked in to a FLNG vessel. The environmental approval comes with 15 conditions attached, including measures to protect whales and dolphins.
The government also has stipulated the need for a marine pollution contingency plan to include dealing with any spills both subsea and on the FLNG vessel.
The project is now on track for FEED to begin in mid-2013 and looking for a final investment decision in late 2014. The project would then be brought on stream in 2018.
Development drilling is scheduled to begin in 2016 and take 2 years to complete. Overall life of the project will be 25-30 years.
The Petrel-Tern-Frigate gas fields were found by ARCO in the late 1960s through to the early 1970s, but were not developed at that stage because gas was not a commercial proposition.
GDF Suez has 60% and operatorship. Santos has the remaining 40% interest in the project.