GENERAL INTEREST — Quick Takes
Total to sell stake in block offshore Nigeria
Total SA has agreed to sell its 20% interest in OML 138 offshore Nigeria, where production began from Usan oil field in February, to a wholly owned subsidiary of China Petrochemical Corp. (Sinopec) for $2.5 billion cash before closing adjustments (OGJ Online, Feb. 24, 2012).
Total E&P Nigeria Ltd., operator of the block, developed Usan with 42 wells connected to a spread-moored floating production, storage, and offloading vessel. The field is in 750-850 m of water 100 km offshore southeastern Nigeria. The FPSO can process 180,000 b/d and store 2 million bbl of crude oil.
The sale is subject to approval by the Nigerian government.
Nigerian National Petroleum Corp. holds the OML 138 concession. Other partners are Chevron Petroleum Nigeria Ltd. and Esso E&P Nigeria (Offshore East) Ltd., 30% each, and Nexen Petroleum Nigeria Ltd., 20%.
Body found near oil platform after fire in gulf
Divers recovered a body Nov. 17 near an oil platform that caught on fire Nov. 15 in the Gulf of Mexico about 20 miles offshore Grand Isle, La., said the US Coast Guard and the rig's owner, Black Elk Energy of Houston.
The platform on West Delta 32 was not producing when the incident happened. Initial reports indicated a contractor is believed to have used a blow torch instead of a saw to cut a pipe, triggering the incident. USGC said no oil was spilled.
The US Bureau of Safety and Environmental Enforcement is investigating, BSEE Director James A. Watson said.
"BSEE is committed to determining the direct and indirect causes of the explosion and will take appropriate enforcement action," he said.
A private dive team hired by Black Elk found the body at 5:25 p.m. Nov. 17 while inspecting the platform. Another crew member remains missing (OGJ Online, Nov. 16, 2012).
The body was recovered after USCG suspended a 32-hr search for two missing workers. Four other workers were burned and taken to Baton Rouge General Medical Center.
FTC okays KMI assets sale to Tallgrass
The US Federal Trade Commission approved Kinder Morgan Inc.'s application to sell certain natural gas pipeline and other assets to Tallgrass Energy Partners LP. The approval came Nov. 9 after commission members backed the proposed divestiture in a 4-0 vote, with Comm. Edith Ramirez recused.
KMI proposed the sale in response to requirements in the FTC's May 1 order settling charges that KMI's acquisition of El Paso Corp. would have been uncompetitive. The order required KMI to sell Kinder Morgan Interstate Gas Transmission LLC, its interest in the Rockies Express Pipeline and Trailblazer Pipeline Co. LLC, and other assets.
Shell to buy Murphy's Schiehallion interest
Royal Dutch Shell PLC has acquired Murphy Schiehallion Ltd.'s 5.9% interest in Schiehallion oil field in the West of Shetlands area offshore the UK, raising its interest to 55%.
Separately, the companies formed an agreement under which Murphy will acquire Shell's interests in the Seal Lake area of northern Alberta (OGJ Online, Nov. 14, 2012).
BP operates Schiehallion field, which is under redevelopment, with a 33.5% interest. Other interests are Statoil and OMV, 5.9% each.
SandRidge ponders sale of Permian basin assets
SandRidge Energy Inc., Oklahoma City, is contemplating the sale of its Permian basin assets although any sale will exclude assets associated with SandRidge Permian Trust.
The trust said on Nov. 13 that SandRidge Energy intends to retain all operations within the trust's area of mutual interest.
A potential sale would involve assets that produce 24,500 boe/d of which 67% is oil, 15% natural gas liquids, and 18% natural gas.
Proceeds would be used to fund activities in the Mississippian play and to repay debt.
Tom Ward, SandRidge's chairman and chief executive officer, said Permian basin acquisitions and development during the past 4 years "have been integral to our conversion from a natural gas company to an oil rich enterprise."
Exploration & Development — Quick Takes
Santos group has large Browse gas-condensate find
A group led by Santos Ltd. has drilled a large gas-condensate discovery in the Browse basin 60 km west of giant Ichthys field offshore Western Australia.
The Crown-1 exploratory well, in 440 m of water on WA-274-P, logged 61 m of net gas pay in the Jurassic Montara, Plover, and Malita reservoirs at 4,873-4,998 m without intersecting a gas-water contact and recovered multiple condensate-bearing gas samples. Pressure data taken at multiple levels indicate that gas could be expected to flow at a high rate, Santos said.
Drilling is to continue to a proposed 5,200 m at the site, 500 km north of Broome and 20 km east of Poseidon filed.
Santos is operator with a 30% stake in WA-274-P. Chevron Corp. has 50% and Inpex has 20%.
Santos revealed that it has signed agreements to take a 30% interest in the WA-408-P permit that adjoins WA-274-P to the east, subject to customary conditions. Total SA operates WA-408-P with 50% interest, and Murphy Oil Corp. has 20%.
The WA-408-P joint venture has committed to drill the Dufresne-1 and Bassett West-1 exploratory wells as soon as Crown-1 has been completed.
ExxonMobil to lead Middle Magdalena exploration
ExxonMobil Exploration Co. Ltd. will become operator of an unconventional oil and gas exploration and development program in Colombia's Middle Magdalena basin.
Subject to approval by Colombia's ANH, ExxonMobil will take a farmout from Patriot Energy Oil & Gas Inc., a subsidiary of Sintana Energy Inc., Toronto, to earn a 70% interest in the 43,000-acre VMM-37 block.
ExxonMobil will earn the 70% interest by completing a work program in the Cretaceous La Luna and deeper formations by drilling three exploratory wells at its sole expense. The first well is to spud in the third quarter of 2013. ExxonMobil will also compensate Sintana for its past expenses on the block.
Patriot will retain its 30% interest in the unconventional play as well as its current 100% participation interest in the conventional resources overlying the unconventional interval.
ExxonMobil will have an option to proceed to a development phase in which it will pay 100% of all additional costs to a maximum of $45 million, of which it will recoup $10 million from 50% of Patriot's production proceeds.
Patriot and ExxonMobil have agreed to make good faith efforts to locate exploratory wells that target the unconventional play as to also test conventional prospects.
ExxonMobil will have the right to withdraw from the project at various stages, relinquish operatorship, and reassign to Patriot the right to the 70% participation interest it would have retained had it met all requirements of the agreement.
If exploration and development of the unconventional resources were to continue beyond the activities and costs enumerated above, those costs will be shared based on the parties' participating interests.
Further exploration and subsequent development plans for the unconventional and conventional formations will be decided on once technical data obtained from drilling the deeper unconventional play and other sources are analyzed, Sintana said.
LLOG, Blackstone form Gulf of Mexico partnership
Privately owned LLOG Exploration Co. LLC of Covington, La., and Blackstone Energy Partners formed a long-term, strategic partnership in which the two committed to invest more than $1.2 billion to expand and accelerate LLOG's offshore operations in the Gulf of Mexico.
Blackstone, a private equity fund, will provide financing along with LLOG's operating expertise and financing to expedite development of LLOG's deepwater discoveries and its exploration and appraisal of prospects on more than 110 offshore leases.
The partnership plans to expand LLOG's asset base in the gulf through federal lease sale participation as well as through mergers and acquisitions.
LLOG said Who Dat field, brought onstream last year, is excluded from the LLOG-Blackstone partnership.
Scott Gutterman, LLOG's chief executive officer, noted the partnership with Blackstone was the first time that LLOG joined forces with an equity partner on a companywide basis.
"We believe the Gulf of Mexico deepwater is one of the most attractive oil plays in the world, and we expect to continue to be a long-term, significant player in the basin," Gutterman said.
Talisman tests light oil at Kurdamir, Iraq
Talisman Energy Inc. said it tested light oil at rates as high as 3,450 b/d from a "significant accumulation" in Lower Oligocene at its Kurdamir-2 in the Kurdistan Region of Iraq and that it plans to test two more zones in the oil leg in coming weeks.
Talisman, operator of the Kurdamir block with a 40% working interest, also said it will drill the Kurdamir-3 appraisal well in early 2013. WesternZagros Ltd. has 40% interest in the block, and the Kurdistan Regional Government has a 20% carried interest.
Kurdamir-2 stabilized at as much as 3,450 b/d of 38° gravity oil and 8.8 MMcfd of gas on a 2-day test on a cased-hole test of a 20-m fractured reservoir below the main porous zone, Talisman said. The final rate was achieved on a 72⁄64-in. choke with 810 psi wellhead flowing pressure.
Talisman said, "The results of this test confirm the presence of an oil column of at least 146 m in the Oligocene reservoir, with no evidence yet of the oil-water contact level. The deeper extent of the oil column will be appraised by the drilling of the Kurdamir-3 well."
Drilling & Production — Quick Takes
Connacher focuses on Great Divide SAGD work
Connacher Oil & Gas Ltd., Calgary, will target capital spending of $95 million (Can.) next year on its two steam-assisted gravity drainage developments in the Great Divide oil sands area of Alberta after selling its Montana refinery and conventional oil and gas business (OGJ Online, Oct. 2, 2012).
A strategic review begun in January hasn't produced any substantial offers for a joint venture, sale, or business combination, the company said (OGJ Online, Jan. 20, 2012).
"Connacher will continue to consider any opportunities which may arise, including discussions with third parties regarding participation in the Company's future growth and expansion plans," it said.
The company said sales of the refinery and conventional oil and gas properties enabled it to pay debt and retain cash of $118 million.
"Connacher is now a single-purpose company active solely in the development, production, and sale of bitumen," it said.
The 2013 budget includes $27 million sustaining capital and $68 million for new development projects, including:
• Drilling of four well-pairs on Drilling Pad 104 on Pod One, one of Connacher's two Great Divide projects. The oil zone under Pad 104 has some of the thickest pay in Pod One. A gas cap overlying the pad is being repressured. Connacher plans to put the new wells on gas lift and install electric submersible pumps as needed.
• Drilling of two to four infill wells at Pod One to produce heated bitumen that can't be drained by existing production wells.
• Redrilling of one well pair at Algar, Connacher's other Great Divide project. The wells will offset an original edge well pair that has performed below expectations.
Connacher also will invest in additional well testing of its proprietary method of injecting solvent with steam. It expects to make a commercial decision about the method in the second quarter of 2013. During the year, it will complete construction of a diluent-recovery unit.
Also next year, it will further develop a strategy it calls "dilbit by rail," delivering more than 60% of its production as diluted bitumen in rail cars.
"This strategy allows the company to maximize pricing of diluted bitumen to refineries not currently accessible by pipeline due in part to volatility in pricing differentials across various North American crude oil markets," it said.
Statoil resumes production from Troll C platform
Statoil has resumed production from the Troll C platform in the North Sea following a temporary shutdown on Nov. 15 after inspectors found corrosion in some tanks on the auxiliary system for treating gas (OGJ Online, Nov. 15, 2012).
A team of experts decided to reinject untreated gas into the reservoir, enabling production to be restarted during late Nov. 17 and early Nov. 18.
"A great effort has been made during the weekend to plan the repair work, and we have also looked into alternative production methods," said Rune Adolfsen, Statoil head of production on Troll C. "We assume that this method will allow us to produce at around 70% of full capacity during the repairs."
Duration of the repair work has not yet been clarified.
Statoil has 30.58% interest in Troll field, and Petoro AS has a 56% interest. AS Norske Shell has 8.1% interest, Total E&P Norge AS 3.7% interest, and ConocoPhilips Skandinavia AS 1.6% interest.
Total, Qatar extend Al Khalij agreement
Total SA and the government of Qatar have signed an agreement to extend the production-sharing agreement covering offshore Al Khalij oil field for 25 years.
Total discovered the field in 1991 and began production from it in 1997. The original PSA, signed in 1989, was to expire early in 2014.
Under the new agreement, Qatar Petroleum and Total will have a 60-40 operating interest in the field, with Total remaining the operator.
TRANSPORTATION — Quick Takes
Targa to buy Bakken oil line, gathering assets
Targa Resources Partners LP plans to buy Saddle Butte Pipeline LLC's Williston basin crude oil pipeline and terminal system along with its natural gas-gathering and processing operations for $950 million.
The transaction is expected to close during the fourth quarter, subject to customary regulatory approvals.
The assets, which include 155 miles of crude oil pipeline, are in the Bakken formation in the North Dakota counties of McKenzie, Dunn, and Mountrail.
The assets have combined crude oil operational storage capacity of 70,000 bbl, including the Johnsons Corner Terminal with 20,000 bbl of storage capacity (expanding to 40,000 bbl) and Alexander Terminal with storage capacity of 30,000 bbl.
The acquisition includes 95 miles of gas-gathering pipelines and a 20 MMcfd gas processing plant with an expansion under way to increase capacity to 40 MMcfd.
Houston-based Targa expects capital expenditures of more than $250 million will be required in 2013 to support system expansions necessary to meet producer activity.
Piedmont buys into Constitution gas pipeline
Piedmont Natural Gas had made an equity investment in Constitution Pipeline Co. LLC, a natural gas pipeline project slated to transport gas from the Marcellus shale in northern Pennsylvania to the US Northeast. Piedmont's wholly owned subsidiary Piedmont Constitution Pipeline Co. LLC will own 24% of the joint venture, joining previous partners Williams Partners LP (51%) and Cabot Oil and Gas Corp. (25%) (OGJ Online, Apr. 25, 2012).
Williams will build, operate, and maintain the 30-in. OD, 121-mile transmission pipeline, designed to transport 650 MMcfd of gas. Constitution will connect with the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, NY, and is already fully contracted with long-term commitments from producers operating in Pennsylvania.
Williams described Constitution as a key component in expanding its Susquehanna Supply Hub to connect Marcellus producers like Cabot and Southwestern Energy with the highest-value markets. The company expects to begin building Constitution in April 2014 with an in-service date of March 2015.
Constitution Pipeline is currently in the prefiling process with the US Federal Energy Regulatory Commission and plans to file a formal certificate application with FERC in second-quarter 2013. Piedmont's investment totaled $180 million. It will not be a customer of Constitution Pipeline.
El Paso to build Arizona gas line to supply Mexico
El Paso Natural Gas Co. LLC affiliate Sasabe Pipeline Co. will provide 200 MMcfd of firm transportation capacity via a 60-mile, 36-in. OD lateral pipeline extending from EPNG's existing south mainlines, near Tucson, Ariz., to the US-Mexico border at Sasabe, Ariz.
The Sasabe Pipeline would interconnect with a 36-in. OD pipeline to be built by Sempra International in Mexico via an international border crossing.
Mexico's Comision Federal de Electricidad (CFE) last month awarded contracts to Sempra International to build, own, and operate a 500-mile, $1 billion pipeline network connecting the northwestern states of Sonora and Sinaloa (OGJ Online, Oct. 26, 2012). The Sempra pipeline will supply natural gas to fuel-oil-fired power generation plants scheduled for conversion as well as new gas-fired power plants to be built during the next 15 years. The Sasabe Pipeline would interconnect with this network.
The Sasabe Pipeline requires US Federal Energy Regulatory Commission approval and a presidential permit for an interconnection-border crossing at the international boundary at Sasabe. EPNG initiated the National Environmental Policy Act prefiling process with the FERC in April and anticipates filing the FERC certificate and presidential permit applications in early 2013.
Subject to regulatory approvals, EPNG expects to begin building the Sasabe lateral first-quarter 2014 for a September 2014 in-service date.
EPNG, owned by Kinder Morgan Energy Partners LP and Kinder Morgan Inc., signed a 25-year transportation precedent agreement to support the $200 million project.
Ryckman Creek concludes gas storage open season
Ryckman Creek Resources LLC, a subsidiary of Peregrine Midstream Partners LLC, finished its recent nonbinding open season for firm natural gas storage service at its high-deliverability, multicycle (HDMC) site in Uinta County, Wyo., with offered capacity oversubscribed by three and a half times. Ryckman offered 8 bcf of firm HDMC capacity, available beginning Apr. 1, 2013, and received market-priced bids from 23 companies totaling 28 bcf.
Ryckman Creek Gas Storage is connected to five interstate pipelines, including Kern River, Questar, Overthrust Pipeline, Ruby Pipeline, and Northwest Pipeline, all of which also connect to the Opal hub just north of Ryckman Creek.
Ryckman began commercial operations in August, converting an existing partially depleted oil and gas field into HDMC storage with Phase 1 working gas capacity of 35 bcf. Phase 1 maximum injection exceeds 350 MMcfd, with maximum withdrawals of roughly 480 MMcfd (OGJ Online, Nov. 23, 2011).
Peregrine Midstream was formed in 2009 by four members of Falcon Gas Storage Co.'s original management group (OGJ Online, Mar. 15, 2009).
Papua New Guinea LNG project increases capacity
The ExxonMobil Corp.-led Papua New Guinea LNG project has increased its output capacity to 6.9 million tonnes/year of LNG from 6.6 million tpy. However, the estimated capital cost of the development has risen sharply from the December 2011 cost update of $15.7 billion to a new figure of $19 billion.
The capacity increase has been achieved through what ExxonMobil calls "system-wide optimisations and minor modifications" to the project.
ExxonMobil said the largest single contributor to the cost increase is foreign exchange rates. There have also been delays due to work stoppages through community disruptions and land access problems. These have led to increased drilling and construction costs.
In addition, the ever-present challenges of logistics in the Papua New Guinea highlands and unpredictable weather patterns have contributed to the increase. Rainfall in particular exceeded historic norms for a substantial part of the last 2 years.
Nevertheless the project remains on schedule to start LNG production in 2014. Drilling has begun on two production wells, and the offshore pipeline in the Papuan Gulf between the Kikori Delta and Port Moresby has been completed.
At the LNG plant site near Port Moresby, all major process equipment and all pipe-rack modules on the LNG jetty have been installed. All piling is complete and foundations are now being laid at the Hides gas conditioning plant in the highlands.
Construction progress is on schedule at the Komo airfield. The runway asphalt is currently being laid while the movement of materials along the Highlands Highway to Hides is ahead of schedule.
ExxonMobil says despite the cost overruns, the project economics have been helped by the 5% increase in plant capacity as well as the 30% increase in commodity pricing since project funding was put in place in 2009.