OGJ Newsletter

March 26, 2012
International news for Oill and Gas professionals

GENERAL INTERESTQuick Takes

BOEM seeks comments on eastern gulf lease sales

The US Bureau of Ocean Energy Management said it will open a public comment period and hold four meetings concerning two proposed oil and gas lease sales in the eastern Gulf of Mexico.

OCS Lease Sales 225 and 226 would include 657,905 acres more than 120 miles off the Alabama and Florida coasts, where there are active leases and known or anticipated hydrocarbon potential, as part of the 2012-17 US OCS leasing program, the US Department of the Interior agency said on Mar. 19.

Other eastern gulf areas are not part of the 5-year OCS program because they are under a congressionally imposed leasing moratorium until June 20, 2022, it added.

BOEM Director Tommy P. Beaudreau said the agency would use information from comments and the meetings to determine issues which would be addressed in an environmental impact statement. Planning for an EIS does not represent a final decision about the sales' inclusion in the 2012-17 plan, he noted.

The agency has scheduled meetings about the lease sales on Apr. 3 in Tallahassee, Fla.; Apr. 4 in Panama City Beach, Fla.; Apr. 5 in Spanish Fort, Ala.; and Apr. 9 at BOEM's New Orleans offices. Comments will be accepted until May 4, it indicated.

IMF seeks comments on resource taxation

The International Monetary Fund has begun a "consultation process" seeking views on "the best way to tax natural resources and how to use the money earned to boost standards of living in the countries that own them."

The group is accepting comments through Apr. 27 from "the private sector, civil society, academics, and others" and has opened a web page for the project. Comments can be sent by e-mail to [email protected].

IMF noted countries face a range of policy questions related to development of oil, natural gas, and other resources. "These policy challenges extend to areas such as resource taxation, fiscal policy design, sustainability of external balqances, the impact of resource booms on exchange rates, and complex linkages between resource and nonresource sectors," it said.

IMF will incorporate comments from the consultation process in two papers its staff is writing for the executive board on natural resource wealth management and taxation of natural resource rents.

IMF also is holding a conference in Kinshasa Mar. 21-22 on management of natural resources in sub-Saharan Africa.

Alberta merges licensing of geoscientists

In response to legislative changes affecting professional licensing, the Association of Professional Engineers, Geologists & Geophysicists of Alberta has become the Association of Professional Engineers & Geoscientists of Alberta (APEGA).

Alberta recently changed laws under which APEGA self-regulates industry professionals to remove the distinction between professional geologists and professional geophysicists. For new licenses, it acknowledges only professional geoscientists.

Existing license-holders can choose between former designation and the new one. New licenses will be issued only for the new designation.

APEGA has 63,000 members, of which 3,730 are licensed professional geologists and 1,130 professional geophysicists. Its members supported the change.

Exploration & DevelopmentQuick Takes

Sprawling Enyenra oil field appraised off Ghana

Tullow Oil PLC said its Enyenra-4A appraisal well confirmed the existence of oil in good quality sandstone reservoirs in the southern part of Enyenra field offshore Ghana and the company is running injectivity tests to support waterflood design.

The well, which went to 4,174 m in 1,878 m of water at a downdip location on the Deepwater Tano license, is 7 km southwest of the Enyenra-2A well and 21 km south of the Enyenra-3A well. It will be suspended for later use.

Enyenra-4A intersected 32 m of net oil pay. Pressure data from the oil leg shows that the oil is in static communication with the oil seen in the field's other wells and indicates a 600-m continuous oil column.

Tullow said, "Proving a 600-m oil column over a distance of 21 km with three appraisal wells is a significant achievement which was only possible through the use of highly refined geophysical techniques."

The Ocean Olympia drillship will return at a later date to drillstem test the oil zone in the Ntomme-2A well, Tullow said.

Tullow operates the Deepwater Tano license with 49.95% interest. Kosmos Energy and Anadarko Petroleum Corp. have 18% each, Sabre Oil & Gas has 4.05%, and Ghana National Petroleum Corp. has a 10% carried interest.

Spain okays Repsol YPF to drill off Canaries

Spain has passed a law that authorizes exploratory drilling by a group led by Repsol YPF SA in the Atlantic midway between the Canary Islands and Morocco. A Repsol YPF spokesman said the group plans to drill two wells starting in 2014.

Spain in January 2002 granted Repsol YPF nine blocks that total 6,160 sq km east of Lanzarote and Fuerteventura islands (see map, OGJ, June 24, 2002, p. 38). The blocks lie 60-100 miles off Tarfaya, Morocco, where oil shale deposits represent the nearest known hydrocarbons. Repsol YPF said the blocks lie in the Sable basin, and the area is also called Fustercasas-Hesperides (OGJ Online, Oct. 21, 2002).

Canarias blocks 1 through 9 are in 700-1,500 m of water 60 km east of the Lanzarote coast. Block interests are Repsol YPF 50%, Woodside Petroleum Ltd. 30%, and RWE Dea AG 20%.

The Canary Islands regional government opposes the drilling on grounds it could harm tourism, but Repsol said the operation will be conducted under the highest standards.

Rialto makes progress in Gazelle field

Rialto Energy Ltd., Perth, started appraisal and pre-development of the Gazelle oil and gas field offshore Ivory Coast with the spudding of its Gazelle-P3 production well.

The company, which is operator of the project with 85% interest in Block CI-202, says the well is the first of three aimed at proving the commercial viability of the field and its surrounding structures (OGJ Online, Jan. 19, 2012).

Gazelle-P3 and the second well in the program will appraise the down-dip potential of the reservoirs while also targeting the deeper Condor prospect. The third well will target the nearby Chouette exploration prospect.

Rialto says Gazelle field is capable of producing 8,000 bo/d along with 100 MMcfd of gas.

The company received development approval from the Ivory Coast government late in 2011 and hopes to make a final investment decision on the development by midyear. Rialto expects to bring the field on stream during fourth-quarter 2013.

The plan is to process oil and gas on an offshore platform set in 40 m of water and bring the production ashore via a 30-km subsea pipeline to existing onshore infrastructure. Cost of development is put at $80 million (Aus.).

The pipeline will have a capacity for transporting as much as 40,000 b/d of oil and 230 MMcfd of gas to allow for increased production through infill drilling and tie-back of existing and yet to be explored satellite fields.

Independent consultant RPS Energy Services reported in September 2011 that the CI-202 block contained estimated total mean contingent resources of up to 50 million bbl of liquids and 1.7 tcf of gas.

MEG Energy starts Surmont consultation

MEG Energy Corp. will begin formal stakeholder consultation leading to regulatory applications to develop oil sands leases in the Surmont area of Alberta.

The company plans to produce 120,000 b/d of bitumen with steam-assisted gravity drainage.

Its leasehold covers 80 sq km about 60 km south of Fort McMurray and north of the Christina Lake area, where it is expanding SAGD production to 60,000 b/d from 25,000 b/d and has regulatory approval to boost production by 150,000 b/d (OGJ Online, Feb. 13, 2012).

MEG Energy has begun environmental and engineering studies for the Surmont project. It expects to submit a regulatory application at midyear.

The project will include multiwell production pads, electricity and steam cogeneration, water and bitumen treatment, and worker accommodations.

The company estimates best-guess contingent resources at 837 million bbl in the Cretaceous McMurray formation productive in the Athabasca oil sands region.

Drilling & ProductionQuick Takes

BLM releases final EIS for Uinta basin project

The US Bureau of Land Management's Vernal, Utah, field office released the final environmental impact statement for Gasco Energy Inc.'s Uinta basin tight gas project for 30 days beginning Mar. 16. A record of decision disclosing BLM's final decision and any project conditions of approval on Apr. 16, it said.

BLM said the Gasco project area encompasses 206,826 acres in an existing gas producing area in Utah's Uintah and Duchesne counties. Under the agency preferred alternative, up to 1,298 gas wells would be drilled from 575 pads over 15 years disturbing 3,604 acres, or about 2% of the total project area.

It said the final EIS considers public comments in response to the project's October 2010 draft EIS, and was prepared in the EIS process. BLM also coordinated closely with the US Fish and Wildlife Service and the Environmental Protection Agency to ensure their concerns were adequately addressed, the US Department of the Interior agency said.

Denver-based Gasco reported Feb. 27 that its Gasco Production Co. subsidiary agreed to sell a half interest in its producing Uinta basin properties to Wapiti Oil & Gas II LLC for $20.75 million in cash and transfer a half interest in its undeveloped Uinta basin properties to Wapiti in exchange for, among other agreements, Wapiti's commitment to provide $30 million for drilling and completion of the undeveloped assets.

Closing was expected sometime during March, Gasco said. The agreements did not include its California projects.

Tawke oil well tops 25,000 b/d from Cretaceous

The Tawke-16 well in the Kurdistan region of Iraq flowed at a combined rate of more than 25,000 b/d of oil from multiple zones tested separately, likely making it the field's test well so far, said DNO International ASA, Oslo.

Appraising the field's undrilled northern flank, the well went to 2,369 m and cut more than 350 m of gross continuous oil column in the Cretaceous interval. It flowed 26-27° gravity oil and is expected to be connected to existing pipeline and processing facilities by mid-April. The cost to drill, complete, and test the well was under $7 million.

DNO International is continuing to develop Tawke field with a goal of boosting production to 100,000 b/d by the end of 2012 (OGJ, Feb. 6, 2012, p. 48).

Tawke-16 is the first of four wells targeting the Cretaceous that the company plans to drill in 2012. A fifth well, Tawke Deep, will also penetrate the deeper Jurassic and Triassic intervals in the field later in the year.

DNO International has a 55% operated working interest in the field. Genel Energy has 25%, and the Kurdistan Regional Government has 20%.

More declines seen on KG D6 block offshore India

Production of natural gas from the KG D6 block, which has yielded major discoveries offshore eastern India, will continue a decline that has elicited calls from authorities for more drilling, according Minister of Petroleum and Natural Gas Shri S. Jaipal Reddy.

Block operator Reliance Industries Ltd. (RIL) has blamed reservoir complexity and natural declines for the production drop (OGJ Online, Jan. 20, 2012).

In response to an inquiry from the Rajya Sabha, India's upper house of Parliament, Reddy said KG D6 fields produced about 36 million standard cu m/day of gas in January, down from an average of 55.35 million cu m/day in the 2010-11 fiscal year.

"The availability of gas from KG D6 is expected to continuously decline in 2012-13 and 2013-14," Reddy said.

The Directorate General of Hydrocarbons has pressured RIL to increase drilling to shore up production. BP last year formed a joint venture with RIL with the purchase of 30% interests in 21 blocks in India, including KG D6.

PROCESSINGQuick Takes

Valero again suspending refinery in Aruba

Another Caribbean refinery able to run heavy, sour crude oil will cease operation.

Citing "unfavorable refinery economics and the outlook for continued unfavorable refinery economics," Valero Energy Corp. said it will halt crude runs at month's end of its 235,000 b/d facility in Aruba.

Valero's move follows by 2 months the announcement by Hovensa LLC, a joint venture of Hess Corp. and Petroleos de Venezuela SA, of closure of the 350,000 b/d refinery at St. Croix, VI (OGJ Online, Jan. 18, 2012). Hovensa will operate the facility, capacity of which had been reduced from 500,000 b/d, as a terminal.

Valero bought the Aruba refinery in 2004 from El Paso Corp. for $465 million (OGJ Online, Feb. 5, 2004). Signs of trouble appeared in 2009, when the company idled the facility because of poor economics. Operations resumed late in 2010 after a turnaround.

Valero said it has been operating the refinery at reduced rates and at a financial loss. While holding open the possibility of a restart, it said it is considering converting the refinery to a terminal.

Built in 1929 by Standard Oil, it was shut down in 1985 by Exxon Corp. and restarted in 1990 by Coastal Corp., which became part of El Paso. The refinery yields distillate products and intermediate feedstocks.

Processing capacities at Aruba include 68,400 b/d of delayed coking, 30,600 b/d of visbreaking, and 214,200 b/d of catalytic hydrotreating.

The location has two deepwater marine docks able to service ultralarge crude carriers and storage capacity of 12 million bbl.

Shell eyes Marcellus petrochemical site

Shell Chemical LP is studying land near Monaca, Penn., for the petrochemical complex it is considering to use ethane from natural gas produced from the Marcellus shale (OGJ Online, June 6, 2011).

The company has signed a land option agreement with Horsehead Corp., a specialty zinc producer based in Pittsburgh, for a site in Potter and Center Townships in Beaver County. Horsehead is moving a zinc production operation on the land to facilities under construction in North Carolina.

If Shell exercises the option, Horsehead would have to vacate the site by Apr. 30, 2014.

When it initially disclosed the project last year, it said it was considering a "world-scale" ethane cracker.

It now says it is considering polyethylene and monoethylene glycol units in addition to the ethane cracker.

"The next steps for this project include additional environmental analysis of the preferred Pennsylvania site, further engineering design studies, assessment of the local ethane supply, and continued evaluation of the economic viability of the project," Shell said in a press statement.

Qatar methanol plant due CO2 recovery plant

Qatar Fuel Additives Co. Ltd., Doha, has let a contract to MHI Industrial Engineering & Services Private Ltd. (MHIES) for construction of a plant to recover carbon dioxide from flue gas for use in methanol production in Mesaieed Industrial City.

The new plant will capture as much as 500 tonnes/day of CO2 from combustion exhaust emitted at Qatar Fuel Additives' 2,500 tonne/day methanol plant.

Separation and recovery will use a proprietary solvent and propriety recovery process of Mitsubishi Heavy Industries Ltd. (MHI), of which MHIES is a wholly owned subsidiary.

MIES will perform engineering, procurement, and construction. Mitsubishi Corp. will handle trade matters for MIES. MHI will license the technology through MIES.

Qatar Fuel Additives produces methanol with steam reforming of methane and methanol synthesis based on ICI technology. Qatar Petroleum supplies the methane. The methanol feeds an adjacent methyl tertiary butyl ether plant with capacity of 1,830 tonnes/day. That plant uses UOP technology and receives butane from Qatar Petroleum.

MHI said the Qatar plant will be first application of its CO2 recovery technology specifically targeting methanol production.

TRANSPORTATIONQuick Takes

Trans Adriatic Pipeline submits Italian ESIA

The Trans Adriatic Pipeline has submitted its Environmental and Social Impact Assessment (ESIA) to the Ministry of Environment in Italy.

The ESIA outlines the project's most recent configuration in Italy, explaining its potential impact on the local environment, as well as proposing measures to avoid or mitigate negative effects and enhance the pipeline's positive effects.

TAP aims to deliver natural gas from the Shah Deniz field in Azerbaijan to western Europe, via Greece, Albania, and the Adriatic Sea, to Italy's Puglia region. TAP's Italian section will consist of a 5-km onshore and 45-km offshore pipeline, extending to a receiving terminal in the province of Lecce. TAP will have a 10 billion cu m/year initial capacity, expandable to 20 bcm/year as Shah Deniz production increases.

TAP's proposed landing point on the Italian coast is between San Foca and Torre Specchia Ruggeri in the municipality of Melendugno (Lecce). TAP will tie-in with the Italian gas network, operated by Snam Rete Gas.

Landfall will occur via tunnel, routing the pipeline under any Posidonia seagrass (protected habitat) growth offshore and beneath the coastline to avoid affecting the landscape. Near-shore construction work will take place during winter to minimize impact on the tourist industry and avoid interfering with the breeding period of sea turtles.

TAP anticipates having the pipeline ready for service by the time the Shah Deniz II development comes online in 2017-18. State Oil Co. of the Azerbaijan Republic (SOCAR) and other members of the consortium developing Shah Deniz, however, have not yet selected a final export route to Europe.

Shah Deniz II is operated by BP with 25.5% interest. Statoil also holds 25.5% interest, with the balance divided among SOCAR 10%, Lukoil 10%, Total 10%, Turkish Petroleum AO 9%, and Naftiran Intertrade Co. 10%.

Parnon targets July completion for Oklahoma pipeline

Parnon Gathering Inc.'s Great Salt Plains crude oil pipeline, which began construction earlier this month, is scheduled for completion in July.

The project includes laying about 115 miles of 8-in. OD pipeline from Cherokee, Okla., to Cushing, Okla., capable of moving an initial 20,000 b/d, expandable to 35,000 b/d. Great Salt Plains will transport crude produced in central and western Oklahoma and southern Kansas to Parnon's Cushing tanks.

All pipe for the project, which also includes a new terminal at Cherokee, has been delivered, Parnon said. Global Pipeline Construction LLC is building the Great Salt Plains Pipeline, with IPS Engineering providing project management.

A second phase might extend the pipeline westward to serve Granite Wash and new tight-formation plays further west in Oklahoma (OGJ Online, Aug. 10, 2011).

An Enterprise Products Partners LP, Enbridge Energy Partners LP, and Anadarko Petroleum Corp. joint venture is planning an NGL gathering system to move Granite Wash gas liquids to the jv's proposed Texas Express NGL pipeline for shipment to Mont Belvieu, Tex. (OGJ Online, Mar. 6, 2012).

Plains Pipeline considering Baker-to-Billings line

Plains Pipeline LP, a subsidiary of Plains All American Pipeline LP, announced an open season for committed capacity on a proposed intrastate crude oil pipeline in Montana that would extend from Baker to Billings.

The line would start at Plains' Baker station and provide initial capacity of at least 50,000 b/d of light sweet crude oil to Billings.

From the Billings station, shippers will have the option to transport volumes on Plains' jointly owned Beartooth/Bighorn system, servicing Casper and Guernsey-Ft. Laramie, Wyo. Shippers also will have the option to transport volumes from Casper to the Salt Lake City market via Plains' jointly owned Frontier and Wahsatch pipelines.

The open season expires May 15.

KGOC lets contract for gas export project management

Kuwait Gulf Oil Co. (KGOC) let a contract to Penspen Group for the project management and detailed design and construction of a natural gas and condensate export system (GCES) from Khafji, Saudi Arabia, on the Kuwait-Saudi border, to Kuwait. Penspen will manage EPC contractor Technip (OGJ Online, Feb. 15, 2012).

The new export system will carry 40 MMcfd of gas via 110 km of 12-in. OD export pipeline, of which about 47 km will be offshore.

Penspen will oversee Technip's detailed design work, procurement activities, and construction undertaken by Technip and its subcontractors. Penspen will also assist with commissioning the final scheme.

GCES will deliver condensate and gas product to Kuwait from Saudi Arabia, reducing gas flaring in the process.

Technip's operating center in Abu Dhabi will execute the project, scheduled to be completed by second-half 2014.

DLB Comanche, which entered the Technip fleet with the acquisition of Global Industries, will complete offshore operations.

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