OGJ Newsletter

Sept. 17, 2012
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

Hess to sell interests to ONGC for $1 billion

Hess Corp. reported it will sell its 2.72% interest in the Azeri, Chirag, and Guneshli (ACG) fields in Azerbaijan and its 2.36% interest in the associated Baku-Tbilisi-Ceyhan (BTC) pipeline to ONGC Videsh Ltd. (OVL), the overseas arm of India's state-owned Oil & Natural Gas Corp., for $1 billion.

The transaction, expected to close in first-quarter 2013, is subject to Indian and other government and regulatory approvals. The BP-operated ACG fields, in the Caspian Sea 100 km east of Baku, started production in 1997.

"The sale of our interest in ACG is consistent with our strategy to divest mature and small working interest assets," said Greg Hill, president of worldwide exploration and production for Hess. "Including this transaction, we have announced asset sales year-to-date totaling nearly $2 billion and additional asset sales are under way as part of our strategic portfolio reshaping," Hill added.

Shareholders of the ACG fields include BP 34.1%, Chevron Corp. 10.3%, SOCAR 10%, Inpex 10%, Statoil 8.6%, ExxonMobil Corp. 8%, TPAO 6.8%, Devon Energy Corp. 5.6%, and Itochu 3.9%.

GAO lists improvements in offshore energy oversight

The US Department of the Interior has aggressively implemented offshore regulatory policy changes since 2010, but continues to face challenges that might affect its Gulf of Mexico oil and gas operations oversight, the Government Accountability office said in a recent report.

"Specifically, [DOI]'s capacity to identify and evaluate risk remains limited, raising questions about the effectiveness with which it allocates its oversight resources," the Aug. 29 report said. It added that the department also continues to have problems implementing effective information technology systems, such as those that aid exploration and development plan reviews, and faces significant workforce planning challenges.

The report recommended that DOI and its two agencies responsible for offshore federal resource oversight—the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement—make offshore oil and gas inspections more effective by entering violation and correction data into its system more promptly.

It also called for improvements in the department's offshore IT and workforce planning efforts.

DOI officials commenting on a draft of the report generally agreed with its findings and the recommendations, GAO said.

DOE will fund 14 methane hydrate research projects

The US Department of Energy has selected 14 methane hydrate research projects in 11 states to receive up to $5.59 million of federal funding. The awards build on a successful, unprecedented test earlier this year where a steady flow of natural gas was safely extracted from methane hydrates on Alaska's North Slope, DOE said.

DOE said the projects, which will be managed by the department's National Energy Technology Laboratory, will advance understanding of the nature and occurrence of deepwater and arctic gas hydrates and their implications for future resource development and environmental performance.

The worldwide volume of natural gas held in methane hydrates is immense, but poorly known, according to NETL. Estimates range from 100,000 tcf to more than 1 million tcf, it said.

DOE said that prior research it has supported and outside studies have confirmed that the resource volume apparently is substantial, and amounts which can be explored for and produced using existing technologies are tremendous.

The 14 new projects will focus research on field programs for deepwater hydrate characterization, the response of hydrate systems to changing climates, and advances in the understanding of hydrate-bearing deposits, DOE said.

Canadian energy chiefs shun federal strategy

Canada's federal, provincial, and territorial energy ministers have concluded an annual conference without pursuing a national energy strategy sought by Alberta Premier Alison Redford. A statement by Joe Oliver, federal minister of natural resources, said the energy leaders agreed "to pursue collective action to strengthen Canada's position as a global energy and mining leader."

In months before the Charlottetown, Prince Edward Island, meeting, Redford had visited counterparts from other provinces seeking support for formalization of a national energy strategy.

Her effort stumbled after British Columbia Premier Christy Clark voiced resistance to the Northern Gateway pipeline project proposed by Enbridge to move synthetic crude oil and diluted bitumen produced in Alberta to an export terminal at Kitimat, BC. Clark demanded a "fair share" of wealth from Alberta's oil sands region, an idea Redford opposed.

At a Sept. 11 news conference in Charlottetown, Oliver said proposals he had heard for a national strategy encompassed nothing not already covered by federal and provincial policies.

Forest Oil names president, chief executive officer

Forest Oil Corp. has named Patrick R. McDonald its president and chief executive officer. McDonald served as interim chief executive officer for the Denver independent since June 21. He has been a Forest director since 2004.

Previously, McDonald served as chief executive officer and president for Carbon Natural Gas Co., an oil and gas exploration company and its predecessor, Nytis USA, since 2004.

During 1987-97, McDonald was chief executive officer, president, and director of Interenergy Corp., a natural gas gathering, processing, and marketing company. Before that, he was an exploration geologist with Texaco Inc.

Exploration & DevelopmentQuick Takes

Apache discovers first hydrocarbons offshore Kenya

Apache Corp. has encountered gas in the shallowest objective in the Mbawa-1 exploratory well in the Lamu basin offshore Kenya, said participant Tullow Oil PLC.

Drilling continues toward a planned final depth of 3,275 m after the well on the L8 license encountered 52 m of net gas pay in porous Cretaceous sandstones at about 2,500 m.

Apache is operator of L8 with 50% interest. Origin Energy Resources Ltd., Sydney, has 20%, and Pancontinental Oil & Gas NL, Perth, and Apache have 15% each.

Angus McCoss, Tullow exploration director, said, "A gas discovery on prognosis in the shallowest objective at Mbawa-1 is an encouraging start to our East African Transform Margin exploration campaign. This is the first hydrocarbon discovery offshore Kenya. The on-going drilling remains on course to test for any deeper oil potential within this gas prone region."

Santos basin wildcat cuts hydrocarbon zones

PanAtlantic Energy Group, Houston, formerly Vanco Overseas Energy Group, said the Sabia-1X exploratory well operated by its Brazilian subsidiary in the Santos basin offshore Brazil has penetrated multiple hydrocarbon-bearing zones of interest.

Sabia-1X went to a total depth of 4,200 m in 195 m of water on the BM-S-72 block. Wireline logs, reservoir pressures, and fluid samples will be further analyzed in coming months, and the well will be abandoned in accordance with ANP requirements. The well has presalt and shallower objectives.

Meanwhile, the GSF Arctic I semisubmersible will move to the Canario prospect on BM-S-63 early next week, PanAtlantic said. Canario is 20 km southwest of the 2010 Piracuca oil discovery, and Sabia is 20 km southwest of Canario.

PanAtlantic, through its Brazilian subsidiary Vanco Brasil Exploracao e Producao de Petroleo e Gas Natural Ltda., holds a 70% working interest in the BM-S-72, BM-S-63, and BM-S-71 concessions together with Panoro Energy do Brasil Ltda. 15% and Brasoil Round 9 Exploracao Petrolifera Ltda. 15%.

As revealed in July, Vanco Brasil and Ecopetrol Oleo e Gas do Brasil Ltda., a subsidiary of Ecopetrol SA, signed an agreement in which Ecopetrol Oleo will acquire from Vanco Brasil a 30% interest in the three concessions, subject to ANP approval.

DNO to develop Benenan Kurdistan oil discovery

DNO International ASA, Oslo, has begun multiwell development of Benenan field on the Erbil license in the Kurdistan Region of Iraq. The company said the Benenan-3 well has encountered movable oil in the Bekhme formation at about 2,000 m. Tests continue to acquire more data.

Benenan-3 will be completed as a horizontal producer in the Najmeh formation. The deeper Najmeh formation was oil bearing in both the Benenan discovery and appraisal wells; the Bekhme formation, however, was not conclusively tested in those downdip wells. Following Benenan-3, the rig will be moved to drill the Bastora-2 development well in adjacent Bastora field, also on the Erbil license (see map, OGJ, Feb. 6, 2012, p. 53). Bastora-1, the first horizontal well completed in Kurdistan, is producing from the Bekhme formation under long-term test in preparation for full field development.

Meanwhile, DNO's Tawke-18 well, designed to increase Cretaceous production and test an exploration footwall target below the main field-bounding fault, is drilling at 2,400 m. Tawke-17, drilling at 550 m, is also designed to increase Cretaceous deliverability from the eastern flank of Tawke field and test the exploratory potential of deeper Jurassic and Triassic intervals.

DNO has mobilized a fourth rig to reenter Tawke-14 in early October for a planned sidetrack into the Cretaceous interval. Tawke-19, the last Tawke development well under the 100,000 b/d production enhancement program, is also scheduled to spud in early October.

Lundin sees development potential offshore Sabah

Lundin Petroleum AB, Stockholm, said its third gas discovery in the SB303 block offshore Sabah, Malaysia, makes four discoveries on the block that present an opportunity to evaluate gas cluster development potential.

The Berangan-1 vertical well went to 1,709 m in 70 m of water and cut 165 m of gross gas column in the target mid-Miocene aged sands. An extensive data acquisition program was completed, including fluid samples and a pressure profile indicating that a single continuous gas column is present and defining the probable gas-water contact. Further work will follow to estimate recoverable resource ranges.

Berangan is 10 km southeast of Lundin's 2011 Tarap gas discovery and 15 km south of the company's 2011 Cempulut gas find. The contract area also contains the Titik Terang discovery, and the four gas fields lie within a 10-km radius.

The West Courageous rig will move to Peninsula Malaysia to execute a three-well exploratory campaign starting with Merawan Batu-1 well on the PM308B offshore block.

Lundin Petroleum has 75% interest in SB303 through its subsidiary Lundin Malaysia BV. PETRONAS Carigali Sdn. Bhd. has 25% interest.

Drilling & ProductionQuick Takes

Transocean to sell 38 rigs to start-up firm

Transocean Ltd. has signed definitive agreements to sell 38 shallow-water drilling rigs to a new company called Shelf Drilling for $1.05 billion.

The price includes $855 million in cash, subject to adjustments, and $195 million in seller financing in the form of preference shares issued by a unit of Shelf Drilling.

Shelf Drilling is sponsored equally by private firms Castle Harlan Inc., CHAMP Private Equity, and Lime Rock Partners.

Steven L. Newman, Transocean president and chief executive officer, said sale of the rigs is part of a strategy to focus on high-specification floating rigs and jack ups.

Shelf Drilling will start work as a private company based in Dubai at closing of the Transocean deal, scheduled for the fourth quarter this year. Its founding CEO is David Mullen, a former Transocean senior vice-president who most recently was chief executive officer of Wellstream of the UK.

With the fleet acquired from Transocean, which includes 37 standard jack ups and a swamp barge, the new company will operate throughout Southeast Asia, India, West Africa, the Middle East, and the Mediterranean.

Two of the rigs are being reactivated, and five are stacked.

Shell using treated waste water for gas field fracs

Royal Dutch Shell PLC is using the Dawson Creek Reclaimed Water treatment plant to provide water for hydraulic fracturing of gas wells in the Greater Groundbirch area in Northeast British Columbia where Shell drills in the Upper Montney shale.

The treatment plant is in the city of Dawson Creek, some 1,191 km northeast of Vancouver, BC. Shell executives and Dawson Creek city officials celebrated the waste water treatment plant opening on Sept. 7. The plant has a capacity of 4,000 cu m/day.

Shell will move its share of the treated water by pipeline 48 km to Groundbirch gas field. The treated waste water will be stored in ponds and later mixed with recycled production water to be used in drilling and well completions.

Shell's Groundbirch complex includes five gas processing plants, more than 250 wells, and a gas-gathering system. Shell plans to drill 3,000 wells over 20 years from Upper Montney microlaminated shales and siltstones at 2,200-3,000 m depth (OGJ, Oct. 3, 2011, p. 108).

Osum's Taiga heavy oil project approved

Osum Oil Sands Corp., Calgary, has received approval of its Taiga thermal heavy oil project near Bonnyville in the Cold Lake region of Alberta from the Energy Resources Conservation Board. Approval came after Cold Lake First Nations withdrew an objection it had filed earlier.

The privately held company plans to use brackish water and recycling for steam-assisted gravity drainage and cyclic steam stimulation to develop proved plus probable reserves estimated at 359 million bbl of bitumen (OGJ Online, Feb. 23, 2012).

Development will occur in two phases for total production of 35,000 b/d. With best-estimate contingent resource of an additional 105 million bbl, the project might support production as high as 45,000 b/d, Osum says.

The company said timing of first production, earlier targeted for 2013, is under evaluation.

PROCESSINGQuick Takes

Enterprise starts up train at Eagle Ford plant

Enterprise Products Partners LP has started up a second 300-MMcfd train at the partnership's Yoakum cryogenic natural gas processing plant in Lavaca County, Tex. The additional train increases nameplate capacity there to 600 MMcfd, and the plant can extract about 74,000 b/d of NGLs.

EPP also said it is on schedule to bring the third 300-MMcfd train at Yoakum into service in first-quarter 2013, raising NGL production capacity to 111,000 b/d.

To date, EPP has completed construction of about 440 miles of natural gas pipelines as part of its Eagle Ford system that connects to Yoakum and the partnership's seven other integrated processing locations in South Texas.

Including the 900 MMcfd of anticipated capacity at Yoakum, EPP expects ultimately to offer about 2.4 bcfd of processing capacity for the region. OGJ data show that more than 27.5 bcfd of total gas plant capacity will come into service 2012-14 in the Eagle Ford play (OGJ, May 7, 2012, p. 88).

Construction of a 173-mile extension of the partnership's NGL pipeline system from Yoakum to LaSalle County, Tex., is also under way and on schedule to begin service in second-quarter 2013 (OGJ, May 7, 2012, p. 104).

This project will link to EPP's recently completed NGL pipeline system that delivers Eagle Ford Shale production from Yoakum to Mont Belvieu, Tex., where Enterprise is building three new NGL fractionators (OGJ Online, Mar. 26, 2012).

Keyera to add de-ethanizer at Fort Saskatchewan

Keyera Corp., Calgary, will build a 30,000 b/d de-ethanizer at its natural gas liquids fractionation and storage location in Fort Saskatchewan, Alta.

The de-ethanizer will allow Keyera to process an ethane-rich (C2+) stream of NGLs to produce specification ethane for petrochemical producers in the province and a propane-rich stream of NGLs for Keyera's fractionators. Estimated total cost for the project, including receipt facilities, C2+ mix storage, and pipeline interconnections, will be about $110 million (Can.). Keyera targets completion for first-half 2014.

Keyera has entered into a long-term, fee-for-service agreement with a large—but unnamed—producer in the deep basin of west central Alberta, providing commercial support for the project. Under terms of the agreement, the producer will furnish C2+ mix to Keyera for processing into specification products including ethane, propane, butane, and condensate (OGJ, July 19, 2010, p. 31).

Keyera is currently in discussions with other producers interested in contracting for the remaining de-ethanization capacity, said the company's announcement.

Detailed engineering work is under way and certain long-lead items have already been ordered, it said. In addition to the de-ethanizer tower and ancillary equipment, Keyera will dedicate an underground storage cavern to C2+ service, construct connections to C2+ receipt pipelines in the area, and build an ethane delivery connection to the Alberta Ethane Gathering System (OGJ, Apr. 7, 2012, p. 104).

Dutch refiner lets contract for refinery upgrade

Dutch refiner Zeeland Refinery NV has awarded an engineering, procurement, and construction contract to a unit of Foster Wheeler AG's Global Engineering and Construction Group to upgrade the distillate hydrocracker at the Zeeland refinery at Vlissingen, the Netherlands.

The EPC contract's value was not disclosed. Zeeland Refinery is a joint venture of Total SA and OAO Lukoil.

The project is to maximize throughput of the distillate hydrocracker by debottlenecking its reaction and fractionation sections. Foster Wheeler's work is to be completed by June 2014.

Chinese petrochem firm picks UOP processes

Heilongjiang Anruijia Petrochemical Co. has selected technologies of UOP LLC for production of isobutylene and normal butane in Heilongjiang Province, China.

New units are to start up in 2014 to produce 180,000 tonnes/year of isobutylene and 150,000 tonnes/year of butane.

UOP's proprietary Oleflex project uses catalytic dehydrogenation to convert isobutane to isobutylene. Its Butamer process uses high-activity, chloride-promoted catalysts in the presence of hydrogen to convert isobutane to normal butane.

In addition to technology licensing, UOP, part of Honeywell, will provide engineering design, catalysts, adsorbents, equipment, staff training, and technical service.

Heilongjiang Anruijia Petrochemical is a private company that focuses on LPG trading in China.

TRANSPORTATIONQuick Takes

Transneft to build ESPO branch supplying refinery

Rosneft and Transneft agreed to jointly build a branch off the Eastern Siberia–Pacific Ocean (ESPO) crude oil pipeline linking it to Rosneft's Komsomolsk-on-Amur refinery. The branch will have a capacity of 8 million tonnes/year.

The companies expect construction to take 4 years. Crude currently arrives at the refinery by rail. Transneft will finance the design and construction of the offshoot using long-term fees paid by Rosneft as part of a separate shipment agreement.

Rosneft is implementing a large-scale modernization program at the Komsomolsk refinery with the stated goal of increasing refinery yield, improving environmental and industrial safety performance, and producing only fuels which comply with Euro 5 environmental standards. Modernization will increase the refinery's capacity to 8 million tpy of crude.

Transneft is building the second stage of the ESPO pipeline, which carries oil from fields in Eastern Siberia to consumers on the Pacific coast and for export to China. The company expects total capacity of ESPO-2 to reach 50 million tpy, with construction between Skovorodino and Kozmino complete in 2014.

Sunoco's Allegheny Access pipeline to proceed

Sunoco Logistics Partners LP received enough binding commitments from shippers during the open season for Sunoco Pipeline LP and Inland Corp.'s Allegheny Access pipeline project to advance the project.

Allegheny Access will transport refined products from the Midwest to eastern Ohio and western Pennsylvania markets.

Sunoco expects the pipeline to have an initial capacity of 85,000 b/d, with the ability to expand to 110,000 b/d. The project will use a combination of new and existing pipe in Ohio and Pennsylvania.

The company expects Allegheny Access to enter service first-half 2014.

Sunoco is operator and 83.3% shareholder of Inland.

CNPC completes SNG pipeline in Xinjiang

China National Petroleum Corp. finished construction of its Yining-Horgos natural gas pipeline, designed to move coal-based synthetic natural gas (SNG) from Yining, Xinjiang Uygur autonomous region, to Zhejiang. Yining-Horgos is linked to the Third West-East Gas Pipeline project (WEPP III).

CNPC subsidiary China Petroleum Engineering Co. Ltd. built the 64-km, 48-in. OD pipeline, which it describes as the first large-diameter SNG pipeline in China. The pipeline has a design pressure of 12 MPa, and an estimated capacity of 30 billion cu m/year.

The Yining-Horgos pipeline sources its SNG largely from Yili, Xinjiang, and allows it to be shipped to south-central China and the country's southeastern coastal region.

Dart Energy Ltd., Brisbane, is exploring for coalbed methane southeast of Urumqi, Xinjiang, as CNPC's partner (OGJ Online, Sept. 8, 2011).