GENERAL INTEREST — Quick Takes
IEA trims 2012 oil demand forecast
The outlook for worldwide oil demand growth in 2012 has been cut due to fourth-quarter weakness, according to the latest monthly oil market report from the International Energy Agency. Paris-based IEA forecasts oil demand growth of 1.1 million b/d this year, down from its previous outlook for 1.3 million b/d of growth from last year's 89 million b/d of global oil demand.
The key contributor to the lower outlook is a 300,000 b/d reduction in estimated demand in the final quarter of 2011, which along with early indicators of January demand, prompted a cut of 500,000 b/d of demand in this year's first quarter.
Mild winter weather, European economic malaise, and elevated oil prices combined to curtail demand in the fourth quarter of 2011, IEA said. These factors drove global oil demand down from a year earlier to 89.5 million b/d in the recent quarter from 89.8 million b/d in the final 2010 quarter.
Having led the global upside since 2010, growth in gasoil demand will once again dominate in 2012, with a projected annual expansion of 1.9%, IEA forecasts. Specifically, diesel demand will benefit from the relative strength foreseen in the industrial complex, garnering additional support from the continued dieselization of the global vehicle fleet.
The persistent volatility of global energy supplies also tended to support diesel demand, thanks largely to the presence of diesel-power back-up generating capacity, the report said.
Oil demand in 2012 among countries of the Organization for Economic Cooperation and Development will average 45.3 million b/d, down from last year's 45.59 million b/d, while non-OECD demand is forecast to grow by 1.37 million b/d this year to 44.75 million b/d.
ConocoPhillips, CNOOC reach settlement on spill
ConocoPhillips and CNOOC Ltd. reached an agreement with China's Ministry of Agriculture in which the oil firms agreed to pay about $160 million in compensation for two oil spill incidents during June 2011 in Penglai 19-3 oil field in Bohai Bay.
The agreement settles public and private claims of potentially affected fishermen in certain Bohai Bay communities, ConocoPhillips said in a Jan. 24 release.
The government in September halted drilling and production at the field, which remains shutin. On June 4, seepage was observed on the seabed along a natural fault near Platform B. Oil and gas bubbles were seen on the surface June 17 near Platform C, 2 miles from the Platform B seep (OGJ Online, Sept. 12, 2011).
ConocoPhillips also said Jan. 24 that it designated $16 million of a previously established environmental fund to be used to improve fisher resources.
Previously, CNOOC approved a fluid discharge and depressurization plan from operator ConocoPhillips China Inc.
Since June 19, less than 1 bbl of oil has been released, ConocoPhillips said, adding that the estimated total volume released was 700 bbl of oil and 2,589 bbl of drilling mud. In November, China's State Oceanic Administration said "Conoco was deficient in management of the field."
Connacher directors start strategic review
Directors of Connacher Oil & Gas Ltd., Calgary, after management changes earlier this month, have engaged Goldman Sachs to help with a strategic review (OGJ Online, Jan. 13, 2012).
In a statement, Connacher said it expects financial results to be strong "assuming crude oil and bitumen prices, as well as favorable heavy oil differentials, continue at or near current levels." It said it can meet all current financial obligations and fund its 2012 capital program.
The company operates two in situ oil sands projects in northeastern Alberta, owns a 9,500 b/d heavy oil refinery in Great Falls, Mont., and holds interests in conventional oil and gas properties in central Alberta.
In the management changes, two directors became interim comanaging directors after the departure of Richard A. Gusella, who had been chairman, chief executive officer, president, and interim chief operating officer.
Exploration & Development — Quick Takes
Chevron makes 13th Aussie gas find since mid-2009
Chevron Corp. has drilled the Satyr gas discovery on the Exmouth Plateau area of the Carnarvon basin, the company's 13th offshore gas find in Australia since mid-2009.
The Satyr-3 well encountered 243 ft of net gas pay. It went to 13,369 ft in 3,688 ft of water 113 miles north of Exmouth, Western Australia, on the WA-374-P permit.
Chevron's Australian subsidiary is operator of the permit with 50% interest, and units of ExxonMobil Corp. and Royal Dutch Shell PLC each hold 25%.
Shell to get four deepwater blocks off Nova Scotia
The Canada-Nova Scotia Offshore Petroleum Board has decided to award exploration rights to Shell Canada Ltd. for four deepwater parcels offshore southwestern Nova Scotia.
Shell has committed to spend $970 million exploring the properties in the next 6 years. Award of the blocks is expected in March 2012. No bids were received for four other parcels posted in the province's 2011 call for bids. The next call for bids is to be posted in May 2012.
Nova Scotia Energy Minister Charlie Parker noted that the province had "invested in world-class research and committed to sharing our findings with oil and gas companies around the world. We're seeing the results of that investment today" (OGJ, July 4, 2011, p. 48).
The province has invested $15 million of offshore revenues in an analysis to prepare a 350-page atlas of the offshore. The Offshore Energy Technology Association commissioned RPS Consulting and Beicip Franlab for the industry-standard analysis. Dalhousie and Saint Mary's universities, Natural Resources Canada's Geological Survey of Canada, the CNOPB, and Department of Energy also contributed.
The study calculated that the province could have potential reserves of 120 tcf of natural gas and 8 billion bbl of oil.
Essar touts its CBM reserves, resources in India
Essar Energy PLC said it has greatly expanded proved and probable reserves at its 500 sq km Raniganj coalbed methane exploration block in West Bengal and that the company has India's most expansive CBM acreage with 10 tcf of gas resources across five blocks.
Independently verified proved and probable reserves and best estimate 2C contingent gas resources at Raniganj were 113 bcf and best estimate 2C contingent resources are 445 bcf. Both figures are as of Sept. 1, 2011. The December 2009 estimate of 2C contingent resources was 201 bcf.
The latest evaluation also shows a best estimate of 297 bcf of prospective resources.
Raniganj is producing 777 Mscfd, reduced to minimize flaring while test sales through a 48-km pipeline to the Durgapur industrial estate continue. Essar is progressing Raniganj towards full commercial production, and output is expected to peak eventually at more than 120 MMscfd. Essar has 100% interest in the block.
Statoil joins Cairn on Baffin Pitu block
Statoil ASA has acquired a 30.625% working interest in the Pitu license in Baffin Bay offshore Greenland from Cairn Energy PLC.
Cairn remains operator with 56.875% working interest, and Nunaoil AS has a carried predevelopment interest of 12.5%. The agreement is subject to final partner and Greenlandic governmental approval.
Pitu is adjacent to the Shell-operated Anu and Napu licenses, on which Statoil has working interests of 20.125% and 14.875%, respectively (see map, OGJ, Jan. 3, 2011, p. 71).
The current work program includes interpretation of 1,500 sq km of 3D seismic. The first exploratory period expires Dec. 31, 2014, and all initial work commitments have been fulfilled. The partnership will evaluate the seismic before deciding on drilling an exploratory well. Statoil will operate any future development.
Statoil drilled an exploratory well in the Fylla area west of Greenland in 1999 and relinquished this exploration licence in 2002 (OGJ Online, Jan. 1, 2001). Statoil is a member of the KANUMAS group in East Greenland.
Cairn noted that Statoil will pay a signature bonus, back costs, and promoted terms of future exploration expenditure on Pitu but that other details of the farmout are confidential.
Cairn said results of a 2011 seabed sampling program confirm new geochemical anomalies at the seabed above the prospective areas identified on the Pitu 2D seismic. These anomalies are related to microseepages of oil.
Meanwhile, Cairn said 1,500 sq km of 3D seismic shot over parts of southern Greenland is being processed, and fully migrated results are expected in the second quarter of 2012.
Evaluation is under way of the exploration programs and data acquired from eight Cairn-operated wells drilled in the last 2 years, and further seismic surveys and drilling are under consideration.
Partners suspend Colombia subsalt Topoyaco well
Partners decided to suspend work on the Yaraqui-1X well, a subsalt prospect on the Topoyaco block in the Putumayo basin foothills in Colombia, said PetroMagdalena Energy Corp.
Pacific Rubiales Energy Corp. holds 50% working interest and operates the block. PetroMagdalena holds the remainder.
The well's development was suspended because of anticipated uneconomic heavy oil flows, PetroMagdelena said. Last year the partners had reported encouraging indications of the subthrust play (OGJ Online, Nov. 21, 2011).
PetroMagdelena gave no details about under what conditions that it might reconsider the well.
Drilling & Production — Quick Takes
Skuld development offshore Norway approved
Statoil has received approval from the Norwegian Ministry of Petroleum and Energy for fast-track development of Skuld oil field on the Halten Bank of the Norwegian Sea (OGJ Online, Sept. 26, 2011).
Skuld is the fifth and largest fast-track project for which Statoil has received approval. It will account for more than half the projects' combined 90,000 boe/d of production in 2014.
With reserves of 90 million boe, mostly oil, the field will produce through three subsea templates tied in to the production and storage vessel on Norne field 16 km and 26 km from the Skuld templates. Water depth is 330-355 m.
Statoil, operator, holds a 64% interest, Petoro 24.5%, and Eni 11.5%.
Lundin to develop Luno field offshore Norway
Lundin Norway AS has submitted plans to develop Luno oil field in the Norwegian North Sea and is continuing talks with Det Norske Oljeselskap ASA for coordinated development with nearby Draupne field (see map, OGJ, Apr. 4, 2011, p. 50).
Lundin expects production to start in late 2015 and to peak at 90,000 b/d.
Its development plan calls for the drilling of 15 wells from a jack-up rig, installation of a processing platform on a steel jacket in about 110 m of water, and a new pipeline connected with the Grane oil pipeline about 35 km north for transport to the Sture terminal.
Luno proved and probable reserves are estimated at 186 million boe in Jurassic and Upper Triassic sandstones and conglomerates at 1,900-1,990 m.
The Luno platform, on production license 338, will have design capacity to handle more than 120,000 b/d in anticipation of production from Draupne field, 10 km northwest on PL001B. Lundin said proposed Draupne development would involve a platform from which partly processed oil and gas would flow to the Luno platform for stabilization and export.
Lundin has let a contract to Kvaerner ASA for engineering, procurement, and construction of the 14,500-tonne Juno platform jacket. Rowan Co. has the drilling contract.
Lundin is the Luno operator with 50% interest. Partners are Wintershall Norge ASA 30% and RWE Dea 20%.
Draupne is a 2008 discovery with oil and gas in the Middle Jurassic Sleipner and Upper Triassic Skagerrak formations at about 2,400 m.
DNO, operator with 35% interest, last month said it had signed a letter of intent with Aker Solutions for a front-end engineering and design study of Draupne development. Other interests are Statoil 50% and Bayerngas Norge 15%.
It also signed a letter of award, subject to development approval, with Maersk Drilling, to use a jack up under construction in Singapore for 3 years, extendable to 7 years, for Draupne drilling.
India's Bhagyam field starts oil production
Production of crude oil has begun from Bhagyam field, the second to start up in a complex developed by Cairn India and state-owned Oil & Natural Gas Corp. in Rajasthan, India (OGJ Online, Oct. 20, 2011).
The first field in the complex, Mangala, has reached its approved ceiling production rate of 125,000 b/d and is on polymer flood.
In a joint statement, Cairn, with 70% interest in project, and ONGC, 30%, said Bhagyam production will reach a plateau rate of 40,000 b/d.
When the third field in the development, Aishwariya, starts up, production from the complex is expected to reach an approved rate of 175,000 b/d.
The companies estimate recoverable resources at 1 billion bbl. Production from the complex flows through a 366-mile heated and insulated pipeline to Salaya, Gujarat.
Contract let for Kearl oil sands expansion
Imperial Oil Resources Ventures Ltd. has let a contract to CB&I for expansion of the Kearl oil sands mining project under development in the North Athabasca region of Alberta (OGJ Online, Mar. 16, 2011).
CB&I will conduct engineering, procurement, module assembly, and construction of a second bitumen extraction plant, froth tank farms, multiple storage tanks, and six froth settling units. The contract value exceeds $750 million.
The first phase of Kearl development, for which CB&I holds major contracts, is to start production late this year at about 110,000 b/d and eventually reach plant capacity of 145,000 b/d.
The expansion will add 110,000 b/d of production. Combined with the initial phase, it will develop 3.2 billion bbl of bitumen at a cumulative unit development cost of about $6.20/bbl, Imperial Oil said last month.
Future bottlenecking of both phases will increase production to the approved rate of 345,000 b/d and fully develop 4.6 billion bbl, the company said.
Imperial Oil holds a 71% interest in the project. ExxonMobil Canada holds the remainder.
RIL details KG D6 production declines
Reliance Industries Ltd., Mumbai, has blamed "reservoir complexity and natural decline in reserves" for disappointing production of crude oil and natural gas from the KG D6 block, which has yielded a series of large discoveries in deep water offshore eastern India (OGJ Online, Sept. 9, 2011).
The Directorate General of Hydrocarbons has been pressuring RIL to drill more wells in the Bay of Bengal block because of production shortfalls against initial projections. RIL says its development practices are sound (OGJ Online, Aug. 4, 2011).
In a report to the Indian parliament last month, the Ministry of Petroleum and Natural Gas said DGH attributed a decline in gas production from two major fields in the area, D1 and D3, to the drilling of only 22 wells-18 producers and 4 drilled but not placed on production-against 31 approved for production through March 2012. The ministry said RIL "has expressed inability to firm up appropriate drilling locations on plea of geological complexities." It said DGH continued to dispute RIL's explanation.
The ministry also said RIL had reported 5 of the producing wells in the fields had ceased flow due top water loading and sand ingress. One well in a third field, MA, with six oil and gas producing wells also had watered out, it said.
In a new financial report, RIL said KG D6 oil production for the 9 months ending Dec. 31 totaled 3.87 million bbl, down 39.8% from the same period a year earlier. Gas production totaled 436.4 bcf, down 21.9% from the earlier period.
Condensate production increased 4% between the periods to 580,000 bbl.
RIL said it has approved development of four satellite discoveries in the block.
KG D6 is one of 21 blocks in which BP PLC last year completed purchase of 30% interests from RIL in a deal forming a joint venture by the companies for Indian exploration and development (OGJ Online, Aug. 30, 2011).
TRANSPORTATION — Quick Takes
Sinopec signs deal for higher stake in APLNG
China's Sinopec has signed an agreement to add an additional 10% equity interest to its holdings in the Australia Pacific LNG Pty. Ltd. (APLNG) venture for a net consideration of $1.1 billion. Sinopec's partners in APLNG are Origin Energy Ltd. and ConocoPhillips.
Also as part of the deal, Sinopec will increase its offtake of LNG from the APLNG development to 7.6 million tonnes/year of LNG through 2035. This firms up the proposed second LNG train for the project on Curtis Island, Gladstone, Queensland. The new deal builds on a previous 20-year arrangement with Sinopec for the sale of 4.3 million tpy of LNG starting in 2015.
After closing on this latest deal, Sinopec's ownership interest in APLNG will rise to 25% from 15%. ConocoPhillips's and Origin Energy's equity interests, meanwhile, will be reduced to 37.5% each.
Gazprom to start South Stream construction in 2012
OAO Gazprom has decided to begin construction of the South Stream natural gas pipeline in December 2012, as opposed to 2013, as previously planned. Gazprom will present the updated construction schedule to the board of directors of South Stream Transport AG in February.
South Stream will cross the Black Sea to deliver 63 billion cu m/year of Central Asian gas to southern and central Europe. Intergovernmental agreements are in place between Gazprom and Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia, and Austria to implement the onshore part of the project.
Turkey granted Gazprom permission earlier this month to build South Stream in its waters (OGJ Online, Jan 9, 2012). South Stream shareholders agreed Sept. 16, 2011, that Gazprom would hold a 50% stake in the offshore part of the pipeline, with the remainder divided between Eni 20%, Wintershall Holding GMBH 15%, and EDF 15%.
Shareholders finalized the project's feasibility study in third-quarter 2011. The study included basic technical decisions on the project with justification of their feasibility, assessment of environmental safety and activities for environmental protection, and economic evaluation of the project, taking into account capital and operating costs.
Vantage gains NEB approval of ethane pipeline
Vantage Pipeline Canada ULC has received National Energy Board approval of its Vantage Pipeline Project ethane line. The $240 million project will carry 45,000 b/d of liquid ethane from Hess Corp.'s natural gas processing plant near Tioga, ND, through Saskatchewan to interconnect with the Alberta Ethane Gathering System (AEGS) near Empress, Alta., for use in Alberta's petrochemical industry.
The Canadian portion of the 700-km project will involve building and operating 578.3 km of new 273-mm OD, high-vapor pressure steel pipeline, from the Canada-US border near Beaubier, Sask., to the AEGS, crossing 573.8 km in Saskatchewan and 4.5 km in Alberta. Vantage has routed the pipeline so it will be within or alongside existing pipelines and road right-of-way for about 503.7 km.
Vantage's capacity will be expandable to 60,000 b/d if warranted by production expansion in the Williston basin. Vantage expects to begin construction in this year's first-half and finish late this year (OGJ Online, Feb. 14, 2011).
NEB accepted Vantage's arguments that Alberta's domestic ethane supply is declining and will continue to decline for some time and that there will be sufficient future ethane supplies and processing capacity available for the project to be viable over its economic life.
Williams, DCP to build Keathley Canyon Connector
Williams Partners LP and DCP Midstream Partners LP plan to expand their Discovery gas gathering pipeline system in the deepwater Gulf of Mexico by building the Keathley Canyon Connector, a 215-mile, 20-in. OD subsea gas gathering pipeline for production from the Keathley Canyon, Walker Ridge, and Green Canyon areas.
Discovery has signed long-term agreements with owners of the Lucius (Anadarko Petroleum Corp., 35%; Plains Exploration & Production PEP, 23.33%; Apache Corp., 11.7%; ExxonMobil Corp., 15%; Petroleos Brasileiro SA (Petrobras), 9.6%; and Eni SPA, 5.4%) and Hadrian South (ExxonMobil, 50%; Petrobras, 25%; and Eni, 25%) fields for transport of their production.
The 400-MMcfd Keathley Canyon Connector will start in the southeast portion of Keathley Canyon and run to an interconnection with Discovery's 30-in. OD mainline near South Timbalier Block 283 for shipment to Williams' 600-MMcfd Larose gas processing plant and 32,000-b/d Paradis fractionator, both in Louisiana.
Construction will begin in 2013 to meet a mid-2014 in-service date. Saipem's Castorone will perform pipelay for the project (OGJ Online, Jan. 19, 2012). Williams estimates total capital expenditures for the Keathley Canyon Connector at $600 million.
Williams owns 60% of the Discovery system and operates it. DCP Midstream Partners LP owns the other 40%.
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