OGJ Newsletter

Dec. 24, 2012
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

NPR-A plan includes pipelines from Alaska's OCS

US Interior Secretary Ken Salazar released an integrated activity plan and final environmental impact statement allowing for development of about 72% of the National Petroleum Reserve-Alaska's crude oil supply.

He also affirmed that the IAP's preferred alternative would allow construction of pipelines from the Beaufort and Chukchi Seas across the NPR-A.

Salazar released the IAP and final EIS Dec. 19. A notice of availability of about 75 documents is scheduled to appear in the Dec. 28 Federal Register. That will start a minimum 30-day review before Salazar issues his final decision in early 2013.

He said that the IAP and final EIS cover the entire reserve, including 9.2 million acres in the southwest area. Plans would allow access to estimated reserves of 549 million bbl of crude oil and 8.7 Tcf of natural gas in 11.8 million acres, Salazar said.

In a memorandum to US Bureau of Land Management Acting Director Mike Pool, Salazar said the final NPR-A plan "should state with clarity" that construction of pipelines from possible future Beaufort and Chukchi Sea oil production areas will be allowed.

"In particular, while construction approaches will need to take into account sensitive values associated with special areas and river crossings, nothing in the IAP-EIS is intended to act as a bar to potential pipelines or otherwise make construction of such pipelines impracticable," he continued.

Specifics of any proposed pipeline would need to be addressed in a subsequent public process under the National Environmental Policy Act, Salazar emphasized.

"We should be clear that this IAP does not preclude any such potential pipeline applications," he told Pool.

ERCB to base unconventional regs on plays

Alberta's Energy Resources Conservation Board is soliciting public comment on what it calls "a new approach" to regulating development of unconventional oil and natural gas resources.

ERCB points out that the technologies of unconventional resource development aren't new to Albertans but that the scale of development is.

"To address the associated challenges with large-scale developments, the ERCB has suggested a new regulatory approach that includes moving from well-by-well regulation to regulation focused on development within a defined area," it says.

The agency points out operators have hydraulically fractured about 171,000 wells in Alberta since the 1950s and since 2008 have drilled about 5,000 horizontal wells completed with multistage hydraulic fracturing.

ERCB's new approach is based on risk and focused on plays. It requires regulatory responses to be "proportional to the level of risk posed by energy development" and to apply to an entire play, designed "to achieve specific environmental, economic, and social outcomes."

ERCB will define plays mainly by geology, properties of the resources, technology required for development, and surface impacts.

Within each play, the new approach will require outcomes related to water management, waste management, air quality, conservation, orderly development, public safety, and information and advice.

BP to sell Yacheng natural gas field

BP PLC agreed to sell its 34.3% interest in Yacheng natural gas field in the South China Sea to Kuwait Foreign Petroleum Exploration Company (KUFPEC) for $308 million.

Subject to approval from regulators, CNOOC Ltd. and necessary third-party approvals, closing is expected during the second half of 2013, BP said. After closing, CNOOC will hold 51% of Yacheng and KUFPEC will hold the rest. Yacheng field is in 90 m of water some 100 km south of Hainan Island.

Commercial production at Yacheng started in 1996. BP operated the field until Jan. 1, 2004, when CNOOC became the operator.

Chen Liming, BP China president, said BP remains committed to working with China where BP holds interests in two deepwater blocks in the South China Sea. Those blocks are under exploration.

The Yacheng sale takes BP's ongoing total divestments announced since 2010 to $37.8 billion.

BP to sell Sean gas field stake to SSE PLC

BP has agreed to sell its 50% nonoperated in Sean natural gas field in the southern UK North Sea to SSE PLC of Perth, Scotland, for $288 million. Production of the field net to BP is about 18,000 boe/d. Shell is operator.

The sale, which is subject to regulatory approval, is part of program BP has announced to sell nonoperated North Sea interests.

BP earlier agreed to sell interests in Alba and Britannia fields to Mitsui and in Draugen field offshore Norway to Shell (OGJ Online, June 26, 2012; Sept. 13, 2012).

Shareholders okay Petrobank, PetroBakken split

Shareholders of Petrobank Energy & Resources Ltd. and its 56%-owned subsidiary PetroBakken Energy Ltd., both of Calgary, have approved a reorganization in which the companies will emerge as separate entities (OGJ Online, Oct. 30, 2012).

After a complex exchange of stock shares, a new company called New Petrobank will own and operate Petrobank's heavy oil business.

The companies expected prompt government approvals and an effective date of Dec. 31 for the transaction.

Tuppinger to head OMV's Schwechat refinery

Dieter Tuppinger has been appointed head of OMV's 192,000 b/d Schwechat refinery in Austria. An OMV employee since 1991, he most recently has been in charge of the international asset development function of the refining and petrochemicals business unit of OMV's Refining and Marketing Division. He succeeds Gerhard Wagner.

Exploration & DevelopmentQuick Takes

Rosneft invites OVL to Okhotsk exploration

Rosneft has invited ONGC Videsh Ltd. (OVL) to participate with it in the exploration of the frontier Magadan-2 and Magadan-3 blocks in the Okhotsk Sea offshore far eastern Russia.

The invitation follows by several months Rosneft's agreement with Statoil to jointly explore four offshore blocks, three of them in the Okhotsk Sea and including the Magadan-1 block (OGJ Online, May 7, 2012).

Disclosure of the invitation to state-owned OVL came in a communication from M. Veerappa Moily, the Indian minister of petroleum and natural gas, to the Rayja Sabha, the upper house of Parliament.

Moily said an OVL team visited a Rosneft data room and is evaluating the blocks.

"Based on initial evaluation, blocks are indicated to be rank exploratory and involve high risk of investment," he said.

Western Isles project offshore UK approved

Dana Petroleum, Aberdeen, and Cieco Exploration & Production UK Ltd., London, have received government approval for the $1.6 billion Western Isles development project in the northern UK North Sea (OGJ Online, July 12, 2012).

The project will develop Harris and Barra oil fields, which lie in 165 m of water 160 km east of Shetland and 12 km west of Tern oil field. Reservoir depths are about 6,000 ft.

Dana, operator with 76.92% interest, expects production to start at the end of 2015 and to peak at 40,000 boe/d from reserves estimated at 45 million boe.

Development will involve drilling of five production wells and four water-injection wells and installation of two eight-slot subsea production manifolds and associated flowlines.

Commingled reservoir fluids will flow to a newbuild floating production, storage, and offloading vessel to be built by Cosco Group, Beijing, and owned by Dana and Cieco.

The companies plan as many as three more exploratory wells.

The fields are 5 km south of Hudson oil field, which Dana operates with a 47.5% interest in partnership with TAQA, 26.7%, and Cieco, 25.8%. Current Hudson production is 4,000 b/d.

Cieco, a wholly owned subsidiary of Itochu Corp., Tokyo, holds a 23.08% interest in the Western Isles project.

Alberta Oilsands due blocks offshore Namibia

Alberta Oilsands Inc., Calgary, has agreed to the indirect acquisition of a Namibian company in a deal that will give it net interests of 85% in two blocks offshore Namibia.

It initially will pay $1.5 million and issue 20 million shares valued at 10¢ each to acquire Maroon Hill International Ltd., a British Virgin Islands firm that owns 85% of Leopard Investments Ten (Pty.) Ltd. of Namibia. Leopard Investments holds 100% of the licenses for Blocks 2712A and 2812 A in the Orange basin. An additional $1 million is payable a year after the closing date.

The blocks cover 2.7 million acres directly west of Kudu natural gas field.

Drilling & ProductionQuick Takes

Statoil acquires central Marcellus acreage

Statoil ASA has acquired 70,000 operated net acres in the central Marcellus shale in Ohio and West Virginia for $590 million from three US private companies: Grenadier Energy Partners LLC, PetroEdge Energy LLC, and Protege Energy LLC. The transaction closed Dec. 18, with Sept. 1 being the effective date.

The Norwegian company will operate the acreage, most of which is liquids rich. Currently, Statoil's production share is 5,000 boe/d, and Statoil believes the assets have significant ramp-up potential.

Statoil entered the Marcellus in 2008 through a partnership with Chesapeake Energy Corp. In 2010, Statoil acquired acreage in the South Texas Eagle Ford shale. In a 2011 acquisition of Brigham Exploration, Statoil obtained assets in the Bakken-Three Forks formations in North Dakota and Montana.

Grizzly seeks to develop Thickwood oil sands

Grizzly Oil Sands ULC has applied to the Alberta Energy Resources Conservation Board for in situ development of oil sands resources at Thickwood, 58 km northwest of Fort McMurray, Alta., reports Gulfport Energy Corp., Oklahoma City, which owns 25% of the private Calgary operator.

Grizzly plans to use steam-assisted gravity drainage (SAGD) and cyclic steam stimulation (CSS) to produce 12,000 b/d of bitumen for up to 40 years. An independent firm has estimated ultimate recovery at 107 million bbl.

The Thickwood project will include a plant with two 6,000-b/d processing units, four SAGD well pads, as many as 33 CSS well pads, and associated facilities.

Gulfport said Grizzly expects to file environmental documents with Alberta Environment and Sustainable Resource Development in January. It expects production to begin about 18 months after regulatory approvals, expected in 12-18 months.

Grizzly discovered the Thickwood deposit during the 2006-07 winter drilling season. Since then it has drilled 59 coreholes and acquired 3D seismic data.

Grizzly holds a 100% working interest in 38,400 acres in the project area, which is near existing bitumen production.

The Cretaceous Wabiskaw D sand covers the entire block. Grizzly describes it as a "clean, blocky sand up to 20 m thick" with no bottom water or top gas.

The thinner, laterally extensive Wabiskaw A offers additional potential. It holds 1.1 billion bbl of bitumen initially in place, Grizzly says.

ROVs find no leaking oil from Macondo

Remotely operated vehicles (ROV) investigating a recurring sheen near the deepwater Macondo wellhead and Deepwater Horizon semisubmersible wreckage identified no sources of leaking oil, officials said.

BP PLC operated the Macondo well, which was drilled by Transocean Ltd. using the Deepwater Horizon. An April 2010 blowout resulted in the deaths of 11 people aboard the Deepwater Horizon, which sank after a fire and explosion. The blowout caused a massive oil spill. The latest ROV inspection, which concluded Dec. 16, was prompted by a report that a sheen was observed during November. An unidentified substance inconsistent with oil was seen emitting from several areas of the rig wreckage, and samples were collected for further lab analysis.

"No apparent source of the surface sheen has been discovered by this effort," said US Coast Guard Capt. Duke Walker, federal on-scene coordinator. "Next steps are being considered as we await the lab results of the surface and subsurface samples and more detailed analysis of the video shot during the mission."

The Macondo wellhead was found to be secure. On Sept. 19, 2010, the well was closed off and cemented.

Satellite surveillance will continue to monitor the sheen while future steps are being considered.

The real time ROV operations were observed remotely by government officials. Video of the ROV inspections will be made available shortly and posted on line.

In September BP reported a sheen and discovered a containment dome was leaking oil. An ROV operation was done to cap the containment dome leaks. No oil emissions from the containment dome were observed after the capping operation (OGJ Online, Nov. 30, 2012).

Jacos okays Hangingstone SAGD project

Japan Petroleum Exploration Co. Ltd. (Japex) has approved commercial in situ development of its Hangingstone oil sands project south of Fort McMurray, Alta., by its consolidated subsidiary Japan Canada Oil Sands Ltd. (Jacos).

Jacos currently operates an adjacent demonstration project producing 6,000-7,000 b/d of bitumen via steam-assisted gravity drainage. The demonstration project has been in operation more than 10 years.

The commercial project will use SAGD to boost production capacity to 20,000 b/d, which might be expanded to 30,000 b/d after start-up. Alberta authorities approved the project in November.

Jacos holds a 75% interest in the project. Nexen Inc. holds the rest.

The project is separate from another SAGD development, also in the southern Athabasca region, by the same name approved recently by Athabasca Oil Corp. (OGJ Online, Nov. 28, 2012).

PROCESSINGQuick Takes

MarkWest starts up Mobley, W.Va., gas plant

MarkWest Energy Partners, Denver, has begun operations at the first of three planned Mobley gas processing plants in Wetzel County, W.Va. The 200-MMcfd plant processes rich-gas production from the Marcellus shale by EQT Corp., Pittsburgh, Magnum Hunter Resources Corp., Houston, and other producers.

The Mobley plant is currently operating at about 60% capacity, says the company, but will continue grow as it handles the drilling continues in the area.

MarkWest expects to complete construction of its second, 120-MMcfd Mobley plant during first-quarter 2013. By fourth-quarter 2013, it will bring online a third, 200-MMcfd plant.

When all plants are operating, the Mobley complex will be able to process about 520 MMcfd in the wet-gas fairway of northern West Virginia. NGLs recovered at Mobley move by MarkWest's NGL gathering network to the 60,000-b/d Houston fractionator in Washington County, Pa.

Rosneft, Saras eye processing-marketing JV

Rosneft and Saras SPA have entered an agreement declaring their intention to create a 50-50 joint venture for the processing of crude oil and sale of oil products.

"The joint venture is meant to allow the parties to capitalize on their respective upstream and downstream positions, focusing around Rosneft's unique access to crude oil and other feedstock and Saras's supply and trading opportunities around the Saras refinery," the companies said in a joint statement.

Saras's Sarroch refinery on Italy's island of Sardinia has crude capacity of 300,000 b/d. Downstream capacities include 86,000 b/d of fluid catalytic cracking and 115,000 b/d of distillate hydrocracking.

Saras has tank farms in Italy and Spain and retail operations in Spain.

TNK-BP completing Ryazan hydrogen plant

Ryazan Oil Processing Co., part of the TNK-BP Group, expects to commission a 617 million cu m/year hydrogen plant at its 340,000 b/d refinery southeast of Moscow in the first quarter of 2013.

The $47 million plant is part of an upgrade that will enable the refinery to fully implement Euro 5 fuel standards (OGJ Online, Oct. 16, 2012).

TRANSPORTATIONQuick Takes

Enbridge launches Southern Access open season

Enbridge Inc. has launched a binding open season to solicit commitments from shippers for capacity on its proposed 165-mile Southern Access Extension crude oil pipeline, to be built, owned, and operated by subsidiary Enbridge Pipelines (Illinois) LLC. The new pipeline will transport crude from Enbridge's Flanagan terminal in Pontiac, Ill., to Patoka, Ill., effectively extending Enbridge Energy Partners LP's Lakehead System.

Enbridge will build the 24-in. OD pipeline as a stand-alone project with an anticipated in service date of early 2015. Diameter of the pipeline could be increased, depending on open season results. Committed shippers will be asked to commit capacity only to Southern Access and will not be required to make long-term commitments to ship on the Lakehead System.

Enbridge has already received sufficient capacity commitments from Marathon Petroleum Co. LP to build the 24-in. pipeline as proposed (OGJ Online, Dec. 7, 2012). This open season provides an opportunity for additional shippers to secure termed space on the pipeline. Shippers will have the option of selecting either 10- or 15-year terms as well as one of three available commencement dates for service.

The open season ends Jan. 18, 2013.

Tesoro buys Northwest Products System

Tesoro Corp. affiliate Tesoro Logistics LP (TLLP) bought Chevron Pipe Line Co.'s Northwest Products System. The system consists of the 760-mile Northwest Product Pipeline (NPP), a separate 5-mile jet fuel pipeline to the Salt Lake City International Airport, and the Northwest Terminalling Co. (NTC).

NPP extends from Salt Lake City to Spokane, Wash. It receives product from five refineries and one pipeline in the Salt Lake City area and is the primary transportation option from Salt Lake City to Pocatello and Boise, Ida., and Pasco and Spokane, Wash. Delivery volumes on the system averaged about 84,000 b/d in 2011.

NTC is comprised of refined products terminals in Boise, Pocatello, and Pasco. The terminals have a total storage capacity of 1.3 million bbl and delivered 51,000 b/d in 2011.

Tesoro spent $400 million on the acquisition. Subject to regulatory approval, the company expects it purchase to close first-quarter 2013. TLLP launched an amendment and upsizing of its $300 million revolving credit facility to $500 million on Dec. 7 to support this purchase and future growth opportunities.

Noble discusses Leviathan gas development

Noble Energy Inc. expects first-phase development of Leviathan offshore natural gas field will provide initial production of as much as 750 MMcfd for Israel via a northern entry point in 2016.

Project partners plan additional capacity for exports via pipeline, onshore LNG, or floating LNG as early as 2018. A Mesozoic oil prospect below the Leviathan gas discovery is planned to be spud in late 2013, Noble executives said Dec. 6 during a fourth-quarter update.

Recently, Noble Energy Mediterranean, Delek Drilling LP, Avner Oil & Gas Exploration LP, and Ratio Oil Exploration LP agreed that Woodside Petroleum Ltd. can buy into the 349/Rachel and 30/Amit licenses containing Leviathan gas field (OGJ Online, Dec. 3, 2012).

After closing, Woodside would acquire a 30% interest in the field, estimated to contain 17 tcf of gas gross. Terms call for Woodside to be included in other exploration opportunities in the licenses.

Charles Davidson, Noble's chief executive officer, said the Leviathan project needed a partner having LNG development and marketing experience.

"We had to acknowledge that we didn't have that expertise," Davidson said during a Dec. 6 media briefing. Noble will continue to operate the upstream portion of the project, he said. Under the agreement, Woodside would operate any LNG development in the Leviathan permits.

Meanwhile, Israel is developing laws authorizing gas exports. Leviathan partners await such a law before making a final investment decision on an LNG export project.

In another project offshore Israel, Noble expects Tamar gas field will come on stream during April 2013. Sales for the remainder of 2013 following first production are expected to average 700 MMcfd with a peak capacity of nearly 1 bcfd.

Leviathan and Tamar production will boost gas supplies for Israel where gas demand is on the rise. Meanwhile, Israel no longer plans to receive gas from Egypt as previously negotiated.

"The thinking now in Israel is that they have to supply their own natural gas and not depend on anybody else," Davidson said.