OGJ Newsletter

Feb. 13, 2012
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

API sees prospective federal regulatory avalanche

Growing interest in oil and gas activities by more federal departments and agencies potentially could stifle development of ample US resources, American Petroleum Institute Chief Economist John C. Felmy warned. "Eight federal agencies in all are looking at hydraulic fracturing alone, some with no timelines," he told reporters during a Feb. 8 teleconference.

"This is a prospective regulatory avalanche. Right now, there's no transparency or indication of prospective outcomes," Felmy continued. "If they don't coordinate and aren't transparent, the results could be negative for American energy."

New regulations could emerge not only from US Department of the Interior agencies with jurisdiction over federally held resources and the US Environmental Protection Agency, but also from divisions of the Departments of Defense, Transportation, and Health and Human Services, he said.

Felmy said API has no quantitative estimate of possible economic consequences because so many federal departments and agencies have entered the federal oil and gas regulatory picture. "We don't know the actual inner workings, only that all these agencies are involved," he said. "Some have had regulatory coverage for a long time. Others haven't. Are they coordinated? Do they have timelines? That's our main concern."

He said API will ask Congress to use its oversight authority to halt the Obama administration's drive to particularly overregulate fracing and gas development. "Clearly, there has to be some coordination of activities," Felmy suggested. "We're looking for a proper level of regulation, but we're also looking for coordination so there aren't redundant calls for information and duplicative research that is redundant and costly."

Sinochem to buy Total's Cusiana, pipeline interests

Sinochem is buying Total SA's Colombian subsidiary TEPMA BV, and the French company plans to maintain its exploration interests in Colombia.

The sale to Sinochem includes Total's working interest in supergiant Cusiana field, producing 7,000 b/d of oil equivalent net to Total, and participations in the OAM and ODC pipelines. Relevant authorities must approve the sale, which is a continuation of Total's asset optimization strategy.

Total said it will come away with $1 billion from the sale to Sinochem and the mid-2011 divestitures of a 5% working interest in the Ocensa pipeline to Petrominerales and another 5% to CEPSA. Total still holds a 5.2% share in Ocensa.

Total plans to maintain its exploration interests in Colombia. It holds 55% interest in the Mundo Nuevo block and 50% in the Niscota block to the south, where the Huron-2 appraisal well is being drilled and Huron-3 is to spud later in 2012.

At Niscota, a group led by operator Hocol SA drilled a "significant gas-condensate field discovery" at Huron-1 in early 2009. Huron-1, in a heavily faulted area of the Andes foothills 300 km northeast of Bogota in the Llanos basin, encountered several reservoirs, one of which was tested at 3,400 b/d of condensate. Gas volume was not disclosed.

J-W Energy restructures midstream subsidiaries

J-W Energy Co. formed J-W Midstream Co. to consolidate midstream activities previously handled by J-W Gathering Co., J-W Pipeline Co., and Q-West Energy Co.

The new midstream company is intended to expand J-W Energy's presence as a full-service provider of midstream services to the upstream natural gas sector.

Larry Carpenter, J-W Midstream president, said the restructuring will better communicate the range of services available for customers.

J-W Energy of Addison, Tex., has offered gathering, marketing, compression, dehydration, treating, processing, and transportation of gas for over 30 years in the Ark-La-Tex region.

The company has the capacity to gather and treat over 600 MMcfd and operates over 400 miles of pipeline systems and 17 processing and treating facilities.

Exploration & DevelopmentQuick Takes

TNK-BP to develop giant Russian Arctic oil fields

TNK-BP, Russia's third largest oil company, will accelerate development of five giant oil fields above the Arctic Circle in the Yamal-Nenets Autonomous Region in a deal said to be worth $12 billion.

TNK-BP said it will finish drilling six wells in Russkoe field in 2012 in preparation for full-scale development of all five fields, but the company said it will be 2017 before it starts intensive commercial development at Russkoe.

Oil will be shipped via the Zapolyarnoe-Purpe-Samotlor pipeline, construction of which will enable TNK-BP to begin accelerated development work on all five of its Yamal oil fields: Russkoe, Suzunskoe, Tagulskoe, Russko-Rechenskoe, and Messoyakhskoe (see map, OGJ, June 4, 1990, p. 40).

The company said Russkoe alone has proved, probable, and possible reserves of 2.25 billion bbl, but it said its total reserves and resources in the region under 3P + 3C categorization are an estimated 5 billion bbl.

The five fields are expected to account for as much as 20% of TNK-BP's oil production by 2021, the company said. Dozens of contractors and suppliers will be involved in the developments.

TNK-BP is owned by BP and the AAR consortium (Alfa Group/Access Industries/Renova) on a parity basis. TNK-BP also owns 50% of the Russian oil and gas company Slavneft. TNK-BP's share of Russia's oil production, including its share in Slavneft, is about 16% and its proved reserves were 8.794 billion bbl of oil equivalent at the end of 2010.

TNK-BP in December 2011 signed a long-term contract with OJSC Transneft for the transportation of oil through the Zapolyarye-Purpe pipeline, which is to connect the Yamal-Nenets fields with the East Siberia-Pacific Ocean oil pipeline. TNK-BP said it will be the largest supplier of hydrocarbons to the Zapolyarye-Purpe pipeline.

TNK-BP said it will invest as much as $10 billion in the midterm for the construction of necessary infrastructure at the fields, including the construction of feed pipelines. It said it is the first oil company to sign a contract to move oil through the Zapolyarye-Purpe line.

PetroMagdalena flows oil, explores Llanos block

PetroMagdalena Energy Corp., Toronto, has started production from its Azor field discovery well while continuing to explore the Arrendajo block in Colombia's Llanos basin.

Azor-1X, placed on production Jan. 31 from the C5 sand, made 1,181 b/d of 35.5° gravity oil with 0.3% water cut at 270 psi wellhead flowing pressure on a 20⁄64-in. choke, natural, for 12 hr. With choke size then reduced to 16⁄64-in., the well stabilized at 870 b/d at 290 psi and 0.3% water cut for 6 days.

PetroMagdalena is drilling toward a projected total depth of 7,022 ft measured depth at the Arrendajo Norte-1X well, spudded Jan. 28. Site is 3 km north of the Azor discovery well. PetroMagdalena has 67.5% working interest subject to ANH approval in the Arrendajo block, just north of the Cubiro block.

Meanwhile, the company has set 7-in. production casing at the Cernicalo-1ST well on the Cubiro block and will test the Guadalupe and C7 Carbonera formations. TD is 6,792 ft. PetroMagdalena has 70% working interest in Cubiro.

On the Santa Cruz block in the Catatumbo basin, PetroMagdalena has set 95⁄8-in. intermediate casing at 9,533 ft measured depth at the Santa Cruz-1X exploratory well adjacent to Rio Zulia oil field and drilled to 10,580 ft. TD is expected before the end of February.

Noble drills sixth Levant basin gas discovery

Noble Energy Inc. said its Tanin gas discovery on the Alon A license offshore Israel contains a gross resource of 0.9-1.4 tcf of gas.

The company's latest Levant basin discovery went to a total depth of 18,212 ft and cut 130 ft of gross gas pay in high-quality Lower Miocene sands, Noble Energy said.

Tanin, in 5,100 ft of water 13 miles northwest of Tamar gas field, is the sixth consecutive discovery for Noble Energy and its partners in the basin. The six discoveries are Tamar, Dalit, Leviathan, Dolphin, Cyprus Block 12, and Tanin.

Four of the discoveries have estimated gross mean resource sizes above 1 tcf. Including Tanin, total discovered gross mean resources in the basin are now estimated to be 35 tcf.

Noble Energy is the operator of Alon A with a 47.06% interest. Avner Oil and Delek Drilling each have 26.47% interest.

Drilling & ProductionQuick Takes

Total starts second Ofon development phase

A unit of Total SA is installing four platforms on Ofon oil field offshore Nigeria in a second phase of development that will triple production to 90,000 boe/d (OGJ Online, July 24, 2007).

The new phase—comprising two production platforms, a processing platform, and an accommodation platform—mostly will accommodate recovery, compression, and transport of associated natural gas. Production is to begin in 2014.

Ofon is on Oil Mining Lease 102, 65 km offshore in 40 m of water. Total has made other discoveries in the area (OGJ Online, Nov. 7, 2011).

OML 102 interests are Total Exploration-Production Nigeria Ltd., operator, 40%, and Nigerian National Petroleum Corp. 60%.

ExxonMobil licenses sand-control technology

ExxonMobil Upstream Research Co. has issued a global license for proprietary oil-well sand-control technology to Weatherford International Ltd.

The technology, called MazeFlo, uses redundant screens and a maze of compartments to provide a self-healing capability against sand entering the producing section of a well, ExxonMobil said.

Each compartment contains a primary screen, outer housing, flow baffles, and a secondary screen. If a primary screen erodes, sand flows into the affected compartment and accumulates on the secondary screen. Fluid continues to flow to adjacent compartments with undamaged primary screens and can be produced without active involvement from surface operators, the company said.

ExxonMobil Upstream Research and Weatherford developed the screens under a joint agreement. ExxonMobil will use the technology in producing wells during the next 2 years and offer it industry-wide after testing and enhancement.

Athabasca presses Montney, Nordegg light oil work

Athabasca Oil Sands Corp., Calgary, reported completion of Montney and Nordegg multistage fractured horizontal wells at Kaybob in the Deep basin of Alberta.

The company's first Montney horizontal well, at 13-22-64-18w5 in the Kaybob East area, averaged 2,265 b/d of 41° gravity oil and 1.8 MMcfd of gas at a stabilized 450 psi flowing pressure. The well's 1,220-m lateral was fracture stimulated with 14 stages of energized oil treatments.

The well is shut in until it can be connected to facilities. The company holds a large land position and will continue delineating the acreage throughout this year's first quarter.

Meanwhile, the company's second Kaybob Nordegg horizontal well, at 04-11-63-20w5, offsetting its first Nordegg horizontal well. After a 16-stage slickwater frac and 4 days of clean-up, the 04-11 well made 335 b/d of 41° gravity oil and 500 Mcfd of gas at 910 psig flowing pressure.

Based on the second well results, the company will focus Nordegg delineation on the Kaybob area with further horizontal drilling, core analysis, and incorporation of its recently shot 3D seismic data.

AOSC has drilled two other Montney and one Duvernay horizontal well at Kaybob and expects completion and testing to occur within weeks.

The company expects its 63-km, 12-in. gas pipeline from Kaybob to the Simonette gas processing plant to be completed in this year's first quarter. In the third quarter, it plans to begin operating a 10,000-bbl oil battery and a 24 MMcfd compressor station and will expand those facilities later to handle all of the company's production from the greater Kaybob area.

AOSC has 1,250 boe/d tied into third party facilities on an interruptible basis and substantial production capacity behind pipe awaiting completion of the company infrastructure. Its 2,012 exit target is 8,000-10,000 boe/d.

PROCESSINGQuick Takes

More processing, NGL handling for Eagle Ford

Southcross Energy, Dallas, has started construction of a fractionator and NGL and residue-pipeline outlets in South Texas to expand service to producers in the liquids-rich Eagle Ford shale where NGL infrastructure has been constrained.

When elements of the project are operating in July, Southcross will have 335 MMcfd of gas processing capacity and 16,300 b/d of fractionation capacity in the area, the company said.

Southcross is installing its Bonnie View fractionator in Refugio County, 26 miles northeast of Corpus Christi near the company's previously announced 200-MMcfd Woodsboro gas processing plant, which is under construction (OGJ Online, June 14, 2011), and its existing 135-MMcfd Gregory gas processing plant and fractionator. The Bonnie View fractionator will have initial capacity of 11,500 b/d of NGLs, which could be expanded to 15,000 b/d, said the company.

As announced last year, Southcross enhanced its Gregory gas plant 13 miles east of Corpus Christi in San Patricio County to 135 MMcfd (OGJ, June 28, 2010, Newsletter). This resulted in increased plant liquids-extraction capacity and full utilization of the plant's 4,800-b/d fractionator.

Southcross also is building pipelines that will interconnect the Woodsboro, Gregory, and Bonnie View plants, as well as NGL and residue gas outlets. When all planned construction is completed, said the company, Southcross will be able to coordinate transportation of natural gas and NGLs between the Woodsboro and Gregory plants and to market residue gas, NGL products, and y-grade NGLs.

Southcross's pipeline connectivity from the Woodsboro and Gregory plants will allow producers access to several major interstate and intrastate residue-gas pipeline outlets, said the announcement, as well as to the company's traditional Corpus Christi ship channel industrial market. The "backbone" of Southcross's residue-gas header system, it said, is the former Tennessee Gas Pipeline Co. 5A system. Southcross acquired this pipeline last year.

Williston diesel-naphtha refinery proposed

Dakota Oil Processing LLC, Williston, ND, is seeking financing and permits to build a $200 million, 20,000 b/d topping refinery in Williams County 16 miles southwest of Williston to produce mainly diesel to support the Bakken liquids play and other local markets.

A 2011 design study indicates that the project would involve a 20,000 b/d atmospheric tower distillation unit and associated boilers, desalters, and other equipment, an 8,000 b/d distillate hydrotreater and associated hydrogen generator for producing ultralow sulfur diesel, a naphtha stabilizer, 667,500-bbl of tankage, and related facilities.

Two middle distillate products, kerosene and diesel, are to be blended to maximize the production of diesel fuel, the primary product for which the plant is designed. At capacity the plant could produce as much as 8,000 b/d a day of ultralow-sulfur diesel.

Light and heavy naphtha, about 30% of the output stream, most likely would be shipped by rail to Canada to be used as a diluent for bitumen, the company said.

Feedstock would be Bakken 41.9° gravity sweet crude and locally produced natural gas. The plant would be on 50-100 acres and take at least 18 months to construct. Operation could begin as early as late 2013, it added.

The producers working in the Bakken play in early 2012 consumed an average of 1,500 gpd of diesel, hundreds of trucks serve drilling, casing, fracturing, pipeline, and other support operations, and diesel locomotives pull unit trains that ship Bakken crude south from North Dakota and Montana.

Dakota Oil Processing said Bakken oil production is approaching 500,000 b/d and is growing by as much as 10%/month.

Methanex to move methanol plant to Geismar

Methanex Corp. has let a contract to Jacobs Engineering Group Inc. to provide engineering services in the possible relocation of a methanol plant from Chile to Geismar, La.

Methanex said last month it had secured a 225-acre site at Geismar and planned to move an idle plant from Chile, where it has supported exploration and production to secure natural gas feedstock (OGJ Online, Apr. 20, 2011).

It has four plants in the South American country with combined capacity of 3.8 million tonnes/year. Financial reports indicate two of the plants, one with capacity of 882,000 tpy and the other with 840,000 tpy, were offline in fourth-quarter 2011. Methanex expects the relocated plant to start up in second-half 2014.

Thai refinery awards resid FCCU upgrade contract

Star Petroleum Refining Co. has awarded a contract to Shaw Group Inc., Baton Rouge, to provide technology license and process design for revamp of a residue fluid catalytic cracking unit at the Map Ta Phut refinery in Thailand. The design will upgrade the 40,800-b/d RFCC unit, said the Shaw announcement.

OGJ refinery data show Star Petroleum Refining operates the 156,000-b/d refinery (OGJ Online, May 17, 2011). Star Petroleum Refining is a joint venture of Chevron Texaco (Caltex) and the Petroleum Authority of Thailand. "Shaw was the original licensor of this RFCC unit, which first started-up in 1996," said James Glass, president of Shaw's Energy & Chemicals Group.

Shaw jointly developed the proprietary RFCCU technology through an alliance with Axens and Total that began in the early 1990s, said the announcement. To date, it said, Shaw and Axens have licensed 51 grassroots units and performed more than 200 revamp projects.

TRANSPORTATIONQuick Takes

Williams starts open season on Atlantic Access

Williams Partners LP is holding a binding open season until Apr. 2 for the remaining capacity on Atlantic Access, a proposed expansion of its Transco interstate natural gas pipeline. The project would connect gas supplies in western West Virginia and Pennsylvania to the Northeast, Mid-Atlantic, Southeast, and Gulf Coast. The partnership has a binding precedent agreement from a shipper for half of Atlantic Access' 1.8 bcfd initial capacity.

Proposed facilities include about 350 miles of new pipeline extending from Marshall County, W.Va., and Butler County, Pa., to Williams' Transco Compressor Station 195 in York County, Pa. Customers subscribing to capacity on the project can choose from three separate paths originating from Marshall County, W.Va., Butler County, Pa., or Bergen County, NJ. Each would transport gas southward on the existing Transco system to all points on the mainline, terminating in Transco Rate Zone 3 in Beauregard Parish, La.

UGI Energy Services Inc. last year announced plans to extend its Auburn Gathering System to a Transco interconnect in Luzerne County, Pa., entering service third-quarter 2013 (OGJ Online, Oct. 21, 2011).

Williams Partners expects Atlantic Access to enter service by late 2014 subject to regulatory approvals, with final capacity determined by shipper interest. Williams owns 74% of Williams Partners, including the general-partner interest.

Plains All American to build Mississippi Lime line

Plains All American Pipeline LP plans to build a 170-mile pipeline to service the increasing Mississippi Lime crude oil production in northern Oklahoma and southern Kansas. This pipeline, in conjunction with its previously announced Medford-to-Cushing pipeline conversion, will provide about 175,000 b/d of crude oil transportation to Cushing by mid-2013.

PAA also entered into a long-term agreement with SandRidge Energy to purchase SandRidge's production from a multicounty area around the pipeline system.

The Mississippi Lime pipeline will start in Alfalfa County near Alva, Okla., and terminate at PAA's Cushing, Okla., crude storage facility. The pipeline will share roughly 80 miles of right-of-way with PAA's Medford-to-Cushing pipeline.

PAA plans to extend the pipeline from Alva northward into Kansas as demand warrants. TGS-NOPEC Geophysical Co. has begun shooting a multiclient 3D survey in the south-central Kansas portion of the Mississippi Lime (OGJ Online, Feb. 6, 2012).

CenterPoint Energy Field Services LLC last week began initial routing of its proposed natural gas gathering and processing system in the Mississippi Lime (OGJ Online, Jan. 30, 2012).

Crosstex Cajun-Sibon pipeline project advances

Crosstex Energy LP has received sufficient long-term supply commitments to build its Cajun-Sibon extension, a 130-mile, 12-in. OD NGL pipeline. The pipeline will extend Crosstex's existing 440-mile Cajun-Sibon NGL system, connecting its NGL fractionation facilities in south central Louisiana to Mont Belvieu supply pipelines in East Texas.

A long-term ethane sales agreement with Williams Olefins LLC, a subsidiary of the Williams Cos. Inc., provides a secure market for project's key product, Crosstex said. Crosstex is negotiating additional long-term agreements for remaining capacity and expects the new pipeline will begin operations at or near its initial capacity of 70,000 b/d.

Crosstex will begin construction as scheduled in this year's third quarter, with an additional supply connection added to initial plans. The company expects to put the extension into service first-half 2013. The partnership is also expanding its Eunice NGL fractionation facilities to 55,000 b/d from 15,000 b/d, increasing its interconnected fractionation capacity in Louisiana to about 97,000 b/d (OGJ Online, July 26, 2011).

Crosstex estimates the pipeline extension's cost at $230 million.

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