OGJ Newsletter

Feb. 6, 2012
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

ExxonMobil to sell Japan unit for $3.9 billion

ExxonMobil Corp. and TonenGeneral Sekiyu KK have entered into an agreement valued at $3.9 billion that will result in the restructuring of ExxonMobil's holdings in Japan. Namely, TonenGeneral Sekiyu will acquire ExxonMobil's shares in ExxonMobil Yugen Kaisha, integrating the marketing operations with its existing manufacturing operations. The deal will result in "a single, integrated downstream business better positioned to meet Japan's energy needs," the firms said.

ExxonMobil will remain TonenGeneral Sekiyu's largest shareholder. TonenGeneral Sekiyu will have exclusive, long-term use of ExxonMobil's existing brands for the sale of ExxonMobil products in Japan.

ExxonMobil will provide ongoing technology support, including technical assistance from ExxonMobil Research & Engineering. ExxonMobil also will provide international crude, feedstock and fuels supply services, including international marine coverage services.

Current management, the firms said, will remain in place until closing, which is expected in midyear.

Beyond its retained shareholding in TonenGeneral Sekiyu, ExxonMobil reported it will maintain a presence in Japan through businesses and partnerships excluded from the restructuring. These include:

• ExxonMobil's butyl, specialty elastomers, polyolefin, synthetics, and catalyst businesses, including its ownership in Japan Butyl Co.

• International Marine lubricants.

• LNG marketing and sales, including LNG market development activities.

• Collaborations and partnerships with Japanese companies in the upstream sector.

New EU oil embargo targets Iran's nuclear drive

The European Union imposed an embargo this week on Iran's oil exports as part of a package of new sanctions aimed at curtailing funds for Tehran's alleged effort to acquire nuclear weapons and pressuring it to return to talks.

Britain's Foreign Sec. William Hague said the new sanctions show how serious EU member states are about preventing nuclear proliferation and pressing Iran to return to the negotiating table.

Hague said Iran continues to defy UN resolutions and enriches uranium to 20% for which there is no civilian explanation. He said it is legitimate for the EU to increase the pressure on Iran to enter into negotiations.

The ministers agreed on an immediate ban on oil imports and a gradual phase-out of existing contracts between now and July 1. They also froze the assets of the country's central bank while ensuring that legitimate trade can continue under strict conditions.

The EU decision effectively outlaws petrochemical imports and investments and bans the sale of gold, diamonds, and other precious metals.

According to OGJ figures, Iran holds 151 billion bbl of reserves and produces 3.6 million bo/d. US Energy Information Administration data show Iran exports 2.4 million bo/d.

The EU is Iran's second-largest oil customer after China, importing 600,000 b/d in the first 10 months of 2011. Iran provided 34.2% of Greece's total oil imports, 14.9% of Spain's, and 12.4% of Italy's in the first 9 months of 2011.

The ministers said they would review the potential impact on economically troubled EU nations heavily dependent on Iranian oil, as well as on the global oil market, by May 1.

Last week, the UN's International Atomic Agency said that a high-level visit to Iran would take place from Jan. 29-31 for talks on Tehran's nuclear activities.

Judge says BP to indemnify Halliburton for oil spill

BP PLC is required to indemnify Halliburton Co. for third-party compensatory claims involving pollution or contamination that did not originate from Halliburton property or equipment located above the surface of land or water in the Apr. 20, 2010, Macondo well blowout and resulting oil spill, a New Orleans federal judge ruled Jan. 31.

US District Judge Carl Barbier issued the ruling to address Halliburton's and BP's cross motions for partial summary judgment regarding indemnity.

BP, operator of the Macondo well, has alleged that Halliburton committed fraud and breached the contract. Barbier said fraud could void an indemnity clause.

Halliburton handled the cement job on the Macondo well. The blowout caused an explosion and fire on Transocean Ltd.'s Deepwater Horizon semisubmersible, killing 11 crew members and resulting in a massive oil spill in the Gulf of Mexico. The semi later sank.

Barbier ruled BP does not owe Halliburton indemnity to the extent Halliburton is held liable for punitive damages, and he did not express an opinion as to whether Halliburton will be held liable for punitive damages.

In addition, Barbier said BP does not owe Halliburton indemnity to the extent Halliburton is held liable for civil penalties of the Clean Water Act.

Barbier on Jan. 26 granted Transocean partial indemnification in Transocean's request for a summary judgment (OGJ Online, Jan. 27, 2011).

Regarding the Halliburton and Transocean rulings, BP said the court sent "a strong signal that contractors involved in critical well operations will be held accountable for their actions under the law."

Exploration & DevelopmentQuick Takes

Tecpetrol hits oil on Llanos CPO-6 heavy oil block

An oil discovery by Tecpetrol Colombia has been reported on the first of a nine-well exploratory well campaign on the CPO-6, CPO-7, and CPO-13 blocks in the Llanos basin of Colombia.

PetroNova Inc., Calgary, which holds 20% working interest in the three blocks operated by Tecpetrol, said the Puerto Gaitan-1 well went to a total depth of 6,400 ft, and mud log and petrophysical interpretation identified the presence of hydrocarbons in the upper sands of the Mirador formation and in the lower and middle C7 sands of the Carbonera formation.

The well flowed at a rate of 367 b/d of 23.4° gravity oil on a 27-hr production test of the objective lower C7 sand of Carbonera. Production tests in the Mirador formation yielded formation water with traces of oil in the upper sands. Deeper Cretaceous and Paleozoic sands were also tested, yielding formation water.

Tecpetrol will complete Puerto Gaitan-1 in the C7 sand and perform an extended production test after Ministry of Mines & Energy permits are obtained.

Two more wells are to be drilled on CPO-6 followed by three wells each on CPO-7 and CPO-13.

Porto pursues Lusitanian onshore targets in Portugal

Porto Energy Corp., The Woodlands, Tex., expects to receive interpreted results in 3 months from a 240 sq km 3D seismic program over the Montejunto anticline on its Torres Vedras concession onshore Portugal.

Montejunto is the fourth and final 3D program that in total has given the company more than 1,600 sq km of new data on its five concessions that cover a combined 5,844 sq km.

The company will use data from Montejunto and from the 24,000 sq km aeromagnetic survey completed in July 2011 to identify drill sites that target multiple stacked pay intervals including Jurassic reefs on the eastern side of the basin, the presalt, and shallower targets.

Using prestack time migration processing from the 160 sq km Aljubarrota 3D seismic survey shot last year, Porto has identified a large Triassic four-way closure in presalt sandstones beneath the gas charged Lower Jurassic Brenha formation. The structure's crest is estimated to be 800 m updip of gas shows in Triassic sandstones in the company's ALJ-2 Brenha gas discovery (OGJ, Dec. 8, 1997, p. 67).

The entire prospect and surrounding area appear to have a thick salt topseal imaged from the seismic data set. Shallower targets have been identified in the mapped four-way closure, and the company is seeking a partner to participate in a 3,000-m presalt well that would be spudded by June 1, 2012, pending funding requirements and partnering efforts.

Porto is working toward a definitive agreement with Sorgenia International BV of the Netherlands and Rohol-Aufsuchungs AG of Austria to jointly evaluate the unconventional resource potential of the Lower Jurassic (Lias) stratigraphic interval on 450,000 acres of Porto's concessions. Porto's Mohave Oil & Gas subsidiary has applied for two new concessions in an effort to further consolidate Lias holdings.

McMoRan logs pay at Blackbeard East

McMoRan Exploration Co., New Orleans, said its Blackbeard East ultradeep exploratory bypass well on the Gulf of Mexico shelf encountered potential hydrocarbons in the Sparta carbonate section of Eocene and Vicksburg section of Oligocene.

Wireline logs, core, and sonic logs at Blackbeard East, drilled to a total depth of 33,318 ft true vertical depth in 80 ft of water on South Timbalier Block 144, indicate that the Sparta interval is 300 ft thick and appears to be a hydrocarbon-bearing fractured carbonate. The Vicksburg sand is credited with 10 net ft of pay over a 40-ft gross interval.

Flow testing will be required to confirm the potential hydrocarbons and flow rates from these limestone and sandstone formations, McMoRan noted.

These new intervals are in addition to the 178 net ft of hydrocarbons previously announced above 25,000 feet in the Miocene and the hydrocarbon bearing sands in the Oligocene (Frio) with good porosity below 30,000 ft.

A production liner will be set to total depth and the well will be temporarily abandoned while development options are evaluated. Pressure and temperature data below the salt weld between 19,500 ft and 24,600 ft at Blackbeard East indicate that a completion at these depths could utilize conventional equipment and technologies, the company said.

Meanwhile, completion activities at the Davy Jones-1 discovery well on South Marsh Island Block 230 are in an advanced stage. Oil-base drilling mud is being displaced with completion fluid.

McMoRan will run a pulsed neutron log, run perforating guns and production tubing, remove the blowout preventers, and installing a production tree. It will then pressure up the tubing to activate and fire the perforating guns to flow test the well.

McMoRan is drilling below 32,900 ft at the Lafitte ultradeep exploratory well in 140 ft of water on Eugene Island Block 223 and is evaluating pressure data and rotary sidewall cores obtained in January 2012 in the Cris R sand. The company has applied for a permit to deepen Lafitte to 34,000 ft to evaluate additional Oligocene and potential Eocene objectives. Flow tests will be required.

Drilling & ProductionQuick Takes

Tecpetrol group to operate northern Ecuador fields

Petroecuador has awarded a joint venture led by Tecpetrol International SA an incremental production contract covering Libertador and Atacapi mature fields in northern Ecuador.

Producing for 30 years, the fields are making a combined 16,000 b/d and are amenable to secondary recovery. The joint venture also includes Schlumberger Ltd., Sertecpet SA, and Canacol Energy Ltd., Calgary. The contract includes potential exploration upside.

The Tecpetrol group will spend $334 million to drill 31 development wells and rework 28 existing wells over the contract's 15-year life. In return for the increased output, the group will receive a fixed $39.56/bbl of incremental oil produced.

Petroecuador will absorb all operating costs and continue to manage regular operations, licensing and permits, and community and government relations. The group will supervise base curve production and assist Petroecuador with potentially reducing operating expenses, splitting any success 50-50.

Besides incremental production, the contract entitles the group to additional upside potential from optimizing the fields' existing production, implementing various secondary recovery techniques, and exploration opportunities.

Canacol noted that it has achieved success under similar risked service contract terms at Rancho Hermoso field in the Mirador formation in Colombia, hiking output 14-fold to 34,000 b/d in 3 years.

Grizzly to buy, develop oil sands acreage

Grizzly Oil Sands UIC has agreed to buy Petrobank Energy & Resources Ltd.'s May River oil sands acreage in northern Alberta and plans to develop it with modular steam-assisted gravity drainage technology.

The 46,720-acre area includes a demonstration project for Petrobank's proprietary THAI thermal in situ production technology, which the company said it is bringing to commercial use elsewhere in Alberta (OGJ Online, Nov. 21, 2008).

Privately held Grizzly said it will apply a SAGD scheme based on modular, reusable plant equipment with production train redundancy and space requirements lower than those of conventional SAGD projects.

It is using the system, which it calls ARMS (for advanced, relocatable, modular, standardized), to develop bitumen reserves at its 56,960-acre Algar Lake property 45 km southwest of Ft. McMurray. Design production capacity there is 11,300 b/d. Drilling of the first well pair is to begin soon. Steam injection is to begin in the first quarter of 2013 with production starting at midyear.

Grizzly said that after closing of the purchase from Petrobank it will apply for full field development at May River, where probable reserves have been estimated at 90.6 million bbl.

Petrobank said it will use cash proceeds from the sale of $225 million to repay bank debt.

It is focusing this year on development of heavy oil at its Kerrobert THAI project in southwestern Saskatchewan, where it is drilling 12 wells in a project with design production capacity of 7,000 b/d.

THAI development involves horizontal production wells with vertical air-injection wells drilled near toes of the horizontal producers to support combustion. The heat upgrades as well as mobilizes the heavy oil.

Both companies are based in Calgary.

FPSO begins well test offshore Brazil

The OSX-1 floating production, storage, and offloading vessel has begun production in an extended well test by OGX Petroleo e Gas Participacoes SA in the Waimea area of the Campos basin offshore Brazil (OGJ Online, June 21, 2011).

OGX will test different rates of oil flow from well OGX-26HP, 80 km offshore in 130 m of water. The target rate is 15,000 b/d.

OGX has a 20 year lease for the FPSO from the OSX Group. The vessel, built in South Korea and customized at Keppel Shipyard in Singapore, is 272 m long with storage capacity of 900,000 bbl of oil.

The OSX-1 is one of three FPSOs OGX plans to use to develop the Waimea complex on Block BM-C-41 in conjunction with two wellhead platforms.

Cyclic steam pilot set at Gulf of Suez Sinai oil field

A rig is expected to arrive in February to drill development wells in Lagia oil field on the Sinai Peninsula side of Egypt's Gulf of Suez in preparation for a cyclic steamflood pilot.

Oil production from Lagia field, as close as 26 km south of the producing Sudr, Matarma, and Asl onshore oil fields, is expected to start in the second quarter of 2012, said MENA Hydrocarbons Inc., Calgary.

The existing Lagia 6 and 7 wells are to be completed with a downhole pump and two development wells and two appraisal wells are planned to be drilled to the top of the Eocene Thebes formation at 1,500 ft. The development wells will be completed with thermal casing to accommodate steam from a 24 MMBtu plant.

MENA owns Lagia Development Lease covering 32 sq km along the gulf. Four wells drilled between 1949 and 2000 have identified the oil field. Consulting engineers estimate a contingent resource of as much as 12 million bbl of heavy oil with potential for lighter oil in deeper formations.

PROCESSINGQuick Takes

Plains All American to build Bakken gas plant

Plains All American Pipeline LP's wholly owned subsidiary Plains Gas Solutions LLC (PGS) plans to build a cryogenic gas processing plant with deep cut ethane plus recoveries and specification product fractionation capability at its multiproduct Ross Complex near Ross, ND. PGS expects the Ross gas plant to process 50-75 MMcfd of natural gas, starting second-quarter 2013.

PGS signed a letter of intent with an anchor customer to provide long-term gas supply for the plant, and is negotiating with additional potential customers to size the facility.

The Ross plant will produce stabilized condensate, purity ethane, specification propane, as well as a butane plus raw-make NGL stream, delivering pipeline quality residue gas into Williston Basin Interstate Pipeline Co.'s transmission system at the tailgate of the facility.

Plains All American's Ross complex includes rail-loading and storage facilities. The NGL portion and the first phase of the crude oil portion of the rail facility were recently commissioned with a design capacity to trans-load 8,500 b/d of NGLs and 20,000 b/d of crude oil. The second phase of the crude oil facility, targeted to be in service by fourth-quarter 2012, will provide unit train loading capability of up to 65,000 b/d served by a 16-mile, 10-in. OD lateral from PAA's Robinson Lake pipeline near Stanley, ND, to the Ross complex.

Oneok Partners LP's 100-MMcfd Garden Creek gas processing plant in eastern McKenzie County, ND, started receiving Bakken shale production last month.

Albanian refinery modernization due study

Albanian Refining & Marketing of Oil (ARMO) has let a contract to the Global Engineering & Construction Group of Foster Wheeler AG to study feasibility of modernizing its two refineries in Albania.

According to Oil & Gas Journal's annual Worldwide Refining Report, ARMO's refinery at Ballshi has crude capacity of 17,800 b/cd. The facility also has 12,000 b/cd of delayed coking, 3,500 b/cd of catalytic reforming, and 17,400 b/cd of catalytic hydrotreating capacity (OGJ, Dec. 5, 2011, p. 30). ARMO's simple refinery at Fieri has crude capacity of 8,500 b/cd.

Foster Wheeler said the formerly state-owned ARMO, privatized in 2008, wants to restore production by the refineries to original design capacity and enable them to produce transportation fuels complying with European regulations. The study is to be complete by mid-2012.

TRANSPORTATIONQuick Takes

CenterPoint begins routing for Mississippi Lime system

CenterPoint Energy Field Services LLC (CEFS), an indirect, wholly owned natural gas gathering and treating subsidiary of CenterPoint Energy Inc., has begun initial routing activities for a proposed gas gathering and processing system in the Mississippi Lime area of north central Oklahoma and south central Kansas. The proposed White Eagle Gathering System would include up to 300 miles of high-pressure gas gathering lines and up to 200 MMcfd of processing capacity with amine treating and nitrogen removal, depending on customer requirements.

White Eagle would interconnect to intra- and interstate markets, with NGL deliveries to the Medford Hub in Grant County, Okla. Additional gathering and transportation services, such as low pressure service at producer interconnects, a crude oil pipeline with interim trucking options, or electric service for submersible pumps, could also be provided.

The project is scalable and its final size will depend on producer interest. Contingent on customer commitments, portions of the system could be operational late-2012 or early-2013.

Chesapeake Energy Corp. last week named the Mississippi Lime as one of the plays it would focus savings from reduced dry gas drilling on exploiting (OGJ Online, Jan. 23, 2012).

BLM seeks comments on proposed Colorado line

The US Bureau of Land Management is seeking public comments on EnCana Oil & Gas (USA) Inc.'s proposed Pumba natural gas pipeline south of Rifle, Colo. Written comments for an environmental assessment which is being prepared will be accepted through Feb. 15.

EnCana USA's proposal calls for construction of a 24-in. pipeline across 7.2 miles of BLM acreage and 4 miles of private land from the East Mamm Creek compressor station southeast of Rifle to the Rifle compressor station west of the town, the US Department of the Interior agency's Silt, Colo., field office said on Jan. 24.

It said that EnCana USA also proposes construction of a 16-in. steel water pipeline paralleling the Pumba pipeline. The water pipeline from the Lake Fox Tie-In (South Grass Mesa) to the Rifle compressor station would cross 5.5 miles of BLM land and 1.2 miles of private acreage.

Both pipelines would be bored 130-280 ft under the Colorado River from private property to avoid impacts to the riverbed, aquatic wildlife, and the adjacent riparian ecosystem, according to BLM. The new bores would be near an existing pipeline bore beneath the river, it said.

The notice said while BLM only has jurisdiction on the sections of proposed pipeline that would cross land which it manages, private land, including the river bore, will be included in its environmental analysis.

Correction

In an article about US President Barack Obama's 2012 State of the Union address, the president of the National Association of Manufacturers (NAM) was misidentified as Cal Dooley. NAM's president is Jay Thomas (OGJ, Jan. 30, 2012, p. 16).

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